Jacobs/Kahan & Co. v. Marsh

• Decision Date: 06 August 1984
• Docket Number: No. 83-1937,83-1937
• Citation: 740 F.2d 587
• Parties: JACOBS/KAHAN & COMPANY, Plaintiff-Appellant, v. Richard M. MARSH and Frances M. Marsh, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 587

740 F.2d 587

JACOBS/KAHAN & COMPANY, Plaintiff-Appellant, v. Richard M. MARSH and Frances M. Marsh, Defendants-Appellees.

No. 83-1937.

United States Court of Appeals, Seventh Circuit.

Argued Dec. 13, 1983.

Decided Aug. 6, 1984.

Paul A. Gold, Paul A. Gold, Ltd., Chicago, Ill., for plaintiff-appellant.

Barry L. Kroll, Jacobs, Williams & Montgomery, Ltd., Chicago, Ill., for defendants-appellees.

Before CUMMINGS, Chief Judge, ESCHBACH and COFFEY, Circuit Judges.

COFFEY, Circuit Judge.

Plaintiff, Jacobs/Kahan & Company, brought this diversity action against defendants, Richard and Frances Marsh, to recover payment for services rendered. Plaintiff is a Delaware corporation with its principal place of business in Illinois. Defendants are citizens of California. The district court granted defendants' motion to dismiss for lack of personal jurisdiction, and plaintiff appeals. We reverse.

I

On October 6, 1980, defendants contracted for plaintiff's services in obtaining a commitment from K-Mart Corporation, which is located in Troy, Michigan, for a store lease in a proposed shopping center on property owned by defendants in Indio, California. Specifically, the agreement provided that plaintiff would receive $250,000 from defendants upon obtaining a mutually satisfactory triple-net lease on K-Mart Corporation's form and that plaintiff would pay all expenses incurred in obtaining the lease. The contract expired by its terms after 90 days, but was extended in writing to February 28, 1981. On February 13, 1981, plaintiff secured a letter of commitment from K-Mart and, on February 26, sent to defendants a standard K-Mart Corporation triple-net lease for a store in the proposed Indio shopping center. However, defendants refused to go forward on the lease and did not pay plaintiff. In the latter half of 1981, defendants allegedly asked plaintiff to restructure the deal with K-Mart as a ground lease rather than a triple-net lease. Plaintiff again entered into negotiations with K-Mart's representatives and incurred substantial expense providing K-Mart with market data, aerial photographs, maps, market research, and architectural and engineering workups for the proposed site. In early 1982, K-Mart and defendants entered into a 27-year ground lease. Defendants refused to pay plaintiff, and this suit followed. Plaintiff claims that it performed under both the original contract and the subsequent oral agreement to restructure and seeks payment of its $250,000 fee plus costs and attorneys fees. In addition, plaintiff claims that defendants never intended to pay plaintiff and seeks $1,000,000 in punitive damages.

Defendants moved to dismiss for lack of personal jurisdiction over them, and plaintiff and defendants both submitted affidavits. Resolving all conflicts in the affidavits in favor of plaintiff, Neiman v. Rudolf Wolff & Company, 619 F.2d 1189, 1190 (7th Cir.), cert. denied, 449 U.S. 920, 101 S.Ct. 319, 66 L.Ed.2d 148 (1980), the relevant facts are as follows. The original contract was executed by defendants and plaintiff's manager, Thomas Niemira, at a meeting in plaintiff's offices in Chicago, Illinois on October 6, 1980. Defendants had requested to come to Chicago to meet plaintiff's principals and examine plaintiff's operation, and plaintiff invited them to do so. Prior to the Chicago meeting, the terms of the contract had been partially negotiated through an exchange of correspondence and telephone calls and at a meeting between Niemira and defendants in defendants' home in Palm Desert, California. ¹ Also prior to the Chicago meeting, defendants had been sent a proposed contract. At the Chicago meeting, the proposed contract was discussed, and defendants requested significant changes that resulted in the addition of two typed paragraphs and a handwritten clause. (The final contract consisted of eight paragraphs.) Defendants and Niemira then signed the contract. The letter extending the performance date was signed by defendants in California and sent to Chicago, and defendants' alleged request for plaintiff to restructure the K-Mart deal as a ground lease was made by telephone.

II

A federal district court in Illinois has personal jurisdiction over a party in a diversity case only if an Illinois court would have such jurisdiction. Rule 4(e), Fed.R.Civ.Pro. The Illinois "long-arm" statute, Ill.Ann.Stat. ch. 110, Sec. 2-209 (1983), authorizes jurisdiction over non-resident defendants "as to any cause of action arising from the doing of any" of certain enumerated acts, including "the transaction of any business" in Illinois. ² In addition, the exercise of long-arm jurisdiction must be consistent with due process. International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945).

