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February 23, 1983


The opinion of the court was delivered by: William T. Hart, District Judge.


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.

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 California.

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 costs.

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 ...

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