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LIBERTY MUTUAL FIRE INS. CO. v. REIMER EXP.

January 25, 2000

LIBERTY MUTUAL FIRE INSURANCE COMPANY, A FOREIGN CORPORATION, PLAINTIFF,
V.
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.

I.

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 1997.

II.

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).

A.

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 these:

[1] Sodick Japan has "loaned" employees to Sodick USA, accounting for a significant portion of USA's personnel, including its president.
[2] Many or most of Sodick USA's officers and members of the board of directors have come ...

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