RAR, Inc. v. Turner Diesel, Ltd.

Decision Date03 March 1997
Docket NumberNo. 96-2280,96-2280
Citation107 F.3d 1272
PartiesRAR, INCORPORATED, an Illinois Corporation, Plaintiff-Appellant, v. TURNER DIESEL, LIMITED, Defendant-Appellee.
CourtU.S. Court of Appeals — Seventh Circuit

Harry N. Arger, James L. Reed, Rooks, Pitt & Poust, Chicago, IL, and George J. Vosicky (argued), Rooks, Pitts & Poust, Joliet, IL, for Plaintiff-Appellant.

John R. Robertson, Sandra A. Miller, and Geoffrey M. Davis (argued), Kirkland & Ellis, Chicago, IL, for Defendant-Appellee.

Before WOOD, Jr., KANNE, and ROVNER, Circuit Judges.

KANNE, Circuit Judge.

This case poses the difficult question of how closely connected a cause of action must be to a defendant's contacts with a forum to justify personal jurisdiction over the defendant in that forum. RAR, Inc. ("RAR") is an Illinois corporation that, between 1991 and 1993, sold engine parts many times from its offices in Illinois to Turner Diesel, Ltd. ("Turner"), a Scottish corporation. In 1993, RAR agreed to buy four diesel, locomotive engines from another Scottish company. RAR arranged for Turner, however, to get the engines in Scotland, dismantle and purchase various parts from the engines, and then assist in the packing of the engines for transportation to Detroit. Everything went fine until some of the transported items were damaged during shipment. RAR sued Turner for breach of contract, alleging that Turner improperly packed the engines. Turner moved for dismissal, however, claiming that the Illinois federal court lacked personal jurisdiction over Turner. The District Court agreed and dismissed the complaint without prejudice. Because Turner's prior contacts with Illinois have no substantive bearing on this action or on the contract at issue, we hold that the District Court did not have personal jurisdiction, and we therefore affirm the dismissal.

I. HISTORY

The basic facts in this case are essentially uncontested. The following is our distillation of the relevant facts from the complaint and the uncontroverted affidavits submitted to the District Court. As the plaintiff, RAR is entitled to have any conflicts in the affidavits resolved in its favor. See Turnock v. Cope, 816 F.2d 332, 333 (7th Cir.1987).

Turner is a Scottish corporation headquartered in Aberdeen, Scotland. Turner does not have any offices, employees, or bank accounts in Illinois, and it does not manufacture products for general sale in Illinois. Between February 1, 1991 and June 1, 1993, however, Turner purchased various engine parts from RAR, which has its headquarters in Lisle, Illinois. On at least 100 occasions, Turner asked RAR to submit its best price on engines or engine parts that Turner wanted to purchase. Turner would typically fax its request for bids to RAR, or Turner would send representatives to meet personally with RAR's sales representative in Illinois. These bids led to more than 20 separate contracts for the sale of engine parts from RAR to Turner. RAR would usually send the parts from Illinois to wherever Turner wanted the parts.

In early 1992, Turner notified RAR that another Scottish company, Wil-Rig U.K., Ltd. ("Wil-Rig"), was interested in selling four engines that RAR might want to buy for resale in the United States. On two separate visits to Scotland in 1992, an RAR representative inspected the engines at the Wil-Rig yard. RAR and Wil-Rig finally negotiated a contract for the engines in April 1993. RAR and Turner representatives, meanwhile, began to discuss--both in transatlantic phone conversations and in person in Scotland--whether Turner wanted to purchase a power pack and a turbocharger from the engines that RAR had just acquired. Around June 1, 1993, RAR and Turner orally agreed that Turner would get the engines from Wil-Rig in Scotland, strip the power pack and turbocharger to keep for itself, and then send the engines (along with other engine parts owned by Turner as compensation for the power pack and turbocharger) back to the United States. Turner was also to include in the shipment 18 cylinder heads it had earlier purchased from RAR but was now returning under RAR's warranty. All of the goods were to be shipped to Detroit--not Illinois--because RAR lacked storage facilities for two of the engines it had purchased. RAR claims it planned to transport the remainder of the shipment back to Illinois on its own, but Turner denies knowing that any of the items were to end up in Illinois.

Turner did get the engines from Wil-Rig and stripped the power pack and turbocharger as planned. Turner then subcontracted with another Scottish corporation, All Timberlines, Ltd., to package all of the items for shipment to Detroit. The items were transported in two shipments, each composed of two containers. During one of the shipments, an engine broke loose in its container, allegedly flipping over the truck on an interstate in Ohio and thus damaging other goods in the container. An engine in the other container, meanwhile, also broke loose during shipment, allegedly causing damage to the engine itself as well as to other items in that container.

