McBreen v. Beech Aircraft Corp.

• Decision Date: 12 November 1976
• Docket Number: No. 76-1411,76-1411
• Parties: Peter J. McBREEN et al., Plaintiffs-Appellees, v. BEECH AIRCRAFT CORPORATION et al., Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 26

543 F.2d 26

Peter J. McBREEN et al., Plaintiffs-Appellees, v. BEECH AIRCRAFT CORPORATION et al., Defendants-Appellants.

No. 76-1411.

United States Court of Appeals Seventh Circuit.

Argued Sept. 15, 1976.

Decided Oct. 19, 1976.

Rehearing Denied Nov. 12, 1976.

Charles J. O'Laughlin, Edmund W. Sinnott, Chicago, Ill., for defendants-appellants.

Randall L. Mitchell, Chicago, Ill., for plaintiffs-appellees.

Before SPRECHER and WOOD, Circuit Judges, and GRANT, Senior District Judge. ^*

SPRECHER, Circuit Judge.

The sole issue on this appeal is whether the due process clause of the Fourteenth Amendment precludes subjecting the defendants to the in personam jurisdiction of the district court.

I

Plaintiffs Peter J. McBreen a citizen of Illinois and Peter J. McBreen & Associates, Inc., an Illinois corporation, brought this diversity suit for libel against Beech Aircraft Corporation, a Delaware corporation, with its principal place of business in Wichita, Kansas; Robert Martin, a citizen of Kansas; Martin, Pringle, Schell & Fair, a law partnership with its principal offices in Wichita, Kansas. This action arose out of certain allegedly defamatory statements made by the defendants about Peter J. McBreen and Peter J. McBreen & Associates. ¹

A brief statement of the facts is required for a complete understanding of the jurisdictional issues presented by this appeal.

In February 1974, Beech, represented by Martin and the law partnership with which Martin was associated, filed an antitrust suit against several insurance adjusters, including the corporate plaintiff in this action. Shortly thereafter, Martin received a long-distance call at his office in Wichita, Kansas from a person who identified himself as a reporter for Business Insurance. The reporter inquired about the suit recently filed by Martin on behalf of Beech, and Martin responded to the reporter's questions.

Martin did not know from where the call originated, but he believed it came from Massachusetts. During the conversation, there was no discussion of the place of publication or the areas of distribution of Business Insurance. In fact, however, the call originated from Chicago, Illinois, which is both the place of publication (and one of the areas of distribution) of Business Insurance, and where the plaintiff engages in the insurance adjustment business.

Soon after the conversation between Martin and the reporter, an issue of Business Insurance appeared containing an article describing the Beech lawsuit. The "source close to the case" referred to in that article is alleged to be Robert Martin, and plaintiff claims that the article includes some of the allegedly defamatory statements made by Martin in the course of his conversation with the Business Insurance reporter.

Martin did not know of the article's publication until after publication, and did not participate or assist in the preparation of the article.

On May 28, 1975, the defendants filed motions in the district court to quash service of summons and dismiss the complaint on the ground that the court lacked personal jurisdiction over the defendants. The court denied the motions, finding jurisdiction proper under Rule 4(e) of the Federal Rules of Civil Procedure and § 17(1)(b) of the Illinois Civil Practice Act. It is from this decision that defendants appeal.

II

Section 17 of the Illinois Civil Practice Act (the Illinois "long-arm" statute) provides in pertinent part:

(1) Any person, whether or not a citizen or resident of this 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:

(b) The commission of a tortious act within this State.

It is well established that for purposes of the Illinois "long-arm" statute a tort is committed in the place where the injury occurs. Honeywell, Inc. v. Metz Apparatewerke, 509 F.2d 1137, 1142 (7th Cir. 1975); Gray v. American Radiator & Standard Sanitary Corp., 22 Ill.2d 432, 435-36, 176 N.E.2d 761, 762-63 (1961). It is also clear that the Illinois "long-arm" statute was intended to extend jurisdiction over non-residents to the extent permitted by due process. Nelson v. Miller, 11 Ill.2d 378, 389, 143 N.E.2d 673, 679 (1957). Therefore, since there appears to be no dispute between the parties that "the injuries suffered by the plaintiffs, if proven, occurred in Illinois," the sole issue to be resolved is whether subjecting the defendants to in personam jurisdiction in this case comports with the due process clause of the Fourteenth Amendment.

