United States District Court, Northern District of Illinois, Eastern Division
January 25, 2000
LIBERTY MUTUAL FIRE INSURANCE COMPANY, A FOREIGN CORPORATION, PLAINTIFF,
REIMER EXPRESS ENTERPRISES, LTD., N/K/A REIMER EXPRESS WORLD CORP., A CANADIAN CORPORATION, AND 241197, INC, F/K/A PALS EXPRESS, INC., AND D/B/A PALS CARTAGE CO. DEFENDANTS.
The opinion of the court was delivered by: Bucklo, District Judge.
MEMORANDUM OPINION AND ORDER
Liberty Mutual Fire Insurance Company ("Liberty"), a
Massachusetts corporation with its principal place of business in
that state, sued the defendants for breach of contract in
connection with certain unpaid insurance premiums in this
diversity/alienage action. It won a default judgment against the
improbably named 241197, Inc., f/k/a Pals Express, Inc., and
d/b/a Pals Cartage Co. ("Pals"). Defendant Reimer Express
Enterprises ("Express") and Reimer Express World Corp ("World"),
Canadian corporations, moved for dismissal on the alternative
grounds that a federal district court in Illinois has no personal
jurisdiction, Fed.R.Civ.P. 12(b)(2), or that Liberty has failed
to state a claim upon which relief can be granted. Rule 12(b)(6).
The parties engaged in some jurisdictional discovery, and, after
rebriefing, the motions to dismiss are denied.
The question here is whether the relationship between Pals and
the Reimer defendants, Express and World, is close enough that
the defendants may be said to be "doing business" in Illinois for
purposes of exercising personal jurisdiction over them. Express
and World are Canadian Corporations based in Winnipeg, Manitoba.
World is a wholly owned subsidiary of Express, and their officers
and directors are the same. Both entities are holding companies
that do no business on their own. World is a "shelf" corporation
that can be "activated" if an appropriate transaction arises.
From 1989 to 1994, Express owned 100% of the stock of Reimer
Express Enterprises America, Inc. ("Express America"), a Delaware
holding corporation that also does no business of its own.
World was activated as part of a corporate restructuring in 1994,
when it became Express America's corporate parent. In 1989,
Express purchased 80% of the stock of Pals, a long-existing
trucking company incorporated in Illinois in 1982; Express then
assigned the shares or its rights to those shares under the
purchase agreement to Express America, which ended up owning the
Pals stock. In 1996, when Pals was in serious trouble, Express
America bought the rest of the stock. Pals went out of business
In federal court, the plaintiff has the burden of demonstrating
the existence of personal jurisdiction. Steel Warehouse of
Wisconsin, Inc. v. Leach, 154 F.3d 712, 714 (7th Cir. 1998). I
construe all disputed facts that bear on personal jurisdiction in
the light most favorable to the plaintiffs. Saylor v.
Dyniewski, 836 F.2d 341, 342 (7th Cir. 1988), superceded on
other grounds by 110 ILCS 2-209. A federal district court
sitting in diversity or alienage has personal jurisdiction over a
nonresident only if a court of the state in which it sits would
have such jurisdiction. Mid-America Tablewares, Inc. v. Mogi
Trading Co., Ltd., 100 F.3d 1353, 1358 (7th Cir. 1996). A
plaintiff can establish personal jurisdiction over a nonresident
corporate defendant under Illinois law: (1) if it is doing
business in Illinois with "a fair measure of permanence and
continuity." Cook Assoc., Inc. v. Lexington United Corp.,
87 Ill.2d 190, 57 Ill.Dec. 730, 429 N.E.2d 847, 853 (1981) (citing
Tauza v. Susquehanna Coal Co., 220 N.Y. 259, 115 N.E. 915, 917
(1917) (Cardozo, J.)); 735 ILCS 5/2-209(b)(4); (2) if the
plaintiff's claims arise out of any of the fourteen enumerated
statutory grounds in 735 ILCS 5/2-209(a); (3) or "on any other
basis" if the exercise of personal jurisdiction is "permitted by
the Illinois Constitution and the Constitution of the United
States." Id. 5/2-209(c); RAR, Inc. v. Turner Diesel. Ltd.,
107 F.3d 1272, 1276 (7th Cir. 1997).
Liberty argues for personal jurisdiction solely on the state
law basis that the Reimer defendants were doing business in
Illinois, see 735 ILCS 5/2-209(b)(4). As explained below, the
state and federal constitutional requirements are satisfied in
virtue of the facts that satisfy the statutory "doing business"
requirement. For personal jurisdiction under the "doing business"
doctrine, the nonresident corporation's contacts must be
"continuous, permanent, ongoing and systematic . . . not
occasional or casual." Milligan v. Soo Line RR, Co.,
775 F. Supp. 277, 279 (N.D.Ill. 1991) (citing Reeves v. Baltimore &
Ohio. R.R., 171 Ill. App.3d 1021, 122 Ill.Dec. 145,
526 N.E.2d 404, 407 (1988)). Liberty's argument boils down to the claim that
Express and World were doing business in Illinois because they
had enough control over Pals, which was indisputably doing
business in Illinois.
