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IDEAL STENCIL MACH. AND TAPE CO. v. MERCHIORI

January 9, 1985

IDEAL STENCIL MACHINE AND TAPE CO., PLAINTIFF,
v.
ALBERTO MERCHIORI, INTERNATIONAL STAPLE AND MACHINE CO., UMBERTO MONACELLI, SHIPPERS SUPPLY & SERVICE CO., AND MAGGIE JAMES, DEFENDANTS.



The opinion of the court was delivered by: Foreman, Chief Judge:

  MEMORANDUM AND ORDER

Before the Court are defendant Alberto Merchiori's Motion to Dismiss (Document No. 4), defendant International Staple & Machine Co.'s Motion to Dismiss (Document No. 6 and 8), defendant Shippers Supply & Service Co.'s Motion to Dismiss (Document No. 7), and defendant Umberto Monacelli's Motion to Dismiss (Document No. 18).

In its complaint, the plaintiff alleges the following facts to support its RICO claims. For numerous years the plaintiff sold goods to Shippers Supply & Service Co. (Shippers Supply) a sole proprietorship owned and operated by Mr. and Mrs. Nixon. On August 15, 1983, unbeknownst to the plaintiff, the defendant International Staple and Machine Co. (International) purchased Shippers Supply. Thereafter, "defendant Shippers Supply, as an `enterprise,' engaged in a `racketeering activity,' in conspiracy and in concert with defendants Merchiori (agent of International and former president of plaintiff), International, Monacelli (president, treasurer, and chief executive officer of International), and James (branch manager of Shippers Supply) . . ." to defraud the plaintiff by placing a number of orders with the plaintiff for various products totaling $24,342.35 and unlawfully converting the products to their own use. The plaintiff alleges that these goods traveled in interstate commerce and that the defendants utilized the United States mail in furtherance of these transactions. The plaintiff contends that these activities constitute mail fraud, wire fraud, conversion, and fraudulent misrepresentation, which amount to a pattern of racketeering activity.

A. PERSONAL JURISDICTION

The defendants raise a number of arguments in support of their Motions to Dismiss. Defendants International, Shippers Supply, and Umberto Monacelli contend that this Court lacks personal jurisdiction over them. International asserts that it is a corporation organized under the laws of Pennsylvania with its principle corporate offices in Butler, Pennsylvania, and that Shippers Supply is a wholly-owned branch of International which conducts its business in Georgia. Likewise, Monacelli asserts that he does not reside in Illinois and that he is an officer of International, a non-Illinois corporation.

Personal jurisdiction is based on a combination of two elements, amenability to jurisdiction and service of process. Terry v. Raymond International, Inc., 658 F.2d 398, 401 (5th Cir. 1981), cert. denied, 456 U.S. 928, 102 S.Ct. 1975, 72 L.Ed.2d 443 (1982). Both must be present to authorize a district court to adjudicate the case. Id. Amenability refers to the substantive reach of the forum's jurisdiction. Amenability has both state law and federal constitutional significance. Service of process is the physical means by which jurisdiction is asserted. Applying these principles the courts have developed three tests to determine if a court possesses personal jurisdiction over a defendant: (1) the assertion of jurisdiction by the law of the forum; (2) conformity of this law with the Constitution; and (3) authority for the means of service of process. Id. The first two tests apply to amenability and the third test applies to service of process.

In a diversity case, the amenability portion of the above tests consists of the following analysis. First, state law (usually the state Long-Arm Statute or case law "doing business" requirement) must assert jurisdiction over the defendant for the cause of action at issue in the suit. Id. Second, the exercise of personal jurisdiction over the defendant must be consistent with the due process clause of the fourteenth amendment. This inquiry consists of deciding whether the defendant has minimum contacts with the forum state "such that the maintenance of the suit does not offend `traditional notions of fair play and substantive justice.'" International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945). Terry, 658 F.2d at 401.

  In a federal question case, the amenability position of the
above tests become less complex. First, since federal statutes
have force throughout the United States, the assertion of
jurisdiction arises only in the context of nonresident alien. Id.
Second, the exercise of personal jurisdiction over the defendant
must be consistent with the due process clause of the fifth
amendment, but the standards are similar to those of the
fourteenth amendment. Holt v. Klosters Rederi A/S, 355 F. Supp. 354
 (W.D.Mich. 1973). The inquiry consists of deciding whether
the defendant has minimum contacts with the United States such
that the maintenance of the suit does not offend traditional
notions of fair play and substantive justice. Obviously this
constitutional standard would only be applied in cases where the
defendant was a nonresident alien since every resident would have
the requisite contacts with the United States. Further, with the
existence of strict venue provisions, it is unnecessary to limit
this constitutional minimum contacts inquiry to the state in
which the district court sits. Any fairness argument by an United
States resident would be eliminated by the venue provisions
authorizing transfer. In Handley v. Indiana & Michigan Elec. Co.,
732 F.2d 1265 (6th Cir. 1984), the Sixth Circuit held that in a
federal question case, the due process clause of the fifth
amendment requires that it be "fair" for the defendant to
litigate in the state where the district court sits. However, the
Handley court did not consider the interplay of the venue
provision. Pursuant to 28 U.S.C. § 1391(b) venue for a federal
question case is proper only in the judicial district where all
the defendants reside or where the claim arose. If the claim were
brought in the judicial district where the defendant resides,
then obviously there would be no personal jurisdiction problem.
When the case is brought in the judicial district where the claim
arose, severe unfairness to the defendant would justify the court
transferring the case to the district in which the defendant
resides. Unlike a diversity action where venue would be proper in
the district where the plaintiff resides, in a federal question
case the small likelihood of any unfairness is more than
compensated for by the provision for transfer.

Thus, as a practical matter, the most significant restraint on the personal jurisdiction of federal courts in federal question cases is service of process, the third-part of the three part set. Terry, 658 F.2d at 403.

In the present case, the plaintiff brings a RICO action asserting this Court's federal question jurisdiction. Therefore, as espoused above, the only relevant inquiry is whether the defendants can be properly served pursuant to Fed.R.Civ.P. 4 and state law. Generally, under Illinois law, service on an out-of-state defendant is permitted if the defendant does business in the state or submits to service by performing any one of the acts enumerated in the Illinois Long-Arm Statute. The Illinois Long-Arm Statute provides in pertinent part:

  (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;
    (2) The commission of a tortious act within this
  ...

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