NTN Bearing Corp. v. Charles E. Scott, Inc.

• Decision Date: 28 February 1983
• Docket Number: No. 82 C 3830.,82 C 3830.
• Citation: 557 F. Supp. 1273
• Parties: NTN BEARING CORPORATION OF AMERICA, Plaintiff, v. CHARLES E. SCOTT, INC., Defendant.
• Court: U.S. District Court — Northern District of Illinois

557 F. Supp. 1273

NTN BEARING CORPORATION OF AMERICA, Plaintiff, v. CHARLES E. SCOTT, INC., Defendant.

No. 82 C 3830.

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

February 28, 1983.

Jerome W. Pope, Winston & Strawn, Chicago, Ill., for plaintiff.

Gerald G. Salmen, Leon L. Wolf, Smith & Schnacke, Cincinnati, Ohio, for defendant.

MEMORANDUM OPINION

WILL, District Judge.

This matter is before us on defendant's motion to dismiss the complaint for lack of personal jurisdiction and improper venue or to transfer the suit to the Southern District of Ohio in the interest of convenience to the parties and witnesses, see 28 U.S.C. § 1404(a). For the reasons which follow, we deny the motion to dismiss or transfer.

FACTS

Our summary of the facts is based in part on affidavits submitted by the parties, the conflicts in which have been resolved in favor of the plaintiff. See O'Hare International Bank v. Hampton, 437 F.2d 1173, 1176 (7th Cir.1971); Océ-Industries, Inc. v. Coleman, 487 F.Supp. 548, 549 (N.D.Ill. 1980).

In 1969, Charles E. Scott (Scott), president and principal owner of defendant, met with the president of NTN Bearing Corporation of America (NTN) at NTN's Illinois offices, in an effort to reach an agreement under which Charles E. Scott, Inc. (Scott, Inc.) would be made a sales representative for NTN. Such a contract was executed, taking effect on January 1, 1970. During 1970 and continually through 1974, Scott made various visits to NTN's Illinois offices. The parties have not stipulated the number of such visits but NTN estimates the number at approximately six per year, for a total of some thirty visits.

Late in 1974, NTN decided to attempt to standardize its contracts with its sales representatives. The terms of the standard form contract developed by NTN differed in certain respects from the earlier contract between NTN and Scott, Inc. A copy of the standard form contract was sent by NTN to Scott, Inc., along with a cover letter requesting Scott, Inc.'s acceptance of the new contract, which would supersede the earlier contract with NTN. Scott, Inc. accepted the new contract and returned it, signed, to NTN. The new contract was effective as of January 1, 1975. From 1975 through 1979, following execution of the new contract, Scott continued to visit the NTN offices in Illinois. NTN has estimated that Scott made at least two or three such visits each year.

NTN and Scott, Inc. undertook to negotiate still another contract, to take effect in 1980. Such negotiations failed to lead to agreement between the parties and eventually the 1975 sales representative contract was terminated. Following termination of the contract a dispute arose concerning Scott, Inc.'s right to be paid certain commissions allegedly due under the contract. The commissions relate to three accounts located in three different states — Ohio, Kentucky and Alabama. In consequence, NTN has filed this diversity suit seeking declaratory judgment as to its obligations under its 1975 contract with Scott, Inc. The latter has countered with a motion to dismiss NTN's suit for lack of personal jurisdiction over it. Further, in the event that we find jurisdiction in this district, Scott, Inc. seeks transfer of the action to the Southern District of Ohio. It argues that venue is improper in the Northern District of Illinois and that the Southern District of Ohio is both a proper and a more convenient forum.

JURISDICTION

This is a diversity suit. Accordingly, we have jurisdiction only if an Illinois state court could exercise jurisdiction. Fed.R. Civ.P. 4(e), Chicago Silver Exchange v. United Refinery, Inc., 394 F.Supp. 1332, 1334 (N.D.Ill.1975). Exercise of jurisdiction by Illinois state courts is dependent upon not only the Illinois long-arm statute, but also the constitutional due process requirement that the defendant have at least minimum contacts with Illinois such that the exercise of jurisdiction would not offend traditional notions of fair play and substantial justice. International Shoe Co. v. State of Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945).

We turn first to the Illinois long-arm statute, under which Illinois courts may assert jurisdiction over out of state defendants in causes of action arising from certain enumerated acts, performed by the defendant, including the "transaction of any business within this State." Ill.Rev.Stat. ch. 110, § 17(1)(a).

We find that Scott, Inc. did transact business in Illinois within the meaning of the Illinois long-arm statute. Scott personally made many visits to plaintiff's offices in Illinois. Defendant has not asserted that these visits were social calls. Defendant does not claim that it was brought from Ohio to Illinois by force or trickery, nor does it suggest that by chance and accident its principal made regular appearances at plaintiff's offices in Illinois. Indeed, defendant does not dispute that Scott's visits to NTN's offices were business calls and that the business between the parties was governed by the contract. That contract provides, in paragraph 2, in part, that Scott, Inc. "will diligently promote the sale of NTN products in the designated territory." Paragraph 3 of the contract provides that Scott, Inc.'s commissions shall be based in part upon NTN's "appraisal of Scott, Inc.'s participation" in the sales. Defendant came to Illinois to enable it, under the contract, effectively to promote plaintiff's products, consequently increasing its own commissions.

