Opinion
No. 99-C-7647
February 14, 2000
MEMORANDUM OPINION AND ORDER
Avesta Sheffield, Inc. ("Avesta") sues Olympic Continental Resources, L.L.C. ("Olympic") for breach of contract. Avesta claims Olympic failed to pay for two shipments of steel it ordered from Avesta. Avesta originally filed this action in the Circuit Court of Cook County seeking actual damages in excess of $135,000. Olympic removed the action to this court on November 24, 1999. Olympic now moves to dismiss the complaint for lack of personal jurisdiction pursuant to Fed.R.Civ.P. 12(b)(2) or, in the alternative, to transfer venue to the Northern District of Ohio pursuant to 28 U.S.C. § 1404 (a).
BACKGROUND
In considering a motion to dismiss for want of personal jurisdiction, the court accepts all well-pleaded allegations as true unless controverted by defendant's affidavits. Any conflicts in the affidavits are resolved in favor of the plaintiff. Turnock v. Cone, 816 F.2d 332, 333 (7th Cir. 1987) Avesta is a Delaware corporation with its principal place of business in Schaumburg, Illinois. Compl. ¶ 1. Olympic is an Ohio limited liability corporation with its principal place of business in Cleveland, Ohio. Id. ¶ 2.
This dispute arises from two orders for steel sent to Avesta on November 16, 1998 and January 19, 1999. The orders purported to be from Olympic. They were printed on Olympic purchase order forms, designated shipment to "Olympic Continental Resources" at an address in Macedonia, Ohio, and were signed by GP Schneikart with "Olympic Continental Resources, L.L.C." printed below the signature line. Motion to Dismiss Ex. B. Avesta shipped the steel to "Olympic Continental Resources" at the Macedonia address designated on the order forms on January 20, 1999 and May 13, 1999. Compl. ¶ 4. The recipient accepted the steel and Avesta sent Olympic invoices for payment. Id. ¶¶ 6-7. Olympic refused to pay for the shipments and Avesta filed this case as a result.
Olympic claims it had nothing to do with the transactions. It asserts that another company, Best Atlas, ordered the goods using Olympic's name without its permission. It contends Gary P. Schneikart is an employee of Best Atlas and the Macedonia address where the steel was shipped belongs to Best Atlas, not Olympic. Affidavit of Uwe Schmidt ¶ 11 ("Schmidt aff."). Olympia claims it never authorized Schneikart or Best Atlas to act on its behalf and had no idea Best Atlas was using its name and purchase orders to buy steel from Avesta. Id. ¶¶ 11, 12.
For two months in early 1997, Olympic acted as an Ohio distributor for Avesta products. According to Olympic, it terminated its relationship with Avesta in March 1997, and has not subsequently done business with Avesta or anyone else in Illinois. Id. ¶ 7. In March 1997, Best Atlas, which is affiliated with one of Olympic's members, took over Olympic's duties as a distributor for Avesta. Id. ¶ 8. Olympic agreed to act as a financial conduit to pay funds owed Avesta by Best Atlas. Under this arrangement, Best Atlas would order steel from Avesta and notify Olympic the amount owed. Once Olympic was assured the ultimate customer paid for the steel, Olympic would send Avesta a check on behalf of Best Atlas. Olympic acted as a conduit for Best Atlas on purchases from Avesta from March 1997 until April 1999. Id. Olympic claims it had no business-related contact with Avesta whatsoever during this time. Id. Olympic asserts it has never authorized any agent to order, receive, or accept goods from Avesta since March 1997. Id. ¶ 6.
According to Avesta, Olympic never notified Avesta that it was terminating their relationship or that it was Best Atlas, and not Olympic, that was purchasing steel after March 1997. Affidavit of Brent Venable ¶¶ 11, 17 20 ("Venable aff."). Prior to March 1997, when Olympic ordered steel from Avesta, Schneikart had authority to act on Olympic's behalf. Id. ¶¶ 4-6. Schneikart ordered steel from Avesta on behalf of Thyssen Continental Resources, L.L.C. as early as July 16, 1996. Id. ¶ 3. In January 1997, Thyssen changed its name to Olympic. Id. ¶ 4. From January 1997 until May 31, 1999, Schneikart continued to order steel purportedly on behalf of Olympic by sending Avesta signed purchase orders on Olympic letterhead. Id. ¶¶ 5, 6.