RAR sued Turner for breach of contract in Illinois state court, praying for damages of $395,000. Turner, as a citizen of a foreign state, removed the matter to the U.S. District Court for the Northern District of Illinois under 28 U.S.C. § 1332(a)(2). Turner then moved to dismiss for lack of personal jurisdiction and on forum non conveniens grounds. The District Court granted the personal jurisdiction motion, RAR, Inc. v. Turner Diesel, Ltd., No. 95 C 7418, 1996 WL 207248 (N.D.Ill. April 24, 1996), and RAR now appeals.

II. Analysis

We review de novo a district court's legal conclusion regarding whether personal jurisdiction exists over a defendant. Klump v. Duffus, 71 F.3d 1368, 1371 (7th Cir.1995), cert. denied, --- U.S. ----, 116 S.Ct. 2523, 135 L.Ed.2d 1047 (1996). A federal district court exercising diversity jurisdiction has personal jurisdiction, of course, "only if a court of the state in which it sits would have such jurisdiction." See id. When determining whether state courts would have jurisdiction, however, federal courts are under no obligation to defer to state court interpretations of federal law. Cf. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 822, 82 L.Ed. 1188 (1938) ("Except in matters governed by the Federal Constitution or by acts of Congress, the law to be applied in any case is the law of the state."). Although state court precedent is binding upon us regarding issues of state law, it is only persuasive authority on matters of federal law. 1 See Industrial Consultants, Inc. v. H.S. Equities, Inc., 646 F.2d 746, 749 (2d Cir.1981).

The plaintiff, moreover, has the burden of demonstrating the existence of personal jurisdiction. See McIlwee v. ADM Industries, Inc., 17 F.3d 222, 223 (7th Cir.1994). Three distinct obstacles to personal jurisdiction must generally be examined: 1) state statutory law, 2) state constitutional law, and 3) federal constitutional law. Turning first to Illinois statutory law, the Illinois long-arm statute provides that an Illinois court "may ... exercise jurisdiction on any ... basis now or hereafter permitted by the Illinois Constitution and the Constitution of the United States." 735 Ill.Comp.Stat. 5/2-209(c). Because the Illinois statute authorizes personal jurisdiction to the constitutional limits, the three inquiries mentioned above collapse into two constitutional inquiries--one state and one federal. And we must at least try to address the state constitutional issue first because the doctrine of constitutional avoidance counsels that "federal courts should avoid addressing federal constitutional issues when it is possible to dispose of a case on pendent state grounds." Triple G Landfills, Inc. v. Board of Comm'rs of Fountain County, Ind., 977 F.2d 287, 291 (7th Cir.1992); see Siler v. Louisville & Nashville R.R. Co., 213 U.S. 175, 193, 29 S.Ct. 451, 455-56, 53 L.Ed. 753 (1909).

The Illinois Supreme Court has made clear that the Illinois due process guarantee is not necessarily co-extensive with federal due process protections. Although the Illinois Supreme Court "may, in construing the Illinois Constitution's guarantee of due process, look for guidance and inspiration to constructions of the Federal due process clause by the Federal courts, the final conclusions on how the due process guarantee of the Illinois Constitution should be construed are for [the Illinois] court to draw." Rollins v. Ellwood, 141 Ill.2d 244, 152 Ill.Dec. 384, 398, 565 N.E.2d 1302, 1316 (1990). Unfortunately, however, the Illinois courts have given little guidance as to how state due process protection differs from federal protection in the context of personal jurisdiction. 2 We are told that "[j]urisdiction is to be asserted only when it is fair, just, and reasonable to require a nonresident defendant to defend an action in Illinois, considering the quality and nature of the defendant's acts which occur in Illinois or which affect interests located in Illinois." Id. Beyond this general norm, however, we have scant case law with which to work.

We do know that Illinois courts have upheld (under the state constitution) personal jurisdiction "over a non-resident corporate purchaser engaged in a commercial relationship with an Illinois corporation through the placing of purchase orders to the plaintiff in Illinois for products manufactured in Illinois." Autotech Controls Corp. v. K.J. Elec. Corp., 256 Ill.App.3d 721, 195 Ill.Dec. 526, 531-32, 628 N.E.2d 990, 995-96 (1993); see G.M. Signs, Inc. v. Kirn Signs, Inc., 231 Ill.App.3d 339, 172 Ill.Dec. 933, 935-36, 596 N.E.2d 212, 214-15 (1992). Although that sounds a lot like Turner's relationship with RAR, those cases involved causes of action arising directly from the Illinois commercial relationship. As mentioned above, however, a key issue in this case is how closely related a...

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