allegedly due under the contract. The commissions relate to three
accounts located in three different states — Ohio, Kentucky and
Alabama. In consequence, NTN has filed this diversity suit
seeking declaratory judgment as to its obligations under its 1975
contract with Scott, Inc. The latter has countered with a motion
to dismiss NTN's suit for lack of personal jurisdiction over it.
Further, in the event that we find jurisdiction in this district,
Scott, Inc. seeks transfer of the action to the Southern District
of Ohio. It argues that venue is improper in the Northern
District of Illinois and that the Southern District of Ohio is
both a proper and a more convenient forum.
This is a diversity suit. Accordingly, we have jurisdiction
only if an Illinois state court could exercise jurisdiction.
Fed.R.Civ.P. 4(e), Chicago Silver Exchange v. United Refinery,
Inc., 394 F. Supp. 1332, 1334 (N.D.Ill. 1975). Exercise of
jurisdiction by Illinois state courts is dependent upon not only
the Illinois long-arm statute, but also the constitutional due
process requirement that the defendant have at least minimum
contacts with Illinois such that the exercise of jurisdiction
would not offend traditional notions of fair play and substantial
justice. International Shoe Co. v. State of Washington,
326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945).
We turn first to the Illinois long-arm statute, under which
Illinois courts may assert jurisdiction over out of state
defendants in causes of action arising from certain enumerated
acts, performed by the defendant, including the "transaction of
any business within this State." Ill.Rev.Stat. ch. 110, §
We find that Scott, Inc. did transact business in Illinois
within the meaning of the Illinois long-arm statute. Scott
personally made many visits to plaintiff's offices in Illinois.
Defendant has not asserted that these visits were social calls.
Defendant does not claim that it was brought from Ohio to
Illinois by force or trickery, nor does it suggest that by chance
and accident its principal made regular appearances at
plaintiff's offices in Illinois. Indeed, defendant does not
dispute that Scott's visits to NTN's offices were business calls
and that the business between the parties was governed by the
contract. That contract provides, in paragraph 2, in part, that
Scott, Inc. "will diligently promote the sale of NTN products in
the designated territory." Paragraph 3 of the contract provides
that Scott, Inc.'s commissions shall be based in part upon NTN's
"appraisal of [Scott, Inc.'s] participation" in the sales.
Defendant came to Illinois to enable it, under the contract,
effectively to promote plaintiff's products, consequently
increasing its own commissions.
Under the Illinois long-arm statute, as applied by Illinois state
courts, plaintiff's claim "arose from" defendant's actions in Illinois.
The Illinois long-arm statute was enacted in 1956, after International
Shoe, with the conscious purpose to assert jurisdiction over
nonresidents to the maximum extent permitted by the due process clause.
Nelson v. Miller, 11 Ill.2d 378, 389, 143 N.E.2d 673
(1957). The term "arose from" as used in the Illinois long-arm statute is
liberally construed by Illinois courts. In Volkswagen Insurance Co. v.