According to Avesta, both Schneikart's and Olympic's actions led it to believe Olympic continued to be the one buying steel after March 1997. Schneikart gave Avesta two phone numbers where he could be reached. One number was identified as Olympic's "warehouse" facility in Macedonia and the other was for Olympic's "headquarters" in Pepper Pike, Ohio. Id. ¶¶ 7, 8. It is undisputed the address in Pepper Pike belongs to Olympic. Both numbers were answered by someone stating "Olympic Continental Resources;" Brent Venable, Avesta's credit manager, was able to speak to Schneikart by calling either number. Id. ¶ 9. In these transactions, Avesta shipped the ordered steel to the Macedonia facility in care of "Olympic Continental Resources Id. ¶ 7.
According to Avesta, after each shipment was invoiced, Venable often called both Olympic's warehouse in Macedonia and its headquarters in Pepper Pike to inquire about payment. Id. ¶ 9. Payment was handled by Dominick Demasi, an employee of Olympic. Id. ¶ 13. In the course of Venable's conversations with Demasi, Demasi often referred Venable to Schneikart and told Venable to discuss this with "Olympic's warehouse" or "our warehouse," referring to the Macedonia facility. Id. ¶ 18. Venable routinely faxed the Olympic purchase orders signed by Schneikart, and Avesta's invoices that showed delivery to Olympic at the Macedonia address, to Demasi at the Pepper Pike facility.Id. ¶ 16; Venable aff. ex. A. Despite Demasi's receipt of these faxes and his multiple conversations with Venable, Demasi never informed Venable that the purchase orders were for Best Atlas and not Olympic, that the invoices were incorrect in listing Olympic as the recipient of the steel, that the Macedonia facility did not belong to Olympic, or that Schneikart had no authority to sign purchase orders on behalf of Olympic. Venable aff. ¶ 17. At all times, Demasi acted as if Olympic had ordered the steel, Schneikart worked for Olympic and the Macedonia facility was operated by Olympic. Id.
According to Avesta, on each occasion, except the two transactions at issue in this litigation, Demasi issued an Olympic check to Avesta in payment for the steel ordered by Schneikart. Id. ¶ 19. Only after Avesta demanded payment numerous times did Olympic inform Avesta that Schneikart did not work for Olympic and had no authority to act on its behalf.
DISCUSSION
I Personal jurisdiction
Avesta has the burden of demonstrating the existence of personal jurisdiction over Olympic. PAR, Inc. v. Turner Diesel, Ltd., 107 F.3d 1272, 1275 (7th Cir. 1997). A federal district court sitting in Illinois has personal jurisdiction over a nonresident party only if an Illinois state court would have jurisdiction. RAR, Inc., 107 F.3d at 1276. An Illinois nonresident may be sued in Illinois if jurisdiction is authorized under the Illinois long-arm statute and the minimum contacts required by due process are present. FMC Corp. v. Varanos, 892 F.3d 1308, 1310 (7th Cir. 1990).
The Illinois long-arm statute authorizes jurisdiction on any basis permitted by the Illinois Constitution and the Constitution of the United States. 735 ILCS 5/2-209(c). The Illinois Constitution requires the court to decide whether 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, 141 Ill.2d 244, 152 Ill.Dec. 384, 565 N.E.2d 1302, 1316 (Ill. 1990). The defendant's connection with Illinois should not be merely "random, fortuitous, or attenuated;" rather, the connection should enable the defendant "to predict that it might be subject to the jurisdiction of this state." Autotech Controls Corp. v. K.J. Elec. Corp., 256 Ill. App.3d 721, 195 Ill.Dec. 526, 628 N.E.2d 990, 995-96 (Ill.App.Ct. 1st Dist. 1993)
Similarly, federal due process requires minimum contacts with the forum state "such that the maintenance of the suit does not offend "traditional notions of fair play and substantial justice." International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). Minimum contacts have been defined as "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." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985) (quoting Hanson v. Denckla, 357 U.S. 235, 253 (1958). Put another way, the federal due process standard requires courts to consider whether the defendant's purposeful contacts with the forum state were such that the defendant could reasonably expect the courts of that state to assert jurisdiction. See Id.; World-Wide Volkswagen Core. v. Woodson, 444 U.S. 286, 297 (1980).
Olympic argues it does not have sufficient contacts to Illinois to establish personal jurisdiction. Olympic claims that with the exception of a two month period in early 1997, it has not done business, owned property or established any substantial direct or indirect contacts with Illinois. It contends that its only contact with the state was acting as a financial conduit when Best Atlas purchased steel from Avesta, and this responsibility took place entirely in Ohio. Olympic concludes that neither it or any of its authorized agents had sufficient contacts regarding the transactions at issue to vest this court with personal jurisdiction over Olympic. Avesta argues that Olympic clothed Schneikart and Best Atlas with apparent authority to act as its agent and that their actions submitted Olympic to personal jurisdiction in Illinois.
