Magnaflux Corporation v. Foerster

• Decision Date: 18 October 1963
• Docket Number: No. 62 C 1419.,62 C 1419.
• Citation: 223 F. Supp. 552
• Parties: MAGNAFLUX CORPORATION, a Delaware corporation, Plaintiff, v. Friedrich FOERSTER, etc., et al., Defendants.
• Court: U.S. District Court — Northern District of Illinois

223 F. Supp. 552

MAGNAFLUX CORPORATION, a Delaware corporation, Plaintiff, v. Friedrich FOERSTER, etc., et al., Defendants.

No. 62 C 1419.

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

October 18, 1963.

Theodore C. Diller, Charles H. Weiland and Barnet C. Engler, Lord, Bissell & Brook, Chicago, Ill., for plaintiff.

Victor P. Kayser and George R. Hooper, Chadwell, Keck, Kayser, Ruggles & McLaren, Richard S. Oldberg and Hamilton Smith, McDermott, Will & Emery, Chicago, Ill., for defendants.

DECKER, District Judge.

This case involves a lawsuit by Magnaflux Corporation, a Delaware corporation licensed to do business and with its principal place of business in the State of Illinois, (hereinafter referred to as Magnaflux). Magnaflux sues Dr. Friedrich Foerster (hereinafter referred to as Foerster) for breach of a contract executed November 5, 1954, and subsequently amended July 14, 1961.

Foerster is a citizen of the Federal Republic of Germany, and he maintains his residence in the City of Reutlingen in West Germany.

Also joined as defendants in the one count complaint are three other parties alleged to have entered into a conspiracy to induce Foerster to breach his contract with Magnaflux. The three other parties are: Hoover Ball and Bearing Company, a Michigan corporation with its principal place of business in Michigan (hereinafter referred to as Hoover Ball); Forster/Hoover Electronics, Inc., a Michigan corporation with its principal place of business in Michigan (hereinafter referred to as Forster/Hoover); and Rudolph G. Hentschel, a citizen of the State of Michigan, residing in Ann Arbor (hereinafter referred to as Hentschel).

The complaint is founded on the diversity jurisdiction of this Court. Equitable relief is sought against all four defendants, including a declaratory judgment that the contract between Foerster and Magnaflux prevents Foerster from selling his products to Forster/Hoover, an injunction of Foerster from making any further sales to Forster/Hoover, an injunction of Hoover Ball and Forster/Hoover and Hentschel from further inducing Foerster to further breach the contract, and for an accounting for damages against all of the defendants.

This matter has come on for decision on the following motions:

(1) A motion filed by the defendants Foerster, Forster/Hoover and Hentschel to dismiss the action pursuant to Federal Rule 12 on the ground that the Court lacks jurisdiction over the person of these defendants.

(2) A motion filed by Hoover Ball to dismiss the action or in the alternative to quash the return of the service of summons on the ground that the Court lacks jurisdiction over the person of the defendant.

(3) All four defendants also moved to dismiss on the ground that the complaint fails to state a claim on which relief can be granted.

The motions to dismiss for want of jurisdiction over the persons of the defendants will be discussed first. The defendants have filed a number of affidavits in support of their motions to dismiss for want of jurisdiction. Plaintiff has filed counter-affidavits in opposition to the same motions. Depositions have been taken by the plaintiff and by the defendants, and references have been made by both plaintiff and defendants to statements contained therein relating to the issue of jurisdiction.

Disposition of these motions requires individual treatment of the service of summons on each of the four defendants, and accordingly, because of the complex facts surrounding the service, each will be dealt with individually.

Foerster

Foerster was served, by special order of court under Federal Rule 4(e), personally at his home in Germany. Foerster's service is sought to be upheld under Section 17(1) (a) of the Illinois Civil Practice Act (Illinois Revised Statutes, Chapter 110, § 17(1) (a)). Service was effected on Foerster by one Roland Willmitzer, who was specially appointed by this Court to serve the summons.

Foerster argues that to subject him to service of process pursuant to the Illinois statute would: (1) Violate Rule 4(f) which prohibited service of process out of the forum state, which in this case is Illinois, unless a statute of the United States so provided; and (2) would be improper even under the Illinois statute, since he had not "transacted any business" in Illinois, and to subject him to extra-territorial service of process without his having had more substantial minimal contacts with the State of Illinois would violate both the due process and the commerce clauses of the United States Constitution.

