The opinion of the court was delivered by: Bua, District Judge.
Plaintiff Mercantile Financial Corporation ("Mercantile") has
brought the instant diversity action against Defendant UPA
Productions of America ("UPA") and its President, Henry
Saperstein, for breach of a security agreement. Defendants have
filed a motion to dismiss for lack of personal jurisdiction and
lack of venue. In the alternative, defendants have moved for a
transfer of venue based on the impropriety or inconvenience of
this forum. For the reasons stated herein, the motion to
dismiss is denied and the Court, based on a finding of improper
venue, pursuant to 28 U.S.C. § 1406(a), orders the cause
transferred to the United States District Court for the Central
District of California.
The facts of this matter as they pertain to the motion before
the Court are as follows: Plaintiff is a Delaware corporation
with its principal place of business in Illinois. Defendant UPA
is an entity incorporated under the laws of California. It also
maintains its principal place of business in that state.
Defendant Saperstein, the President of UPA, resides in
The instant action involves a release agreement entered into
between the parties in which the parties reaffirmed certain
security interests which plaintiff held in certain notes and
accounts receivable of the defendants. The purpose of the
release was to settle a debt of more than $2 million which
defendant owed to plaintiff.
Negotiations concerning the release took place in Illinois, as
did the execution of the contract. Under the agreement, the
amounts paid on the notes and accounts receivable were to be
sent to a "lock box" account held at the Bank of America in
California and then forwarded to Mercantile in Illinois.
Plaintiff's complaint alleges that the defendants have breached
the terms of the release in that the payments received have
Personal jurisdiction in this diversity action is governed by
Ill.Rev.Stat. Ch. 110, ¶ 2-209(a)(1) (formerly § 17(1)(a))
which is the Illinois "long-arm" statute. It provides that:
(a) 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 or her 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: (1) The
transaction of any business within this State . . .
Mercantile contends that this Court has jurisdiction over the
defendants by virtue of their business dealings in Illinois
with plaintiff as well as with others. Defendants, on the other
hand, argue that their contacts with Illinois are insufficient
under Section 2-209(a)(1) and the due process clause of the
Fourteenth Amendment as interpreted by International Shoe Co.
v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945),
and its progeny, to render them subject to suit in Illinois.
The Court finds this argument unpersuasive and holds that the
cause of action arose directly from the transaction of business
within this state, thus subjecting defendants to the Court's
jurisdiction in the Northern District of Illinois.*fn1
Under Section 2-209(a)(1), a defendant is amenable to suit in
Illinois if it has transacted business in the state so long as
the litigation arises out of that business transaction. In the
instant case, Defendant Saperstein admits to having negotiated
and executed the release agreement in Illinois. Where a
defendant engages in negotiations of some substance in Illinois
regarding the transaction from which the cause of action arose,
the defendant is subject to suit in Illinois under Section
2-209(a)(1). See Scovill Manufacturing Co. v. Dateline
Electric Co., 461 F.2d 897 (7th Cir. 1972); Ronco, Inc. v.
Plastics, Inc., 539 F. Supp. 391, 396 (N.D.Ill. 1982).
Defendants' argument that it was not "doing business" in
Illinois is inconsequential. The "doing business" test applies
only to assert jurisdiction over an entity where the cause of
action is not related to the defendant's contacts in the state
and not where, as here, the jurisdictional basis and the
transaction are intertwined. Cook ...