The opinion of the court was delivered by: William T. Hart, District Judge.
MEMORANDUM OPINION AND ORDER
Plaintiff The Northern Trust Co. ("Northern Trust") filed this
action against Randolph C. Dillon ("Randolph") and Randolph C.
Dillon, Inc. ("Dillon, Inc.") in the Circuit Court of Cook
County. The defendants removed this action to the United States
District Court for the Northern District of Illinois. Subject
matter jurisdiction is predicated on diversity of citizenship.
28 U.S.C. § 1332(a)(1).
Randolph and Dillon, Inc. have filed a motion to dismiss the
complaint pursuant to Fed.R.Civ.P. 12(b)(2) for lack of personal
jurisdiction. For the reasons stated below, the defendants'
motion to dismiss is granted.
Northern Trust is an Illinois banking corporation with its
principal place of business in Chicago, Illinois. Unilease, a
division of United Leasing Co. of Illinois, is an Illinois
corporation with its principal place of business in Chicago,
Illinois. Dillon, Inc., a
California corporation with its principal place of business in
Los Angeles, California, engages in the business of selling
insurance. Randolph is vice-president of Dillon, Inc., and is a
resident and citizen of California. Coburn Consultants, Inc.
("Coburn") is a California corporation with its principal place
of business in Torrance, California. Coburn was engaged in the
business of marketing computer systems to insurance agents.
The complaint, together with the briefs and affidavits filed
relative to the instant motion, reveal the following. Dillon,
Inc. received a flyer from Coburn describing certain computer
equipment and programs known as the Farmer's Insurance Package.*fn1
After this initial solicitation, Randolph contacted Coburn with
regard to purchasing its system. During the course of their
negotiations, Coburn informed Randolph that some of Coburn's
customers paid cash for the system, others found financing
through local banks or leasing companies, and still others relied
on Coburn to arrange mutually satisfactory financing.
On or about December 19, 1980, Dillon, Inc. agreed to purchase
the Farmer's Insurance Package from Coburn and further agreed
that Coburn would arrange the financing of the transaction. All
negotiations between Randolph and Coburn with respect to Dillon,
Inc.'s purchase of the Farmer's Insurance Package took place in
The financing of the purchase arranged by Coburn involved
Dillon, Inc.'s leasing of the computer equipment from Unilease.*fn2
On December 29, 1980, Dillon, Inc. executed a Delivery and
Acceptance Receipt wherein Dillon acknowledged receipt of the
hardware and software as contemplated by the purchase agreement
and Unilease disbursed the proceeds to Coburn.
Also on December 29, 1980, Coburn (acting on behalf of
Unilease) presented to Dillon, Inc. an equipment lease agreement
in the amount of $11,448.00. Dillon, Inc. executed the lease
agreement, and Randolph then granted a guaranty to Unilease in
the amount of $11,448.00. The lease agreement provided that the
lease would not be a binding agreement until accepted by the
lessor and that Illinois law would govern the terms of the lease.
The guaranty signed by Randolph also provided that Illinois law
would govern the terms of the guaranty agreement. Dillon, Inc.
and Randolph signed the lease agreement and guaranty in
California. Unilease accepted the lease agreement in Chicago,
Illinois on December 31, 1980.
Subsequent to or contemporaneous with Unilease accepting the
lease with Dillon, Inc., Unilease assigned the lease to Northern
Trust. Accordingly, Dillon, Inc. made lease payments to Northern
Trust in accordance with the terms of the lease.*fn3
On February 19, 1982, Dillon, Inc. was informed that the
computer software updates, a feature Randolph considered to be
essential for Dillon, Inc.'s effective use of the system (see n.
1, supra), no longer would be available.*fn4 Dillon, Inc. requested
Unilease to hire a new software supplier; Unilease took no
action.*fn5 Dillon, Inc. thereupon
attempted to tender the original computer system to Unilease, but
Unilease rejected the tender.*fn6 On March 2, 1982, Dillon, Inc.
ceased payments under the terms of the lease agreement.
In its two count complaint, Northern Trust alleges that Dillon,
Inc. breached its lease agreement by failing to make the required
payments under the agreement. Additionally, Northern Trust
alleges that Randolph personally guaranteed Dillon, Inc.'s
performance of the lease agreement. Northern Trust seeks actual
damages of $14,355.44, attorney's fees of $644.55, and court
Service of the complaint was effected and personal jurisdiction
claimed through Fed.R.Civ.P. 4(d)(7) and 4(e), by reference to
Ill.Rev.Stat. ch. 110, § 2-209, the Illinois long arm statute.
In support of their motion to dismiss for lack of personal
jurisdiction, the defendants argue that the execution of a lease
and guaranty with an Illinois corporation and the sending of
lease payments to Illinois do not show sufficient contacts with
Illinois to permit personal jurisdiction to be asserted by this
Court.*fn7 They also contend that jurisdiction should not be invoked
over them here since the contract was substantially performed in
California. Further, they argue that the exercise of personal
jurisdiction over them would violate the due process clause of
the Fourteenth Amendment due to the fact that the defendants
never purposefully availed themselves of the privileges and
benefits of conducting activities within the state of Illinois,
and thus could not reasonably foresee that their conduct and
connection with Illinois was such that they could anticipate
being brought into court in this state.
In opposing the motion, Northern Trust argues that two
statements in the lease agreement and guaranty signed by the
defendants — that the lease agreement would not become binding
until accepted by the lessor, and that Illinois law would govern
the terms of the lease agreement and guaranty — demonstrate that
the defendants "transacted business" in the state of Illinois.
See Ill.Rev.Stat. ch. 110, § 2-209(a)(1). Furthermore, Northern
Trust argues that Dillon, Inc. initiated the purchase of the
computer system from Coburn and that Dillon, Inc. relied on
Coburn to finalize the financing of the transaction. Northern
Trust asserts that the case law ...