Hyatt Intern. Corp. v. Coco

Decision Date03 September 2002
Docket NumberNo. 01-1709.,01-1709.
Citation302 F.3d 707
PartiesHYATT INTERNATIONAL CORP., et al., Plaintiffs-Appellants, v. Gerardo COCO, et al., Defendants-Appellees.
CourtU.S. Court of Appeals — Seventh Circuit

Mark P. Miller (argued), Wildman, Harrold, Allen & Dixon, Chicago, IL, for Plaintiffs-Appellants.

Jonathan G. Bunge (argued), Chicago, IL, for Defendants-Appellees.

Before ROVNER, DIANE P. WOOD, and WILLIAMS, Circuit Judges.

DIANE P. WOOD, Circuit Judge.

It has become commonplace to observe that the world is getting smaller and that boundary lines between one country and the next have become blurred, if not nonexistent. Yet those boundary lines still exist, and one of their more important functions is to allocate litigation among the several national court systems. This can be tricky, if a business relationship that has flowed seamlessly from one country to another goes sour. We have just such a case. Gerardo Coco, an Italian businessman who had dealings with Hyatt International Corporation. (Hyatt) in Chicago concerning a property in Italy, is fighting Hyatt's effort now to hale him into the U.S. courts to resolve some disputes that have arisen. His challenge to that attempt prevailed in the district court, but we conclude that the case should not have been dismissed for lack of personal jurisdiction, and we therefore remand for further proceedings.


Coco is a director and employee of A.T.E. Holdings, Limited, and of A.T.E. Italia, S.r.l. (collectively A.T.E.). A.T.E. Holdings, Limited, is a business organized under the laws of England with its principal place of business in London; A.T.E. Italia, S.r.l., is a business organized under the laws of Italy, with its principal place of business in Milan.

Through the A.T.E. entities, Coco enters into ventures for the development of real estate in the hospitality industry. He provides a full range of services as a developer, investor, broker, or even contractor for hotel properties. It was in these capacities that he was approached in 1999 by the English entity Newpenny, Limited (Newpenny), which had an option to purchase a real estate parcel suitable for a hotel in downtown Milan. Newpenny asked Coco to facilitate its development of the parcel by finding investors willing to commit resources to the project. Thinking he might find an interested party in Hyatt, Coco sent a fax to Michael Evanoff, Hyatt's Vice President of Development, at Hyatt's Chicago headquarters. Evanoff, apparently intrigued by the opportunity, responded positively, and later he met with Coco to discuss the incipient project over dinner in London. At that time, Coco unequivocally stated that he was acting merely as an agent of Newpenny, and accordingly was not seeking a commission or broker's fee from Hyatt. Evanoff confirmed Hyatt's interest in a possible deal.

Flurries of faxes and phone calls between Milan and Chicago followed, and Coco even visited Evanoff at Hyatt's Chicago headquarters on one occasion in connection with the proposed deal. The parties' initial discussions contemplated an agreement whereby Hyatt would own 50% of the equity in the project, and Coco and Newpenny would own 20%. But despite these promising efforts, that agreement fell apart, and on July 7, 1999, Hyatt went ahead solo in the development of what will soon open as the Park Hyatt Milan. At that point, Coco re-entered the picture and claimed that Hyatt owed him a broker's fee for the work that he performed that ultimately led to Hyatt's project. Hyatt took the opposite position, claiming that Coco had expressly disclaimed any right to such a fee.

Coco responded with two arguments. First, he referred to a supposed promise that Hyatt made to him during one of the final meetings in Milan, when Hyatt expressed its desire to undertake the development without any assistance. This promise, he claimed, was backed by a later recommendation that he be provided a "$1,000 per key finders' fee," as is supposedly customary, at least overseas. He further argued that Hyatt could not have finalized this deal but for Coco's involvement, and he was accordingly entitled to some remuneration for his efforts. He attempted to reconcile this position with his earlier disclaimer of any right to a fee by asserting that the no-fee arrangement was effective only so long as there was some understanding between the parties that a partnership would ultimately be formed; once Hyatt took off on its own, he said, his status was transformed into that of a de facto broker.