Whittington, 58 Ill.App.3d 621, 625, 16 Ill.Dec. 179, 374 N.E.2d 954
(1978), the court stated that a "foreign corporation's business within
Illinois must be related to the cause of action in question
before section 17(1)(a) will confer personal jurisdiction. If none of this
business gives rise, at least in part, to the cause of action in
question, then no such jurisdiction exists." [Emphasis added.] See also
Ballard v. Rawlins, 101 Ill.App.3d 601, 604, 56 Ill.Dec. 940,
428 N.E.2d 532 (1981); Chicago Film Enterprises v. Jablanow,
55 Ill. App.3d 739, 742, 13 Ill.Dec. 466, 371 N.E.2d 161 (1977).
Construing the phrase "arising from" as used in sections 17(1) and (3),
the court in Johnston v. United Presbyterian Church,
103 Ill. App.3d 869, 59 Ill.Dec. 518, 431 N.E.2d 1275 (1981) stated
that there must be a "sufficiently close relationship between the
defendant's business activities in the State and the litigation against
him." Id. at 872, 59 Ill.Dec. 518,
431 N.E.2d 1275 [Emphasis added.] Similarly, in Ballard v.
Rawlins, 101 Ill.App.3d 601, 56 Ill.Dec. 940, 428 N.E.2d 532
(1981), the court concluded that jurisdiction is proper only if
there exist "sufficient affiliating circumstances showing a
relationship between the defendant, the State of Illinois and
this lawsuit." Id. at 605, 56 Ill.Dec. 940, 428 N.E.2d 532
(Emphasis added.) Finally, in Huffman v. Inland Oil & Transport
Co., 98 Ill.App.3d 1010, 54 Ill.Dec. 306, 424 N.E.2d 1209 (1981),
the court stated that "[t]he purpose of the limiting phrase
`arising from' is to insure that there is a close relationship
between a cause of action against a non-resident corporation and
the business activities through which it submitted to Illinois
jurisdiction. . . . The minimum relationship required is that the
plaintiff's suit be one which lies in the wake of the commercial
activities by which the defendant submitted to the jurisdiction
of Illinois courts." Id. at 1015-16, 54 Ill.Dec. 306,
424 N.E.2d 1209 (citations omitted).
Defendant points out that plaintiff is suing for declaratory
relief. Defendant argues that, since it was in Ohio when it
demanded payment, and since such demand is a prerequisite to
plaintiff's suit, the action of necessity "arose from" acts
performed in Ohio, not in Illinois. Hence, according to
defendant, we lack jurisdiction under the Illinois long-arm
statute. Whatever the merits of defendant's "last event" test, it
is clear that Illinois courts do not regard it as controlling in
contract actions. As the court stated in Chicago Silver Exchange
v. United Refinery, Inc., 394 F. Supp. 1332 (N.D.Ill. 1975), the
Illinois long-arm statute "requires that the activities which are
relied on to sustain jurisdiction must give rise to the suit in
question, at least in part." Id. at 1335 (citation omitted).
Exercise of jurisdiction by Illinois courts under the Illinois
long-arm statute "depends upon the facts of each case." Illinois
National Bank v. Gulf States Energy Corp., 102 Ill.App.3d 1113,
1119, 57 Ill.Dec. 938, 429 N.E.2d 1301 (1981). The statute does
not require Illinois courts to weigh Illinois contacts against
out of state contacts. Rather, Illinois courts focus only upon
the defendant's activity in Illinois, finding jurisdiction where
such activities are sufficiently related to the suit filed even
though there may be more activities in other jurisdictions. See,
e.g., id. at 1120, 57 Ill.Dec. 938, 429 N.E.2d 1301. Given the
Illinois courts' interpretation of the long-arm statute, an
Illinois court could exercise jurisdiction over the defendant.
Defendant's argument that personal jurisdiction is here sought
to be predicated solely upon NTN's activities in Illinois ignores
Scott's and defendant's significant post-1975 Illinois contacts
and depends, moreover, upon the fallacious assumption that
everything that occurred prior to the 1975 agreement on which
this lawsuit is based is irrelevant to the International Shoe
minimum contacts analysis. However, the 1975 agreement is
obviously a mere extension and continuation of the parties'
ongoing contractual relations. Lakeside Bridge & Steel Co. v.
Mountain State Construction Co., 597 F.2d 596, 600-603 (7th Cir.
1979), on which Scott, Inc. principally relies, is therefore not
relevant here. Nor does the Seventh Circuit's recent decision in
Froning & Deppe, Inc. v. Continental Illinois National Bank &
Trust Co., 695 F.2d 289, 293 (7th Cir. 1982), that personal
jurisdiction may not be founded solely on the "hypothetical
amenability of a forum state plaintiff to a forum state suit
initiated by a non-resident defendant" avail Scott, Inc. here in
light of its extensive pre-1975 and not insignificant post-1975
Illinois contacts, all in furtherance of the contractual
relationship that underlies this lawsuit.
