BRIAN BARNETT DUFF, District Judge.
Plaintiff William Rose has sued defendant Greg Franchetti for breach of contract and fraud arising out of the plaintiff's purchase of an airplane from the defendant. Diversity jurisdiction exists, but the defendant has moved to dismiss pursuant to Rule 12(b)(2) on the grounds that the court lacks personal jurisdiction over him, and in the alternative, requests transfer of venue pursuant to 28 U.S.C. § 1404(a). As set forth below, the motion will be denied.
The facts relevant to this motion are not in dispute. The plaintiff is a citizen of Illinois. The defendant is a citizen of Rhode Island who does business out of Massachusetts. In June, 1988, the plaintiff was reading a magazine of general circulation when he came across the defendant's advertisement for the sale of an airplane. He instructed his employee, Andrew Spak, to contact the defendant to inquire about the aircraft. Spak did so.
Over the next few weeks, Spak and the defendant exchanged phone calls on a number of occasions to discuss the plane.
The plaintiff thereafter sent agents to Massachusetts to see the plane. After inspecting the plane's records, the agents purchased the plane and flew it back to Illinois.
Spak, a certified FAA mechanic, then disassembled the plane for inspection. He discovered numerous repairs which had not been logged in the aircraft's records and which did not comply with FAA practices. The condition of the aircraft rendered it virtually valueless.
The plaintiff subsequently filed this lawsuit alleging breach of contract and intentional misrepresentation. The defendant has moved to dismiss the complaint for lack of personal jurisdiction, or in the alternative, to transfer this case to Massachusetts.
In order to enter a binding judgment, a court must have personal jurisdiction over the defendant. A court acquires such jurisdiction when the plaintiff properly serves the defendant with process pursuant to a statute or rule, and the service does not violate due process. Omni Capital International v. Rudolf Wolff & Co., Ltd., 484 U.S. 97,
In federal court, Fed.R.Civ.P. 4 governs service of process. Rules 4(c)-(e) prescribe the manner in which process may be served. Rule 4(f) describes where it may be served:
Where, as here, the plaintiff is suing a defendant located "beyond the territorial limits of the state," id., Rule 4(f) refers to Rule 4(e):
Thus, the first sentence of this rule applies when a federal statute authorizes out-of-state service of process. The second sentence governs in the absence of such a federal statute. In this case, no such statute exists, so this court may obtain personal jurisdiction over the defendant only "under the circumstances and in the manner prescribed in [an Illinois] statute or rule." Fed.R.Civ.P. 4(e).
Neither party has informed the court as to the manner of service plaintiff employed in serving the defendant. Since the defendant has not objected to it, this court assumes that the manner of service was proper. See Fed.R.Civ.P. 12(b)(4), (5).
The only question remaining then, is whether service was authorized "under the circumstances"—that is, whether Illinois law permits service on this out-of-state defendant. The Illinois long-arm statute, Ill. Rev.Stat.1987 ch. 110, ¶ 2-209(a) ("¶ 2-209(a)"), provides:
Thus, in order to sue the defendant here, the plaintiff must establish that the defendant either transacted business within Illinois or committed a tort within Illinois, and that the causes of action arose from these acts.
In Wiles v. Morita Iron Works Co., 152 Ill.App.3d 782, 105 Ill.Dec. 657, 504 N.E.2d 942 (1987), rev'd on other grounds, 125 Ill.2d 144, 125 Ill.Dec. 812, 530 N.E.2d 1382 (1988), the court held that personal jurisdiction existed under ¶ 2-209(a)(1) over a foreign defendant for claims arising out of a single transaction which occurred outside the state because the defendant "sold its products to a corporation that used the products in Illinois, the transaction was a money-making event for defendant, and plaintiff's injury was a direct result of the transaction." Id., 152 Ill.App.3d at 789, 105 Ill.Dec. 657, 504 N.E.2d 942. This holding certainly suggests that the defendant here, who sold a plane for profit in Massachusetts knowing it would be returned to Illinois, falls within the reach of ¶ 2-209(a)(1).
