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July 6, 1999


The opinion of the court was delivered by: Moran, Senior District Judge.


This action for fraud under the laws of Illinois arises from damage allegedly suffered by CBI Industries, Inc. (CBI) due to its business dealings with Alfred Slifka. For the reasons stated herein, the complaint is dismissed.


Praxair, Inc. (Praxair), a Delaware corporation headquartered in Connecticut, is engaged in the business of manufacturing and selling medical and specialty gases to customers located throughout the United States. Between January and March 1996, Praxair acquired all of the outstanding common stock of CBI Industries, Inc. (CBI), a Delaware corporation headquartered in Oak Brook, Illinois. Statia Terminals, Inc. (Statia Terminals) was a subsidiary of CBI. This action arises from Statia Terminals' business relationship with defendant Alfred Slifka (Slifka), a Massachusetts resident who is the president and 50% shareholder of co-defendant Global Petroleum Corporation (Global), a privately-held Massachusetts corporation headquartered in that state and engaged in the business of distributing gasoline.

Early in 1992 Global approached Statia Terminals and proposed that the two companies engage in a joint project to refurbish the Point Tupper Terminal Facility (the terminal facility), a dormant petrochemical storage facility located in Point Tupper, Nova Scotia, Canada, then owned by a Canadian corporation, Point Tupper Properties Limited (PTPL). Statia Terminals agreed and, pursuant to a stock purchase and shareholder agreement (the shareholder agreement) Statia Point Tupper Corporation (Statia's acquiring corporation), with financing from CBI, purchased a 24.5% share in PTPL. Also pursuant to the shareholder agreement, Slifka arranged for the purchase of 24.5% ownership of PTPL by Tupper Associates Limited Partnership (Tupper Associates), a Massachusetts limited partnership formed to serve as Global's acquiring corporation. Pursuant to the shareholder agreement, the remaining 51% was purchased by a third party, Point Tupper Ventures Ltd. The shareholder agreement provided that a Canadian corporation, Point Tupper Terminals Company (PTTC), would manage the terminal facility and each of the three shareholders was entitled to appoint one representative to PTTC's shareholder committee (the committee). Although Slifka was not a named representative to the committee, Praxair maintains that he attended several of the scheduled meetings.

After the parties entered the shareholder agreement, Global agreed to lease at least one million barrels of gasoline tankage at the terminal facility for at least two years at 25 cents (Canadian) per barrel per month (the throughput agreement). This agreement is evidenced by a letter Slifka sent to the Nova Scotia Business Development Authority on October 1, 1992 (Mem.Exh.A). Praxair maintains that by January 1993, Global had agreed to lease at least 1,340,000 barrels at 27.5 cents (U.S.) per barrel per month, although there is no documentary evidence to that effect. By January 1993, it was clear that additional financing was needed to refurbish the facility, and such financing was discussed at the shareholders' committee meeting held on January 29, 1993, at CBI's Illinois office. Slifka and other Global officers attended. At that meeting, CBI was asked to guarantee a loan from the Bank of Montreal in the amount of $35.7 million (U.S.) and George Schueppert (Schueppert), CBI's executive vice-president and chief financial officer, agreed on CBI's behalf. CBI executed a guaranty agreement on March 30, 1993, and the Bank of Montreal loaned the amount (which was later increased to $50 million (U.S.)) to PTTC.

Praxair next maintains that in May or June of 1993, Slifka telephoned Schueppert at CBI's Illinois office to ask CBI to purchase Slifka's interest in the terminal facility. Slifka went to Illinois to discuss the buyout with CBI's management including Schueppert and John Jones, the Chairman and CEO of CBI. In addition, Slifka and CBI's management discussed the matter by telephone on several occasions. Such calls were initiated by both parties. On October 20, 1993, Statia Point Tupper Corporation purchased Slifka's interest for $5 million. On October 29, 1993, Global declared that it would not fulfill its agreement to lease space at the terminal facility.

