The opinion of the court was delivered by: Decker, District Judge.
This case involves a lawsuit by Magnaflux Corporation, a
Delaware corporation licensed to do business and with its
principal place of business in the State of Illinois,
(hereinafter referred to as Magnaflux). Magnaflux sues Dr.
Friedrich Foerster (hereinafter referred to as Foerster) for
breach of a contract executed November 5, 1954, and subsequently
amended July 14, 1961.
Foerster is a citizen of the Federal Republic of Germany, and
he maintains his residence in the City of Reutlingen in West
(5) Performance of this amended contract has continued, at
least in part, in Illinois down to the present.
(6) Negotiations for the 1954 agreement took place at
plaintiff's place of business in Illinois, with Foerster
personally present and actively engaged in the negotiations from
October 27, 1954, through November 5, 1954.
(7) As a part of the immediate performance of this 1954
contract, plaintiff delivered to Foerster a check for $22,
000.00, which Foerster cashed on November 6, 1954, in Chicago, by
endorsing it to The First National Bank of Chicago.
(8) During the period from 1951 to 1962, Foerster spent a total
of approximately 54 days at the plaintiff's plant in Illinois.
These 54 days were divided among thirteen separate visits, at all
of which Foerster discussed problems of manufacture and sale of
Foerster equipment with plaintiff's engineers in furtherance of
the 1954 agreement, as amended in 1961, and under which the
plaintiff now sues. The last of these visits was on March 15 and
16, 1962, when Foerster discussed performance of the contract
with Magnaflux and with some of the other defendants.
(1) As for Foerster's contention that Rule 4(f) prohibits
reference to the law of Illinois in order to sustain service of
process made extra-territorially, reference to the amendments to
the Rules of Federal Procedure which became effective July 1,
1963, should suffice.
Rule 4(f) has now been clarified to specifically authorize the
service of process on an out-of-state individual or
corporation, "* * * in the manner prescribed by the law of the
state in which the district court is held * * *," as outlined in
Therefore, I hold that Rule 4(d)(7) prior to the July 1, 1963,
amendment, rather than Rule 4(f), establishes the mode of
effecting service on a defendant outside the state in which this
Court sits. Therefore, we must look to the law of Illinois to
determine whether service of process on Foerster was sufficient
to give this Court jurisdiction over his person.
The Court held that the performance of one of the four
jurisdictional acts set out in Section 17 by a non-resident or by
his agent, "while physically present in Illinois," is essential.
The one morning visit to the plaintiff's plant by the defendant
at which, it was held, defendant by his conduct accepted
plaintiff's offer and formed a contract, was further held
sufficient by the Illinois Court to satisfy the test of the
"transaction of any business within this State" as set out in
Section 17(1)(a) of the Illinois Civil Practice Act.
Certainly, considering the findings set out above regarding
Foerster's contacts with Illinois, service of process on Foerster
in Germany pursuant to the Illinois statute should be upheld
under the Kropp Forge case.
Hoover Ball is a Michigan corporation which is not licensed to
do business in the State of Illinois, but which does maintain a
sales office for soliciting orders for its products in Illinois.
No contracts are made at this office and all orders are forwarded
to Michigan where they are accepted or rejected. Hoover Ball's
business can be best described by quoting from an advertising
pamphlet published by it, which is attached as an exhibit to the
"Diller Affidavit" filed by Magnaflux:
Hoover Ball was served at this office which it maintains at
8581 South Chicago Ave., Chicago, Illinois. Plaintiff Magnaflux
contends that by having this office in Chicago, Hoover Ball was
"doing business" in Illinois and therefore subject to service at
that office. Plaintiff Magnaflux also argues that Hoover Ball
"transacted business" under Section 17 of the Illinois
Civil Practice Act, which would alternatively make it subject to
service of process.
Hoover Ball moves to dismiss the complaint or to quash service
of summons on the grounds that:
(1) The Chicago office is used merely for soliciting orders for
acceptance at its home office in Michigan, and that no orders
solicited in Illinois are accepted in the Chicago office;
(2) All of the products so ordered and accepted are delivered
in Illinois by shipment from Michigan or Tennessee in interstate
commerce only, f.o.b. the points of shipment;
(3) No discussions or transaction of any kind relating to
Foerster, Hentschel or Forster/Hoover have occurred in the
Chicago office which Hoover Ball maintains;
(4) None of the salesmen nor the office girl who use Hoover
Ball's Chicago office have ever had any contact with Foerster or
the other defendants; and
(5) Hoover Ball is not qualified as a foreign corporation to do
business in Illinois.
