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December 2, 1982


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 California.

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 been deficient.


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 ...

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