Foerster's contacts with the State of Illinois are as follows:

(1) Prior to April 24, 1952, Foerster did maintain office facilities in Illinois to market his own products by himself. Subsequent to that date, he removed all of his own facilities pursuant to the contract with plaintiff Magnaflux, whereby it was given the exclusive distribution rights in the United States to Foerster's products.

(2) Foerster executed and personally delivered in Illinois the contract in suit on November 5, 1954. This contract was also to be performed in Illinois, and it is being performed here, at least in part, presently.

(3) Paragraph 22 of this contract, which is attached as Exhibit B to the complaint, and which remains unamended, reads:

"This agreement shall be construed in accordance with the laws of the State of Illinois."

(4) On July 14, 1961, the 1954 contract was amended (the execution and delivery of this amendment took place entirely in Germany).

Foerster now contends that the 1954 contract was cancelled and superseded by the 1961 contract. However, paragraph U. of the 1961 amendment reads:

"Except as specifically amended by the foregoing paragraphs A. through T. inclusive, said agreement of November 5, 1954, shall remain unchanged and, as thus amended, shall be and remain in full force and effect between the parties hereto."

The Court finds that the 1954 contract was not cancelled, as Foerster contends, but rather it was amended.¹

(5) Performance of this amended contract has continued, at least in part, in Illinois down to the present.

(6) Negotiations for the 1954 agreement took place at plaintiff's place of business in Illinois, with Foerster personally present and actively engaged in the negotiations from October 27, 1954, through November 5, 1954.

(7) As a part of the immediate performance of this 1954 contract, plaintiff delivered to Foerster a check for $22,000.00, which Foerster cashed on November 6, 1954, in Chicago, by endorsing it to The First National Bank of Chicago.

(8) During the period from 1951 to 1962, Foerster spent a total of approximately 54 days at the plaintiff's plant in Illinois. These 54 days were divided among thirteen separate visits, at all of which Foerster discussed problems of manufacture and sale of Foerster equipment with plaintiff's engineers in furtherance of the 1954 agreement, as amended in 1961, and under which the plaintiff now sues. The last of these visits was on March 15 and 16, 1962, when Foerster discussed performance of the contract with Magnaflux and with some of the other defendants.

Opinion

(1) As for Foerster's contention that Rule 4(f) prohibits reference to the law of Illinois in order to sustain service of process made extra-territorially, reference to the amendments to the Rules of Federal Procedure which became effective July 1, 1963, should suffice.

Rule 4(f) has now been clarified to specifically authorize the service of process on an out-of-state individual or corporation, "* * * in the manner prescribed by the law of the state in which the district court is held * * *," as outlined in Rule 4(d) (7).

The Supreme Court Advisory Committee on Civil Rules in a comment states that this clarification did not change the prior law, but rather more explicitly stated and adopted "the salutary results" of those cases which sustained out-of-state service pursuant to statute such as Section 17 of the Illinois Civil Practice Act² by "reading paragraph (7) as not limited by subdivision (f)."

It is also interesting to notice in the comments of the Supreme Court Advisory Committee on Civil Rules relating to paragraphs (e), (f) and (i) of Rule 4, it is stated that "the Party seeking to make the service may proceed under the Federal or the State law, at his option." Further, regarding service on a defendant in a foreign country, specifically referring to the Illinois Civil Practice Act, the Supreme Court Advisory Committee expressly commends the manner in which service was made on Foerster here:

"Foreign service by personal delivery on individuals and corporations, partnerships and associations, provides for a manner of service that is not only traditionally preferred, but also is most likely to lead to actual notice."

And, as regards the order of this Court specifically appointing Willmitzer to make service in Germany, the Supreme Court says:

"* * * by permitting the court by order to tailor the manner of service to fit the necessities of a particular case or the peculiar requirements of the law of the country in which the service is to be made * * this alternative increases the possibility that the plaintiff will be able to find a process server who can proceed unimpeded in the foreign country * * *."³

Therefore, I hold that Rule 4(d) (7) prior to the July 1, 1963, amendment, rather than Rule 4(f), establishes the mode of effecting service on a defendant outside the state in which this Court sits. Therefore, we must look to the law of Illinois to determine whether service of process on Foerster was sufficient to give this Court jurisdiction over his person.

(2) In regard to Foerster's contention that even if Section 17 of the Illinois Civil Practice Act does apply, its requirements have not been satisfied, I think the law is to the contrary. There have been numerous Illinois and Seventh Circuit cases on this question, all of which I believe establish beyond any doubt that...