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GORDON v. INT'L TELEPHONE AND TELEGRAPH CORP.

September 14, 1967

ROBERT I. GORDON, DOING BUSINESS AS HOMEMAKERS RESEARCH INSTITUTE, PLAINTIFF,
v.
INTERNATIONAL TELEPHONE AND TELEGRAPH CORP., A CORPORATION, HOWARD W. SAMS, INC., A CORPORATION, BOBBS-MERRILL COMPANY, INC., A CORPORATION, THEODORE AUDEL & COMPANY, A CORPORATION, AND AMERICAN HANDBOOK AND TEXTBOOK CO., INC., A CORPORATION, DEFENDANTS.



The opinion of the court was delivered by: Will, District Judge.

MEMORANDUM OPINION

Plaintiff brings this action for breach of contract seeking damages and recission of the contract. Briefly, the complaint alleges that one of the defendants is the successor in interest to parties who were obligated to plaintiff under a royalty contract for the publication of certain copyrighted cookbooks. Plaintiff claims that, in return for his assignment of the copyrights to these books, defendants' predecessors promised to pay plaintiff certain royalties and to promote the sale of the books. Plaintiff's promisors and their successor, one of the defendants, allegedly failed to perform their obligations.

All the defendant corporations are closely related and plaintiff alleges that he has been unable to identify which defendant now owns the copyrights. Consequently, he brought suit against all the named defendants.*fn1

Defendant International Telephone and Telegraph Company (ITT) has moved to dismiss the complaint as to itself on the ground that the complaint fails to state a claim against ITT. The only allegation against ITT is that defendant Howard W. Sams & Co., Inc. (Sams) is its subsidiary. ITT is correct in its assertion that mere ownership of stock does not make a parent corporation liable for the acts of its subsidiary. The organizational confusion engendered by the corporate maneuvers of the defendants has led plaintiff to urge that he might be able to allege facts which would justify "piercing the corporate veil." Since we have yet to see any allegations which would support such a finding in the instant case, the complaint as to ITT will be dismissed. If plaintiff subsequently has a basis for so doing, he may seek leave to amend the complaint to allege facts supporting this theory.

One other defendant must also necessarily be dismissed. Defendant Theodore Audel & Company is not a separate entity at all but merely a division of Sams. Service on American Handbook & Textbook Company must be quashed because the person upon whom service was made was in no way connected with that company. As a result, the service was inadequate. International Shoe Co. v. State of Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95, 161 A.L.R. 1057 (1945)

All the other defendants have moved to dismiss on the ground that they are not subject to the in personam jurisdiction of Illinois courts. Since, in a diversity case, federal courts must follow state rules regarding the assertion of in personam jurisdiction over non-residents*fn2 to the extent such rules are consistent with due process, defendants contend that this court is bound by Illinois law. They argue that the cause of action did not arise out of activities which took place within the state of Illinois and that their activities in Illinois, which are unrelated to the instant action, do not afford a basis for exercising in personam jurisdiction over defendants under Illinois law.

We disagree. After an examination of the facts produced by extensive discovery, we conclude that defendants' activities within Illinois are sufficient to support in personam jurisdiction over them.

The relevant facts briefly are these. Sams is a Delaware corporation organized in 1966. It acquired the assets and assumed the liabilities of HWS, Inc. (HWS), an Indiana corporation which is in process of dissolution. Bobbs-Merrill Company, Inc. is an Indiana corporation. On February 7, 1967, in Indianapolis, Indiana, a United States Deputy Marshal personally served summons on A.V. Langston, an officer of all the above named companies. Sams and Bobbs-Merrill are book publishers as was HWS. Since its inception Sams has employed two salesmen to solicit orders for its products in the state of Illinois. These same men performed the same services for HWS when it existed. Bobbs-Merrill regularly sends salesmen into Illinois to solicit orders. In addition, these companies have engaged in heavy mail order solicitation in Illinois.*fn3

The jurisdictional question presented by this motion is whether under Illinois law a foreign corporation may be subjected to personal jurisdiction based on a large volume of personal and mail sales solicitation and sales in Illinois unconnected with the instant cause of action.*fn4 Defendants argue that Illinois law governs the question and that Illinois law requires more than "mere solicitation" for the exercise of in personam jurisdiction.

Those earlier Illinois cases which held that in personam jurisdiction over foreign corporations cannot be based on "mere solicitation" justified their holdings on a now outdated interpretation of the due process clause of the Fourteenth Amendment. See Bull & Co. v. Boston & Maine R.R., 344 Ill. 11, 175 N.E. 837 (1931); Booz v. Texas & S.P.R.R., 250 Ill. 376, 95 N.E. 460 (1911); both citing as authority Green v. Chicago, Burlington & Quincy Ry., 205 U.S. 530, 27 S.Ct. 595, 51 L.Ed. 916 (1907).

Subsequently, in 1945, International Shoe Co. v. State of Washington, supra, held that solicitation alone on a systematic and continuous basis was sufficient to support the assertion of in personam jurisdiction. In that case and its successors, the Supreme Court categorically rejected the old "fictive" concepts of "presence", "consent", and "doing business." Olberding v. Illinois Central R.R., 346 U.S. 338, 74 S.Ct. 83, 98 L.Ed. 39 (1953); McGee v. International Life Insurance Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957). In their stead was substituted the requirement that personal jurisdiction be predicated on a person's so-called "minimum contacts" with the forum through which that person can be said to have affirmatively invoked the benefits and protection of the forum's laws. Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958). The nature of these "minimum contacts" was admittedly ill-defined, it being necessary only that the assertion of jurisdiction be consistent with "traditional notions of fair play and substantial justice."*fn5

Applying this standard to the instant case, it is readily apparent that the defendants, both through personal contacts and the mails, affirmatively attempted to and did obtain purchase orders from numerous Illinois citizens. Defendants must have recognized that it might be necessary to invoke the protection of Illinois law to enforce the benefits of their numerous contracts with Illinois citizens. Since defendants actively sought and obtained responses from within Illinois which might require the exercise of the power of the state of Illinois for their benefit, it is fair that defendants be subjected to the jurisdiction of Illinois courts.

The evolution reflected by International Shoe could have been limited to situations where forum state activities were related to the suit in which jurisdiction was asserted. However, the Supreme Court in International Shoe recognized cases where jurisdiction had been grounded on substantial forum state activities unrelated to the cause in suit. That substantial unrelated activities within the forum state could support in personam jurisdiction over a nonresident was reaffirmed in Perkins v. Benguet Consolidated Mining Co., 342 U.S. 437, 72 S.Ct. 413, 96 L.Ed. 485 (1952).

The present federal standard of due process them provides that solicitation alone may be sufficient to support in personam jurisdiction over a nonresident. Further, if that solicitation be substantial and continuous, it ...


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