The contacts of Hoover Ball with Illinois are as follows:
(1) It maintains an office in Chicago.
(2) It staffs this office with one office girl, Miss Killeen,
who acts as a secretary-receptionist, and with the Sales Manager
of the Central Zone of the United States, Mr. McGregor, and
several other salesmen who have intermittently used the office
(Messrs. Merren, Lawrence and Maschek). The Central Zone
encompasses eleven midwestern states, including Illinois.
(3) In addition to working as salesmen, the employees at the
Chicago office perform the additional activities of furnishing
engineering services for customers, handling complaints of
customers regarding the performance of Hoover Ball products and
attend trade shows to exhibit such products.
(4) It lists its Chicago office in the Chicago telephone
directory, the "Red Book", as "Hoover Ball and Bearing Co.,
Central Zone Sales Office."
(5) It purchased a full page advertisement in Fortune Magazine,
which has a national circulation, and listed its Chicago office
as one of its three "Zone Sales Offices."
(1) As regards plaintiff's contention that Hoover Ball
"transacted business" in Illinois under Section 17(1)(a) of the
Illinois Civil Practice Act, plaintiff misconstrues the import of
First, even if it is assumed arguendo that what Hoover Ball did
through its Chicago sales office satisfies the standard of
"transaction of any business," Section 17 specifically qualifies
its coverage in subsection (3):
"Only causes of action arising from acts enumerated
herein [one of which is the transaction of business]
may be asserted against a defendant in an action in
which jurisdiction over him is based upon this
The Act does not confer jurisdiction upon a defendant unless it
does two things: (a) enters into Illinois, and (b) to transact
the business from which the cause of action arises. If a
defendant transacts business with A, which has absolutely no
relation with its dealings with B, B cannot obtain jurisdiction
over the person of the defendant under the Illinois statute on
the specific theory that the defendant has transacted business.
Here the plaintiff has not alleged a cause of action against
Hoover Ball arising out of the transaction of any business
between Hoover Ball and plaintiff. On the contrary, plaintiff's
cause of action against Hentschel, Forster/Hoover and Hoover Ball
is grounded solely upon the allegation of a conspiracy to induce
Foerster to breach his contract with plaintiff. This is an
allegation sounding in tort, and in order to satisfy Section 17
of the Illinois Civil Practice Act, plaintiff would have to
establish "the commission of a tortious act within this State"
under Section 17(1)(b).
Section 17(1)(a) is inapposite as to all defendants except
Foerster, the only defendant alleged to have transacted business,
by entering into a contract, with Magnaflux. All that plaintiff
has shown is that Hoover Ball, by maintaining an office in
Chicago, has transacted business with some unnamed third persons
who have no relationship to this lawsuit. There is no allegation
that Hoover Ball has transacted business with plaintiff in
Illinois and that this cause of action arises out of that
transaction of business with the plaintiff.
Secondly, and more basically, Section 17 deals with
out-of-state service on parties whose conduct within Illinois
makes them subject to the jurisdiction of Illinois courts. Here
service was made in Illinois on Hoover Ball by serving personally
an agent of the corporation found in Illinois. The return of
"Served this writ together with a copy of complaint
on the within named Hoover Ball and Bearing Co., a
corporation, by delivering copies thereof to Mr.
Higgins, salesman an [sic] agent, of such
corporation, this 30th day of July A.D. 1962.
"The president of said corporation not found in my
The return is prima facie evidence of proper service and is not
to be set aside except on clear and satisfactory evidence. Marnik
v. Cusack, 317 Ill. 362, 148 N.E. 42 (1925); Cannata v. White Owl
Express, Inc., 339 Ill. App. 79, 81, 89 N.E.2d 56 (1949).
Therefore, though the parties in their briefs extensively argue
the applicability of Section 17 as if this were out-of-state
service of process, the appropriate sections of the Illinois
Civil Practice Act are Sections 13.1 and 13.3.
