McDonald's Corp. v. Bukele, 96 C 4361.

• Decision Date: 12 March 1997
• Docket Number: No. 96 C 4361.,96 C 4361.
• Parties: McDONALD'S CORPORATION, Plaintiff, v. Roberto BUKELE, and Servipronto De El Salvador, S.A., Defendants.
• Court: U.S. District Court — Northern District of Illinois

960 F.Supp. 1311

McDONALD'S CORPORATION, Plaintiff, v. Roberto BUKELE, and Servipronto De El Salvador, S.A., Defendants.

No. 96 C 4361.

United States District Court, N.D. Illinois, Eastern Division.

March 12, 1997.

Carl A. Gigante, Foran & Schultz, Chicago, IL, James R. Figliulo, Peter A. Silverman, Figliulo & Silverman, Chicago, IL, for Plaintiff.

Gary C. Rosen and Ivan J. Reich of Becker & Poliakoff, P.A., Fort Lauderdale, FL, James J. Riebandt, Riebandt & Dewald, P.C., Arlington Heights, IL, Omar J. Arcia, Zarco & Associates, Miami, FL, for Defendants.

MEMORANDUM OPINION AND ORDER

BUCKLO, District Judge.

This case arises from a dispute between McDonald's Corporation ("McDonald's") and one of its foreign franchisees. McDonald's is a Delaware corporation with its principal place of business in Oak Brook, Illinois. Defendant Servipronto De El Salvador, S.A. ("Servipronto") is an El Salvadoran company with its principal place of business in San Salvador. Defendant Roberto Bukele is a resident of El Salvador and the president of Servipronto. Mr. Bukele has moved to dismiss McDonald's complaint on the ground that this Court does not have personal jurisdiction over him. He also seeks dismissal for insufficiency of process. Finally, he has moved for dismissal based on the doctrine of forum non conveniens or in the alternative to transfer venue. For the following reasons, the motion to dismiss for lack of personal jurisdiction is denied. The motion to dismiss on the grounds of forum non conveniens is granted, and the remaining motions are denied as moot.

I. Background

In 1972, Puerto Rico Franchising Corporation ("Puerto Rico") was operating several McDonald's restaurants in El Salvador pursuant to a license from McDonald's. Puerto Rico, in turn, sub-licensed Servipronto to operate the restaurants. Mr. Bukele was an employee and officer of Servipronto. He travelled to Illinois on several occasions to meet with McDonald's representatives and discuss issues surrounding the operation and physical design of the restaurants. He also attended McDonald's Hamburger University, located in Illinois, for training.

In 1978, Servipronto became McDonald's direct licensee for the operation of three El Salvador restaurants. The three license agreements were negotiated and executed in El Salvador and were written originally in Spanish. In 1981, subsequent to the completion of those agreements, Mr. Bukele again travelled to Oakbrook to meet with McDonald's executives regarding royalty delinquencies and the difficult political situation prevalent in El Salvador at that time. As a result of this meeting, McDonald's and Mr. Bukele, personally and on behalf of the corporation, agreed to a temporary reduction in royalty payments, forgiveness of some past due royalties, and other operational issues. During the 1980's, Mr. Bukele continued to have periodic contact by phone and mail with individuals at McDonald's offices in Oakbrook regarding various operational and payment issues.

Mr. Bukele concluded additional agreements with McDonald's in the 1980's and 1990's. In 1985 and again in 1987, Mr. Bukele, personally and on behalf of the corporation, signed promissory notes to McDonald's for loans and delinquent royalty payments. Furthermore, in 1989, Mr. Bukele, again personally as well as on behalf of the corporation, signed a letter agreement (the "1989 agreement") with McDonald's which permitted him to change the location of one of his restaurants and required that Mr. Bukele and Servipronto be in full compliance with all the terms of the licenses. In 1993, Mr. Bukele once again came to Illinois to discuss the extension or renewal of Servipronto's license agreements. Following that meeting, two agreements were reached involving Servipronto, Bukele, and McDonald's. In April 1994, McDonald's and Mr. Bukele signed a letter agreement¹ (the "1994 agreement") providing for the renewal of the restaurant licenses on the condition that the restaurants' physical appearances and facilities were upgraded. McDonald's also agreed to loan $1,000,000 to Mr. Bukele for the purposes of remodeling the restaurants. Finally, McDonald's gave Mr. Bukele interim approval to develop three additional restaurants in San Salvador if certain conditions were satisfied. Shortly thereafter, Mr. Bukele, individually, and McDonald's entered into a license agreement in November, 1994 for a restaurant in San Salvador located at La Calle Poniente y La Avenida Sur, Frente a Parque San Jose (the "San Jose restaurant"). The San Jose restaurant, however, ceased operations and was closed in June 1996.