In Nelson v. Miller, 11 Ill.2d 378, 143 N.E.2d 673 (1957), the Illinois Supreme Court determined that Sec. 2-209 reflects "a conscious purpose to assert jurisdiction over nonresident defendants to the extent permitted by the due process clause." 143 N.E.2d at 679. As a consequence, jurisdictional analysis under the statute has until recently focused almost exclusively on tests developed for interpreting the requirements of due process. However, the Illinois Supreme Court disapproved this practice in Green v. Advance Ross Electronics Corp., 86 Ill.2d 431, 56 Ill.Dec. 657, 427 N.E.2d 1203 (1981), stating that its observation in Nelson v. Miller was not

"the equivalent of declaring that the construction and application of section [2-209] depend entirely upon decisions determining in what circumstances due process requirements would permit long-arm jurisdiction. Neither do we read Nelson to say that in applying section [2-209] we should not construe the meaning and intent of our own statute irrespective of the due process limitations generally applicable to state long-arm statutes. A statute worded in the way ours is should have a fixed meaning without regard to changing concepts of due process, except, of course, that an interpretation which renders the statute unconstitutional should be avoided, if possible."

56 Ill.Dec. at 661-62, 427 N.E.2d at 1207-08. See also Cook Associates, Inc. v. Lexington United Corp., 87 Ill.2d 190, 57 Ill.Dec. 730, 733, 429 N.E.2d 847, 850 (1981).

Although the Illinois Supreme Court did not in Green overrule either Nelson or any past decisions reached under Nelson by application of due process tests, it clearly mandated a new approach to Illinois long-arm jurisdiction that inquires separately whether jurisdiction is statutorily conferred and whether the exercise of jurisdiction is constitutional. Deluxe Ice Cream Company v. R.C.H. Tool Corp., 726 F.2d 1209, 1213 (7th Cir.1984). See generally, Welles Products Corp. v. Plad Equipment Co., 563 F.Supp. 446, 448 (N.D.Ill.1983); Ronco, Inc. v. Plastics, Inc., 539 F.Supp. 391, 397-99 (N.D.Ill.1982). Fully broken down, the requisite analysis consists of three questions: (1) whether the defendant engaged in one of the jurisdictional acts enumerated in the statute (in this case, "the transaction of any business"); (2) whether the cause of action is one "arising from" the jurisdictional act; and (3) whether the exercise of long-arm jurisdiction is consistent with due process as defined by prevailing constitutional standards.

III

A

We have no difficulty concluding that defendants' partial negotiation and execution of a contract while they were physically present in Illinois is "the transaction of any business" in Illinois. See Snyder v. Smith, 736 F.2d 409, 416 (7th Cir.1984); Deluxe Ice Cream, 726 F.2d at 1216; In re Oil Spill by Amoco Cadiz, 699 F.2d 909 (7th Cir.1983); Consolidated Laboratories, Inc. v. Shandon Scientific Co., 384 F.2d 797, 801 (7th Cir.1967); Ronco, Inc. v. Plastics, Inc., 539 F.Supp. 391, 396 (N.D.Ill.1982) ("At the meeting details of the transaction were laid out and legally binding contract changes were made. If this is not the transaction of business in Illinois, it is difficult to know what is.").

Defendants argue that they cannot be found to have transacted business in Illinois because performance of the contract was centered in California. ³ This argument fails for two reasons. First, while contract performance in Illinois has of itself been held a sufficient basis for jurisdiction, see, e.g., Cook Associates, Inc. v. Colonial Broach & Machine Co., 14 Ill.App.3d 965, 304 N.E.2d 27 (1973), it is plainly not necessary for defendant to have performed in Illinois in order to have transacted business in Illinois, see, e.g., Ronco, Inc., 539 F.Supp. at 395. Second, contract performance was not, as defendants assert, centered in California. While it is true that plaintiff took photographs and collected data in California, the project was coordinated and supervised by plaintiff's personnel in Illinois. Moreover, plaintiff's performance obligation under the contract was to negotiate and obtain a lease commitment from K-Mart, and those negotiations were conducted between plaintiff in Illinois and K-Mart in Michigan. Finally, defendants' sole obligation under the contract was to pay plaintiff, and there is nothing to suggest that payment was to be made anywhere other than to plaintiff's office in Illinois. Thus, the contract was to be performed substantially, if not primarily, in Illinois. We further note that an Illinois court would almost certainly hold that the contract is governed by Illinois law. See D.P. Service, Inc. v. A.M. International, 508 F.Supp. 162, 164 (N.D.Ill.1981) (stating that if contract is to be performed in more than one state, Illinois applies the law of the place of execution); Ehrman v. Cook Electric Co., 468 F.Supp. 98, 99 (N.D.Ill.1979). ⁴

B

Defendants' principal contention is that plaintiff's cause of action does not "arise from" the Illinois transaction as required by section 2-209 because the written contract between the parties called for a triple-net lease, not a ground lease, and expired...