Ronco, Inc. v. Plastics, Inc.

• Decision Date: 13 May 1982
• Docket Number: No. 81 C 4141.,81 C 4141.
• Citation: 539 F. Supp. 391
• Parties: RONCO, INC., an Illinois corporation, and Ronco Teleproducts, Inc., an Illinois corporation, Plaintiffs, v. PLASTICS, INC., a Texas corporation, John C. Parker, individually, and William J. Dacus, individually, Defendants.
• Court: U.S. District Court — Northern District of Illinois

539 F. Supp. 391

RONCO, INC., an Illinois corporation, and Ronco Teleproducts, Inc., an Illinois corporation, Plaintiffs, v. PLASTICS, INC., a Texas corporation, John C. Parker, individually, and William J. Dacus, individually, Defendants.

No. 81 C 4141.

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

May 13, 1982.

COPYRIGHT MATERIAL OMITTED

Martin M. Ruken, Michael P. Greenwald, Friedman & Koven, Chicago, Ill., for plaintiffs.

William Farley, McDermott, Will & Emery, Chicago, Ill., for defendants.

MEMORANDUM OPINION

MARSHALL, District Judge.

Plaintiffs, Ronco, Inc. and Ronco Teleproducts, Inc. are Illinois corporations with their principal places of business in Elk Grove Village, Illinois. While they are separate corporate entities, they are treated as one by the parties, and will be so treated for purposes of the instant ruling (hereinafter "Ronco"). Defendant Plastics, Inc. is a Texas corporation with its principal place of business in Jacksonville, Texas (hereinafter "Plastics").

In December, 1979, Ray Norris, an independent marketing consultant located in Texas, contacted Ronco's corporate office located in Los Angeles, California. Affidavit of John C. Parker ¶ 7. Norris informed Ronco that Plastics might be able to manufacture injection molded products for Ronco. In response to the call, Ronco sent Plastics one of its products, a record vacuum, so that Plastics could determine if it could produce this product for Ronco.

In early 1980, Plastics sent employees to Ronco's Los Angeles office to examine Ronco's tooling for the part in question and to negotiate the terms of an agreement for its manufacture. Id. ¶ 8.

Ronco employees also visited Plastics' Texas plant during this period. In early April, 1980, an oral agreement was reached under which Plastics would manufacture and assemble the record vacuum at its Jacksonville, Texas, plant. Id. ¶¶ 9-10. The agreement was memorialized when Ronco sent to Plastics its purchase order indicating that it would purchase 195,000 "Ronco Record Vacuums" from Plastics for a total purchase price of $477,750.00. Id. ¶ 9. On its face, the purchase order indicates that it is not binding on Ronco until signed by two of its officers. The purchase order is an offer, which is accepted by the vendor, Plastics, when signed by an appropriate person in the lower left-hand corner. The purchase order is dated April 16, 1980, is signed by a Ronco officer, and the offer is accepted by John C. Parker. The purchase order was executed by Parker, who is a vice president of Plastics, in Texas.¹ The acceptance is dated September 3, 1980. The purchase order indicates that Parker and William J. Dacus, who was then Chairman of the Board of Plastics, see Affidavit of William J. Dacus ¶ 1, jointly and severally guaranteed Plastics' performance.²

On September 16, 1980, Parker appeared in Ronco's Elk Grove office. Apparently, the contract between Ronco and Plastics was discussed, and Parker initialed changes in the production schedule. Second Supplemental Affidavit of John C. Parker, ¶ 8. The contract states that it shall be governed by the law of Illinois. Complaint Ex. B at 3. The contract also states that delivery is to be made by Plastics to Ronco in Elk Grove, Illinois.³

In October, 1980, Plastics shipped the record vacuums to Ronco. Over 60 percent of the vacuums were shipped to Illinois. Affidavit of Earl Rosenstein ¶ 8. It appears that the shipments to Illinois were actually "freight collect," despite the provisions of the contract. Accordingly the cost for shipping was paid by Ronco. Supplemental Affidavit of John C. Parker ¶ 6. Ronco alleges that the bulk of the vacuums delivered were defective, and seeks damages for breach of contract, breach of warrant, negligence⁴ and fraud.⁵ Defendants have moved to dismiss the complaint for lack of personal jurisdiction. Fed.R.Civ.P. 4(d)(3) requires that we look to the Illinois long-arm statute in order to determine whether this court can assert jurisdiction over defendants under it. The 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, and, if an individual, his personal representative, to the jurisdiction of the courts of this State as to any cause of action arising from the doing of any such acts:

(a) The transaction of any business within this State.

. . . . .

Ill.Rev.Stat. ch. 110, § 17(1) (1979).