(2) Sections 13.1 and 13.3 allow summons to be served on any
private corporation by serving a copy of the process on any
"agent" of the corporation found anywhere in the State. Such
in-state service may be effected on either a domestic or foreign
corporation; and regarding foreign corporations, no distinction
is made between those that have qualified to do business,
appointing a registered agent for service of process, and those
that do some business in the state without qualifying.
Consolidated Cosmetics v. D-A Pub. Co., 186 F.2d 906 (7 Cir.
1951); Johnson v. Hanover Fire Insurance Co., 15 F. 97 (D.C.Ill.
1883); Phillips v. Interstate Motor Freight System, 45 F. Supp. 1
(E.D.Ill. 1942); Canright v. General Finance Corporation,
33 F. Supp. 241 (E.D.Ill. 1940); Craig v. Sullivan Mach. Co.,
344 Ill. 334, 176 N.E. 353 (1931); Hall v. Metropolitan Life Ins.
Co., 298 Ill. App. 83, 18 N.E.2d 388 (1938).
Due process of law, however, requires that a foreign
corporation served with process in Illinois under Section
13.3 "* * * have certain minimum contacts with it 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, 66 S.Ct. 154, 90 L.Ed. 95 (1945),
quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 85
L.Ed. 278 (1940). Illinois courts have typically construed "fair
play" to require that the foreign corporation so served must be
doing some amount of business in Illinois.
Three recent Seventh Circuit cases are instructive. In
Riverbank Laboratories v. Hardwood Products Corp., 220 F.2d 465
(1955), the Seventh Circuit, following its decisions in two
earlier cases, Roberts v. Evans Case Co., 218 F.2d 893 (1955),
and Canvas Fabricators, Inc., v. William E. Hooper & Sons Co.,
199 F.2d 485 (1952), held that the defendant was not doing
business in Illinois, and therefore its motion to dismiss should
have been granted. In Riverbank the defendant was a non-resident
corporation, not licensed to do business in Illinois, nor had it
authorized an agent for service of process there. Defendant
maintained a sales office in Illinois, where service of process
was made, for the purpose of soliciting orders for goods
manufactured by defendant in Wisconsin. Sales orders were
transmitted to Wisconsin for acceptance or rejection. Defendant's
on the door of its Chicago office, and also in the Chicago
Telephone directory. The District Court upheld service of summons
on the defendant's salesman in charge of its Chicago sales office
under the predecessor to Section 13.3 of the Civil Practice Act.
In Canvas Fabricators, the defendant's Chicago-based sales
representative also used stationery bearing the defendant's name
and address of the Chicago office, and the defendant maintained
a Chicago bank account where it had deposited the plaintiff's
checks for the purchase of merchandise. In Roberts, in addition
to fitting all of the facts above describing Riverbank and Canvas
Fabricators, the defendant filed a personal property schedule
with the Assessor of Cook County, Illinois, for "merchandise on
The Seventh Circuit refused to distinguish its prior holdings
because of the additional facts that the defendant in Riverbank
received royalty payments as the licensor of its product in
Illinois, and that the Chicago-based sales representative
investigated complaints concerning the functioning of defendant's
products in Illinois. The Court held that:
"* * * [t]he law of Illinois must control and that
decisions by the Illinois Supreme Court * * *
establish the rule that a defendant is not subject to
process in Illinois if it was not engaged in business
in that state in any way other than the solicitation
of orders to be accepted or rejected elsewhere."
(Ibid., 220 F.2d, at p. 467.)
The Supreme Court of the United States reversed Riverbank in a
terse per curiam opinion: "The Court is of the opinion that the
District Court correctly found there was proper service upon the
defendant in this case." (350 U.S. 1003, 76 S.Ct. 648, 100 L.Ed.