To be sure, the defendant could have argued that Wiles is distinguishable on the grounds that the injury there occurred inside Illinois whereas the injury here arguably occurred in Massachusetts, where the defective plane was purchased. But that distinction does not explain why the plaintiff failed to cite the case, for he has predicated most of his arguments on the theory that his injury occurred when his employee inspected the plane in Illinois and discovered the defects.
The plaintiff, however, may have had another reason for not relying on Wiles as a basis for asserting jurisdiction under ¶ 2-209(a)(1): Wiles, or at least that portion of it dealing with this subsection, is probably wrong.
Connelly, however, come at a time when the Illinois Supreme Court still viewed the Illinois long-arm statute as extending as far as federal due process would allow. See Connelly, 75 Ill.2d at 402, 27 Ill.Dec. 343, 389 N.E.2d 155. Green v. Advance Ross Electronics Corp., 86 Ill.2d 431, 56 Ill.Dec. 657, 427 N.E.2d 1203 (1981), subsequently rejected this premise, holding that ¶ 2-209 is not coterminous with the due process clause, and the Seventh Circuit has read Green as undermining the reasoning of cases decided before it. See Small v. Sheba Investors, Inc., 811 F.2d 1163, 1164-65 (7th Cir.1987).
Gordon v. Tow, 148 Ill.App.3d 275, 101 Ill.Dec. 394, 498 N.E.2d 718 (1986), by contrast, recognized that Green changed the landscape for ¶ 2-209 analysis, and set forth a multifactor test for determining when an out-of-state defendant transacts business within Illinois for the purposes of ¶ 2-209(a)(1):
Id. 148 Ill.App.3d at 280, 101 Ill.Dec. 394, 498 N.E.2d 718.
In Gordon, an Illinois plaintiff purchased shares in a Rhode Island limited partnership from a defendant located in Rhode Island. The plaintiff had met with the defendant in Rhode Island before the purchase, and had then corresponded with him in letters and telephone calls between Rhode Island and Illinois. The plaintiff finally sent the defendant a signed subscription agreement for the purchase of an interest in the limited partnership, which the defendant executed in Rhode Island. When the plaintiff sued for securities and common law fraud, the court held that the defendant could not be sued in Illinois. Id. at 283, 101 Ill.Dec. 394, 498 N.E.2d 718.
For relevant purposes, Gordon is indistinguishable from this case. The contract for the purchase of the airplane was executed in Massachusetts, and was to be performed in Massachusetts. Further, although the defendant advertised in a magazine with Illinois circulation, Illinois courts do not consider such solicitation to be an initiation of contacts for jurisdictional purposes. See Cook Associates, Inc. v. Colonial Broach & Machine Co., 14 Ill.App.3d 965, 970, 304 N.E.2d 27 (1973). Instead, plaintiff initiated the contacts when he responded to the advertisement. Thus, under the multifactor analysis set forth in Gordon (and cited with approval in Small, 811 F.2d at 1165-66), this court has no basis for exercising jurisdiction over the defendant pursuant to ¶ 2-209(a)(1). See also Maurice Sternberg, Inc. v. James, 577 F.Supp. 882, 885 (N.D.Ill.1984) ("[I]nterstate telephone and mail communications to an Illinois plaintiff are not sufficient to constitute the transaction of business required by the Illinois long-arm statute ... regardless of which party initiates the calls, correspondence or the transaction itself.") (citations omitted).
Of course, the above discussion sought only to explain why the plaintiff did not rely on ¶ 2-209(a)(1). Even had this court determined that jurisdiction would lie under this subsection, the court would still have refused to exercise it given the plaintiff's waiver of this position. But now we know the reason for the waiver.
This leaves ¶ 2-209(a)(2). The defendant begins his attack by arguing that the plaintiff cannot rely on this subsection because he has not stated a claim for fraud, and therefore cannot show the commission of a tortious act at all, no less in Illinois. The defendant predicates this argument on the economic loss doctrine first enunciated by the Illinois Supreme Court in Moorman v. National Tank Company, 91 Ill.2d 69, 61 Ill.Dec. 746, 435 N.E.2d 443 (1982). Under this doctrine, a plaintiff suing for purely economic losses generally
Ordinarily, attacks on the merits of a plaintiff's case should come only after jurisdictional issues have been resolved. See Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 778, 104 S.Ct. 1473, 1480, 79 L.Ed.2d 790 (1984). But because the Illinois long-arm statute specifically makes the commission of a tort an independent basis for jurisdiction, Illinois courts require the plaintiff to state a viable claim in tort before relying on ¶ 2-209(a)(2).
