Summary
finding "[a]ll of [the defendant's] communications with Illinois followed from [the plaintiff's] initial inquiry" and the defendant's communications from outside of Illinois did not amount to minimum contacts with Illinois
Summary of this case from Griffith v. Wood BrothersOpinion
No. 99 C 4160.
March 3, 2000.
MEMORANDUM AND ORDER
Plaintiff Ameritech Services, Inc. (Ameritech) brings this action against SCA Promotions, Inc. (SCA) alleging breach of contract and failure to insure. For the reasons set forth below, we grant defendant's motion to dismiss the complaint for lack of personal jurisdiction.
BACKGROUND
Ameritech is a telecommunications company organized under the laws of Delaware and based in Illinois. In early 1998, Ameritech was in the process of developing a promotional campaign in which it planned to offer pre-paid phone cards free of charge to customers who purchased eligible Ameritech products and services. While designing the campaign, Ameritech became concerned that the cost of its promotion might exceed its budget. In January 1998, an Ameritech representative attended a conference in Florida at which he learned that SCA, a Texas corporation based in Dallas, was in the business of helping companies avoid budgetary overruns in connection with promotional campaigns (Hamman Aff. at ¶¶ 15-16). An Ameritech official telephoned SCA within a few weeks after the conference and asked SCA to prepare a proposal for Ameritech's planned phone-card promotion. Over the course of the next several weeks representatives of the two companies negotiated via telephone, fax, and mail communications (Hamman Aff. at 6 ¶ 17). The two companies eventually reached an agreement by which SCA would be responsible for cost overruns if Ameritech distributed more than 400,000 phone cards in the course of its promotion. The agreement took the form of two short contracts (Cplt. Exhs. 1 2). On April 6, 1998, an agent of Ameritech signed the contracts and then sent them to Dallas, where an SCA official completed the deal by executing the contracts on April 8, 1998 (Hamman Aff. at ¶ 19).
Ameritech distributed 570,853 phone cards during its promotional campaign. Having exceeded its budget for the promotion, Ameritech asked SCA to fulfill its contractual duties and cover the cost overrun. SCA refused, claiming that Ameritech's method of distributing the phone cards was not authorized by the terms of the contracts and therefore the excess costs fell outside the scope of SCA's obligations. Ameritech filed suit in state court in Illinois to enforce the contracts. On June 23, 1999, the complaint was removed to federal court pursuant to 28 U.S.C. § 1332, 1441 and 1446. Counts I and II of the complaint allege breach of contract, and Count III alleges failure to insure on the part of SCA. SCA has moved to dismiss the complaint for lack of personal jurisdiction. See Fed.R.Civ.P. 12(b)(2). In the alternative, SCA seeks to dismiss Count III for failure to state a claim. See Fed.R.Civ.P. 12(b)(6). We dismiss the complaint in its entirety for want of jurisdiction.
DISCUSSION
On a motion to dismiss the plaintiff bears the burden of demonstrating the existence of personal jurisdiction. RAR, Inc. v. Turner Diesel, Ltd., 107 F.3d 1272, 1276 (7th Cir. 1997). In determining whether personal jurisdiction exists, we may receive and consider affidavits from both parties. Turnock v. Cope, 816 F.2d 332, 333 (7th Cir. 1987). We must resolve factual disputes in the pleadings and affidavits in favor of the plaintiff, but take as true those facts in defendant's affidavits that are unrefuted. Jamik, Inc. v. Days Inn of Mount Laurel, 74 F. Supp.2d 818, 821 (N.D.Ill. 1999).
In a diversity action a federal court has personal jurisdiction if a court in the state in which it sits would have such jurisdiction. See Klump v. Duffus, 71 F.3d 1368, 1371 (7th Cir. 1995); cert. denied, 518 U.S. 1004 (1996). In this case we look to Illinois' long arm statute to determine whether we have personal jurisdiction over SCA. See 735 ILCS 5/2-209. The Illinois statute, in turn, provides that a court may exercise personal jurisdiction on any basis permitted by the Illinois Constitution and the Constitution of the United States. 735 ILCS 5/2-209(c); RAR, 107 F.3d at 1276. Under the Illinois Constitution's due process clause, personal jurisdiction "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."Rollins v. Ellwood, 565 N.E.2d 1302, 1316 (Ill. 1990). Unfortunately, the Illinois courts have provided little guidance as to how Illinois due process differs from federal due process. See RAR, 107 F.3d at 1276; Jamik, 74 F. Supp.2d at 821-22. Therefore, we will focus our inquiry on the federal constitutional requirements for personal jurisdiction.
Ameritech argues that personal jurisdiction over SCA is constitutionally permissible because the claims underlying this lawsuit arise out of SCA's specific contacts with Illinois. See 735 ILCS 5/2-209(a); NUCOR Corp. v. Aceros Y Maquilas de Occidente, S.A. de C.V., 28 F.3d 572, 580 (7th Cir. 1994). Ameritech's argument invokes the concept of specific jurisdiction. In RAR, the Seventh Circuit elucidated the constitutional standards applicable in such cases:
Specifically, Ameritech argues that SCA transacted business in Illinois, contracted to insure a risk located in Illinois, and entered into a contract substantially connected to Illinois, thereby giving rise to the claims alleged in the complaint. See 735 ILCS 5/2-209(a)(1), (4) and (7).