In December 1993, Global sued PTTC in the Supreme Court of Nova Scotia, claiming that it had been damaged by PTTC's actions (the first Canadian action) on two contracts that are entirely separate from this case*fn1 (Cplt.Exh A.,Carmichael aff.). In that action, PTTC filed a counterclaim against Global, seeking to recover damages from Global's refusal to comply with the throughput agreement discussed above (cplt., exh.B, defence and counterclaim). In April 1996, Global filed a second action in the Supreme Court of Nova Scotia (the second Canadian action), naming as defendants CBI, Statia Terminals, Statia Terminal Point Tupper and Statia Point Tupper Corporation. In the complaint, Global gives a somewhat different view of the events described above. Specifically, Global alleges that, working in conjunction with a Canadian company, Scotia Synfuels Limited (Synfeuls), also a plaintiff in the second Canadian action, it found the terminal facility investment opportunity and, upon deciding they needed another investor, approached Statia Terminals in the fall of 1991. Statia agreed, and in exchange for its participation received half of Global's interest in PTTC. When they approached Statia, Global and Synfuels claim that they had already calculated the estimated project cost at roughly $25,000,000 (Canadian). On July 31, 1992, Global claims that Statia sent Global and Synfuels a statement of estimated projected construction costs, cash flow and income, in which the cost of the renovation was $23,287,829 (Canadian). At Statia Terminals' insistence an equity reduction provision was added to the shareholder agreement under which any partner that failed to provide funds in response to calls for capital for the terminal renovation would have its investment in the project reduced. Global claims that Statia Terminals and CBI deliberately added phases to the renovation and undertook unauthorized repairs that more than doubled the cost, misrepresented the spiraling costs to Statia Terminals and Global, eventually putting Global in a situation where it had no choice but to sell out and forego its share of the profits. Global does not discuss the throughput agreement or its terms.

In 1996, Praxair acquired all of CBI's assets and repaid the loan that CBI had guaranteed in the amount of $56,097,323.44 (U.S.). Praxair subsequently filed this suit on behalf of CBI against Global and Slifka in the state courts of Illinois, seeking to recover the $60 million it paid out on CBI's behalf. Defendant Global and Slifka removed the case to federal court.


I. Personal Jurisdiction Over Alfred Slifka

Defendant Slifka first argues that this court lacks personal jurisdiction over him as an individual. Under Illinois law, personal jurisdiction is permitted to the full extent of the due process clause of the Constitution, which requires that an individual have sufficient minimum contacts with the forum state before he will be subject to the jurisdiction of that state's courts. International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945). There are two types of personal jurisdiction: specific and general. Specific jurisdiction refers to "jurisdiction over a defendant in a suit arising out of or related to the defendant's contacts with the forum." Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 n. 8, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984). To satisfy due process, specific jurisdiction requires that the suit "arise out of" or "be related to" these minimum contacts with the forum state. Id.

In determining whether the minimum contacts requirement is satisfied, we focus on whether the defendant has "purposefully established minimum contacts within the forum State." Steel Warehouse of Wisconsin, Inc. v. Leach, 154 F.3d 712, 714 (7th Cir. 1998) citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476-77, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985). Crucial to this inquiry is whether defendant should reasonably anticipate being haled into court in Illinois because he has purposefully availed himself of the privilege of conducting activities here. Id.

Praxair alleges that Alfred Slifka, on behalf of Global, made fraudulent representations concerning his company's interest in entering into a business arrangement with CBI in order to induce CBI to guarantee the $60,000,000 loan needed to refurbish the Point Tupper Terminals Facility, and then to buy out his 24.5% interest in PTTC. Praxair maintains that these misrepresentations occurred over months of conversations and negotiations which took place both in person and by phone, both in Massachusetts and Illinois. Praxair further points to several occasions on which Slifka proposed, negotiated and discussed these transactions in Illinois, with CBI and its representatives at CBI's corporate headquarters. We find that these contacts are sufficient to satisfy ...

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