FMC Corp. v. Varonos

• Decision Date: 11 January 1990
• Docket Number: Nos. 89-1217,89-1325,s. 89-1217
• Citation: 892 F.2d 1308
• Parties: RICO Bus.Disp.Guide 7407 FMC CORPORATION, Plaintiff-Appellee, Cross-Appellant, v. Victoria VARONOS, Defendant-Appellant, Cross-Appellee, v. CONTINENTAL ILLINOIS NATIONAL BANK, Garnishee-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1308

892 F.2d 1308

RICO Bus.Disp.Guide 7407

FMC CORPORATION, Plaintiff-Appellee, Cross-Appellant, v. Victoria VARONOS, Defendant-Appellant, Cross-Appellee, v. CONTINENTAL ILLINOIS NATIONAL BANK, Garnishee-Appellee.

Nos. 89-1217, 89-1325.

United States Court of Appeals, Seventh Circuit.

Argued Sept. 12, 1989.

Decided Jan. 11, 1990.

James J. Stamos, Joseph A. Cari, Jr., Barbara J. Anderson, Steven J. Thompson, J. Timothy Eaton (argued), Coffield, Ungaretti, Harris & Slavin, Chicago, Ill., for FMC Corp. and Continental Illinois Nat. Bank and Trust Co. of Chicago.

Joseph A. Namikas, Robert A. Leier (argued), Chicago, Ill., for Victoria Varonos.

Before CUMMINGS, WOOD, Jr., and COFFEY, Circuit Judges.

HARLINGTON WOOD, Jr., Circuit Judge.

Plaintiff, FMC Corporation, ("FMC") brought this diversity and RICO action against Victoria Varonos. FMC is a Delaware corporation with its principal place of business in Chicago, Illinois. Varonos is a citizen and resident of Greece. The district court entered a default judgment against Varonos after she failed to answer FMC's second amended complaint. On appeal, Varonos renews her arguments that the district court lacked personal jurisdiction and that the district court abused its discretion in denying her motion to dismiss on forum non conveniens grounds. FMC cross-appeals from the denial of its petition for attorneys' fees. For the reasons set forth below, we affirm in part and reverse and remand in part.

I. FACTUAL AND PROCEDURAL BACKGROUND

FMC International, A.G., a corporation organized under the laws of Switzerland, is a wholly-owned subsidiary of FMC. From January 1977 to August 1987, Varonos was office manager for FMC International's Athens regional office in Greece. Her duties as office manager included telexing FMC's Chicago office each month to request cash transfers for estimated operating expenses for both the Athens office and related regional offices. FMC would then wire funds from Chicago to accounts in Athens. These funds would be converted into drachmas and then deposited into two drachma accounts located in Athens. Varonos was also responsible for ordering services and supplies for the Athens office. She informed FMC's Chicago office of the Athens office's monthly expenditures. She made many of these communications concerning monthly expenditures by telecopier during and after September 1986. Varonos also exercised her authority to co-sign checks drawn on the Athens drachma accounts to cover office expenses.

FMC's five-count second amended complaint alleges grounds for prejudgment attachment of Varonos's personal bank account, RICO violations, fraud and deceit, conspiracy to defraud, and breach of fiduciary duty. ¹

Because Varonos defaulted on FMC's second amended complaint, we take the factual allegations in that complaint relating to liability as true. Dundee Cement Co. v. Howard Pipe & Concrete Prods., 722 F.2d 1319, 1323 (7th Cir.1983). The complaint alleges that from March 1985 to July 1987, Varonos engaged in a scheme to defraud FMC of thousands of dollars by submitting to FMC for payment fraudulent invoices for services that were never performed. To carry out this scheme, Varonos telexed requests for reimbursements for operating expenses, which included monies to cover the fraudulent invoices that she had prepared or procured. Varonos also telecopied monthly expenditure reports that listed fraudulent invoices as "expenses." In addition, she signed and co-signed checks drawn on the Athens drachma bank accounts to cover the fraudulent invoices for services. FMC was thus induced to transfer funds from Illinois to Greece that covered the fraudulent as well as the legitimate expenses that Varonos was reporting. Varonos and her co-conspirators cashed the checks drawn to pay for the fraudulent invoices and split the proceeds. FMC claimed that as a result of this scheme it suffered $55,980.00 in actual damages.

Varonos failed to answer FMC's second amended complaint and on December 14, 1988, the district court found her in default. The district court entered final judgment against Varonos on January 3, 1989, ² in the amount of $160,535.49 ³ and released funds in an account Varonos held in Continental Illinois Bank. ⁴ On January 10, 1989, the district court denied FMC's petition for attorneys' fees and costs, allowing only statutory filing and service of process fees. Varonos filed a timely notice of appeal from the final judgment and FMC filed a timely cross-appeal from the denial of its petition for fees and costs. We have jurisdiction under 28 U.S.C. § 1291.