Ameritech does not, and cannot, rely on a theory of general jurisdiction. The Illinois long arm statute authorizes jurisdiction over corporations "organized under the laws" of Illinois or "doing business" in Illinois regardless of whether the lawsuit arises out of the company's Illinois contacts. 735 ILCS 5/2-209(b)(3) and (4). SCA is a Texas corporation based in Dallas, Texas; it is not licensed to business in any other state. SCA has no physical presence — no office, mailbox, or telephone — in Illinois, and its employees rarely make business-related visits to this state. (Hamman Aff. at ¶¶ 2-14). SCA does not have "continuous and systematic general business contacts" with Illinois and therefore is not subject to general jurisdiction in this state. See Helicopteros Nacionales de Columbia, S.A. v. Hall, 466 U.S. 408, 416 (1984).
In specific jurisdiction cases, we must decide whether a defendant has "purposefully established minimum contacts within the forum State" and consider whether, by traditional standards, those contacts would make personal jurisdiction reasonable and fair under the circumstances. Crucial to the minimum contacts analysis is showing that the defendant "should reasonably anticipate being haled into court [in the forum State]," because the defendant has "purposefully avail[ed] itself of the privilege of conducting activities" there.RAR, 107 F.3d 1277 (citations omitted). The Seventh Circuit also admonished that specific jurisdiction requires that the lawsuit "arise out of" or "be related to" a defendant's minimum contacts with the forum state. Id. "We cannot simply aggregate all of a defendant's contacts with a state — no matter how dissimilar in terms of geography, time or substance — as evidence of the constitutionally-required minimum contacts." Id. With these standards in mind, we examine SCA's specific contacts with Illinois to determine whether this lawsuit arises out of those contacts in a manner sufficient to warrant exercising personal jurisdiction over SCA.
It is well settled that a non-resident defendant, like SCA, does not subject itself to personal jurisdiction in Illinois simply by entering into a contract with an Illinois resident. See RAR, 107 F.3d at 1277 ( citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 479 (1985)). Instead, courts consider a number of factors as relevant to the question of specific jurisdiction, including who initiated the transaction, where the negotiations were conducted, where the parties executed the contract, and where the defendant would have performed the contract. RAR, 107 F.3d at 1277; see Dillon Enterprises, Ltd. v. Breland Builders, Inc., 1998 WL 525173, at *2 (N.D.Ill. Aug. 19, 1998) All of these factors weigh against exercising personal jurisdiction over SCA. First, the evidence indicates that Ameritech initiated the discussions which led to the contractual relationship. Ameritech telephoned SCA after an Ameritech official learned of SCA's business at the January 1998 trade show in Florida (Hamman Aff. at ¶¶ 15-16). This fact is not disputed by Ameritech and therefore we take it as true.
Second, the contracts between Ameritech and SCA were not negotiated in Illinois. After Ameritech's initial telephone inquiry to SCA, both parties engaged in further discussions regarding the deal via telephone, fax, and mail communications (Hamman Aff. at ¶ 17). Significantly, the negotiations were not conducted in person, and no representative of SCA traveled to Illinois to meet with Ameritech officials. Ameritech argues that by making calls to Illinois telephone numbers and sending faxes and mailings into Illinois, SCA purposefully availed itself of the benefits and protections of Illinois law. This is incorrect. All of SCA's communications with Illinois followed from Ameritech's initial inquiry into the possibility of a deal with SCA. Even when aggregated, SCA's telephone calls, faxes, and mailings to Ameritech's Illinois offices did not amount to minimum contacts with Illinois. See Dillon, 1998 WL 525173, at *3; Buske Lines, Inc. v. Thermo King Michigan, Inc., 960 F. Supp. 170, 171-72, 174 (C.D. Ill. 1997); Cherry Communications, Inc. v. Coastal Telephone Co., 906 F. Supp. 452, 455 (N.D.Ill. 1995).
Third, the contracts at issue here were made in Texas. Ameritech signed the proffered written agreements on April 6, 1998, and then sent them to SCA's office in Dallas. On April 8, 1998, SCA signed the agreements, concluding the deal (Hamman Aff. at ¶ 19). Under Illinois law the "place where the last act necessary to give validity to the contract is done is the place where the contract is made." Gordon v. Tow, 498 N.E.2d 718, 722-23 (Ill.App. 5 Dist. 1986) (quoting Youngstown Sheet Tube Co. v. Industrial Commission, 404 N.E.2d 253, 257 (Ill. 1980)). Therefore, since SCA completed the deal by signing the contracts on April 8, 1998, the contracts were made in Texas. See Gordon, 498 N.E.2d at 722-23 (no personal jurisdiction in Illinois where final signature to contract was affixed in Rhode Island); see also Jamik, 74 F. Supp.2d at 823.