It is true that a number of factors which have been used to support a conclusion that a defendant has transacted business in Illinois within the meaning of § 17(1)(a) are absent in this case. For example, it has been held that a defendant who initiates a transaction by seeking out a citizen of Illinois and proposing a business transaction has satisfied the statute. See Telco Leasing, Inc. v. Marshall County Hospital, 586 F.2d 49, 52 (7th Cir. 1978) (per curiam); Hutter Northern Trust v. Door County Chamber of Commerce, 403 F.2d 481 (7th Cir. 1968); Franchise Architects, Consultants for Franchising, Inc. v. Tuneomize, Inc., No. 81 6710, slip op. at 5 (N.D.Ill. April 21, 1982); Wessel Co. v. Yoffee & Breitman Management Corp., 457 F.Supp. 939, 941 (N.D.Ill.1978); Geneva Industries, Inc. v. Copeland Construction Co., 312 F.Supp. 186 (N.D.Ill.1970); Chicago Film Enterprises v. Jablanow, 55 Ill.App.3d 739, 13 Ill.Dec. 466, 371 N.E.2d 161 (1977). Here, the contract was initiated by a third party, and all solicitation apparently took place in conversations between a Texas-based marketing consultant and Ronco's Los Angeles office. Also absent is the necessity under the contract for defendant to engage in substantial performance of its contractual duties in Illinois, a factor supporting jurisdiction under the statute. See United States Railway Equipment Co. v. Port Huron & Detroit Railroad Co., 495 F.2d 1127, 1130 (7th Cir. 1974); Aetna Casualty & Surety Co. v. Looney, 98 Ill.App.3d 1057, 54 Ill.Dec. 444, 424 N.E.2d 1347 (1981); Woodfield Ford, Inc. v. Akins Ford Corp., 77 Ill.App.3d 343, 32 Ill. Dec. 750, 395 N.E.2d 1131 (1979); International Merchandising Associates, Inc. v. Lighting Systems, Inc., 64 Ill.App.3d 346, 350-54, 20 Ill.Dec. 838, 843-45, 380 N.E.2d 1047, 1052-54 (1978); Artoe v. Mann, 36 Ill.App.3d 204, 343 N.E.2d 647 (1976); Colony Press, Inc. v. Fleeman, 17 Ill.App.3d 14, 308 N.E.2d 78 (1974); Cook Associates, Inc. v. Colonial Broach & Machine Co., 14 Ill. App.3d 965, 304 N.E.2d 27 (1973). Clearly, the bulk of the performance called for in the contract was to be at Plastics' plant in Texas.⁶ Another factor supporting jurisdiction, acceptance of the contract in Illinois, see International Merchandising Associates, Inc. v. Lighting Systems, Inc., 64 Ill.App.3d 346, 351-52, 20 Ill.Dec. 838, 242-43, 380 N.E.2d 1047, 1051-52 (1978), is also absent.

However, these factors do not compel the conclusion that Plastics has not transacted business in Illinois within the meaning of § 17(1)(a). In three significant ways, Plastics did transact business in Illinois.

First, Plastics, through an employee, engaged in negotiations related to the contract in Illinois, when, on September 16, it sent Parker to Elk Grove. Parker, by his own admission, discussed the transaction while in Elk Grove, and initialed changes made in the contract. See Second Supplemental Affidavit of John C. Parker ¶¶ 5-10; Affidavit of John C. Parker, ¶ 12. At the meeting, the details of the transaction were laid out, and legally binding contractual changes were made. If this is not "transacting business in Illinois" it is difficult to imagine what is. When a defendant comes to Illinois and engages in negotiations of some substance regarding the transaction from which the cause of action arises, then the defendant is subject to suit in Illinois under § 17(1)(a). See Scoville Manufacturing Co. v. Dateline Electric Co., 461 F.2d 897 (7th Cir. 1972); Consolidated Laboratories, Inc. v. Shandon Scientific Co., 384 F.2d 797, 802 (7th Cir. 1967); Otis Clapp & Son, Inc. v. Filmore Vitamin Co., No. 78 C 3541, slip op. at 20-21 (N.D.Ill. Jan. 22, 1982); In re Oil Spill by the Amoco Cadiz, 491 F.Supp. 170, 174 (N.D.Ill.1979); United Air Lines v. Conductron Corp., 69 Ill.App.3d 847, 853-55, 26 Ill.Dec. 344, 348-49, 387 N.E.2d 1272, 1276-77 (1979). See also Cook Associates, Inc. v. Lexington United Corp., 87 Ill.2d 190, 198-99, 57 Ill.Dec. 730, 733-34, 429 N.E.2d 847, 850-51 (1981).⁷

Second, defendants transacted business in Illinois by voluntarily seeking the benefits and protections of Illinois law. The contract which defendants entered stated that it would be governed by the law of Illinois. By choosing to apply Illinois law to this transaction, defendants sought to invoke the protections and benefits of the law of Illinois. See United States Railway Equipment Co. v. Port Huron & Detroit Railroad Co., 495 F.2d 1127 (7th Cir. 1974); O'Hare International Bank v. Hampton, 437 F.2d 1173, 1177 (7th Cir. 1971). By selecting the law of Illinois, defendants obviously intended that a breach of the contract would have consequences under Illinois law, and presumably also intended to utilize the protections of that law had Ronco breached the contract. See Otis Clapp & Son, Inc. v. Filmore Vitamin Co., No. 78 C 3451, slip op. at 20 (N.D.Ill. Jan. 22, 1982). When a defendant voluntarily invokes the benefits and protections of Illinois law, he transacts business in Illinois within the meaning of the statute. See id.; Rosenthal & Co. v. Dodick, 365 F.Supp. 847, 850 (N.D. Ill.1973); Woodfield Ford, Inc. v. Akins Ford Corp., 77 Ill.App.3d 343, 346, 395 N.E.2d 1131, 1135 (1979); AAAA Creative, Inc. v. Sovereign Holidays, Ltd., 76 Ill. App.3d 514, 32 Ill.Dec. 119, 395 N.E.2d 66 (1979); Mergenthaler Linotype Co. v. Leonard Storch Enterprises, Inc., 66 Ill.App.3d 789, 797, 23 Ill.Dec. 352, 358, 383 N.E.2d 1379, 1385 (1978); Chicago Film...