Bodine's, Inc. v. Sunny-O, Inc.

• Decision Date: 23 May 1980
• Docket Number: No. 79 C 4272.,79 C 4272.
• Citation: 494 F. Supp. 1279
• Parties: BODINE'S, INC., an Illinois Corporation, Plaintiff, v. SUNNY-O, INC., a Foreign Corporation, Defendant.
• Court: U.S. District Court — Northern District of Illinois

494 F. Supp. 1279

BODINE'S, INC., an Illinois Corporation, Plaintiff, v. SUNNY-O, INC., a Foreign Corporation, Defendant.

No. 79 C 4272.

United States District Court, N. D. Illinois, E. D.

May 23, 1980.

Henry C. Krasnow and Joseph M. Cotugno, Mandel, Lipton, and Stevenson, Robert H. Krasnow, Chicago, Ill., for plaintiff.

Shalom L. Kohn and Henry L. Mason III, Sidley & Austin, Chicago, Ill., Carlton, Fields, Ward, Emmanuel, Smith & Cutler, Tampa, Fla., for defendant.

MEMORANDUM OPINION AND ORDER

ASPEN, District Judge:

This action arises out of the purchase by plaintiff of orange juice concentrate from defendant Sunny-O, Inc. ("Sunny-O") through the auspices of an independent broker, Pilgrim Marketing, Inc. ("Pilgrim"). The complaint states that during 1978, Bodine's, Inc. ("Bodine's"), a manufacturer and distributor of orange juice and orange juice concentrates, placed a purchase order for "Grade A" orange juice concentrate with Pilgrim, a broker and distributor of orange juice products. Pilgrim then contacted Sunny-O, a manufacturer of citrus products, which agreed to sell "Grade A" orange juice concentrate to Bodine's. Bodine's arranged for shipment of the concentrate "F.O.B. Lakeland," and plaintiff received delivery of the goods by common carrier in Chicago. Plaintiff alleges that although it had contracted for "Grade A" concentrate and the concentrate containers were so labeled, in fact the concentrate was of an inferior quality due to the high percentage of wash pulp solids contained therein.

As a result, plaintiff filed this diversity action seeking recovery of $250,000 in damages under theories of breach of express and implied warranties, and of tortious fraud. In addition, based on the allegation that the tortious conduct was willful, wanton, and malicious, plaintiff seeks an additional $500,000 in punitive damages. The case now is before the Court on defendant's motion to dismiss for lack of personal jurisdiction pursuant to Fed.R.Civ.P. 12(b)(2) or, in the alternative, to transfer of venue of this action to the United States District Court for the Middle District of Florida (Tampa Division) under 28 U.S.C. § 1404(a). Inasmuch as the Court would be powerless to transfer venue in the absence of valid personal jurisdiction over the defendant, the Court first will address defendant's motion directed to jurisdiction.

I. The Illinois Long-Arm Statute

From the undisputed facts as they appear at this early stage of the proceedings, it is evident that the defendant's presence in Illinois is not such that jurisdiction could attach on the basis of its conduct of a continuous and systematic course of business in the State. Lindley v. St. Louis-San Francisco Railway Co., 407 F.2d 639, 641 (7th Cir. 1968); Braband v. Beech Aircraft Corporation, 51 Ill.App.3d 296, 298, 9 Ill. Dec. 684, 367 N.E.2d 118 (1st Dist. 1977). Defendant is a Florida corporation with its sole place of business in Lakeland, Florida. It has no employees or agents working in Illinois, does not advertise or otherwise solicit business in Illinois, and has dealt with no Illinois corporation other than Bodine's. Thus, if personal jurisdiction over the defendant exists in this case, it does so by virtue of the Illinois Long-Arm Statute.¹

A review of the relevant authority has convinced the Court that section 17(1)(b) of the Illinois act confers it with personal jurisdiction over the defendant on the tortious fraud claim. In Gray v. American Radiator & Standard Sanitary Corp., 22 Ill.2d 432, 176 N.E.2d 761 (1961), the Illinois Supreme Court reached a similar conclusion on facts indistinguishable in principle from those in the instant case. In Gray, an Illinois resident injured by the explosion of a water heater sued both the distributor of the water heater and the foreign corporation that had constructed the safety valves which allegedly were defective. At the outset, the court observed that in construing the reference in section 17(1)(b) to a "tortious act," the situs of a tort is to be governed by place of the last event necessary to render the actor liable — which in most instances is the place of the injury. 176 N.E.2d at 762-763. Thus, the court concluded that since plaintiff had been injured in Illinois as the consequence of defendant's negligence, defendant had committed a tortious act in Illinois within the meaning of section 17(1)(b).