Nevertheless, the defendant's efforts to escape jurisdiction on this basis fail, and fail miserably. In Moorman, and in subsequent cases applying it, the Illinois courts steadfastly have held that economic loss is recoverable in tort "where one intentionally makes false representations." Id. 91 Ill.2d at 88-89, 61 Ill.Dec. 746, 435 N.E.2d 443; Anderson Electric, Inc. v. Ledbetter Erection Corp., 133 Ill.App.3d 844, 849, 88 Ill.Dec. 863, 479 N.E.2d 476 (1985); see also Swaw v. Ortell, 137 Ill.App.3d 60, 73-74, 92 Ill.Dec. 49, 484 N.E.2d 780 (1985).
The defendant next argues that his alleged misrepresentations to the plaintiff's agents over the phone and in Massachusetts do not amount to the commission of a tort within Illinois. He suggests instead that any wrongdoing occurred in Massachusetts, where the purchase took place.
The fact that the parties contracted in Massachusetts, however, is not determinative under ¶ 2-209(a)(2). A single tortious act can give rise to jurisdiction under the Illinois long-arm statute even if most of the defendant's activities occur elsewhere. Nelson v. Miller, 11 Ill.2d 378, 143 N.E.2d 673 (1957); see Heil v. Morrison Knudsen Corp., 863 F.2d 546, 549-50 (7th Cir.1988). A single telephone call into Illinois thus will give rise to Illinois jurisdiction so long as the call constitutes the commission of a tortious act within Illinois.
To show the commission of a tortious act within Illinois, the plaintiff first must establish that a tort occurred in Illinois. The general rule is that where tortious acts are committed over the telephone, the situs of the tort is the place where the phone call was received. Harvey v. Price, 603 F.Supp. 1205, 1209 (S.D. Ill.1985). Since the plaintiff received the fraudulent statements while he was in Illinois, it would certainly appear that a tort occurred within Illinois for the purposes of ¶ 2-209(a)(2).
To do so, the plaintiff notes that he first discovered the plane's defects when his employee inspected it in Illinois, and argues that his injuries thus occurred in Illinois. Not so. The plaintiff may have first learned of his injury when he discovered the defects, but the last act necessary to render the defendant liable for the plane's defects occurred when the plaintiff's agents paid for the plane and took possession of it — in Massachusetts. See Yates v. Muir, 112 Ill.2d 205, 97 Ill.Dec. 394, 492 N.E.2d 1267 (1986).
Now, the plaintiff could have countered with a reference to Gray, where the court analogized jurisdictional analysis to statute of limitations problems and suggested that a tort occurs at the same time that the statute of limitation begins to run. 22 Ill. 2d at 435, 176 N.E.2d 761. Since the defendant's alleged efforts to hide the plane's defects clearly would have tolled the running of the limitations period until the plaintiff reasonably could have discovered them, the plaintiff could have argued that the tort accrued at this time, with the plane in Illinois.
But the plaintiff has not so argued, and this court finds it unnecessary to delve further into this somewhat abstract inquiry. While the plaintiff suffered his most severe damages when he purchased the plane, his first injury accrued when he relied on the defendant's misrepresentations and incurred the expense of sending employees to Massachusetts to inspect the aircraft. These acts alone thus gave rise to an action for fraud. Since they occurred in Illinois, the tort occurred here.
Having established that a tort occurred in Illinois, the language of the statute appears to be satisfied. But because the "last event" approach to the situs of a tort extends the reach of the Illinois long-arm statute quite far, and indeed farther even than the due process clause would allow, Illinois courts have engrafted the additional requirement that, in order to have committed a tortious act within Illinois, the defendant must have purposefully engaged in some relationship with Illinois.
Before examining just what that relationship must be, it is worth noting that this approach arose at a time when the Illinois courts viewed the long-arm statute as coextensive with the due process clause. Since the due process clause imposed such a limit on long-arm statutes, see International Shoe v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945), the Illinois courts had to impose the same limit on their statute to keep the two consistent.