866 (1956).) Since the Supreme Court gave no reasons for its
reversal, one can only speculate as to the error in the Seventh
Circuit. A reasonable presumption is that the Court of Appeals
erred in its failure to give proper regard to the District
Court's finding that the Chicago salesman, who was served with
process, investigated complaints of customers in addition to
soliciting orders, since this fact was absent in the two earlier
Seventh Circuit cases. In any event, this fact would constitute
one of those "sufficient additional activities" mentioned in
International Shoe, 326 U.S. 310, 314, 66 S.Ct. 154, 90 L.Ed. 95,
which when added to regular and systematic solicitation of orders
in a state, render a foreign corporation amenable to service of
Here there is no doubt that the Hoover Ball salesmen stationed
at the Midwest Zone sales office located in Chicago regularly and
systematically solicited orders for acceptance by Hoover Ball in
Michigan. Depositions of four of the salesmen at the Chicago
office establish the following additional activities in Illinois
(although it is not established quantitatively how substantial
the activities are):
(1) McGregor testified that the salesmen are
equipped to give engineering advice to customers
regarding simple calculations of loads and stresses
on Hoover Ball products.
(2) McGregor testified that typically when a
customer would call the Chicago office to report a
bearing that was not giving proper service, one of
the salesmen would suggest something like a change of
lubricant to the customer.
(3) McGregor testified to having displayed samples
of Hoover Ball products at the Design Engineers Show
at McCormick Place, Chicago, in the spring of 1962.
(4) Lawrence testified that he handled a complaint
by a customer in Chicago concerning a ball which the
customer had rejected because of a pit in it.
(5) Lawrence testified that he personally attended
the Design Engineers Show at McCormick Place,
Chicago, during its entire three days in June, 1962.
(6) Merren testified that he assisted the engineers
employed by customers
of Hoover Ball in the design, selection and
proper application of bearings.
(7) Merren testified that when he received a
complaint from a customer he submitted a report to
McGregor and then returned to the customer with a
solution if it lay within his technical
(8) Maschek testified that he confers with Hoover
Ball customers regarding their complaints.
(9) Maschek testified that as the Chicago
representative of Hoover Ball, he worked at the Home
Builders Show at McCormick Place, Chicago, for five
days in December, 1961, where he had a booth
displaying the Hoover Ball products.
These additional contacts with Illinois are sufficient to
sustain service of process under Section 13.3. The Seventh
Circuit in Riverbank stated it was governed by Illinois law in
testing the validity of service of process, and cited Booz v.
Texas and Pacific Railway Co., 250 Ill. 376, 95 N.E. 460 (1911),
in support of the proposition that solicitation of orders for
acceptance outside Illinois is insufficient contact with
Illinois. It did not mention American Hide & Leather Co. v.
Southern Railway Co., 310 Ill. 524, 529, 142 N.E. 200 (1924),
which expressly distinguished Booz. In American Hide, service on
the defendant, which maintained an office and track in Illinois,
was made on an employee of the defendant, employed to solicit
freight orders for the defendant's acceptance elsewhere:
"He was not employed as soliciting agent for any
other company. He made no contracts on behalf of
defendant, issued no bills of lading, sold no
tickets, and collected no money for defendant." (Id.
310 Ill. at p. 528, 142 N.E. at p. 201.)
In Booz, service was made on a purported "agent" of the
defendant, which maintained neither track nor office in Illinois,
who was employed by two independent contractors who represented
several foreign railroads and solicited orders for all of them.
I think the jurisdictional facts of the case at bar fit American
Hide more closely than Booz.
Other pertinent authorities on Illinois law lead to the same
conclusion. Pergl v. United States Axle Co., 320 Ill. App. 115,
50 N.E.2d 115 (1943), sustained jurisdiction over a foreign
corporation, which was served through a local warehouse company
which solicited orders for the defendant, on the ground that, in
addition to continuous solicitation of orders and shipment of
goods into Illinois, there was a stock of goods maintained in
Illinois from which customers were sold. (The depositions in the
case at bar establish that the salesmen maintained samples of
Hoover Ball products in Illinois from which customers were sold.)
Olshansky v. Thyer Mfg. Corp., 13 F.R.D. 227 (N.D.Ill. 1952),
relying on the Booz case, held service on the employee of an
independent contractor, who solicited orders in Illinois for
several corporations' out-of-state acceptance, was insufficient.
