Cross v. Simons

• Decision Date: 11 May 1989
• Docket Number: No. 87 C 1835.,87 C 1835.
• Citation: 729 F. Supp. 588
• Parties: Raymond CROSS, Plaintiff, v. John SIMONS and Francisco Jacobs Valenzuela, Defendants.
• Court: U.S. District Court — Northern District of Illinois

729 F. Supp. 588

Raymond CROSS, Plaintiff, v. John SIMONS and Francisco Jacobs Valenzuela, Defendants.

No. 87 C 1835.

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

April 18, 1989.

On Motion to Alter or Amend Ruling May 11, 1989.

COPYRIGHT MATERIAL OMITTED

Malachy J. Cochlan & Assoc., Chicago, Ill., for plaintiff.

Dan K. Webb, Steven F. Molo, Peter C. McCabe, III, Julie A. Bauer, Winston & Strawn, Chicago, Ill., for defendants.

MEMORANDUM OPINION AND ORDER

ANN C. WILLIAMS, District Judge.

The plaintiff Raymond Cross brings this five count complaint against the defendants John Simons and Francisco Jacobs Valenzuela alleging violations of Illinois law and of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961-1968. The defendants move to dismiss the claims against them pursuant to Federal Rules of Civil Procedure 12(b)(2) and 12(b)(6). The court grants relief as follows.

I

Rule 12(b)(2)

The defendants move to dismiss the claims against them for lack of jurisdiction pursuant to Rule 12(b)(2).¹ When ruling on this motion, "the court must accept all undenied factual allegations and resolve all factual disputes in favor of the party seeking to establish jurisdiction." Saylor v. Dyniewski, 836 F.2d 341, 342 (7th Cir. 1988). Accordingly, any conflicts in the parties' affidavits will be resolved in Cross' favor. Turnock v. Cope, 816 F.2d 332, 333 (7th Cir.1987). In addition, "the allegations in his complaint are to be taken as true unless controverted by the defendants' affidavits." Id. (emphasis added). Cross "has the burden of providing sufficient evidence to establish a prima facie case of personal jurisdiction" with regard to each cause of action. Id. at 333-34; Club Assistance Program Inc. v. Zukerman, 594 F.Supp. 341, 345 (N.D.Ill.1984). As the Seventh Circuit has held, this court will have "`personal jurisdiction over a party in a diversity case only if an Illinois court would have such jurisdiction.'" John Walker and Sons, Ltd. v. DeMert & Dougherty, Inc., 821 F.2d 399, 401 (7th Cir.1987), quoting Jacobs/Kahan & Co. v. Marsh, 740 F.2d 587, 589 (7th Cir.1984); Fed.R.Civ.P. 4(e).

The pertinent background facts are as follows. The plaintiff Cross is a citizen of Illinois. The defendant Simons is a citizen of Wyoming and Valenzuela, a resident of Texas, is a citizen of Mexico. John Karstrom, Jr., on Cross' behalf, contacted Simons in late November or early December of 1983 and requested information on the availability of mining properties.² Simons' Affidavit, ¶ 2. Karstrom stated that he acted on behalf of himself and an "associate." This was the first contact between the parties regarding the Guazapares mining property at issue in this case. Cross and Karstrom, at their request, met with Simons in Tuscon, Arizona on May 7, 1984. Id. In May of 1984, the defendants mailed the final draft of the agreement from El Paso to Cheyenne and finally to Cross in Chicago. Under the terms of the agreement, Cross would receive sole and exclusive rights to mine and sell the minerals at the Guazapares project. The defendants would be compensated in return for their contributions of knowledge and assistance. The agreement was signed by the defendants before it reached Cross in Chicago. The defendants later sent a signed addendum to the agreement to Cross. The addendum required the parties to open a bank account in El Paso, Texas. Valenzuela was given the duty of personally verifying the deposits. Simons traveled to Chicago to meet with Cross on three occasions to discuss the parties' agreement. These visits occurred in August of 1985 and in August and October of 1986. Id. at ¶ 3. Between May of 1984 and December of 1986, Cross had telephone contact with Valenzuela concerning the mining venture. Cross' Affidavit, ¶ 3.

Cross asserts that this court has personal jurisdiction over the defendants pursuant to the provisions of the Illinois Long-Arm Statute, Ill.Rev.Stat. ch. 110, ¶ 2-209. To establish personal jurisdiction, Cross must show that the defendants engaged in one of the enumerated jurisdictional acts, that the cause of action alleged arose from the jurisdictional act, and that the exercise of long-arm jurisdiction is consistent with the constitutional requirements of due process. Jacobs/Kahan & Co. v. Marsh, 740 F.2d 587, 590 (7th Cir.1984).³

a. Transaction of Business

Illinois courts have considered a number of factors when determining whether out-of-state defendants have transacted business within Illinois. For example, courts consider which party solicited the contract and where the contract was solicited, negotiated, executed, and substantially performed. See United Federal Savings Bank v. McLean, 694 F.Supp. 529, 533 (C.D.Ill.1988) (and cases cited within); Konicki v. Wirta, 169 Ill.App.3d 21, 119 Ill.Dec. 692, 696, 523 N.E.2d 160, 164 (2d Dist.1988). The courts also determine whether the defendants sought the benefits and protections of Illinois law by, for example, selecting Illinois law with a choice of law provision in their agreement. Id. Finally, the defendants' contacts with the state are noted. These contacts include visits, telephone calls, and any other regular activity in the state. Id. Finally, the court must focus on the acts of the defendants. Afirm, Inc. v. Frazee Paint & Wallcovering Co., 624 F.Supp. 973, 976 (N.D.Ill.1985) (Aspen, J.); Maurice Sternberg, Inc. v. James, 577 F.Supp. 882, 885 (N.D.Ill.1984) (Grady, J.); Gordon, 101 Ill. Dec. at 398, 498 N.E.2d at 722.