In Zukerman, Judge Shadur noted that in assessing whether telephone calls from an out-of-state defendant into Illinois constitute the commission of a tortious act within Illinois, Illinois courts have looked to whether the defendant "inten[ded] to affect Illinois interests." 594 F.Supp. at 346-47. The defendant objects to this characterization, urging instead that the inquiry is whether the defendant "invoked the benefits and protections of the law of the forum." Gray v. American Radiator & Standard Sanitary Corp., 22 Ill.2d at 440, 176 N.E.2d 761.
In fact, Illinois courts have used both phraseologies. This split reflects the United States Supreme Court's divergent approaches to jurisdictional analysis under the due process clause, at times concentrating on the state's regulatory interests in determining the constitutionally permissible reach of long-arm statutes, and at other times stating that amenability to suit turns on the defendant's consensual relationship with the forum state. See generally Stein, Styles of Argument and Interstate Federalism in the Law of Pesonal Jurisdiction, 65 Tex.L.Rev. 689 (1987).
The proper inquiry depends on the type of conduct involved. Jurisdictional analysis focuses on the defendant's intentional acts vis-a-vis the forum state. Where the alleged wrongdoing is unintentional — i.e., negligence — the defendant has not intended to do harm in the forum state, so jurisdiction turns on his consensual relationship with the forum state — i.e., whether he invoked the benefits and protections of its laws. Gray, 22 Ill.2d at 440, 176 N.E.2d 761. On the other hand, where the defendant allegedly has committed an intentional wrong in the forum state, "it is awkward to refer to a defendant's alleged deliberate violation of Illinois law as `invoking the benefits and protections of Illinois law.'" Zukerman, 594 F.Supp. at 346 n. 8. It is also unnecessary. So long as the defendant intended to affect Illinois interests, his conduct is of the sort the Illinois long-arm statute seeks to reach. See Brainerd v. Balish, 164 Ill.App.3d at 841, 115 Ill.Dec. 792, 518 N.E.2d 317.
In this case, the defendant clearly intended to affect Illinois interest. He advertised in Illinois, made phone calls to an Illinois resident, and then sold a plane knowing it was destined for Illinois. Accordingly, if the defendant committed a tortious act, and for now the court must assume that he did, then he committed it within Illinois for the purposes of the long-arm statute. Because all of the plaintiff's claims lie in the wake of this tortious conduct, the long-arm statute authorizes jurisdiction over the defendant for each count in the complaint. See Loggans v. Jewish Community Center, 113 Ill.App.3d 549, 557, 69 Ill.Dec. 484, 447 N.E.2d 919 (1983); ¶ 2-209(c) ("Only causes of action arising from acts enumerated [in ¶ 2-209(a)] may be asserted against a defendant in which jurisdiction over him or her is based upon this section.").
That the Illinois long-arm statute reaches the defendant does not quite end the jurisdictional inquiry. The court must also ensure that asserting jurisdiction comports with due process. The Supreme Court as well as the Seventh Circuit consistently have looked to the Due Process Clause of the Fourteenth Amendment as governing in diversity cases. See, e.g., Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 104 S.Ct. 1473, 79 L.Ed.2d 790 (1984); Mason v. F. Lli Liugi & Franco Dal Maschio, 832 F.2d 383 (7th Cir.1987); see generally 4 Wright & Miller, Federal Practice & Procedure, § 1067.1 at 505 (1987). Just why this
The Fourteenth Amendment sets limits on state power. The Fifth Amendment curbs federal power. See Stafford v. Briggs, 444 U.S. 527, 100 S.Ct. 774, 63 L.Ed.2d 1 (1980) (Stewart, J., dissenting) ("[D]ue process requires only certain minimum contacts between the defendant and the sovereign that has created the court."). So why does the Fourteenth Amendment ever apply to a federal court's power to exercise jurisdiction?
