Illinois Commerce Com'n v. Entergy-Koch

• Decision Date: 21 December 2005
• Docket Number: No. 1-05-0552.,1-05-0552.
• Citation: 841 N.E.2d 27
• Parties: ILLINOIS COMMERCE COMMISSION, Petitioner-Appellee, v. ENTERGY-KOCH TRADING, LP, Respondent-Appellant.
• Court: Illinois Supreme Court

841 N.E.2d 27

ILLINOIS COMMERCE COMMISSION, Petitioner-Appellee, v. ENTERGY-KOCH TRADING, LP, Respondent-Appellant.

No. 1-05-0552.

Appellate Court of Illinois, First District, Fourth Division.

November 17, 2005.

Rehearing Denied December 21, 2005.

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DLA Piper Rudnick Gray Cary US LLP, Chicago, Christopher J. Townsend, Kenneth L. Schmetterer, Christopher N. Skey, for Appellant.

Lisa Madigan, Attorney General, Chicago, John P. Kelliher, Special Assistant Attorney General, for Appellee.

Justice GREIMAN delivered the opinion of the court:

Respondent Entergy-Koch Trading, LP, appeals from the circuit court's denial of its motion to dismiss the Illinois Commerce Commission's (ICC) application to compel the production of certain documents and recordings for an administrative proceeding to which respondent is not a party. Respondent also appeals from the circuit court's holding, pursuant to its dismissal order, that respondent is subject to the jurisdiction of Illinois courts. For the reasons that follow, we affirm.

Respondent is a limited partnership entity which is wholly owned by another limited partnership, Entergy-Koch, LP (EKLP), and until 2004 functioned as a wholesale energy trading and consulting company. Respondent was incorporated in Delaware and its principal place of business is Houston, Texas. EKLP represents a limited partnership between Entergy Corporation, with its principal place of business in New Orleans, Louisiana, and Koch Energy, Inc., with its principal place of business in Wichita, Kansas.

In October 2000, Koch Energy Trading, Inc., a subsidiary of Koch Energy, Inc., merged with IMD Storage Transportation and Management (IMD). In February 2001, Koch Energy Trading was merged with respondent. Between August 1999 and November 2000, IMD was registered in Illinois as a foreign limited liability company and had an Illinois registered agent.

Between 1999 and 2003, respondent and IMD entered into contracts with Northern Illinois Gas Company (NICOR) for consultation services in connection with NICOR's Gas Cost Performance Program (Program), which allowed the company to share in any savings it achieved through procuring natural gas on the open market as measured against financial benchmarks established by the ICC. Specifically, respondent and IMD received payment from NICOR for proposing strategies on the storage of its acquired gas supplies. In February 2001, the services performed by IMD were transferred to respondent. NICOR's working relationship with respondent encompassed approximately 80 contracts, letter agreements, modifications and written strategies. Under those agreements respondent developed, marketed to, and implemented supply, storage and risk management strategies on behalf of NICOR in order to maximize NICOR's profits under the Program. Some of the major agreements were drafted primarily in Illinois and contained Illinois choice of law provisions. In the performance of those contracts, respondent's personnel would travel to Illinois to meet in person with NICOR personnel, speak by telephone, and correspond by mail. Respondent staged several presentations in Illinois relating to its working relationship with NICOR, and between 1999 and 2003, NICOR tendered $6.7 million in fees to respondent.

The ICC opened investigations into NICOR's activities under the Program to determine whether the rates NICOR charged to Illinois consumers were just and reasonable. As part of the proceedings, in July 2004, the ICC issued administrative subpoenas for certain materials in respondent's possession relating to the rates charged by NICOR to consumers under the Program, specifically recordings of telephone calls and business documents pertaining to the consulting services respondent provided to NICOR from 1999 to 2003. Respondent failed to comply with the subpoenas, and the ICC filed an application to compel their enforcement in November 2004.

Respondent filed a motion to dismiss for lack of personal jurisdiction pursuant to section 2-301 of the Code of Civil Procedure (735 ILCS 5/2-301 (West 2004)). Respondent argued that the ICC's application to compel failed to allege personal jurisdiction and that no provision existed in the Illinois long-arm statute (735 ILCS 5/2-209 (West 2004)) that would confer jurisdiction. Respondent asserted that it was a foreign entity without a registered agent, office, principal place of business, affiliates, or parent entities located in Illinois. Respondent also asserted that it had no contacts or bank accounts in Illinois, nor was it licensed or admitted to do business in the state, nor did it have any employees or property or pay taxes in Illinois.