More correspondence flowed between Chicago and Milan, and Coco threatened to sue Hyatt in Milan for the fee he was owed. After a few such threats, Hyatt filed an action under 28 U.S.C. § 2201 in the Northern District of Illinois seeking a declaratory judgment that it had no obligation to pay Coco and his entities any fee or commission in connection with the hotel development. Shortly thereafter, Coco filed the threatened suit in the Civil Court of Milan seeking payment for his services.

While pursuing the currently pending Italian litigation, Coco and A.T.E. moved to dismiss the Illinois litigation on three grounds: lack of personal jurisdiction, forum non conveniens, and the impropriety of a declaratory judgment in this matter. The district court agreed with the defendants on the first point, finding that even though Coco had sufficient contacts with Illinois throughout the "partnership" part of the deal, the transaction out of which he was asking for the fee was a separate event that took place entirely outside of Illinois. Pursuant to the "transaction of business" provision of the Illinois long-arm statute, the district court dismissed the action for lack of personal jurisdiction.

A. Impropriety of Declaratory Judgment

Because Coco's argument concerning the propriety of Hyatt's effort to obtain a declaratory judgment potentially implicates the district court's jurisdiction, we choose to address it first (recognizing that the option is ours, under Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 578, 119 S.Ct. 1563, 143 L.Ed.2d 760 (1999)). The question, in short, is whether Hyatt is impermissibly seeking an advisory opinion about its obligation to pay fees to Coco. If it is, then we would have to dismiss the suit for lack of a proper Article III case or controversy. If not, or at a minimum if the record requires further development on this point, dismissal on that ground would be premature.

Declaratory judgment actions serve an important role in our legal system insofar as they permit prompt settlement of actual controversies and establish the legal rights and obligations that will govern the parties' relationship in the future. See Edwin Borchard, Declaratory Judgments 107 (1934). On the other hand, there is no doubt that the declaratory judgment mechanism can be abused. As we commented in Hoover v. Wagner, 47 F.3d 845 (7th Cir.1995), "[d]eclaratory relief is discretionary in a strong sense, but that is probably because it is often used to seize the forum from the natural plaintiff." Id. at 850 (citations and emphasis omitted). In this case, the natural plaintiff is Coco: it is he who claims a right to a fee from Hyatt, and Hyatt that claims it has no such obligation. Furthermore, Hyatt's action does not fit particularly well within the usual declaratory judgment pattern, under which the "natural" defendant wants to proceed with a business opportunity — e.g., the production of widgets — but it is impeded because of a lack of clarity as to its legal rights, fearing something like a possible patent infringement suit. See 10B Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure, § 2751, pp. 455-56 (3d ed.1998). It is hard to see what harm Hyatt would have suffered by waiting for Coco to sue, other than the normal uncertainty a defendant experiences while the statute of limitations is running and there is a possibility of a later obligation to pay money damages. Early resolution of a threat of litigation, in a friendly forum, is no doubt of value to a potential defendant, but the statute requires an "actual" controversy. That is easily seen in the patent example cited above, because the natural defendant is prevented from engaging in some extra-judicial conduct (that the law does not aim to discourage) as long as its patent rights are unclear.

Indeed, it is not just § 2201 that requires an "actual" controversy. As we have already noted, a declaratory action, like any other action, must satisfy Article III, which allows federal courts to act only in the event of actual "cases and controversies." See Maryland Cas. Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273, 61 S.Ct. 510, 85 L.Ed. 826 (1941). The declaratory judgment plaintiff must be able to show that the feared lawsuit from the other party is immediate and real, rather than merely speculative. Lake Carriers' Ass'n v. MacMullan, 406 U.S. 498, 506-07, 92 S.Ct. 1749, 32 L.Ed.2d 257 (1972); Norfolk Southern Ry. Co. v. Guthrie, 233 F.3d 532, 534-35 (7th Cir.2000). Hyatt's evidence on these points was thin, at least until Coco proved its prediction right by filing his Italian action. Until it sued Coco in the Northern District of Illinois, it was possible that Coco's repeated threats to sue Hyatt in Italy were no different from those of many other disgruntled co-venturers. If anything, Coco's delay in instituting his threatened suit suggests that the prospect of litigation was unclear. On the other hand, because the district court did not reach this question, we may not have all the relevant facts. We do not know, for example, whether under Italian law a broker has any kind of lien on the property or other powers to disrupt the business of Hyatt's new hotel in Milan. If that were the case, then Hyatt's action bears a closer resemblance to other declaratory judgment suits in which the declaration of rights is a bona fide...

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