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O'Hare International Bank v. Hampton

February 4, 1971


Fairchild, Kerner and Pell, Circuit Judges.

Author: Pell

PELL, Circuit Judge.

The sole issue presented on this appeal is whether the district court erred in dismissing plaintiff's complaint for want of personal jurisdiction over the person of each defendant.

Plaintiff, a Chicago, Illinois, banking association, is the assignee for collateral purposes of a lease executed between Air Lease, Inc., an Illinois corporation, as lessor, and World Travelers, Inc., an Oklahoma corporation, as lessee. Defendants, all residents of either Oklahoma, Arkansas, Texas or Florida, are the individual guarantors of the performance of the obligations by the lessee. This diversity action (28 U.S.C. § 1332) was instituted in the district court upon the nonresident guarantors' alleged refusal to perform the agreements and obligations of the lease which they guaranteed.

None of the defendants submitted to personal jurisdiction in this forum. Extraterritorial service of process on and acquisition of jurisdiction over such defendants were sought pursuant to the long arm statute of Illinois, §§ 16-17, Illinois Civil Practice Act, Ill.Rev.Stat. ch. 110 (1969). The relevant parts of this statute provide:

"§ 16. Personal service outside State.(1) Personal service of summons may be made upon any party outside the State. If upon a citizen or resident of this State or upon a person who has submitted to the jurisdiction of the courts of this State, it shall have the force and effect of personal service of summons within this State; otherwise it shall have the force and effect of service by publication.

"§ 17. Act submitting to jurisdiction -- Process. (1) Any person, whether or not a citizen or resident of this State, who in person or through an agent does any of the acts hereinafter enumerated, thereby submits such person, and if an individual, his personal representative, to the jurisdiction of the courts of this State as to any cause of action arising from the doing of any of such acts:

(a) The transaction of any business within this State; * * *"*fn1

Eleven of the thirteen defendants were served with process outside of Illinois. Each entered a special appearance below, moving for dismissal, or in lieu thereof to quash the return of summons, on the ground that the district court lacked personal jurisdiction. Rule 12(b) (2), Federal Rules of Civil Procedure. After considering the motions, together with briefs and affidavits submitted, the district court concluded that "there has not been demonstrated in this case the existence of the minimal contacts or activities within the State of Illinois which would be necessary to confer jurisdiction in Illinois over these moving defendants." Accordingly, the district court granted the motions to dismiss and quashed the return of summons as to each of the eleven moving defendants. In addition, the court on its own motion dismissed the action as to the two remaining defendants upon whom service of process had not been obtained.

The parties below submitted affidavits to the district court containing factual allegations which the court considered in reaching its conclusion. The facts presented to the district court in the affidavits, which were contradictory as to certain allegations, are briefly as follows.

Negotiations were commenced in December, 1965 between Frank Jung of World Travelers and Sherman Butler, an officer of Air Lease, concerning the purchase of a DC-7B aircraft by Air Lease, which would then lease the airplane to World Travelers. Butler indicated that these negotiations were initiated by a telephone call to his Chicago office from Jung, who reportedly was calling from St. Louis, Missouri. Jung denied making such a call. Butler claimed that Jung stated that individual guarantors were available because the thirteen named defendants had formed or were in the process of forming a corporation (World Travelers) for the purpose of operating an air travel club.

On January 5, 1966, Butler, allegedly in response to a request by Jung, went to Oklahoma City, Oklahoma, to meet with some of the nonresident guarantors for discussions about the lease and guaranty. Butler further stated that at least one guarantor, whose identity he could not remember, later traveled to Illinois for further negotiations. All guarantors denied having gone to Illinois. Next Butler met in Miami, Florida, with several of the guarantors, who were also officials of the newly formed corporation. A lease agreement was signed there on January 13, 1966, by the president of World Travelers. At this time it was agreed that a guaranty containing signatures of all the proposed guarantors would be delivered to Air Lease in Chicago before payment for the aircraft would be made. Thereafter, on January 17, the lease, which had already been signed by the officer of World Travelers, was executed by the president of Air Lease at its offices in Chicago. The lease provided for monthly payments to be made at Chicago, or at another place designated by the lessor. Subsequently, a guaranty, signed by the thirteen defendants and dated January 5, 1966, was delivered to Air Lease in Chicago. The guaranty provided that it "shall be construed according to the law of the State of Illinois, in which State it shall be performed. * * *" Air Lease later assigned the lease to plaintiff, O'Hare International Bank, and upon World Travelers' failure to pay rent under the lease, plaintiff commenced this action.

In situations where federal jurisdiction is based upon diversity of citizenship, in personam jurisdiction "is determined in accordance with the law of the state where the court sits, with 'federal law' entering the picture only for the purpose of deciding whether a state's assertion of jurisdiction contravenes a constitutional guarantee." Arrowsmith v. United Press International, 320 F.2d 219, 223 (2nd Cir. 1963); accord, Canvas Fabricators, Inc. v. William E. Hooper & Sons Co., 199 F.2d 485, 486 (7th Cir. 1952).

Personal jurisdiction over a nonresident defendant does not depend upon the physical presence of the defendant within the state. It is sufficient that the act or transaction itself has a substantial connection with the forum state. Gray v. American Radiator & Standard Sanitary Corp., 22 Ill.2d 432, 438, 176 N.E.2d 761, 764 (1961); Koplin v. Thomas, Haab & Botts, 73 Ill.App.2d 242, 254, 219 ...

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