Exercise of jurisdiction by an Illinois court would not violate
the constitutional due process requirements set forth in
International Shoe. Contrary to defendant's argument,
jurisdiction is not here based upon plaintiff's "unilateral"
performance in Illinois, but rather, upon defendant's activities
in Illinois. Scott came to Illinois to visit NTN, pursuant to a
business relationship between Scott, Inc. and NTN which was
governed by the contract here in dispute. Thus, even ignoring any
other contacts with Illinois, "defendant purposefully avail[ed]
itself of the privilege of conducting activities within
[Illinois], thus invoking the benefits
and protections of its laws. [citing International Shoe]" Hanson
v. Denkla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1239, 2 L.Ed.2d 1283
(1958). It does not offend traditional notions of fair play and
substantial justice to require Scott, Inc. to come once more to
Illinois to defend a suit based upon a contract under which it
has so frequently and willingly come to Illinois. We conclude
that our exercise of jurisdiction over defendant is proper.
Much of defendant's argument against our exercise of
jurisdiction is misdirected. The parties' contacts with Ohio and
the weight of those contacts as against the Illinois contacts are
irrelevant if jurisdiction is properly based upon defendant's
contacts with Illinois. Such matters are, however, relevant to
our determination of proper venue.
Under 28 U.S.C. § 1391(a), venue is proper only in the judicial
district where all plaintiffs reside or all defendants reside, or
in which the claim arose. Defendant, incorporated in Ohio, is a
resident of Ohio. Plaintiff, although doing business principally
in Illinois, is incorporated in New York. In a materially
identical case, the Seventh Circuit has held that for venue
purposes, under 28 U.S.C. § 1391(e), a corporate plaintiff
"resides" only in the judicial district of its incorporation.
Reuben H. Donnelley Corp. v. FTC, 580 F.2d 264, 270 (7th Cir.
1978). Thus, venue is proper in this district only if the "claim
arose" in this district.
We have already held that the claim "arose" in Illinois for
purposes of Illinois long-arm jurisdiction. Plaintiff argues that
since both the Illinois long-arm statute and 28 U.S.C. § 1391(a)
impose identical requirements, a finding that jurisdiction is
proper in Illinois is tantamount to a finding that venue is
proper as well. The so-called "identity rule" has previously been
applied in this district. Under similar facts, Océ-Industries,
Inc. v. Coleman, 487 F. Supp. 548, 552 (N.D.Ill. 1980), the court
adopted the identity rule, holding that once jurisdiction is
established under the Illinois long-arm statute, the venue
requirements of 28 U.S.C. § 1391(a) are "necessarily" satisfied.
See also Bastille Properties, Inc. v. Hometels of America, Inc.,
476 F. Supp. 175 (S.D.N.Y. 1979) (applying the identity rule in
connection with New York's long-arm statute).
The Supreme Court stated in Leroy v. Great Western United
Corp., 443 U.S. 173, 99 S.Ct. 2710, 61 L.Ed.2d 464 (1978), that
the question of personal jurisdiction "goes to the court's power
to exercise control over the parties" while venue "is primarily
a matter of choosing a convenient forum." Id. at 180, 99 S.Ct. at
2714. Paraphrasing, jurisdictional rules tell us where a party
may be sued, while venue rules tell us where such suit ought to
be conducted. A state is not forbidden to enact a statute which
permits its courts to exercise jurisdiction over foreign
defendants only if federal venue would also be proper within the
state. Under such a statute, application of the identity rule
would be entirely appropriate. In our view, Illinois has not
adopted such a statute.
The vice of the identity rule is apparent. Applying the
"minimum contacts" test of International Shoe and the
"transaction of any business . . . giving rise to [the action]"
test of the Illinois long-arm statute, a court finds jurisdiction
proper and from there, bootstraps into venue. The supposed virtue
of the identity rule is that it permits "courts to get away from
the frequent hypertechnical weighing of `contacts' under § 1391."
Océ-Industries, Inc. v. Coleman, supra, 487 F. Supp. at 5520. We
are somewhat troubled by the Océ-Industries analysis. If a
finding of proper venue under section 1391 requires that contacts
be weighed, it is not clear to us that such requirement can be
dispensed with by beginning with the jurisdictional inquiry.
Under our reading of the Supreme Court's opinion in Leroy v.