Under the Illinois long-arm statute, a non-resident can submit to Illinois jurisdiction through the acts of an agent. 735 ILCS 5/2-209(a). Establishing personal jurisdiction over a defendant through an agent is also consistent with the due process clause.Wisconsin Electrical Mfg. Co. v. Pennant Products, Inc., 619 F.2d 676, 677-78 (7th Cir. 1980). An agent's authority can be actual or apparent, with circumstantial evidence used to establish the existence and extent of the authority. Damian Services Corp. v. PLC Services, Inc., 763 F. Supp. 369, 372 (N.D. Ill. 1991). Apparent authority exists where a principal, through his words or conduct, creates a reasonable impression that the agent has been granted the authority to perform relevant acts.Id.; Granite Properties Ltd. Partnership v. Granite Inv. Co., 581 N.E.2d 90, 92 (Ill.App. 1991). To establish apparent authority, the relying party must base the relationship upon words or acts of the principal, not the representations or acts of the agent.Damian, 763 F. Supp. at 372-73. Thus, any agency relationship created by apparent authority here must be based on Olympic's actions, not those of Schneikart or Best Atlas.
Avesta has made a sufficient showing to establish personal jurisdiction over Olympic. Based on Venable's affidavit, it is clear Olympic clothed Schneikart and Best Atlas with apparent authority to order steel on behalf of Olympic. Schneikart was authorized to purchase steel on behalf of Olympic prior to March 1997. For over two years after March 1997, Avesta received purchase orders on Olympic letterhead, shipped steel to "Olympic Resources Limited" at the Macedonia facility, discussed payment issues with Demasi, an Olympic employee, and received payment for steel from Olympic. According to Venable's affidavit, Olympic never notified Avesta that Schneikart was no longer authorized to purchase steel or that the orders were not actually made by Olympic. It was not until April 1999, after numerous attempts by Avesta to collect payment, that Olympic informed Avesta that Schneikart was unauthorized to order steel in its name. Olympic's failure to inform Avesta of the true nature of the transactions strongly suggests Schneikart had apparent authority to order steel in Olympic's name. "The authority of an agent may be presumed from silence of the alleged principal when he knowingly allows another to act for him as his agent." Sakun v. Taffer, 643 N.E.2d 1271, 1277 (Ill.App. 1994).
Furthermore, according to Venable's affidavit, Olympic was an affirmative actor in these events. Demasi discussed the purchase orders and the invoices showing Olympic as the purchaser with Venable. Venable paid for the invoices with Olympic checks that referenced the invoices. He consistently forwarded telephone calls from Olympic to Schneikart at the Macedonia facility. More importantly, despite the fact Demasi purportedly knew Schneikart was not an employee of Olympic and Best Atlas was not authorized to use Olympic's name, he referred to Best Atlas' Macedonia facility as "our warehouse" or "Olympic's warehouse" in conversations with Venable. In short, Olympic's actions fostered the impression that Schneikart had authority to place purchase orders for Olympic.
Olympic's arguments are unpersuasive. This is unlike cases where allegations of an agency relationship were insufficient to establish personal jurisdiction. In Damian Services Corp. v. PLC Services Inc., plaintiff asserted defendants were subject to personal jurisdiction because their daughter, purportedly acting as their agent, transacted business in Illinois. 763 F. Supp. 379. The court determined there was no personal jurisdiction over defendants because plaintiff's sole reason for believing the daughter was their agent were acts and statements made by the daughter herself. Id. at 373. Here, more than the actions of Schneikart and Best Atlas support a finding of apparent authority. According to Venable's affidavit, the actions of Olympic and its employees contributed to Avesta's conclusion there was an agency relationship.
Similarly, Olympic relies on Damian and First Financial Leasing Corp. v. Hartage, 671 F. Supp. 538 (N.D. Ill. 1987) for the notion that a defendant's affidavit denying the existence of an agency relationship is sufficient to defeat personal jurisdiction. Olympic has submitted the affidavit of Uwe Schmidt, a member and its former president, which plainly denies that any agency relationship existed between Olympic and Schneikart or Best Atlas. However, in both Damian and First Financial, defendants' affidavits were unrefuted. Here, Avesta has submitted Venable's affidavit refuting Olympic's denial of an agency relationship. Resolving conflicts in Avesta's favor, Schneikart had apparent authority to act as Olympic's agent.
