Sky Valley Ltd. Partnership v. ATX Sky Valley, Ltd.

• Decision Date: 28 October 1991
• Docket Number: No. 91 C 4728.,91 C 4728.
• Citation: 776 F. Supp. 1271
• Parties: SKY VALLEY LIMITED PARTNERSHIP, an Illinois limited partnership, Plaintiff, v. ATX SKY VALLEY, LTD, a Texas limited partnership, Defendants.
• Court: U.S. District Court — Northern District of Illinois

776 F. Supp. 1271

SKY VALLEY LIMITED PARTNERSHIP, an Illinois limited partnership, Plaintiff, v. ATX SKY VALLEY, LTD, a Texas limited partnership, Defendants.

No. 91 C 4728.

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

October 28, 1991.

COPYRIGHT MATERIAL OMITTED

Donald E. Egan, Bonita L. Stone, Kenneth M. Kliebard, Katten, Muchin & Zavis, Chicago, Ill., for plaintiff.

Alan S. Ganz, Marc A. Primack, Rooks, Pitts and Poust, Chicago, Ill., for defendants.

ORDER

BUA, District Judge.

For reasons stated herein, ATX's motion to dismiss this complaint for lack of personal jurisdiction is denied. ATX's motion to transfer this case to the Northern District of California is granted.

I. FACTS

The plaintiff, Sky Valley Limited Partnership ("Sky Valley") is a limited partnership formed solely to acquire and develop the Sky Valley Project ("the project"), a massive real estate acquisition and development project located in Vallejo, California. It is an Illinois corporation with its offices in Elk Grove Village, Illinois. Its sole limited partner is Tang, Industries, Inc. ("Tang, Industries"), an Illinois corporation.

The defendant, ATX Sky Valley, Ltd ("ATX") is a limited partnership formed solely to manage and develop the project. It is a Texas corporation but does the bulk of its business in California in connection with the project.

The following facts are assumed to be true for the purposes of this motion. ATX initiated a discussion with Tang, Industries for the purpose of soliciting it to fund the purchase of the Sky Valley project which ATX would manage and develop. At least four discussions during the negotiations process took place between agents of ATX and agents of Tang, Industries in Elk Grove Village, Illinois. These occurred on May 9, 1989, July 7, 1989, July 19, 1989, and July 25, 1989. The substance of many of these meetings involved negotiations on and tentative agreements to many of the terms ultimately incorporated into the final agreement ("the Agreement") which was executed on September 7, 1989.

Problems eventually arose concerning the project which prompted the filing of at least four lawsuits by third parties against ATX and Sky Valley as codefendants ("the California Suits"). These suits are all pending in California.

Sky Valley filed this lawsuit against ATX alleging that ATX has ceased performing its obligations under the Agreement and, that there is an actual controversy concerning the rights of the parties under the Agreement. Sky Valley asks for both declaratory relief and damages. ATX filed a countersuit against Sky Valley in the Northern District of California alleging breach of the Agreement and alleging promissory fraud and tortious interference with contract. ATX filed a motion to dismiss this action for lack of personal jurisdiction or in the alternative, to transfer this motion to the Northern District of California.

II. DISCUSSION

A. Motion to Dismiss For Lack of Personal Jurisdiction

A federal court will only have personal jurisdiction over a party if the forum state court could exercise personal jurisdiction over the party. Young v. Colgate-Palmolive Co., 790 F.2d 567, 569 (7th Cir. 1986); Lakeside Bridge & Steel Co. v. Mountain State Construction Co., Inc., 597 F.2d 596, 598 (7th Cir.1979), cert denied, 445 U.S. 907, 100 S.Ct. 1087, 63 L.Ed.2d 325 (1980). Thus, this court must consider whether an Illinois court could exercise jurisdiction over ATX according to Illinois law.

In Illinois, the party seeking to establish personal jurisdiction over a nonresident defendant must satisfy a two-part test. He must show that personal jurisdiction is proper under the Illinois long-arm statute, Ill.Rev.Stat. ch. 110, para. 2-209 (1989) and that the exercise of jurisdiction would be proper under the due process requirements of the United States Constitution.

In order to sustain its burden of proof, a plaintiff must make a prima facie showing that personal jurisdiction over the defendant is proper. O'Hare Int'l Bank v. Hampton, 437 F.2d 1173, 1176 (7th Cir. 1971). In deciding a motion to dismiss for lack of personal jurisdiction, the court may consider any affidavits submitted by either side but all factual disputes are to be resolved in favor of the party seeking jurisdiction. Saylor v. Dyniewski, 836 F.2d 341, 342 (7th Cir.1988); Deluxe Ice Cream Co. v. R.C.H. Tool Corp., 726 F.2d 1209, 1215 (7th Cir.1984); Torco Oil Co. v. Innovative Thermal Corp., 730 F.Supp. 126, 128 (N.D.Ill.1989).