Justice Powell has opined that the answer lies in the Rules of Decisions Act, 28 U.S.C. § 1652. See Insurance Corporation of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 711-13, 102 S.Ct. 2099, 2108-09, 72 L.Ed.2d 492 (1982) (Powell, J., concurring). But this will not do. The Rules of Decisions Act requires federal courts to apply state substantive law in diversity cases, see Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), but the Fourteenth Amendment is not state substantive law, it is federal Constitutional law. Moreover, personal jurisdiction is distinct from the underlying cause of action, and is more procedural than substantive: Were it not, then the Federal Interpleader Statute, 28 U.S.C. § 2361, which authorizes nationwide service of process in diversity cases (see Indianapolis Colts v. Mayor of Baltimore, 733 F.2d 484, 487 (7th Cir. 1984)), would be on shaky constitutional ground, but it is not. See Arrowsmith v. United Press International, 320 F.2d 219, 224-27 (2d Cir.1963) (Congress has the authority to enact nationwide service of process rules to govern diversity cases).
Some courts have stated that the answer lies in the Federal Rules: Since Rule 4(e) states that, in the absence of a federal statute, a federal court may obtain extra-territorial jurisdiction only "under the circumstances prescribed in [a state] statute or rule," these courts reason that any constitutional limits on state long-arm statutes must apply when a federal court employs the statute.
The best reason, then, for utilizing Fourteenth Amendment scrutiny, at least in diversity cases, is that this seems to be the intent of the drafters of Rule 4(e), see Fed.R.Civ.P. 4(e) (Advisory Committee Notes to 1963 Amendments); but see Welkowitz, supra, 56 Ford.L.Rev. at 19 n. 123 (discussing the advisory committee notes), and effectuates the interests of intrastate uniformity underlying Erie: Were federal courts to employ a different due process standard in diversity cases than state courts must, plaintiffs would have an incentive to shop for a federal forum, a result not intended by the drafters of Rule 4(e), and, in any case, not sanctioned by the Supreme Court.
Under the Fourteenth Amendment Due Process Clause, a court may not assert jurisdiction over a defendant unless the defendant has "certain minimum contacts with [the forum state] such that the maintenance of the suit does not offend `traditional notions of fair play and substantial
Minimum contacts, however, is not enough. Although their existence makes it more likely that exercising jurisdiction will be appropriate, see id. at 1034 (plurality opinion); Burger King Corp. v. Rudzewizc, 471 U.S. 462, 477, 105 S.Ct. 2174, 2184, 85 L.Ed.2d 528 (1985), the court still must ensure that haling the defendant into the forum would not be "unreasonable and unfair," Asahi, 107 S.Ct. at 1038 (Stevens, J., concurring); Burger King, 471 U.S. at 477-78, 105 S.Ct. at 2184-85. In making this determination:
Asahi, 107 S.Ct. at 1034 (plurality opinion) (quoting World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292, 100 S.Ct. 559, 564, 62 L.Ed.2d 490 (1980))
The only factor favoring the defendant is the first: the substantial burden he will face in having to litigate in Illinois. Yet, this burden is no greater than the burden the plaintiff would endure were he forced to go to Massachusetts to obtain relief. And Illinois has a substantial interest in protecting its citizens from the sort of interstate fraud alleged here. Cf. Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 104 S.Ct. 1473, 79 L.Ed.2d 790 (1984). These factors, when considered in light of the defendant's intentional decision to engage in business with an Illinois citizen (in Illinois), leave no question that the exercise of jurisdiction over him would be fair and reasonable. See Burger King Corp. v. Rudzewizc, 471 U.S. at 477, 105 S.Ct. at 2184 ("[W]here a defendant who purposefully has directed his activities at forum residents seeks to defeat jurisdiction, he must present a compelling case that the presence of some other considerations would render jurisdiction unreasonable."). Accordingly, the defendant's motion to dismiss for lack of personal jurisdiction will be denied.
The defendant requests a transfer of venue to the United States District Court in Massachusetts pursuant to 28 U.S.C. § 1404(a).
The parties do not dispute that venue is proper here, and would be proper in Massachusetts. Thus, the only issue left is the third. The statute instructs the court to take account of three factors: the convenience of the parties, the convenience of the witnesses, and the interests of justice. Coffey v. Van Dorn Iron Works, 796 F.2d 217,
With respect to the convenience of the parties, the defendant cannot do so. Although the defendant will be inconvenienced if he must litigate here, he has provided no evidence suggesting that the plaintiff will be any less inconvenienced if he must litigate in Massachusetts. Thus, this factor comes down even. C. Wright & A. Miller, Federal Practice & Procedure, § 3848 at 246 (1976) (transfer improper if it would merely "shift the inconvenience from one party to the other").