The District Court emphasized that the independent contractor had
no authority to place the name of the defendant on the door of
her office (for which she paid her own rent) or in any telephone
directories. (There is no question in the case at bar that the
person served was an employee of the defendant, using an office
maintained as the defendant's Chicago office and at the
Further, as regards the attendance of defendant's salesmen at
business conventions in McCormick Place, Chicago, Scene-In-Action
Corp. v. Knights of Ku-Klux-Klan, 261 Ill. App. 153 (1931),
indicates that this is an important contact with Illinois for
purposes of testing validity of service:
"The question whether the holding of a general
convention by a foreign corporation constitutes
`doing business' within the meaning of the rule here
under consideration, is one upon which we have been
unable to find authority. * * * Our opinion is that
after defendant had sent its agent into the State of
hold a general convention, which is in the exercise
of its charter powers, it is not in a position to say
that it has never been in the State of Illinois, and
we hold that the service made in this case gave the
court jurisdiction over defendant." (Id. 261 Ill.App.
at p. 158.)
Finally, it must be noted that as a matter of common sense
"doing business" does not consist solely of the final act of
business, i.e. consummating a deal by a sale. Customers must be
solicited, sold, pacified when dissatisfied with the product
purchased, and constantly advised in the use of the product in
order to retain their patronage, in addition to the myriad other
activities connected with the manufacture and distribution of a
product. That Hoover Ball has been "doing business" in Illinois
in this sense is demonstrated in Consolidated Cosmetics v. D-A
(7 Cir. 1951). That case involved service
on the defendant, who edited a magazine in New York, in Illinois
through its agent which was selected to print the magazine in
Illinois in order to qualify for second-class mailing privileges.
The Court said:
It is interesting to note that while Section 17 expressly
limits jurisdiction of Illinois courts, obtained under its
provisions for out-of-state service of process, to "[o]nly causes
of action arising from acts enumerated" therein, Section 13
contains no such limitation. Subsection (4) of Section 17 (see
footnote 2 above) preserves the right to use any other manner of
service of process on non-resident defendants authorized by law.
Thus, even though Hoover Ball's business in Illinois was not
transacted with Magnaflux, in-state service of process under
Section 13.3 may still be sustained. I find that the service of
summons on Hoover Ball is sufficient to satisfy both the tests of
Section 13.3 of the Illinois Civil Practice Act and the due
process clause of the United States Constitution.
Forster/Hoover is a Michigan corporation. It was served in
Illinois by service of summons on its vice-president, one Norman
H. Sonderman, who is an Illinois resident. Mr. Sonderman was
served at his home in Lake Zurich, Illinois.
Forster/Hoover carries on all of its activities in the State of
Michigan, with the exception of some activities in Illinois by
Sonderman. Although plaintiff alleges and argues that
Forster/Hoover uses the office of Hoover Ball at 8581 South
Chicago Ave., in Chicago, Illinois, the affidavits filed by
Forster/Hoover clearly refute this charge, and plaintiff's
affidavits do not challenge Forster/Hoover on this point at all.
(1) Sonderman, Forster/Hoover's vice president, lives in
Illinois and has spent 15% of his working time for Forster/Hoover
(2) Sonderman has the authority to accept orders for the sale
of Forster/Hoover products.
(3) Sonderman admits to having obtained two orders for
Forster/Hoover equipment from Illinois customers.
Also, plaintiff argues that other inferences about his conduct
in Illinois can be made from Hentschel's admission that he quit
his employment with Magnaflux about one week before the amendment
to the 1954 agreement was renegotiated in Germany in 1961, and
from the fact that Hentschel took employment with Hoover Ball
while the negotiations between Magnaflux and Foerster were
continuing in Germany in 1961, and from the further fact that
Hentschel was made a vice-president of the newly formed
Forster/Hoover immediately after it was incorporated.
The difficulty I have with finding these latter facts
sufficient to establish jurisdiction over the person of Hentschel
is that they are so heavily based upon inference as regards a
finding that any of Hentschel's conduct, which is alleged to have
been in furtherance of the conspiracy, took place in Illinois. It
can be agreed that Hentschel's employment record and his close
relationship with Foerster and Hoover Ball suggest that he was
conspiring with them, but there is absolutely no evidence by way
of affidavit that any of this took place in Illinois. Except for
his attendance at the March 15-16, 1962, conference in Chicago,
there is no evidence that any of Hentschel's conduct took place
in Illinois. Regarding that Chicago conference, I find that the
allegations of Magnaflux concerning Hentschel's conduct are
insufficient to support the requisite jurisdictional finding that
Hentschel committed a tortious act in Illinois.