Great Western United Corp., supra, our duty to weigh contacts,
however "hypertechnical," cannot so easily be wished away.
Section 1391(a) allows venue in "the judicial district . . . in
which the claim arose." As the Court noted in Leroy, there is
considerable disagreement as to whether the language of the
statute requires a court to isolate the one and only
one district in which the claim arose. Id. at 184-85, 99 S.Ct. at
2716-17. The Leroy Court declined to decide whether section 1391
"adopts the occasionally fictive assumption that a claim may
arise in only one district." Id. But the Court stated that only
in an "unusual case" is it not clear that the claim arose in one
specific district. Id. at 185, 99 S.Ct. at 2717. The
Océ-Industries court disposed of Leroy in a footnote. We are less
certain that under Leroy we may disregard contacts with other
districts, basing venue upon defendant's Illinois contacts alone.
Our finding, that defendant conducted business in Illinois
sufficient to constitute "minimum contacts" with Illinois and
giving rise "at least in part" to plaintiff's cause of action is
not equivalent to a finding that Illinois, more than Ohio, is the
locus of this action.
As an alternative to its holding under the identity rule, the
Océ-Industries court held that under the traditional weighing of
contacts approach, venue was proper in the Northern District of
Illinois. While we acknowledge the identity rule, we will also
weigh contacts and make a determination based thereon.
Accordingly, we must determine whether the claim arose more in
Illinois than in Ohio. As stated earlier, defendant urges us to
adopt what is in effect a "last event" test under which the claim
would arguably arise in Ohio since defendant was in Ohio when it
demanded payment. We reject this mechanical rule. We note that in
tort actions Illinois state courts have sometimes applied a last
event test. For example, where a water heater exploded in
Illinois, causing injuries in Illinois, the Illinois Supreme
Court upheld Illinois state court jurisdiction because the last
event necessary to render the defendant liable took place in
Illinois. Gray v. American Radiator & Standard Sanitary Corp.,
22 Ill.2d 432, 435, 176 N.E.2d 761 (1961). While the occurrence of
a last event may provide a basis for jurisdiction, there is no
suggestion that it constitutes the sole basis for jurisdiction.
Further, the district in which an explosion, automobile accident
or other tort occurs is a logical candidate for jurisdiction.
Here, however, defendant could have demanded payment while in
Illinois on business or at any other time or place. The demand
for payment is obviously a different "event" than an explosion or
accident. Finally, although the occurrence of a last event may be
sufficient in certain cases to confer jurisdiction, it is of only
trivial significance to a venue decision where, as here, the last
event could have taken place anywhere and happened to occur in
Ohio because the defendant unilaterally selected an Ohio mailbox.
Defendant has not cited, nor have we found, any authority which
binds or persuades us to adopt the last event test as
determinative of venue. Moreover, in the instant case, the
argument is fallacious. It proceeds from the false premise that
plaintiff's claim arises from a single action — defendant's
demand for money. An action for declaratory judgment under
28 U.S.C. § 2201 requires, at the threshold, the existence of an
"actual controversy." Granted, there might be no controversy here
had the defendant never demanded payment. But likewise there
would be no controversy if NTN had paid the amount demanded by
Scott, Inc. To have a controversy, parties must disagree. Not
Scott, Inc.'s demand for payment, but the parties' disagreement
itself is what "gives rise" to this action.
We must look to the facts underlying the parties' dispute.
Accordingly, our analysis must focus upon the parties' contract.
Defendant signed the contract in Ohio. Hence, defendant urges
that as a matter of "black letter law" the contract was formed in
Ohio. Plaintiff apparently signed it in Illinois where the
original contract between the parties was negotiated. Under the
circumstances, we accord little weight to the place of signature.
The rights and obligations here in dispute arose not from the
formation of the contract but from performance under it. The
contract does not expressly require Scott, Inc. to perform any of
its contract obligations in Illinois. Nor does the contract
explicitly state that plaintiff must perform in Illinois.
Nonetheless, the contract was performed at least in part in
Illinois as well as in Ohio, Kentucky, Alabama, Arkansas,
Georgia, Mississippi and Tennessee.