Finally, performance of the contract, if any, would take place in Texas. If obligated to perform under the contract, SCA would draw a check in Texas from a Texas bank and send it to Illinois (Hamman Aff. at ¶ 20). Ameritech argues that the budgetary overrun occurred in Illinois, where it is based, and therefore the place of performance is Illinois. Ameritech's performance, however, is irrelevant. Helicopteros, 466 U.S. 416-17; Cherry, 906 F. Supp. at 455. The personal jurisdiction analysis focuses on where the non-resident defendant would perform the contract. In this case, SCA's performance would occur in Texas.
Ameritech argues that personal jurisdiction nevertheless is appropriate because SCA has engaged in a strategy of soliciting business in Illinois. Ameritech faces an uphill battle — as demonstrated above, the initiation, negotiation, execution, and performance of the contracts all direct us away from exercising jurisdiction in Illinois. In order to have a chance of success, Ameritech must demonstrate that the contracts at issue arose from SCA's solicitation of Illinois business. Ameritech hangs this tenuous argument on two factual pegs: SCA employees' visits to Illinois and SCA's internet website. Neither supports its argument.
SCA officials have attended trade shows in Illinois in the past and employees of the company have traveled to Illinois for business-related reasons on rare occasions (Hamman Aff. at ¶ 8). These sporadic visits, however, are insufficient to support personal jurisdiction over SCA. See Fluid Management Ltd. Partnership v. H.E.R.O Industries, Ltd., 1997 WL 112839, at *6 (N.D.Ill. Mar. 11, 1997). Moreover, nothing in the record suggests that the contracts at issue in this lawsuit arose out of SCA's participation in trade shows or other events in Illinois. Ameritech does not claim that it attended the same Illinois trade shows as SCA, let alone assert that its relationship with SCA began during one SCA's rare ventures into Illinois. On the contrary, the unrefuted evidence is that Ameritech's contracts with SCA stemmed from the January 1998 trade show in Florida (Hamman Aff. at ¶¶ 15-19). In breach of contract claims, only those dealings between the parties that pertain to the disputed contracts are relevant to the minimum contacts analysis. RAR, 107 F.3d at 1278. SCA's other sparse contacts with Illinois are not significant.
Ameritech similarly fails to establish that this lawsuit arose out of SCA's internet activity. There is no evidence that SCA solicited Ameritech's business through its website. Indeed, it is unclear whether Ameritech even accessed SCA's website prior to entering into the contracts in April 1998 (Moy Aff. at ¶¶ 2-6). In any event, when tested against the sliding scale approach commonly applied in this circuit, it is clear that SCA does not operate a jurisdiction-conferring website. See Ty Inc., 2000 WL 51816, at *3-4; International Star Registry, 1999 WL 300285, at *4-5. SCA's website advertises the company's services and provides means to e-mail company officials and obtain price quotes; however, the website does not enable customers to buy and sell SCA services on-line (Moy Aff. Exh. 2). With these characteristics, SCA's website falls, at most, within the "middle ground" of the sliding scale model, "occupied by interactive Web sites where a user can exchange information with the host computer." Ty Inc., 2000 WL 51816, at *3 (quoting Zippo, 952 F. Supp. at 1124). Compared to other websites in the "middle ground," SCA's website supports a relatively low level of interactivity. Therefore, it cannot serve as the basis for exercising personal jurisdiction over SCA in Illinois. See Ty Inc., 2000 WL 51816, at *4; Scherr v. Abrahams, 1998 WL 299678, at *4-5 (N.D.Ill. May 29, 1998).
On one extreme of the sliding scale are websites that enable the host to transact business with users from foreign jurisdictions. On the other extreme are entirely passive websites on which the host merely posts information or advertisements. Hosts of the first sort of website generally are subject to personal jurisdiction in foreign jurisdictions, but hosts of the second sort of website generally are not. In between the two extremes are interactive websites which allow for some exchange of information between users and the host. Personal jurisdiction over hosts of these types of websites depends on the level of interactivity supported by the site and the commercial nature of the information exchanged. See Ty Inc. v. Clark, 2000 WL 51816, at *3-4 (N.D.Ill. Jan. 14, 2000); International Star Registry of Illinois v. Bowman-Haight Ventures, Inc., 1999 WL 300285, at *4-5 (N.D.Ill. May 6, 1999); Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119, 1124 (W.D. Pa. 1997).
The vast majority of SCA's business activity took place in Texas. More importantly, SCA's specific contacts with Illinois are unrelated to its contractual relationship with Ameritech. As the Supreme Court has stated, due process ensures "a degree of predictability to the legal system that allows potential defendants to structure their primary conduct with some minimum assurance as to where that conduct will and will not render them liable to suit." World-Wide Volkswagen v. Woodson, 444 U.S. 286, 297 (1980). SCA could not have foreseen being haled into Illinois courts by virtue of its dealings with Ameritech. Therefore, SCA is not subject to personal jurisdiction in our state.
CONCLUSION
For the reasons set forth above, defendant's motion to dismiss is granted.