The key precedent, not cited by either party, is Japax, Inc.
v. Sodick Co. Ltd., 186 Ill. App.3d 656, 134 Ill.Dec. 446,
542 N.E.2d 792 (1989). In Japax, an Illinois state court found that
personal jurisdiction existed where:
Sodick USA, despite being set up as a separate
corporate entity, functions as the service arm of
Sodick Japan, maintaining the EDM systems in Illinois
and other states. . . . Sodick Japan maintains some
control over its subsidiary, or at least maintains
significant connections with it in order to
facilitate the sales and servicing of its systems.
Id. at 797. The facts on which the Japax court relied were
 Sodick Japan has "loaned" employees to Sodick
USA, accounting for a significant portion of USA's
personnel, including its president.
 Many or most of Sodick USA's officers and members
of the board of directors have come from Sodick
 Sodick Japan has loaned or guaranteed millions of
dollars on behalf of its subsidiary.
 Employees of Sodick Japan come to the United
States, including Illinois, to train Sodick USA
personnel, to assist in Sodick USA's service
activities and to attend trade shows. Some visit and
inspect the premises of Sodick's Illinois
 The two companies regularly communicate[,] and
 Sodick USA's officers apparently report to Sodick
Japan's executive managing director.
Id. The Japax court said that it was unnecessary to
"determine whether Sodick USA is the alter ego of Sodick Japan
for all purposes" because there were "enough links between the
two companies to impute Sodick USA's marketing and servicing
activities in Illinois to its parent corporation." Id.
In this case, Express and World were sufficiently involved in
the management of Pals for personal jurisdiction to exist. After
the share purchase, Donald, Delbert, and Gerald Reimer, members
of the boards of directors of Express and World, became members
of the board of Pals. Waldemar A. Redekopp, counsel for Express
and World, consulted several times a year with Pals' attorney
Peter Appel, giving him business advice. Appel stated that
Redekopp "had to approve everything." World apparently paid
Appel's legal bills after Pals went broke in 1996. Charles Pals,
president of Pals, consulted with Donald Reimer and Redekopp
about the purchase of some property, and Express advanced Pals
money for the purchase. Express helped finance Pals' general
payables and operating expenses, guaranteed payment with respect
to equipment leases, and loaned Pals a good deal of money in
1992-97. World paid for vehicle insurance for Pals in 1995. Pals'
books and records were reviewed by the officers and directors of
Express and World. In 1996, when it appeared that Pals was in
serious trouble, Redekopp sent Mr. Paul Graham, who had worked
for James Reimer, an Express director, to review Pals' books and
discuss the financial problems with Charles Pals. Graham was
dispatched as an agent of Pals, but also in part at the request
of World. Graham spent four months at Pals and reported to Ed
Nieroda, director of financial services for World.
In view of these facts, most of the Japax factors are
satisfied. The defendants "loaned" employees to Pals (Graham).
Many of Pals' directors came from Express and World. The
defendants loaned or guaranteed Pals a lot of money and even paid
its bills. Employees of the defendants came to Illinois to
consult with Pals and offer business advice. The defendants often
communicated with Pals. While Pals' officers did not have to
formally report to Express or World, Pals' counsel said that the
defendants' attorney had to "approve everything." And World
started out by owning 80% of Pals' stock and ended up by owning
all of it.
The defendants dispute the strict accuracy of some of Liberty's
characterization of the facts, but the differences are largely
small — concerning, for example, whether it was Express or World
that arranged financing for certain of Pals' expenses. In any
event, in federal court, factual disagreement on a motion to
dismiss must generally be resolved in favor of the plaintiff. The
defendants do offer testimony that Charles Pals continued to run
Pals: he testified that he needed no authorization to make his
decisions and that Express and World had no significant role in
the day-to-day operations of the company. But this is not
inconsistent with Liberty's arguments that the defendants had
enough of a role to justify exercise of personal jurisdiction. As
Japax indicates, total control is not necessary. "Some control"
or "at least significant connections" may, in certain factual
situations, be enough. See 134 Ill.Dec. 446, 542 N.E.2d, at
797. I hold that they are enough here.
My determination is reinforced by the policy rationale
presented by the Illinois
courts and the Seventh Circuit. Judge Posner explains that "the
concept of `doing business,' as it is understood in cases
interpreting long-arm statutes and the due process limitations on
the reach of those statutes, is that it picks out those
nonresident businesses that are so like resident businesses,
insofar as the benefits they derive from state services are
concerned, that it would give them an undeserved competitive
advantage if they could escape having to defend their actions in
the local courts." IDS Life Ins. Co. v. SunAmerica Life Ins.