The subject matter of the contract was representation by Scott,
Inc. of NTN in a territory encompassing six southern and
midwestern states. Under the contract, Scott, Inc. solicited
orders for NTN's products within those six states. Ohio was only
one of the six states covered by the contract. Only one of the
accounts here in dispute is located in Ohio. The other disputed
accounts are located in Kentucky and Alabama. Insofar as the
place of performance of contract obligations is relevant to venue
determination, Ohio has no greater connection to the dispute than
does Kentucky or Alabama.
Meetings between the parties took place, as defendant states,
"for convenience," in Illinois. Affidavit of Mr. Charles E.
Scott, paragraph 10. Defendant points out that plaintiff has
several offices, but that the contract does not specify an
address for NTN. Yet, defendant knew that, after signing the
contract, it should return it to plaintiff's Illinois offices.
The previous contract had been negotiated and executed in
Illinois, previous meetings between the parties had occurred in
Illinois, and a cover letter accompanying the proposed contract
was mailed by NTN from Illinois, requesting that the contract be
returned, signed, to Illinois.
Defendant states that much of its business with NTN was
conducted "through" NTN's office in Atlanta, Georgia. We note
that whatever the parties' contacts with Georgia, such contacts
do not support venue in Ohio. Further, no business between Scott,
Inc. and NTN could be conducted "through" Georgia until
"accepted" by NTN in Illinois. See Contract, ¶ 5, and Affidavit
of Mr. E.R. Wallenberger, ¶ 3. Scott, Inc.'s performance under
the contract, the soliciting of orders, took place in six states.
Those orders were not binding upon NTN until accepted by it in
one state, Illinois.
Facts do not come neatly packaged with weights attached. We
must look to the entire relationship between the parties,
analyzing all the facts in light of that relationship, in order
to determine where venue is proper. Doing so, we conclude that
venue is proper in this district. Defendant dealt with plaintiff
continuously over a period of many years. Defendant knew exactly
what it was dealing with — a corporation doing business in
Illinois, setting policy, signing contracts, making decisions,
meeting with sales representatives, accepting orders, directing
shipments and calculating and paying commissions in and from
Illinois. Defendant knew that plaintiff would perform its
contract obligations within Illinois. We do not minimize the
parties' contacts with Ohio. We merely point out that in
accordance with the parties' expectations, plaintiff's
performance of the contract was centered in Illinois, while
defendant's performance was scattered across six states. If, as
Leroy suggests, we must select a single district in which the
present claim "arose," we hold, for the foregoing reasons, that
the claim arose in the Northern District of Illinois.
CHANGE OF VENUE UNDER 28 U.S.C. § 1404(a)
Defendant's final contention is that the case should be
transferred to the Southern District of Ohio as a more convenient
forum pursuant to the provisions of 28 U.S.C. § 1404(a). The
Southern District of Ohio is not a more convenient forum since
any increased convenience to defendant by transfer of this case
to Ohio will apparently be offset by increased inconvenience to
plaintiff. The controversy between the parties apparently
involves commissions with respect to three accounts handled by
Scott, Inc., one in Ohio, one in Alabama and one in Kentucky.
Whether or not any records or testimony of personnel of any of
those business entities will be necessary is not now apparent. It
may well be that the records and personnel of plaintiff and
defendant will suffice. If more is required, a question may arise
as to the relevant convenience of the two districts. At the
present time, there appears to be little or no difference. In the
absence of a clear difference in convenience, the plaintiff's
choice of forum is determinative. Under those circumstances, we
conclude that neither the convenience of the parties nor the
interests of justice will be served by a transfer.
Since we conclude that the Illinois long-arm statute,
Ill.Rev.Stat. ch. 110, § 17(1)(a), is applicable to defendant,
that venue properly rests in this district and that defendant has
failed to establish any difference, much less a substantial one,
in the convenience of the parties as between the Northern
District of Illinois and the Southern District of Ohio, the
defendant's motion to dismiss or transfer will be denied. An
order to that effect will be entered.
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