There are insufficient facts to support a finding that the defendants transacted business in this case. The plaintiff solicited the agreement in either Cheyenne or Tuscon. The contract was negotiated, executed, and substantially performed by the defendants outside of Illinois. Even if the agreement was substantially performed in Illinois as Cross contends, this "would not appear to be sufficient, alone, for this Court to find in personam jurisdiction over the Defendants." McLean, 694 F.Supp. at 535; see also J.J. & J. Foundation Co., Inc. v. Tommy Moore, Inc., 640 F.Supp. 1119, 1122 (N.D.Ill.1986) (Nordberg, J.) ("a corporation does not `transact business' in Illinois when it merely enters a contract which provides that the plaintiff must perform in part in Illinois.").

Furthermore, the defendants did not seek the benefits and protections of Illinois law through a choice of law provision. In addition, Simons' three Illinois visits were made after the parties' agreement was executed. See Woodfield Ford, Inc. v. Akins Ford Corp., 77 Ill.App.3d 343, 32 Ill.Dec. 750, 755, 395 N.E.2d 1131, 1136 (1st Dist. 1979). These visits are immaterial because Cross' causes of action arose out of the parties' agreement. Valenzuela never visited Illinois. His "mere communication with Cross by interstate telephone or mail service does not significantly aid jurisdiction." Felicia, Ltd. v. Gulf American Barge, Ltd., 555 F.Supp. 801, 805 n. 9 (N.D. Ill.1983) (Shadur, J.). Consequently, the court finds that the defendants did not transact business for the purposes of Illinois' long-arm statute. See Konicki, 119 Ill.Dec. at 696, 523 N.E.2d at 164; Woodfield Ford, 32 Ill.Dec. at 755, 395 N.E.2d at 1136 (citing to Artoe v. Mann, 36 Ill.App.3d 204, 343 N.E.2d 647 (1st Dist.1976)) ("the mere receipt of a formal purchase order by mail in Illinois was not a sufficient contact where the plaintiff had initiated the transaction by visiting the defendant's out-of-state office, in spite of numerous phone calls between the parties, some of which originated out of state."); Gordon, 101 Ill. Dec. at 398-99, 498 N.E.2d at 722-23.

b. The Commission of a Tortious Act

Cross also asserts that the defendants have brought themselves within the reach of the long-arm statute by committing a tortious act within Illinois. See Ill. Rev.Stat., ch. 110, ¶ 2-209(a)(2). The defendants, according to Cross, committed a tortious act by mailing the agreement and addendum to him in Chicago. This agreement, which is allegedly replete with misrepresentations, led to the loss of Cross' funds. See Cross' Memorandum in Opposition to the Defendants' Amended Motion to Dismiss at 3. Under Illinois law, a tort occurs where the injury occurs. See, e.g., McBreen v. Beech Aircraft Corp., 543 F.2d 26, 28 (7th Cir.1976). However, "an Illinois court does not acquire jurisdiction under the `last act' doctrine simply because an economic loss is felt in Illinois when all the conduct contributing to the injury occurred outside Illinois." Turnock, 816 F.2d at 335. Still, "mailing (or causing mailing of) money or messages to Illinois, coupled with defendant's intent to affect Illinois interests, has consistently been held to satisfy the requirements of Section 2-209." Club Assistance, 594 F.Supp. at 346-47; Turnock, 816 F.2d at 335. The defendants mailed the agreement to Illinois with the intent of affecting Cross' interests. Consequently, they have committed a tortious act in Illinois.⁴

The court must now determine whether the causes of action alleged arose from the tortious act.⁵ The common law fraud claim alleged in Count I clearly arose from the parties' agreement. Two of the three RICO claims also arise from the defendants' actions. In Count III, Cross alleges that the defendants conducted the affairs of the Navojoa Mining Enterprise through a pattern of racketeering. 18 U.S.C. § 1962(c). The acts of mail and wire fraud alleged as predicate acts occurred, in part, within Illinois. See Complaint, ¶¶ 112, 113. See Club Assistance, 594 F.Supp. at 349. In Count V, Cross alleges that the defendants acquired an interest in or control of the Navojoa Mining Enterprise through a pattern of racketeering. 18 U.S.C. § 1962(b). The defendants' use of the proceeds from the pattern of racketeering to acquire an interest in or maintain control of Navojoa, a Mexican mining corporation, does not provide this court with personal jurisdiction over them. Id. Cross "does not allege...