Co., 136 F.3d 537, 540-541 (7th Cir. 1998). In Japax, to find
that there was no personal jurisdiction "would allow foreign
corporations to purposefully exploit local markets and reap the
benefits and advantages of doing business directly while
insulating themselves from lawsuits by using `separate'
subsidiaries and distribution networks to implement their
business activity." 134 Ill.Dec. 446, 542 N.E.2d at 797 (citing
Maunder v. DeHavilland Aircraft of Canada, 112 Ill. App.3d 879,
68 Ill.Dec. 450, 445 N.E.2d 1303, 1306 (1983) ("The fact that
[defendant's] sales were conducted indirectly through a third
party does not excuse [it] from the jurisdiction of Illinois
The defendants were "doing business" in Illinois because they
had enough control over or significant connections with Pals, a
company that was doing business in Illinois. They cannot insulate
themselves from lawsuits in Illinois by operating through "shelf"
corporations while owning from 80-100% of a corporation doing
business in Illinois, paying its bills and legal fees, extending
it loans and guarantees, loaning it personnel, giving it business
advice and requiring approval for its activities by their own
Once it is clear that an Illinois court may exercise personal
jurisdiction on statutory grounds, I must determine whether the
exercise is consistent with federal due process requirements.
Michael J. Neuman & Assoc., Ltd. v. Florabelle Flowers, Inc.,
15 F.3d 721, 725 (7th Cir. 1994). A court in Illinois may
exercise personal jurisdiction only if the defendant has "certain
minimum contacts with [Illinois] such that the maintenance of the
suit does not offend `traditional notions of fair play and
substantial justice.'" Int'l Shoe Co. v. Washington,
326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945) (citations omitted).
In view of Express and World's activities in Illinois through
Pals, these requirements are satisfied.
The exercise of personal jurisdiction must also be consistent
with the Illinois Constitution's "separate and independent"
guarantee of due process. Rollins v. Ellwood, 141 Ill.2d 244,
152 Ill.Dec. 384, 565 N.E.2d 1302, 1316 (1990). It must be "fair,
just and reasonable to require a nonresident defendant to defend
an action in Illinois, considering the quality and nature of the
defendant's acts which occur in Illinois or which affect
interests located in Illinois." Id. I must conduct an
independent analysis of due process under Illinois law, but I may
look to federal due process law for guidance. Id. Because the
Reimer defendants offer no reason to otherwise construe the facts
in light of the Illinois Constitution, I find that exercise of
personal jurisdiction over them would not violate requirements of
Illinois due process. See Neuman, 15 F.3d at 725.
The Reimer defendants, Express and World, also move to dismiss
the contract complaint against them on the grounds that it was
Pals, and not they, who held the insurance policies and was named
as the insured on those policies, and who was therefore liable on
any agreements concerning those policies. The complaint would
have to assert some factual and legal basis for finding a policy
holder's indirect parent corporation to be liable for its unpaid
premiums, but, they say, Liberty has not done so. On a motion to
dismiss for failure to state a claim under Fed. R. 12(b)(6), the
inquiry is whether relief is possible under any set of facts
with the allegations of the plaintiff's complaint. Pokuta v.
Trans World Airlines, Inc., 191 F.3d 834, 839 (7th Cir. 1999)
(citing Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct.
2229, 81 L.Ed.2d 59 (1984)). I read a complaint liberally and
accept as true its well pleaded allegations and the inferences
that may be reasonably drawn from those allegations. Sapperstein
v. Hager, 188 F.3d 852, 855 (7th Cir. 1999).
Here, Liberty has asserted that Pals was an alter ego of
Express and World. If proven, that would be enough to show that
they were liable for its unpaid insurance policies. Express and
World protest that Liberty must allege some factual basis for
this claim. This is not true. Federal notice pleading requires
the plaintiff to set out its complaint a short and plain
statement of the claim that will provide the defendant with fair
notice of the claim. Leatherman v. Tarrant County Narcotics
Intelligence and Coordination Unit, 507 U.S. 163, 168, 113 S.Ct.
1160, 122 L.Ed.2d 517 (1993). A complaint need not spell out
every element of a legal theory to provide notice. Hemenway v.
Peabody Coal Co., 159 F.3d 255, 261 (7th Cir. 1998) (contrasting
notice pleading with heightened pleading, i.e., "the who, what,
when, where and how" required for fraud claims). A plaintiff can
plead conclusions as long as those conclusions provide the
defendant with minimal notice of the claim. Jackson v. Marion
County, 66 F.3d 151, 154 (7th Cir. 1995). In the ordinary case,
a pleading need contain only enough "to allow the defendant[s] to
understand the gravamen of the plaintiff's complaint." Payton v.
Rush-Presbyterian-St. Luke's Med. Ctr., 184 F.3d 623, 627 (7th
The Reimer defendants do not allege that heightened pleading
requirements apply here, or that they could not understand the
gravamen of Liberty's complaint. They obviously do understand it.
They do argue that Liberty has not alleged enough of a factual
basis to show that Pals really was their alter ego. However, it
does not have to. The issue on a motion to dismiss is not whether
a plaintiff will ultimately prevail but whether he is entitled to
offer evidence to support his claims. It "may appear on the face
of the pleadings that a recovery is very remote and unlikely, but
that is not the test." Sapperstein, 188 F.3d at 855 (internal
quotations omitted). I do not say that the prospect of recovery
appears remote or unlikely here.
I therefore DENY Express and World's motions to dismiss
Liberty's complaint for lack of personal jurisdiction and failure
to state a claim.
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