Gordon v. Tow

• Decision Date: 25 September 1986
• Docket Number: No. 85-0075,85-0075
• Citation: 148 Ill.App.3d 275,101 Ill.Dec. 394,498 N.E.2d 718
• Parties: , 101 Ill.Dec. 394 Jerome J. GORDON, II, Plaintiff-Appellant, v. Robert Y. TOW, Defendant-Appellee.
• Court: United States Appellate Court of Illinois

Page 718

498 N.E.2d 718

148 Ill.App.3d 275, 101 Ill.Dec. 394

Jerome J. GORDON, II, Plaintiff-Appellant, v. Robert Y. TOW, Defendant-Appellee.

No. 85-0075.

Appellate Court of Illinois First District, Fourth Division.

Sept. 25, 1986.

Barry T. McNamara, and Wayne D. Lipson, Chicago, for plaintiff-appellant.

David F. Graham, Sidley & Austin, Chicago, for defendant-appellee.

Justice McMORROW delivered the opinion of the court:

Plaintiff, Jerome J. Gordon, brought a two-count action against defendant, Robert Y. Tow, the general partner of Matrix Alpha Ltd. (Alpha), a Rhode Island limited partnership. Plaintiff sought rescission of his purchase of a limited partnership interest in Alpha, alleging violations of the Illinois Security Law of 1953 (Ill.Rev.Stat.1983, ch. 121 1/2, par. 137.1 et seq.) and common law fraud. Tow, a Rhode Island resident, moved to dismiss the complaint for lack of in personam jurisdiction. The trial court sustained this motion, holding that Tow had not invoked the benefits and protections of Illinois law and was not engaged in the "transaction of business within this State" within the meaning of the Illinois long-arm statute. (Ill.Rev.Stat.1983, ch. 110, par. 2-209(a)(1).) Gordon appeals, contending that Tow was subject to in personam jurisdiction in Illinois.

We affirm.

BACKGROUND

Robert Tow (Tow) is the president of Matrix Publications, Inc. (Matrix), a Rhode Island corporation located in Providence, Rhode Island, which is primarily engaged in the publication of photography books. Tow, a resident and citizen of Rhode Island, has no office, place of business, bank account, employee or agent in Illinois. In October 1981, Tow and Matrix formed the Alpha limited partnership under the laws of Rhode Island. The Limited Partnership Agreement provides that "the rights and liabilities of the parties shall be determined in accordance with the applicable provisions of the laws of the State of Rhode Island, and this Agreement is intended to be performed in accordance with, and only to the extent permitted by, all applicable laws, ordinances, rules and regulations of such state." The performance of Alpha's business was intended to take place in its principal place of business in Providence, Rhode Island. According to Tow, he intended to restrict the sales of interests in Alpha to Rhode Island residents in order to avoid subjecting those interests to the laws of other states.

On March 29, 1982, Gordon, domiciled in Chicago, Illinois, purchased a limited partnership interest in Alpha for $20,000. On May 2, 1984, Gordon filed a two-count complaint for rescission, alleging that this investment was a "security" within the meaning of the Illinois Security Law of 1953 (Ill.Rev.Stat.1983, ch. 121 1/2, par. 137.2-1) which was not registered in Illinois prior to its sale (Ill.Rev.Stat.1983, ch. 121 1/2, par. 137.5) entitling Gordon to void the transaction. (Ill.Rev.Stat.1983, ch. 121 1/2, par. 137.13.) Gordon further alleged that a prospectus provided by Tow in connection with the sale contained numerous misstatements and omissions which amounted to fraud. Gordon asserted that he had been On June 11, 1984, Tow filed a special and limited appearance and a motion to dismiss Gordon's complaint for lack of personal jurisdiction. Attached to his motion was Tow's affidavit which described his version of the events preceding the sale of the shares in Alpha. According to Tow, he met Gordon in 1980. Gordon obtained his name from Charles Traub, a New York City art instructor who served as a consultant editor for Matrix. At this initial meeting, and at a subsequent meeting in March 1981, Gordon visited Tow in Rhode Island and proposed that Matrix publish Gordon's photography book, but Tow declined the offers both times. Tow's affidavit stated that in the fall of 1981, after the Alpha partnership had been formed, Tow received a telephone call from Traub. Although Traub was not associated with or employed by Alpha, he advised Tow that he, Traub, mentioned Alpha to Gordon, that Gordon seemed interested in investing in the partnership, and that Gordon would subsequently contact Tow. Gordon later telephoned Tow in Rhode Island, expressed a desire to invest in Alpha, requested materials regarding Alpha and again discussed the possibility of Matrix distributing his book. Tow claimed that he did not solicit or communicate with Gordon regarding Gordon's investment in Alpha prior to this telephone conversation. At no time was Tow or any of his agents physically present in Illinois in connection with Tow's transactions with Gordon. Pursuant to Gordon's request, Tow forwarded an Alpha prospectus and other materials to Gordon's investment advisors. Subsequently, Tow mailed other materials regarding Alpha from Rhode Island to Chicago, but all materials which were mailed into Illinois were sent at the request of Gordon or his agents.