1. Illinois Long-Arm Statute

Under the Illinois Long-arm Statute, the party seeking personal jurisdiction over a nonresident defendant must show that the defendant performed one of the acts enumerated in the Illinois long-arm statute. One enumerated act is the transaction of business in Illinois. Ill.Rev.Stat. ch. 110, Para. 2-209(a)(1) (1987). The exercise of this jurisdiction is limited to causes of action "arising" from that transaction of business. Ill.Rev.Stat. ch. 110, Para. 2-209(a) and (d) (1987).¹

a. Transaction of Business

There are three factors which are particularly useful in determining whether a company transacted business in Illinois for the purpose of personal jurisdiction in a contract case: "which party initiated the transaction; where the contract was negotiated and consummated; and where performance of the contract occurred." Ben Kozloff, Inc. v. H & G Distributors, Inc., 717 F.Supp. 1336 (N.D.Ill.1989). See also Gordon v. Tow, 148 Ill.App.3d 275, 280-281, 101 Ill.Dec. 394, 398, 498 N.E.2d 718, 722 (1st Dist.1986). None of these factors is dominant. The court must look at the totality of circumstances to determine whether the defendant transacted business in Illinois within the meaning of the statute. Kozloff, 717 F.Supp. at 1338.

Where as here, a defendant is physically present in the state of Illinois for the purpose of initiating the transaction with the plaintiff, the courts have generally found this to weigh heavily in support of personal jurisdiction. Torco Oil Co., 730 F.Supp. at 131; Maurice Sternberg, Inc. v. James, 577 F.Supp. 882 (N.D.Ill.1984). Because we must resolve factual disputes in favor of the plaintiff, we must take as true Sky Valley's assertion that several agents of ATX travelled to Elk Grove Village, Illinois on May 9, 1989 to discuss ATX's interest in securing Sky Valley's participation in the transaction involved in this lawsuit.

In addition to this initial meeting, the agents of ATX also travelled into Illinois three more times in order to negotiate the contract which was ultimately consummated. Where in-state negotiations are of some substance, they clearly rise to the level of transaction of business in Illinois. Torco Oil Co., 730 F.Supp. at 126; Ronco, Inc. v. Plastics, Inc., 539 F.Supp. 391, 396 (N.D.Ill.1982); First National Bank of Chicago v. Boelcskevy, 126 Ill.App.3d 271, 274, 81 Ill.Dec. 380, 466 N.E.2d 1182, 1185 (1984). The negotiations which took place in Illinois are sufficient to satisfy this test since they included tentative agreements on many of the terms ultimately incorporated in the final contract. See Feldman Assocs. v. Lingard & Assocs., Inc., 676 F.Supp. 877, 879 (N.D.Ill.1988). It is not relevant that the meeting on July 19, 1989 was terminated by one of the parties following a disagreement. It was still an integral part of the negotiation process. A phone call between the two parties occurred on the following day during which it was agreed that the negotiations would continue.

The fact that the contract at issue here specifies Illinois law is also a factor which supports a finding of personal jurisdiction. Continental Bank N.A. v. Everett, 742 F.Supp. 508, 510-511 (N.D.Ill. 1990) (J. Bua).² Under the Illinois long-arm statute, it is not necessary that the contract at issue be formed in Illinois as long as there are other sufficient contacts to establish that the defendant transacted business in Illinois. Deluxe Ice Cream, 726 F.2d at 1216; Feldman, 676 F.Supp. at 879. Nor is it necessary that the contract be performed in Illinois. Kozloff, 717 F.Supp. at 1338. The facts that ATX initiated the transaction, that four meetings took place in Illinois, and that the contract designates Illinois law as controlling all serve to convince this court that the ATX transacted business in the state of Illinois.

b. Arising Out of

The arising out of requirement is uniformly interpreted to mean that the cause of action "lie in the wake" of the instate activity. Torco Oil Co., 730 F.Supp. at 133; Deluxe Ice Cream, 726 F.2d at 1215. This is met in this case since Sky Valley's claim is based upon the contract which was the subject of the Illinois negotiations and which designates Illinois law as governing.

2. Due Process

Once it has been determined that jurisdiction is proper under the long-arm statute, it becomes necessary to determine whether this exercise of jurisdiction is proper under the due process clause.

Due process protects a defendant from being subjected to the jurisdiction of a state with which he has no "contacts, ties, or relations." International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 159, 90 L.Ed 95 (1945). But, if there is "some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws," there is sufficient contacts to subject the defendant to the jurisdiction of the state. Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1239, 2 L.Ed.2d 1283 (1958). Where the relationship between the defendant and the forum state is such that it is reasonably foreseeable that the defendant could be haled into court in the forum state, the minimum contact requirement is met. Worldwide Volkswagon Corp. v. Woodson, 444 U.S. 286, 292-93, 100 S.Ct. 559, 567, 62 L.Ed.2d 490 (1980).

In this case, ATX's contacts with Illinois are not merely "random or fortuitous." See Burger King Corp. v....