The acts of Schneikart and Olympic are sufficient to establish personal jurisdiction over Olympic for the transactions at issue. Olympic, through Schneikart, initiated the transactions by sending the purchase orders to Avesta in Illinois. According to Venable's affidavit, Schneikart regularly ordered steel under Olympic's name and accepted the goods at the Macedonia facility. Olympic accepted the corresponding invoices and paid Avesta for the steel ordered by Schneikart consistently for two years. These acts are sufficient to confer personal jurisdiction. Heritage House Restaurants, Inc., v. Continental Funding Group, Inc., 906 F.2d 276, 280 (7th Cir. 1990). Personal jurisdiction is conferred by solicitation of a purchase in Illinois, particularly when the parties have an on-going relationship. Id. The fact that neither Schneikart or Olympic traveled to Illinois is not dispositive. "The physical presence of a defendant in Illinois during the transaction is not necessary to obtain jurisdiction under the long-arm statute. Where a relationship is naturally based on telephone and mail contact, these contacts can justify jurisdiction over a defendant." Id. at 281. Avesta has carried its burden of establishing personal jurisdiction over Olympic in Illinois. Accordingly, the motion to dismiss must be denied.
II Transfer of venue
Olympic moves to transfer this case to the United States District Court for the Northern District of Ohio pursuant to 28 U.S.C. § 1404. Section 1404 allows a district court to transfer a case to another federal court where the original case could have been brought "for the convenience of the parties and witnesses, in the interest of justice." 28 U.S.C. § 1404. There are three elements of a valid transfer under § 1404: (1) venue must be proper in the transferor court; (2) venue must be proper in the transferee court; and (3) the transfer must be for the convenience of the parties and witnesses, and in the interest of justice. Keppen v. Burlington N.R.R. Co., 749 F. Supp. 181, 183 (N.D.Ill. 1991). Venue should be transferred only if there is a clear balance of inconvenience in the transferor district. Sky Valley Ltd. Partnership v. ATX Sky Valley, Ltd., 776 F. Supp. 1271, 1276 (N.D. Ill. 1991). It is Olympic's burden to show that the transferee forum is clearly more convenient.Heller Financial, Inc. v. Midwhey Powder Co., Inc., 833 F.2d 1286 [ 883 F.2d 1286], 1293 (7th Cir. 1989). The first two requirements of § 1404 are met here; the parties do not dispute that venue is proper in both forums. The motion turns on whether transfer would be for the convenience of the parties and witnesses and is in the interests of justice.
In deciding whether to transfer venue, the court first considers the convenience of the parties and witnesses. Hanley v. Omarc, 6 F. Supp.2d 770, 774 (N.D. Ill. 1998). For this purpose, the court considers: (1) the plaintiff's choice of forum; (2) the site of material events; (3) the relative ease of access to sources of proof; (4) the convenience of the witnesses; and (5) the convenience to the parties of litigating in the respective forums. North Shore Gas Co. v. Salomon, Inc., 896 F. Supp. 786, 791 (N.D. Ill. 1995). These factors do not suggest transfer is appropriate in this case.
The Northern District of Illinois is Avesta's chosen forum. A plaintiff's choice of forum is entitled to substantial weight under § 1404(a). Vandeveld v. Christoph, 877 F. Supp. 1160, 1167 (N.D. Ill. 1995); Advertising to Women, Inc. v. Gianni Versace S.p.A., 1998 WL 378419 (N.D. Ill. July 1, 1998) (the court must accord substantial weight to the plaintiff's choice of forum) Thus, this factor weighs significantly against transfer.
The second and third factors do not strongly favor either venue. Olympic argues all of the alleged conduct complained of by Avesta occurred in Ohio and therefore the site of the material events favors transfer. However, Schneikart initiated the transaction by sending purchase orders to Illinois and the steel was shipped from Avesta's Illinois facility. Also, the communications between the parties involved phone calls, faxes, and mail into and from Illinois. In short, not all material events took place in Ohio. Similarly, Olympic argues the great majority of documentation on these issues is located in Ohio. However, the court is convinced all necessary documents could easily be transferred and does not place significant weight on the third factor.
The fourth consideration is the convenience of witnesses. This is the most important factor in the transfer balance. Brandon Apparel Group, Inc. v. Quitman Mfg. Co., 42 F. Supp.2d 821, 834 (N.D. Ill. 1999). In analyzing this factor, the court must look to the nature and quality of the witnesses' testimony with respect to the issues, not just the number of witnesses in each venue. Vandeveld, 877 F. Supp. at 1168. The court must also consider whether these witnesses are subject to compulsory process and the cost to obtain attendance of willing witnesses.Hanley, 6 F. Supp.2d at 775.
