In a diversity action, the choice of law rules of the state in
which the district court is located apply. Klaxon Co. v. Stentor
Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021, 85 L.Ed. 1477
(1941). In Illinois, it is well established that the courts will
look to the jurisdiction with the "most significant relationship"
in determining the applicable law in tort cases. Ingersoll v.
Klein, 46 Ill.2d 42, 45, 262 N.E.2d 593, 595 (1970); Forty-Eight
Insulations, Inc. v. Johns-Manville Products Corp., 472 F. Supp. 385,
391 (N.D.Ill. 1979). Increasingly, Illinois courts have
employed the "most significant relationship" approach in contract
cases as well. Ehrman v. Cook Electric Company, 468 F. Supp. 98
In determining which jurisdiction has the most significant
relationship to a tort action, the court should consider: (1) the
place of injury; (2) the place where the conduct causing injury
occurred; (3) the domicile, place of incorporation, and place of
business of the parties; and (4) the center of gravity of the
parties' relationship. "[T]he contacts test is not an end in
itself to be applied mechanically, but rather is a means reliably
calculated to insure that the interests of the state with the
most significant relationship to the occurrences will be
protected." Forty-Eight Insulations, supra, at 391.
Plaintiff claims that Illinois law governs this entire action.
Defendant Swiss Bank argues that some issues should be determined
under Illinois law while others are more appropriately decided
under Swiss law. Specifically, defendant claims that any
liability it may have to plaintiff should be determined under
Swiss law because Switzerland is the site of the alleged tort,
defendant is located in Switzerland, and any relationship between
defendant and plaintiff was created in Switzerland.
In applying the "most significant relationship" test to the
instant case, the court finds that Illinois law should govern all
aspects of this action. Although Switzerland is the place where
the conduct causing the injury occurred and is the defendant's
place of business, all other elements point to Illinois. Both
Hyman-Michaels and Continental are Illinois residents and conduct
business in Illinois. The acts which resulted in Hyman-Michaels'
loss were set in motion in Illinois. Illinois, as Hyman-Michaels'
place of domicile, is the place where the alleged injury to
plaintiff can be said to have occurred.
Finally, the center of gravity of the relationship between the
parties is unquestionably Illinois. Hyman-Michaels, headquartered
in Illinois, hired Continental in Illinois to make the transfer
of funds necessary to effect the Charter payment. Because the
payment had to be made in Switzerland, Continental used defendant
Swiss Bank as its correspondent bank to transfer the funds by
Illinois, as the place of incorporation and principal place of
business of plaintiff, the principal place of business of
third-party defendant Continental, and the center of the
relationship of the parties, has the most significant
relationship to this action with respect to all claims between
the parties and with respect to the measure of any damages.
Plaintiff's complaint alleges breach of contract, negligence,
and breach of fiduciary duty on the part of defendant Swiss Bank.
Defendant claims that it owed no duty of care to plaintiff under
either Swiss contract or tort law. Swiss law requires privity and
thus precludes the imposition of liability to the owner on a
As discussed below, Illinois law does not require privity to
establish the existence of a duty. It is undisputed, however,
that a contract existed between plaintiff and Continental.
Continental owed plaintiff a duty of care and Swiss Bank, as
Continental's correspondent bank, owed plaintiff that same duty.
Although the Uniform Commercial Code ("U.C.C.") does not
specifically address the problems of electronic fund transfers,
courts have reasoned by analogy from concepts contained therein.
In Delbrueck & Co. v. Manufacturers Hanover Trust Company,
609 F.2d 1047 (2d Cir. 1979), the court held that transfers of
funds made via an electronic fund transfer system known as CHIPS
(Clearing House Interbank Payments System) were irrevocable when
made. The court found that the U.C.C. was not applicable to the
case but stated that "analogous use of concepts such as the
finality of checks once `accepted' (§§ 3-410, 4-303) would
support the irrevocability of these transfers." 609 F.2d at 1051.
An analogy may be drawn between the concept of "collecting
bank" as found in Article 4 of the U.C.C. and Swiss Bank's role
as a correspondent bank in the instant case. Under Section 4-201,
a collecting bank's agency status with respect to the owner of an
item is presumed prior to final settlement of the item.*fn5
Similarly, a correspondent bank in a wire transfer transaction
may be presumed to be an agent of the initiator of the
transaction until such time as the transaction is completed. The
court finds that Swiss Bank, as a correspondent bank in the
subject transaction, was an agent of plaintiff and owed plaintiff
the same duty of care as did Continental with whom plaintiff had
an express contractual relationship.
We turn now to plaintiff's negligence claim. Under Illinois
law, a plaintiff in a negligence action must prove the existence
of a duty owed by defendant to plaintiff, a breach of that duty,
and an injury proximately resulting from the breach. The
existence of such a duty is a question of law. Cunis v. Brennan,
56 Ill.2d 372, 308 N.E.2d 617 (1974).
In determining whether a legal duty exists, the court must find
that the occurrence involved was not simply foreseeable but that
it was reasonably foreseeable. As stated by the Court in Cunis:
. . The creation of a legal duty requires more than
a mere possibility of occurrence. Negligence as
defined in the Restatement (Second) of Torts (1965),
section 282, is conduct which falls below the
standard established for the protection of others
"against unreasonable risk of harm." Harper and
James, in their Law of Torts, observe: "Not what
actually happened, but what the reasonably prudent
person would then have foreseen as likely to happen,
is the key to the question of reasonableness." (2 Law
of Torts (1956), sec. 16.9, at 929).
308 N.E.2d at 619.