Respondent admitted that it had entered into contracts with NICOR, an Illinois entity, for the transportation, storage, distribution, and financial trades of natural gas supplies, but argued that the negotiation, substantial performance, and execution of those contracts occurred at its place of business in Texas. Respondent also asserted that the mere possession of the documents and recordings sought by the ICC was insufficient to confer jurisdiction to Illinois courts and that it did not have sufficient minimum contacts with NICOR to submit it to the jurisdiction of Illinois courts. Lastly, respondent contended that it never purposefully availed itself of the privilege of doing business in Illinois and that the subject matter of the ICC's application to compel did not arise from its contacts with Illinois.

In a written order, the circuit court denied respondent's motion and found that the evidence weighed in favor of jurisdiction over respondent, pursuant to section 2-209(a)(7) of the long-arm statute, under which foreign corporate defendants in causes of action arising from the making or performance of contracts connected with Illinois are subject to the jurisdiction of Illinois courts. 735 ILCS 5/2-209(a)(7) (West 2004). The court relied on the facts that IMD had preceded respondent in the agreement to and execution of the contracts with NICOR, that the contracts were at least partly performed in Illinois, that respondent had engaged in solicitation efforts to secure the agreements, and that the ICC subpoenas related to NICOR's activities relating to the Program.

The court also found jurisdiction proper pursuant to section 2-209(a)(1), which confers jurisdiction over causes of action that arise from the transaction of business in Illinois. 735 ILCS 5/2-209(a)(1) (West 2004). The court noted that, as a result of its contractual relationship with NICOR, respondent was involved in the execution of and was paid for services in connection with NICOR's Program, and made continuous and systematic business communications in Illinois, both in person and electronically.

The circuit court determined that Illinois jurisdiction did not violate due process because respondent had the requisite minimum contacts within Illinois by means of actively marketing its services to NICOR, continuously communicating with NICOR, and remitting invoices to and accepting payment from NICOR, such that respondent had fair warning that it might be subject to litigation in Illinois at some point in time. The court noted that the agreements between respondent and NICOR specifically incorporated the terms of the agreements between NICOR and IMD, that payments were to be remitted to the same bank account that IMD had used, and that a majority of the agreements between respondent and NICOR contained provisions stating that Illinois law would govern them and that disputes would be litigated in Illinois. The court therefore found that respondent had derived financial benefits from its activities with an Illinois entity and took advantage of the benefits and protections of Illinois law such that it had submitted itself to the jurisdiction of Illinois courts.

Respondent sought an order from the circuit court to certify the issue of personal jurisdiction for interlocutory appeal, pursuant to Supreme Court Rule 308. 155 Ill.2d R 308. The circuit court denied respondent's motion. Respondent thereafter filed a petition in this court for leave to file an interlocutory appeal pursuant to Supreme Court Rule 306(a)(3). 166 Ill.2d R 306(a)(3). We granted the petition and now affirm.

Respondent contends on appeal that the circuit court's ruling was erroneous because the ICC's application to compel the production of the records it seeks did not allege a prima facie basis for personal jurisdiction over respondent; because there is no connection between respondent's business activities in Illinois with NICOR and the instant cause of action, i.e. the ICC's application to compel production; and because the exercise of Illinois jurisdiction over respondent would violate due process.

A plaintiff has the burden of establishing prima facie bases for exercising a court's in personam jurisdiction over a defendant. Haubner v. Abercrombie & Kent International, Inc., 351 Ill.App.3d 112, 117, 285 Ill.Dec. 884, 812 N.E.2d 704 (2004). A plaintiff's prima facie case may be rebutted by a defendant's uncontradicted evidence that defeats jurisdiction. Alderson v. Southern Co., 321 Ill.App.3d 832, 846, 254 Ill.Dec. 514, 747 N.E.2d 926 (2001). Where a circuit court determines jurisdiction based on documentary evidence, we review the court's decision de novo. Alderson, 321 Ill.App.3d at 846, 254 Ill.Dec. 514, 747 N.E.2d 926.

Respondent first contends that the ICC's application to compel failed to plead allegations establishing the circuit court's jurisdiction over respondent and that such an omission is fatal to the application. A plaintiff must allege facts in its initial complaint upon which to base the relevant court's jurisdiction over a nonresident defendant under the long-arm statute. Heller Financial, Inc. v. Conagra, Inc., 166 Ill.App.3d 1, 4, 117 Ill.Dec. 571, 520 N.E.2d 922 (1988).

The ICC's application stated...