As for the convenience of the witnesses, the defendant says that his witnesses will be more severely inconvenienced if the case goes forward here than will be the plaintiff's witnesses if the litigation moves to Massachusetts. He also suggests that whereas the plaintiff's witnesses all work for the plaintiff and therefore will voluntarily appear, the defendant's witnesses do not work for the defendant, will have to be subpoenaed for testimony, and may be unwilling to appear in Illinois for trial.
This argument unquestionably is the defendant's strongest one favoring transfer. The convenience of witnesses is often viewed as the most important factor in the transfer balance, see C. Wright & A. Miller, Federal Practice & Procedure, § 3851 at 264 (1976), and is all the more so when the convenience of the parties is a wash. The defendant, however, has made it difficult for this court to gauge just how much weight this factor merits.
The defendant states in an affidavit that he intends to call certain (unspecified) individuals residing in the Massachusetts area as witnesses to testify about the condition of the plane. He indicates that these witnesses will assist him in showing that the defects in the plane were obvious to anyone experienced in aircraft engines. Yet, he does not spell out why this testimony will be critical for his case. As far as this court can tell, the plaintiff's case rests on the defendant's alleged misrepresentations regarding the condition of the aircraft vis-a-vis its actual condition. The defendant's own testimony about what he said thus will be his most important evidence.
Of course, the defendant could build a defense around the obviousness of the defects, but if this is his approach, he will need far more than the testimony of a few individuals who knew of them: He will need the testimony of experts regarding the condition of the plane. The plane, however, is right here in Illinois, and according to the plaintiff, immobile at that, so if the Massachusetts witnesses tilt the scale towards transfer, their weight is offset, at least in part, by the location of the aircraft. Without the defendant's assistance in elucidating who his witnesses are, and why they are important, this factor weighs, if at all, only marginally in the defendant's favor. See General Portland Cement Co. v. Perry, 204 F.2d 316, 320 (7th Cir.1953); C. Wright & A. Miller, Federal Practice & Procedure, § 3851 at 270-71 (1976).
The final factor is the "interest of justice," a broad category relating to the "efficient functioning of the courts, not to the merits of the underlying dispute." Coffey v. Van Dorn Iron Works, 796 F.2d at 221. Encompassed within this category are the relative speed with which the case is likely to get to trial, the presence of related litigation in a particular forum, and in diversity cases, the advantage of having federal judges most familiar with the applicable state law try the case. Id.; see generally C. Wright & A. Miller, Federal Practice & Procedure, § 3854 (1976).
This court does not know the condition of the Massachusetts District Court docket, but things here are just fine; the court will be ready for trial when the parties are.
Here, the defendant appears correct that, under Illinois conflicts of law rules, Massachusetts law would govern the contract claim. This fact favors transfer, but only slightly. After all, contracts are contracts; it seems extremely unlikely that the Massachusetts federal court will have any noticeable advantage over this court in applying Massachusetts law.
More important, however, is that any such advantage would be more than offset by the legal issues surrounding the fraud claim. The defendant confidently has asserted that this claim poses no problem because it will be dismissed under the Illinois economic loss doctrine; yet, as discussed earlier, he is wrong. Whether the defendant's argument on this score constitutes a stipulation that Illinois law should govern the fraud claim presents an interesting question, see ante at p. 1209 n. 5, but one this court need not resolve now. For even if the defendant has not so stipulated, Illinois principles of conflicts of law will determine which substantive law applies. This court, sitting in Illinois, is in a far better position to apply Illinois conflicts law than would be a Massachusetts federal court.
In sum, then, the "convenience of the parties" factor favors neither side, the "convenience of witnesses" factor marginally supports the defendant, and the "interest of justice" factor marginally supports the plaintiff. Thus, whether the plaintiff's choice of forum is considered as a fourth factor, or instead is viewed as imposing a heavier burden on the defendant in seeking transfer, the motion to transfer cannot prevail.
The defendant's motion to dismiss or transfer is denied.