Under the Illinois long-arm statute, as applied by Illinois state courts, plaintiff's claim "arose from" defendant's actions in Illinois. The Illinois long-arm statute was enacted in 1956, after International Shoe, with the conscious purpose to assert jurisdiction over nonresidents to the maximum extent permitted by the due process clause. Nelson v. Miller, 11 Ill.2d 378, 389, 143 N.E.2d 673 (1957). The term "arose from" as used in the Illinois long-arm statute is liberally construed by Illinois courts. In Volkswagen Insurance Co. v. Whittington, 58 Ill.App.3d 621, 625, 16 Ill.Dec. 179, 374 N.E.2d 954 (1978), the court stated that a "foreign corporation's business within Illinois must be related to the cause of action in question before section 17(1)(a) will confer personal jurisdiction. If none of this business gives rise, at least in part, to the cause of action in question, then no such jurisdiction exists." Emphasis added. See also Ballard v. Rawlins, 101 Ill.App.3d 601, 604, 56 Ill.Dec. 940, 428 N.E.2d 532 (1981); Chicago Film Enterprises v. Jablanow, 55 Ill.App.3d 739, 742, 13 Ill.Dec. 466, 371 N.E.2d 161 (1977). Construing the phrase "arising from" as used in sections 17(1) and (3), the court in Johnston v. United Presbyterian Church, 103 Ill.App.3d 869, 59 Ill.Dec. 518, 431 N.E.2d 1275 (1981) stated that there must be a "sufficiently close relationship between the defendant's business activities in the State and the litigation against him." Id. at 872, 59 Ill.Dec. 518, 431 N.E.2d 1275 Emphasis added. Similarly, in Ballard v. Rawlins, 101 Ill. App.3d 601, 56 Ill.Dec. 940, 428 N.E.2d 532 (1981), the court concluded that jurisdiction is proper only if there exist "sufficient affiliating circumstances showing a relationship between the defendant, the State of Illinois and this lawsuit." Id. at 605, 56 Ill.Dec. 940, 428 N.E.2d 532 (Emphasis added.) Finally, in Huffman v. Inland Oil & Transport Co., 98 Ill.App.3d 1010, 54 Ill.Dec. 306, 424 N.E.2d 1209 (1981), the court stated that "the purpose of the limiting phrase `arising from' is to insure that there is a close relationship between a cause of action against a non-resident corporation and the business activities through which it submitted to Illinois jurisdiction.... The minimum relationship required is that the plaintiff's suit be one which lies in the wake of the commercial activities by which the defendant submitted to the jurisdiction of Illinois courts." Id. at 1015-16, 54 Ill.Dec. 306, 424 N.E.2d 1209 (citations omitted).

Defendant points out that plaintiff is suing for declaratory relief. Defendant argues that, since it was in Ohio when it demanded payment, and since such demand is a prerequisite to plaintiff's suit, the action of necessity "arose from" acts performed in Ohio, not in Illinois. Hence, according to defendant, we lack jurisdiction under the Illinois long-arm statute. Whatever the merits of defendant's "last event" test, it is clear that Illinois courts do not regard it as controlling in contract actions. As the court stated in Chicago Silver Exchange v. United Refinery, Inc., 394 F.Supp. 1332 (N.D.Ill.1975), the Illinois long-arm statute "requires that the activities which are relied on to sustain jurisdiction must give rise to the suit in question, at least in part." Id. at 1335 (citation omitted).

Exercise of jurisdiction by Illinois courts under the Illinois long-arm statute "depends upon the facts of each case." Illinois National Bank v. Gulf States Energy Corp., 102 Ill.App.3d 1113, 1119, 57 Ill.Dec. 938, 429 N.E.2d 1301 (1981). The statute does not require Illinois courts to weigh Illinois contacts against out of state contacts. Rather, Illinois courts focus only upon the defendant's activity in Illinois, finding jurisdiction where such activities are sufficiently related to the suit filed even though there may be more activities in other jurisdictions. See, e.g., id. at 1120, 57 Ill.Dec. 938, 429 N.E.2d 1301. Given the Illinois courts' interpretation of the long-arm statute, an Illinois court could exercise jurisdiction over the defendant.

Defendant's argument that personal jurisdiction is here sought to be predicated solely upon NTN's activities in Illinois ignores Scott's and defendant's significant post-1975 Illinois contacts and depends, moreover, upon the fallacious assumption that everything that occurred prior to the 1975 agreement on which this lawsuit is based is irrelevant to the International Shoe minimum...