The court observed, however, that the commission of such an act could justify the extension of personal jurisdiction over a foreign party only if to do so would not offend basic notions of due process. "The relevant inquiry is whether defendant engaged in some act or conduct by which he may be said to have invoked the benefits and protections of the law of the forum." Id. 176 N.E.2d, at 765. In examining the facts therein, the court noted that the foreign defendant had manufactured the safety valve with the intent that it be distributed in Illinois. For this reason, the court found it irrelevant that "the purchase was made from an independent middleman or that someone other than the defendant shipped the product into this State." Id. 176 N.E.2d, at 766. The court also observed that by intentionally distributing its product in Illinois, the foreign corporation "has undoubtedly benefitted, to a degree, from the protection" of Illinois law. Therefore, the court concluded that "as a general proposition, if a corporation elects to sell its products for ultimate use in another State, it is not unjust to hold it answerable there for damage caused by defects in those products." Id.

Similarly, to the extent that plaintiff has suffered injury from the tortious conduct alleged, that injury has occurred in Illinois.² Thus, defendant herein has committed a tortious act within the meaning of the Illinois Long-Arm Statute. Moreover, the Court believes that it would not offend due process to require defendant to make his defense in this forum. As did the foreign defendant in Gray, Sunny-O intentionally distributed its product to an Illinois resident. For the purposes of section 17(1)(b), it is immaterial that defendant received the purchase order through an independent broker, or that risk of loss shifted to the plaintiff when delivery of the order was made to the common carrier in Lakeland.

Defendant seeks to avoid the result dictated by Gray on several grounds. First, Sunny-O argues that place of injury interpretation of tortious conduct should not obtain where the injury suffered is economic rather than physical. For this proposition defendant relies solely on a stray statement made without supporting citation in Gates Rubber Co. v. USM Corp., 351 F.Supp. 329, 338 (S.D.Ill.1972), rev'd on other grounds, 508 F.2d 603 (7th Cir. 1975), which indicated that where fraudulent misrepresentations allegedly had originated in New York, the cause of action arose in New York rather than in Illinois, the situs of the injury. From the context of this statement, however, it is clear that the court was addressing a choice of law question rather than interpreting section 17(1)(b). Indeed, the statement in Gates is consistent with the Illinois rule that the place of the act which forms the basis of the tort governs the question of whether the conduct constitutes a tort. I.L.P. Torts § 6 at 358. Moreover, courts construing section 17(1)(b) consistently have declined to distinguish between economic and physical injury. See e. g. Honeywell, Inc. v. Metz Apparatewerke, 509 F.2d 1137, 1142 (7th Cir. 1975) (patent infringement); Southeast Guaranty Trust Co., Ltd. v. Rodman and Renshaw, Inc., 358 F.Supp. 1001, 1009 (N.D.Ill.1973) (fraudulent misrepresentation).³ Thus, the Court finds no basis for treating differently economic and physical injury under section 17(1)(b).

Second, defendant argues that the exercise of personal jurisdiction would be inappropriate under the most recent Supreme Court pronouncement in this area, World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980). In that case, the plaintiffs, residents of New York, had purchased a new Audi automobile from a New York dealer in 1976. The next year, while driving through Oklahoma en route to their new home in Arizona, they suffered a rear end collision resulting in a fire and severe injury to various members of the family. Plaintiffs thereafter filed suit in Oklahoma state court against the manufacturer; the importer, Volkswagen, Inc.; the regional distributor, World-Wide Volkswagen, Inc.; and the retailer, Seaway Volkswagen, Inc. Although neither World-Wide nor Seaway had carried on any activity whatsoever in Oklahoma, the state courts upheld the exercise of personal jurisdiction on the ground that it was foreseeable that the automobile would be used in Oklahoma.

On review, the Supreme Court reversed, rejecting the view that jurisdiction could be premised on "one, isolated occurrence and whatever inferences can be drawn therefrom: the fortuitous circumstance that a single Audi automobile, sold in New York to New York residents, happened to suffer an accident while passing through Oklahoma." Id. at 566. (Emphasis supplied.) The Court observed that for purposes of due process it is irrelevant whether a party could foresee that its product might wend its way into the forum state. "Rather, it is relevant that the defendant's conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there." Id. at 567. The Court, as did the Illinois Supreme Court in Gray, observed that such foreseeability exists when a party "purposefully avails itself of the privilege of conducting activities within the forum State." Id., citing Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1239, 2 L.Ed.2d 1283 (1958). The Court then stated:

Hence if the sale of a product of a manufacturer or distributor such as Audi or Volkswagen is not simply an isolated occurrence, but arises from the efforts of the

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