Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

CAPITAL HARDWARE MFG. CO. v. NATCO

February 24, 1989

CAPITOL HARDWARE MANUFACTURING CO., INC., a Delaware Corporation, Plaintiff,
v.
NATCO, INC., a Florida Corporation; SCHOTTENSTEIN SOUTH, INC., a Florida Corporation; MAURICE COHEN and NATALIE COHEN, Defendants



The opinion of the court was delivered by: DUFF

 BRIAN BARNETT DUFF, UNITED STATES DISTRICT JUDGE

 The parties to this case are or once were in the business of encouraging displays. *fn1" Capitol Hardware Manufacturing Co., Inc., a Delaware corporation whose principal place of business is in Chicago, Illinois, manufactures and sells clothing display racks for clothing retailers. Sel-O-Rak International, Inc. was in the same business in Miami, Florida, part of which included a plating facility. In 1986 Capitol began negotiating with Sel-O-Rak's principal owners and officers, Maurice and Natalie Cohen, for the purchase of Sel-O-Rak. These negotiations involved (as negotiations do) several telephone and postal exchanges between Capitol in Illinois and the Cohens in Florida. On September 30, 1987, representatives of Capitol met in Chicago with the Cohens, along with attorneys for both sides. This meeting lasted over six hours, during which the parties discussed and negotiated an Asset Purchase Agreement and several pertinent schedules thereto.

 At the end of the meeting, the Cohens signed the Agreement and departed Chicago. The Cohens signed this agreement on behalf of themselves and in their capacities as officers of Sel-O-Rak and Schottenstein South, Inc., another of the Cohens' companies. (This court will refer to those companies and Schottenstein South collectively as the "Sel-O-Rak group.") Included in the Agreement were representations and warranties from the Sel-O-Rak group that the tangible assets sold pursuant to the Agreement conformed to applicable laws, that Sel-O-Rak facilities complied with all pertinent environmental laws, that the Sel-O-Rak group had received all necessary environmental permits, and that the Sel-O-Rak plating facility was in good working order. The Agreement also provided that it should be construed under Illinois law. See Complaint, Ex. A §§ 6.9, 6.15, 6.17, 16.

 Capitol thus filed suit in this court. It charges breach of contract, asks for recission of the sale, and claims fraud in the negotiations leading to the contract. It sued the Cohens, Schottenstein South, and NATCO, Inc., the successor to Sel-O-Rak, under this court's diversity jurisdiction, 28 U.S.C. § 1332 (1982). Capitol then attempted to serve the defendants by registered mail, thinking that Rule 4(c)(2)(C)(ii), Fed.R.Civ.P., allows such service on persons not inhabiting or found within Illinois, the state of this forum. Maurice Cohen received the registered package but refused to acknowledge service of process. Capitol thus hired someone to serve the defendants personally. This effort paid off for Capitol, as the defendants are now present before this court.

 Capitol wants to be compensated for its abortive effort to serve process on the defendants by mail. Capitol directs this court to Rule 4(c)(2)(D), which states:

 
Unless good cause is shown for not doing so the court shall order the payment of the costs of personal service by the person served if such person does not complete and return within 20 days after mailing, the notice and acknowledgment of receipt of summons.

 The defendants argue that this court has a good cause for not ordering payment of costs: the Federal Rules of Civil Procedure do not allow service of out-of-state defendants in the manner Capitol chose. Rule 4(e) provides that summons of persons not inhabiting or found within a state where the district court sits shall be according to the law of the state, unless federal law or federal rules permit otherwise. Illinois permits extraterritorial service, but not by registered mail alone. See Ill.Rev.Stat. ch. 110, paras. 2-208, 2-209(e) (Smith-Hurd Ann. 1983 and 1988 supp.); Chronister v. Sam Tanksley Trucking, Inc., 109 F.R.D. 1 (N.D. Ill. 1983). This court holds that a party demonstrates good cause for not having costs of service assessed against it under rule 4(c)(2)(D) when the attempted service would have proved ineffectual.

 The defendants now raise several objections, one to the jurisdiction of this court over their persons and one to the propriety of this forum. The defendants contend first that Capitol's complaint fails to plead facts specifically suggesting that this court has personal jurisdiction. This argument finds no support in the Federal Rules, however. Rule 8(a) requires a party to allege only the grounds for the court's subject-matter jurisdiction, "a short and plain statement of claim showing that the pleader is entitled to relief," and a demand for relief. The court can resolve the issue of personal jurisdiction later, relying on things outside of the pleadings. See O'Hare International Bank v. Hampton, 437 F.2d 1173, 1176 (7th Cir. 1971) (court can decide issue of personal jurisdiction based on affidavits not contained in complaint).

 The defendants implicitly recognize this principle, as they have provided the court with two affidavits to assert that this court lacks personal jurisdiction. This court would lack jurisdiction over this diversity action only if the courts of Illinois would lack jurisdiction. See Young v. Colgate-Palmolive Co., 790 F.2d 567, 569 (7th Cir. 1986); Leeco Steel Products v. Ferrostaal Metals Corp., 698 F. Supp. 724, 726 (N.D. Ill. 1988). Capitol contends that the Illinois courts would have had jurisdiction over these defendants by virtue of the Illinois long-arm statute, which reads in part:

 
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 . . . to the jurisdiction of the courts of this State as to any cause of action arising from the doing of any such acts:

 Ill.Rev.Stat. ch. 110, para. 2-209 (Smith-Hurd Ann. 1988 supp.). Capitol submits that the defendants transacted business within Illinois by virtue of their negotiations between Illinois and Florida and, most importantly, the six-hour meeting in Chicago. While Capitol's unspecific allegations of interstate communications are not enough to amount to "transaction" of business, this court believes that the closing meeting did. This case bears many similarities to Ronco, Inc. v. Plastics, Inc., 539 F. Supp. 391 (N.D. Ill. 1982). In Ronco, Judge Marshall canvassed the Illinois decisions treating the "transaction of any business" requirement, and held that the Illinois courts would have had jurisdiction over Plastics, Inc. Judge Marshall found jurisdiction based on Plastics' dispatching of an employee to Illinois to ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.