Dr. Friedrich Foerster is charged with a breach of his 1954
contract, as amended in 1961, with Magnaflux in that contrary to
his promise not to sell Foerster instruments in the United States
or Canada, except directly or through a "Forster group," as
defined in the contract, he has in fact sold his products to
Forster/Hoover, which does not qualify as a "Forster group" as
The Articles of Incorporation of Forster/Hoover Electronics,
Inc., are appended to the complaint as Exhibit A. They provide
that the corporation shall have a total authorized capital stock
of 20,000 Class A Common shares of a par value of $1. and 82,000
Class B Common shares of a par value of $1. Further, it is
provided that, "The Class A Common Stock and the Class B Common
Stock shall have equal privileges, preferences and rights, except
that until January 1, 1965 the Class A Common Stock shall have
exclusive voting power with respect to the election of directors.
Effective on January 1, 1965, the Class A Common Stock and the
Class B Common Stock shall have equal privileges, preferences,
rights and voting powers, without distinction."
The Articles further provide that Friedrich Foerster owns
10,200 shares of Class A and that Hoover Ball owns 9,800 shares
of Class A Common Stock; Foerster owns none of Class B, while
Hoover Ball owns 71,800 Class B shares, Norman Sonderman owns
5,100 of the Class B shares and Rudolph Hentschel owns 5,100 of
the Class B shares.
The complaint alleges on information and belief that there have
been no transfers of stock since the original subscription
outlined above in the Articles of Incorporation, and the same
parties still own the same percentages of the two classes of
The contract between Foerster and Magnaflux expires on December
31, 1964, provided that a notice of termination is given at least
one year prior to that date. So that it appears, and plaintiff so
alleges, that the temporary suspension of the voting rights in
the Class B Common Stock until January 1, 1965, was designed to
give Foerster voting control of the corporation only as long as
he was contractually bound not to sell his products through any
corporation other than a "Forster group."
It is clear that after January 1, 1965, Hoover Ball will have
the voting control of Forster/Hoover by a comfortably wide
Therefore, it would appear that plaintiff has sufficiently
pleaded ultimate facts alleging a breach of its contract with
Foerster. Whether the term "voting stock" is considered
ambiguous, and plaintiff is correspondingly allowed to introduce
parol evidence to explain the term, or whether plaintiff relies
upon its allegations of fraudulent inducement of the contract by
Foerster, it cannot be said as a matter of law that plaintiff has
not stated a claim upon which relief can be granted. Further, as
regards plaintiff's allegations that Forster/Hoover in conspiracy
with two others induced Foerster to make this breach of contract,
it would also appear that all the elements required for stating
a claim for inducement to breach a contract have been stated.
Accordingly, the motion of the defendants, Dr. Friedrich
Foerster, Hoover Ball and Bearing Company and Forster/Hoover
Electronics, Inc., to dismiss the complaint for failure to state
a claim upon which relief can be granted is denied.
(1) The motion of Dr. Friedrich Foerster to dismiss the
complaint for want of jurisdiction over his person is denied.
(2) The motion of Forster/Hoover Electronics, Inc., to dismiss
the complaint for want of jurisdiction over its person is denied.
(3) The motion of Hoover Ball and Bearing Company to dismiss
the complaint for want of jurisdiction over its person is denied.
(4) The motion of Rudolph G. Hentschel to dismiss the complaint
for want of jurisdiction over his person is granted.
(5) The motion of Rudolph G. Hentschel to dismiss the complaint
for failure to state a claim on which relief can be granted is
moot, the complaint having been dismissed for lack of
jurisdiction over his person.
(6) The motion of Dr. Friedrich Foerster, Hoover Ball and
Bearing Company and Forster/Hoover Electronics, Inc., to dismiss
the complaint for failure to state a claim upon which relief can
be granted is denied.
(7) Defendants, Dr. Friedrich Foerster, Hoover Ball and Bearing
Company and Forster/Hoover Electronics Inc., are given twenty
days from the date of the receipt of this opinion for filing
their answers to the complaint.