III

The Supreme Court in International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945), held that in order to exercise in personam jurisdiction over a non-resident defendant due process must be satisfied in that he must "have certain minimum contacts with . . . (the forum) such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.' " (Emphasis supplied, citations omitted.)

Apparently the court below agreed with the parties' assumption that the dispositive test of minimum contacts is whether the possible effects of Martin's statements in Illinois were foreseeable. In the court's words:

(S)ince the statements were about Illinois residents and made to a reporter Martin believed was calling from Massachusetts, he should have been aware of the nature and scope of distribution of Business Insurance and, hence, the possible effect of his remarks in Illinois.

However, in our view, the limitations imposed upon the exercise of in personam jurisdiction by the due process clause "cannot be determined by application of a rigid formula or rule" such as "foreseeability." Honeywell, supra at 1144. Rather,

(t)he issue of minimum contacts turns on the specific facts of each case, and the existence or absence of jurisdiction depends on an assessment of the quality and nature of a defendant's activity.

Id. at 1144. Accordingly,

(t)he test . . . is a flexible one which emphasizes the reasonableness of subjecting a defendant to suit; and the proper inquiry is whether a non-resident defendant can be said to have invoked, by act or conduct, the benefits and protection of the laws of the forum (citations omitted).

Applying these principles to the case at bar, we find that the defendant Martin did not have sufficient contacts with Illinois to justify subjecting him to the jurisdiction of the district court. However, because the issue is one which by its nature requires resolution on a case-by-case basis and because this case is similar in some respects to cases where jurisdiction has been upheld, we deem it appropriate to discuss those cases and indicate the reasons why they do not control.

IV

In Gray v. American Radiator & Standard Sanitary Corp., 22 Ill.2d 432, 176 N.E.2d 761 (1961), the Illinois Supreme Court upheld jurisdiction over an Ohio corporation which manufactured a valve which was incorporated in Pennsylvania in a water heater and then sold to an Illinois resident who was injured when the heater exploded. The court recognized that "the relevant inquiry is whether defendant engaged in some act or conduct by which he may be said to have invoked the benefits and protections of the law of the forum." 22 Ill.2d at 440, 176 N.E.2d at 765. Applying this test, the court stated:

In the case at bar defendant does not claim that the present use of its product in Illinois is an isolated instance. . . . (I)t is a reasonable inference that its commercial transactions, like those of other manufacturers, result in substantial use and consumption in this State. To the extent that its business may be directly affected by transactions occurring here it enjoys benefits from the laws of this State, and it has undoubtedly benefited, to a degree, from the protection which our law has given to the marketing of hot water heaters containing its valves.

22 Ill.2d at 441-42, 176 N.E.2d at 766. Hence, the court concluded,

it is not unreasonable where a cause of action arises from the alleged defects in his product, to say that the use of such products in the ordinary course of commerce is sufficient contact with this State to justify a requirement that he defend here.

22 Ill.2d at 442, 176 N.E.2d at 766 (emphasis supplied).

To the same effect is the recent decision by this court in Honeywell, Inc. v. Metz Apparatewerke, 509 F.2d 1137 (7th Cir. 1975). In Honeywell, a foreign corporation, knowing that its product infringed a patent held by an Illinois corporation, deliberately marketed the product and promoted its sale in the United States. Subsequently, sales were in fact made in Illinois. In upholding the exercise of in personam jurisdiction over the defendant in Illinois, this court stated:

We look to the economic and commercial realities of this case, and in our view, it is not within the contemplation of the concepts of fairness and due process to allow a wrongdoing manufacturer to insulate himself from the long arm of the courts by using an intermediary or by professing ignorance of the ultimate destination of his products.

Id. at 1144 (emphasis supplied).

Similarly, where newspaper, magazine or book publishers have deliberately circulated their "products" in the stream of interstate commerce and those "products" are alleged to have tortious consequences (i. e. injury to reputation) within the forum state, the courts have generally upheld jurisdiction. ² See Buckley v. New York Post Corp., 373 F.2d 175 (2d Cir. 1967); Process Church of Final Judgment v. Sanders, 338 F.Supp. 1396 (N.D.Ill.1972). As Judge Friendly noted in Buckley :

Newspapers, magazines, and broadcasting companies are businesses conducted for profit and often make very large ones. Like other enterprises that inflict damage in the course of performing a service highly useful to the public . . . they must...