[101 Ill.Dec. 396] solicited in Illinois by Tow to purchase the limited partnership interest.

After March 22, 1982, Tow received in Rhode Island a subscription agreement, which was signed by Gordon, accompanied by a $20,000 check, offering to become a limited partner in Alpha. According to Tow, when he received this agreement, it bore only Gordon's signature, and subsequently was signed and accepted by Tow in Rhode Island.

In opposition to Tow's motion to dismiss, Gordon presented his own affidavit as well as those of his two investment advisors and his attorney. According to Gordon's affidavits, Traub introduced him to Tow in 1981 in New York City and they "discussed the possibility of [Gordon's] investment in the limited partnership [Tow] was forming in exchange for [Tow's] publication and/or distribution of [Gordon's] photographic book." Gordon told Tow that he lived in Chicago and that Tow should contact his advisors and attorney in Chicago. In October 1981, Gordon's advisor received in Illinois an Alpha prospectus and limited partnership subscription agreement for a limited partnership interest in Alpha. The affidavits submitted by Gordon further reveal that between November 1981 and March 1982, Tow and Gordon's advisors and attorney were in frequent contact through telephone calls and written correspondence concerning the negotiations for Gordon to invest in Alpha and Matrix's distribution of Gordon's photography book. Accompanying these affidavits were financial materials and advertisements pertaining to Matrix and Alpha which had been sent to Illinois from Rhode Island as well as correspondence between the participants to the negotiations.

Based on the parties' pleadings, documents, affidavits and written and oral argument, the trial court dismissed Gordon's complaint for lack of in personam jurisdiction on December 5, 1984. A timely notice of appeal was filed.

OPINION

The sole issue on appeal is whether the trial court correctly determined that the facts of this case were insufficient to subject Tow to in personam jurisdiction under the "long-arm statute," section 2-209(a)(1) of the Illinois Code of Civil Procedure (Ill.Rev.Stat.1985, ch. 110, par. 2-209(a)(1)) which provides in relevant part:

"(a) Any person, whether or not a citizen or resident of the State, who in person or through an agent does any of the acts hereinafter enumerated, thereby submits such person * * * to the jurisdiction of the courts of this State as to any cause of action arising from the doing of any such acts:

(1) The transaction of any business within this State;

* * *

* * *

(c) Only causes of action arising from acts enumerated herein may be asserted against a defendant in an action in which jurisdiction over him or her is based on this Section."

Initially, we reject the contention that the sole focus is whether Tow had sufficient "minimum contacts" with Illinois so as to comport with the Fourteenth Amendment's due process limitations on a State's jurisdiction over a nonresident defendant. International Shoe Co. v. Washington (1945), 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95, 102.

The Illinois Supreme Court has stated that the "boundaries or limits under our statute are not to be equated with the 'minimum contacts' test under the due process clause." (Cook Associates, Inc. v. Lexington United Corp. (1981), 87 Ill.2d 190, 197, 57 Ill.Dec. 730, 733, 429 N.E.2d 847, 850; see also Green v. Advanced Ross Electronics Corp. (1981), 86 Ill.2d 431, 436, 56 Ill.Dec. 657, 427 N.E.2d 1203.) An invocation of "long-arm" jurisdiction must satisfy two criteria: (1) the statutory requirements of section 2-209 (Ill.Rev.Stat.1985, ch. 110, par. 2-209), and if the requirements of section 2-209 are met, (2) the constitutional requirements of due process. (Financial Management Services, Inc. v. Sibilsky and Sibilsky, Inc. (1985), 130 Ill.App.3d 826, 832-33, 86 Ill.Dec. 100, 474 N.E.2d 1297.) "Clearly, if jurisdiction is not found to be proper under the long-arm statute, there is no need to determine whether jurisdiction is constitutionally permissible." R.W. Sawant & Co. v. Allied Programs Corp. (1986), 111 Ill.2d 304, 311, 95 Ill.Dec. 496, 500, 489 N.E.2d 1360, 1364.

Where a plaintiff seeks to exert in personam jurisdiction over a nonresident defendant pursuant to the long-arm statute and the defendant denies the existence of jurisdiction, the burden of establishing a valid basis for jurisdiction rests with the party who seeks to establish its existence. (R.W. Sawant & Co. v. Allied Programs Corp. (1986), 111 Ill.2d 304, 310, 95 Ill.Dec. 496, 499, 489 N.E.2d 1360, 1363.) While even a single transaction may suffice for jurisdiction, that transaction must: "(1) give rise to the cause of action and (2) be one by which the defendant purposefully avails [himself] of the privilege of conducting activities within the forum State and voluntarily invokes the benefits and protections of the State's laws." Conroy v. Andeck Resources, Ltd. (1985), 137 Ill.App.3d 375, 388-89, 92 Ill.Dec. 10, 21, 484 N.E.2d 525,...