II. DISCUSSION

A. Personal Jurisdiction

1. Illinois Long-Arm Statute

A federal district court in Illinois has personal jurisdiction over a party in a diversity case only if an Illinois court would have such jurisdiction. Fed.R.Civ.P. 4(e); Turnock v. Cope, 816 F.2d 332, 334 (7th Cir.1987). The Illinois long-arm statute, Ill.Rev.Stat. ch. 110, § 2-209 (1987), enumerates a series of acts that provide bases for jurisdiction over a nonresident defendant. A nonresident defendant may be sued in Illinois if (1) he or she performs one of the enumerated acts in Illinois and (2) the minimum contacts with Illinois that due process requires are present. Saylor v. Dyniewski, 836 F.2d 341, 343 (7th Cir.1988); Turnock, 816 F.2d at 334. We consider the two requirements separately. ⁵

The Illinois long-arm statute provides in relevant part that a nonresident defendant submits to the jurisdiction of Illinois courts by committing a tortious act within the state. Ill.Rev.Stat. ch. 110, § 2-209(a)(2). ⁶ FMC contends that the Illinois long-arm statute confers jurisdiction over Varonos because Varonos's actions in carrying out her scheme to defraud FMC constitute "[t]he commission of a tortious act" in Illinois within the meaning of section 2-209. Specifically, FMC claims that the telexes and telecopied monthly reports of expenditures sent by Varonos included material misrepresentations of the amounts required to cover the legitimate expenses of the Athens regional office. FMC argues that Varonos perpetrated a fraud on FMC in Illinois by sending these communications, which she knew contained material misrepresentations, and that FMC was thus induced, to its detriment, to transfer funds to Greece.

Varonos asserts that any tortious acts she may have committed were not committed within Illinois. She claims that the fraudulent invoices, not the communications requesting the transfer of funds, contain the misrepresentations. Varonos argues further that even if FMC relied on her communications to transfer funds from Illinois to Greece, neither she nor her co-conspirators converted the funds because FMC made these transfers to other of its own accounts in Greece. Finally, Varonos contends that even if the telexes and transfers were in furtherance of the scheme to defraud, mere economic loss in Illinois resulting from acts outside of Illinois does not constitute tortious activity in Illinois within the scope of the long-arm statute. We are not persuaded.

Varonos's argument that the misrepresentations were contained in the invoices rather than in the communications that she sent to FMC in Chicago is disingenuous. Although these communications reflected expenditures for some legitimate expenses, they also reflected expenditures for services that the Athens office did not receive. To the extent that the telexes and telecopied reports Varonos sent reflected monies for services never received, the communications clearly contained misrepresentations.

Additionally, Varonos's argument that no conversion occurred is irrelevant to the question of personal jurisdiction in this case. FMC did not include in its second amended complaint any allegations of conversion ⁷ and does not argue that Varonos is subject to jurisdiction on this ground.

Finally, contrary to Varonos's contention, FMC does not seek to predicate jurisdiction on mere economic loss in Illinois but rather claims that Varonos's tortious activities in communicating with FMC in Chicago in furtherance of her scheme to defraud the company bring her within the scope of section 2-209(a)(2).

Varonos relies on Green v. Advance Ross Electronics Corp., 86 Ill.2d 431, 427 N.E.2d 1203, 56 Ill.Dec. 657 (1981), where the Illinois Supreme Court held that a counter-defendant, sued for alleged misappropriations, diversions of corporate assets and breach of fiduciary duties, was not subject to Illinois jurisdiction. The counter-defendant was a Texas resident who had served as an officer and a consultant to a corporation headquartered in Illinois. The dispute involved an employment relationship carried out in Texas and all of the alleged instances of misconduct took place in Texas.

Green, however, is easily distinguished from the present case. In Green, there was no dispute that the counter-defendant's acts and conduct all occurred in Texas and the counter-plaintiff sought to predicate jurisdiction on the fact that the out-of-state actions resulted in a drain on the corporation's Illinois assets. Id. at 435, 427 N.E.2d at 1207, 56 Ill.Dec. at 661. It is true that an effect of Varonos's and her co-conspirators' scheme was to deplete FMC's bank accounts. Unlike the situation in Green, however, FMC does not base its claim of jurisdiction on mere economic loss. Rather, as noted above, FMC argues that Varonos is subject to jurisdiction because she committed tortious activities in Illinois, namely sending communications that she knew to contain material misrepresentations to FMC's Chicago office. Varonos's tortious acts incidentally adversely affected FMC's financial interests. ⁸

We believe that Club Assistance Program, Inc. v. Zukerman, 594 F.Supp. 341 (N.D.Ill.1984), relied on by the district court, provides better guidance than does Green in this case. The defendants in Club Assistance, officers and directors of a California corporation, attempted to conceal their looting and...