In December 1995, McDonald's sent a letter to Mr. Bukele informing him that he had not complied with the requirements of the 1994 agreement. Therefore, McDonald's did not re-write the licenses for the three restaurants, but it did agree to extend the licenses until June 30, 1996 in an effort to provide Mr. Bukele and Servipronto with one last opportunity to bring those restaurants into compliance. The letter warned that McDonald's would enforce all of its rights unless the conditions set forth in the 1994 agreement were satisfied. McDonald's subsequently concluded that these conditions had not been met, and it instituted this diversity action against Mr. Bukele and Servipronto in this Court in July, 1996. McDonald's seeks an injunction prohibiting the defendants from the continued use of McDonald's systems, trademarks, service marks, and trade names and the return of all McDonald's proprietary information. It also seeks damages and a disgorgement of profits for the unauthorized use of McDonald's commercial name, trademarks, and service marks.

II. Personal Jurisdiction

A. Standard of Review

On a motion to dismiss for lack of personal jurisdiction, the party asserting jurisdiction, the plaintiff in this case, bears the burden of making a prima facie showing that jurisdiction is proper. Chemical Waste Management v. Sims, 870 F.Supp. 870, 873 (N.D.Ill.1994). When deciding such a motion, a court may accept affidavits submitted by both parties, but all factual disputes must be resolved in favor of the plaintiff. Saylor v. Dyniewski, 836 F.2d 341, 342 (7th Cir. 1988).

B. Illinois Long-Arm Statute and Due Process Considerations

In a diversity action,² a federal district court in Illinois has personal jurisdiction over a party if an Illinois state court would have personal jurisdiction. Heritage House Restaurants, Inc. v. Continental Funding Group, Inc., 906 F.2d 276, 279 (7th Cir.1990). Under the Illinois long-arm statute, non-residents are subject to the jurisdiction of the Illinois courts if their conduct falls into one of several categories. The relevant provisions of the statute state:

(a) 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:

(1) The transaction of any business within this State;

...

(7) The making or performance of any contract or promise substantially connected with this State;

...

(f) Only causes of action arising from acts enumerated herein may be asserted against a defendant in an action in which jurisdiction over him or her is based upon subsection (a).

735 ILCS 5/2-209(a)(1)(7) & (f). Moreover, even if jurisdiction exists under the long-arm statute, a court must determine whether the exercise of personal jurisdiction would meet the requirements of constitutional due process. Heritage House, 906 F.2d at 279.³

C. Transaction of Business and Substantially Connected Contracts

Turning to the analysis, the first question is whether Mr. Bukele's conduct fits into one of the above-listed categories. When determining whether a party has transacted business in Illinois, courts consider several factors such as which party initiated the transaction, where the contract was negotiated and executed, and where performance of the contract was to occur. Gordon v. Tow, 148 Ill.App.3d 275, 101 Ill.Dec. 394, 398, 498 N.E.2d 718, 722 (1986). Although these factors are significant, none of them are dispositive, and "the court should look at the totality of the circumstances to determine whether defendant transacted business in the state." North Am. Philips Corp. v. American Vending Sales, Inc., No. 93 C 3261, 1993 WL 473630, at *11 (N.D.Ill. Nov.15, 1993).

These initial factors weigh against the exercise of personal jurisdiction by this Court. In the instant case, it is undisputed that McDonald's initially contacted Mr. Bukele and Servipronto to enter into these licenses due to the difficulties it had encountered with the previous licensee. Bukele Aff. 9/16/96 ¶ 6. In addition, all three license agreements were negotiated and executed in El Salvador. Id. ¶ 4. Furthermore, performance of the agreements was to take place primarily in El Salvador. In fact, even the payments that Servipronto made to McDonald's were deposited in a bank account maintained by McDonald's in San Salvador. Id. ¶ 9. The only part of these agreements that had anything to do with Illinois is the fact that McDonald's is located here and may have performed its part of the contract in Illinois by providing advice and support from its Oakbrook headquarters. This fact, however, is irrelevant because the inquiry focuses on what Bukele did in Illinois and not what McDonald's did. See Asset Allocation and Management Co. v. Western Employers Ins. Co., 892 F.2d 566, 569 (7th Cir.1989).

Other considerations also argue against jurisdiction over Mr. Bukele. All three licenses specify that El Salvadoran law will govern their interpretation. Although a choice of law provision standing alone cannot grant or defeat jurisdiction, it may be considered as part of the analysis. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 482, 105 S.Ct. 2174, 2187, 85 L.Ed.2d 528 (1985)...