Olympic claims the convenience of the witnesses favors transfer. Olympic asserts that it has dissolved and its members would incur hardship if compelled to litigate this case in Illinois. More importantly, Olympic argues that there are numerous non-party witnesses that are crucial to the issue of whether Best Atlas had actual or apparent authority to act on its behalf. It contends these witnesses are either beyond the subpoena powers of this court, or would be excessively and unnecessarily inconvenienced if forced to attend trial in Illinois.
Olympic's claims regarding its non-party witnesses are insufficient. The party seeking transfer must identify the witnesses to be called and proffer a general statement of their testimony. Vandeveld, 877 F. Supp. at 1167. Olympic fails to do this. It does not identify any non-party witness, the number of non-party witnesses it expects to call, or whether these witnesses would refuse to testify voluntarily. Olympic simply makes reference to "numerous non-party witnesses, including officers and employees of Best Atlas." Furthermore, it is not clear that the unidentified third party witnesses' testimony is essential. It appears the central issue is whether Schneikart and Best Atlas had apparent authority to act for Olympic. The testimony of Best Atlas employees is not crucial to this determination. As discussed earlier, apparent authority is dependent solely on Olympic's statements and actions. Damian, 763 F. Supp. at 372-73. Furthermore, the location of Olympic's members is irrelevant on the issue of witness convenience. It is presumed that a party's employees will appear as witnesses voluntarily.Weller v. Calvin Gilmore Prod., Ltd., 1995 WL 382471 * 3 (N.D. Ill. 1995). Accordingly, this factor only weighs slightly in favor of transfer.
Additionally, the court must consider the convenience of the parties in its § 1404(a) determination. Specifically, the court should consider the parties' respective residences and their ability to bear the costs of litigating in a particular forum. Habitat Wallpaper Blinds, Inc. v. K.T. Scott Ltd. Partnership, 807 F. Supp. 470, 474 (N.D. Ill. 1992). However, a court should not grant a transfer if it merely transforms an inconvenience for one party into an inconvenience for the other party. Chemical Waste Management v. Sims, 870 F. Supp. 870, 876 (N.D. Ill. 1994)
Olympic claims it would be more inconvenient for it to litigate in the Northern District of Illinois than it would be for Avesta to litigate in the Northern District of Ohio. Olympic argues that Avesta is a large, international company with revenues in the multi-million dollar range and Olympic is very small in comparison. However, Olympic offers no evidence to support its characterizations. Similarly, Olympic presents no evidence regarding its inability to litigate in Illinois. "Absent evidence to suggest that defending this suit in Illinois will work a financial hardship on [defendant], the fact that it is `smaller' than [plaintiff] has little value." Central States v. Kurtz Gravel Co., 1998 WL 684216 (N.D. Ill. 1998). While it certainly would be more convenient for Olympic to litigate in Ohio, Illinois is Avesta's home forum and it would be more convenient for Avesta to litigate here. The fifth factor is neutral.
Finally, the court must consider whether transfer is in the interests of justice. In making this determination, the court considers traditional notions of judicial economy rather than the private interests of the litigants and their witnesses. TIG Ins., Co. v. Brightly Galvanized Prods., Inc., 911 F. Supp. 344, 346 (N.D.Ill. 1996). Considerations include the relations of the community to the issues, the respective courts' familiarity with the applicable law, and ensuring a speedy trial. Coffey v. Van Dorn Iron Works, 796 F.2d 217, 220-21 (7th Cir. 1986); Vandeveld, 877 F. Supp. at 1169 (citing Heller, 883 F.2d at 1293).
Olympic points out the most recent statistics regarding judicial caseload indicate that a case proceeds to trial more quickly in the Northern District of Ohio than the Northern District of Illinois. Specifically, the median time from filing to trial in Ohio is 19 months, whereas in Illinois it is 23 months. Also, Olympic contends that the case will depend on agency issues that will likely be a matter of Ohio law. These facts do not indicate transfer is necessary. The parties are insured a speedy outcome in this court; trial has been scheduled in June, 2000. Also, this court is confident it can properly apply Ohio law, if necessary. Accordingly, the motion to transfer must be denied.
CONCLUSION
Olympic's motion to dismiss for lack of personal jurisdiction, or, in the alternative, to transfer venue is denied.