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KIMMEL v. WIRTZ

June 4, 1992

HELEN KIMMEL, individually and as Trustee U/W Milton A. Kimmelman FBO Helen Kimmelman, Plaintiffs,
v.
WILLIAM W. WIRTZ, ARTHUR M. WIRTZ, JR., W. ROCKWELL WIRTZ, KENNETH E. SCRANTON, BRUCE W. MacARTHUR, WIRTZ CORPORATION, CONSOLIDATED ENTERPRISE, INC., WIRTZ REALTY CORPORATION, FORMAN REALY CORPORATION, AMERICAN MART CORPORATION, and 333 BUILDING CORPORATION, Defendants.


Williams


The opinion of the court was delivered by: ANN CLAIRE WILLIAMS

Plaintiff Helen Kimmel ("Kimmel") brought this action against defendants William W. Wirtz, Arthur M. Wirtz, Jr., W. Rockwell Wirtz, Kenneth E. Scranton, Bruce W. McArthur, Wirtz Corporation, Consolidated Enterprise, Inc. Forman Realty Corporation ("Forman"), American Mart Corporation ("American Mart"), and 333 Building Corporation ("333 Building"). In her original complaint, the plaintiff claimed that the defendants failed to pay dividends, the directors and officers of Forman, American Mart, and 333 Building breached fiduciary duties to the corporations and their minority shareholders, she was entitled to redemption of the preferred shares she holds in 333 Building, and Foreman, American Mart, and 333 Building should have been dissolved and the liquidated proceeds distributed to the shareholders.

 The defendants subsequently moved for a dismissal of the case pursuant to Federal Rule of Civil Procedure 12(c). Of particular interest to the motion currently pending before this court, the defendants sought the dismissal of Count IV of the plaintiff's complaint. In Count IV, the plaintiff requested the dissolution of Forman, 333 Building, and American Mart and the distribution of the liquidated-proceeds pursuant to Section 12.50 ("Section 12.50") of the Illinois Business Corporations Act ("IBCA"). 32 Ill. Ann. Stat. § 12.50. In the alternative, the plaintiff sought an order directing Forman, American Mart, and 333 Building to purchase plaintiff's shares in these corporations at fair value as determined by this court pursuant to Section 12.55 ("Section 12.55") of the IBCA. 32 Ill. Ann. Stat. § 12.55.

 On December 17, 1991, the Court granted the defendants' motion to dismiss Count IV on behalf of American Mart and 333 Building and denied it on behalf of Foreman. *fn1" The court's determination was based on the conclusion that Section 12.50, and the alternative remedy established under Section 12.55, could not be applied to American Mart and 333 Building. The law of a party's state of incorporation generally controls in cases involving substantive corporate law issues. American Mart and 333 building were incorporated in Delaware. Since the court determined that a request for dissolution of a corporation raised a significant substantive law issue, the court found that only Delaware law could be applied to determine the liability of these foreign corporations.

 Plaintiff Kimmel has subsequently withdrawn her claims pursuant to Section 12.50 with respect to all the defendants and now seeks leave to amend her complaint to obtain a money judgment against Forman, American Mart and 333 Building pursuant to Section 12.55. The defendants object to the application of this statute to American Mart and 333 Building because they are foreign corporations. For the reasons stated below, the court denies the plaintiff's motion.

 The Motion to Amend Plaintiff's Complaint

 Leave to amend is generally "freely given as justice requires." Foman v. Davis, 371 U.S. 178, 182, 9 L. Ed. 2d 222 , 83 S. Ct. 227 (1962). "If the underlying facts or circumstances relied upon by a plaintiff may be a proper subject of relief, he ought to be afforded an opportunity to test his claim on the merits" unless there is evidence of undue delay, bad faith, dilatory motives, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowing the amendment, or futility of the amendment. Id.

 In the instant action, the plaintiff seeks to amend her complaint to include a claim for monetary relief pursuant to Section 12.55. The defendants do not contest the application of Section 12.55 to Foreman, but they do contest its application to American Mart and 333 Building. As previously noted, this court has already determined that Section 12.50 could not be applied to American Mart and 333 Building because that provision raises a significant substantive law issue which must be determined according to Delaware law, the law of American Mart's and 333 Building's state of incorporation. According to the defendants, Section 12.55 is only intended to be an alternative remedy to Section 12.50 and this court should not apply Section 12.55 to American Mart and 333 Building.

 This court recognizes that Section 12.55 provides an alternative remedy to Section 12.50 as the defendants suggest. However, Section 12.55 also provides an independent basis for relief. As Section 12.55 states:

 32 Ill. Ann. Stat. § 12.55 (emphasis added). In her proposed amended complaint, the plaintiff only seeks to raise a claim under the second alternative established under Section 12.55. The language of the statute clearly provides for such independent relief as long as the plaintiff makes the appropriate allegations. Since Section 12.55 provides for a separate and distinct cause of action from Section 12.50, the court will not deny the plaintiff leave to amend her complaint based upon the court's earlier conclusion that Section 12.50 could not be applied to American Mart and 333 Building.

 Having determined that a separate cause of action can be brought under Section 12.55, the court must now determine whether an independent Section 12.55 claim can be brought against foreign corporations such as American Mart and 333 Building. The law of a party's state of incorporation generally controls in cases involving substantive corporate law issues. Seidel v. Allegis Corp., 702 F. Supp. 1409, 1410 (N.D. Ill. 1989); Millsap v. Central Wisconsin motor Transport Co., 41 Ill. App. 2d 1, 189 N.E.2d 793 , 189 N.E.2d 793 (Ill. App. Ct. 1962). However, under Illinois law, foreign corporations seeking to do business in Illinois, in certain circumstances, can be held to the same duties and liabilities as Illinois corporations. Section 13.10 of the IBCA provides that foreign corporations receiving a certificate of authority to conduct business in Illinois shall enjoy the same rights and privileges as domestic corporations and "except as in Section 13.05 otherwise provided with respect to the organization and internal affairs of a foreign corporation and except as elsewhere in this Act otherwise provided, shall be subject to the same duties, restrictions, penalties, and liabilities now or hereafter imposed upon a domestic corporation of like character." 32 Ill. Ann. Stat. § 13.10 ("Section 13.10").

 Plaintiff contends that based upon Section 13.10, liability can be imposed upon American Mart and 333 Building pursuant to Section 12.55. The plaintiff claims that American Mart and 333 Building can be held liable under Section 12.55 because her Section 12.55 claim for monetary relief will not affect the internal affairs of these foreign corporations as is required under Section 13.10. The defendants counter that the granting of monetary relief pursuant to Section 12.55 would affect the organization and internal affairs of American Mart and 333 Building in contravention of the express language of Section 13.10. See 32 Ill. Ann. Stat. § 13.10.

 It is often difficult to draw a distinct line between those acts which are related to or affect the internal affairs of a corporation and those which do not. The Illinois Supreme Court has provided some examples of issues affecting the internal affairs of corporations including suits to dissolve corporations, to appoint receivers, to prevent or compel the declaration of a dividend or issue of stock, to compel a division of assets, and to restore a shareholder's right to vote. See Babcock v. Farwell 245 Ill. 14, 91 N.E. 683, 690 (1910). This list is by no means ...


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