Appeal from the Circuit Court of Cook County. Nos. 98 L 9058 98 L 9216 98 L 9486 98 L 9731 98 L 10614 Honorable William D. Maddux, Judge Presiding.
The opinion of the court was delivered by: Justice Barth
The appellants in this case are affiliated corporations that allegedly owned, possessed, or operated the premises where the accident giving rise to this dispute occurred. They appeal from the order of the circuit court which denied their motions to dismiss the actions against them for lack of in personam jurisdiction. We affirm in part, reverse in part, and remand the cause to the circuit court for further proceedings.
The complaints in these consolidated cases stem from injuries plaintiffs Richard T. Alderson, Robert A. Kallok, Cyril Smotrilla, Paul Danielson, and David Arcuri sustained in a July 28, 1998, coal dust explosion at the State Line Generating Station (Power Plant) in Hammond, Indiana (Hammond). The Power Plant abuts the Indiana-Illinois state line. Plaintiffs are employees of Indiana contractors that were performing services at the Power Plant at the time of the explosion. Alderson, Kallok, Arcuri, and Danielson are Indiana residents.
The complaints name as defendants Southern Company (Southern), Southern Energy, Inc. (Southern Energy), Southern Energy Resources, Inc. (Southern Energy Resources), Southern Energy Trading and Marketing, Inc. (Southern Energy Trading and Marketing), Southern Electric International, Inc. (Southern Electric International), Southern Energy North America, Inc. (Southern Energy North America), State Line Energy, L.L.C. (State Line Energy), SEI State Line, Inc. (SEI), State Line Holding Corp. (State Line Holding), and Commonwealth Edison. Plaintiffs alleged that all defendants other than Commonwealth Edison (hereinafter referred to collectively as defendants) owned and operated the Power Plant on the date of the accident.
The complaints contain counts against defendants sounding in negligence and res ipsa loquitur and allege general negligence in the operation and maintenance of the Power Plant. Defendants filed a special appearance and a motion to dismiss for lack of in personam jurisdiction. In the motion, defendants asserted that they do not transact business, own property, maintain offices, or have employees in Illinois and attached affidavits of officers or employees to support these assertions.
The trial court granted plaintiffs leave to conduct limited discovery on the issue of jurisdiction before responding to the motion. Discovery revealed the following pertinent facts. Southern is essentially a holding company organized primarily to acquire and hold the securities of electric power, light and gas, and other public utility companies. It is the parent corporation of Southern Energy. Southern Energy North America is a wholly-owned subsidiary of Southern Energy. Southern Energy North America owns SEI and State Line Holding. Southern Energy Trading and Marketing was the entity within the Southern organization which facilitated the trading of energy resources among utility companies. According to deposition witnesses, in September 1997, Southern Energy Trading and Marketing merged with another corporation to form Southern Company Energy Marketing. Southern Energy Trading and Marketing maintains a registered agent for service of process in Illinois. Each defendant just described is a Delaware corporation and has its principal office in Georgia.
SEI and State Line Holding own State Line Energy. State Line Energy is an Indiana limited liability company and owns the power plant and its equipment. State Line Energy has no employees. All personnel at the Power Plant on the date of the accident were employees of Southern Energy Resources. Many of the workers employed at the Power Plant are Illinois residents. As is the case with State Line Energy, most of the Southern entities do not have employees but instead draw their personnel from Southern Energy Resources. A subsidiary of Southern Energy, Southern Energy Resources is a Delaware corporation, has its principal office in Georgia, and maintains a registered agent for service in Illinois. Plaintiffs served summons upon the Illinois registered agents of Southern Energy Trading and Marketing and Southern Energy Resources. With the exception of the suits filed in connection with the July 28, 1998, incident, defendants have never been sued in Illinois.
Pursuant to an Asset Sale Agreement dated April 17, 1996, State Line Energy purchased the Power Plant from Commonwealth Edison Company of Indiana, Inc., a wholly-owned subsidiary of Commonwealth Edison. On that same date, State Line Energy executed a Power Purchase Agreement under which it agreed to supply the Power Plant's electrical output exclusively to Commonwealth Edison for 15 years. This agreement required State Line Energy to commit the Power Plant's normal operating capacity, 490 megawatts at the time the parties entered into the agreement, to Commonwealth Edison. The Power Purchase Agreement also granted Commonwealth Edison a right of first refusal regarding any power generated beyond 490 megawatts.
Commonwealth Edison retained title to equipment on the Power Plant premises to enable it to take title to the electricity at that location. It distributed the power from there to its customers. Both the Asset Sale Agreement and the Power Purchase Agreement were executed in Illinois and contained Illinois choice-of-law provisions. The notice provisions in both agreements directed that communications to State Line Energy be sent to the offices of SEI in Georgia.
There are several other agreements that define the relationship between State Line Energy and Commonwealth Edison. Pursuant to a Coal Supply Agreement dated December 29, 1997, Commonwealth Edison agreed to supply all of the coal required to satisfy State Line Energy's obligations under the Power Purchase Agreement. The Coal Supply Agreement contained an Illinois choice-of-law provision, a venue provision designating Illinois as the chosen forum for any action to enforce the provisions of the agreement, and a notice provision providing that communications to State Line Energy be sent to its Hammond, Indiana, address.
A Facilities Agreement dated December 30, 1997, sets forth State Line Energy's obligations regarding the maintenance of certain equipment at the Power Plant to ensure the reliable delivery of electrical power to Commonwealth Edison. The Facilities Agreement also provided for a communications link, in the form of a dedicated telephone line, between the Power Plant and Commonwealth Edison offices in Illinois. The purpose of the dedicated line was to allow the parties to the agreement to communicate regarding output requirements and conditions affecting the output or reliability of the Power Plant. The Facilities Agreement likewise contained an Illinois choice-of-law provision and a notice provision directing that communications to State Line Energy be sent to the offices of SEI in Georgia.
In a Consulting Services Agreement dated January 1, 1998, Commonwealth Edison undertook to provide consulting services to State Line Energy. This agreement contained an Indiana choice-of-law provision and a notice provision directing that any communications to State Line Energy be sent either to a post office box in Chicago or to its Hammond address.
In a Training Services Agreement dated June 10, 1998, Commonwealth Edison agreed to provide emergency response training to State Line Energy at a Commonwealth Edison facility in Illinois. This agreement listed State Line Energy's Chicago post office box address and contained an Illinois choice-of-law provision.
In connection with its purchase of the Power Plant, State Line Energy filed a petition requesting that the Indiana Utility Regulatory Commission (IURC) refrain from asserting jurisdiction over the Power Plant's operation. In the petition, State Line Energy stated that, because of its obligations under the Power Purchase Agreement, it would not be making any sale of power to a retail customer in Indiana or elsewhere. The petition further stated that the "Illinois Commerce Commission is currently conducting hearings on the proposed transaction and impacts in Illinois where most, if not all, of the Plant's output will be utilized. It is not anticipated that any of the Plant's power will be sold or used in Indiana at wholesale or retail." The petition further represented that, as an exempt wholesale generator, State Line Energy was subject to the regulation of the Federal Energy Regulatory Commission and that Illinois, in effect, would review State Line Energy's transactions through its regulation of Commonwealth Edison. *fn1
The discovery materials also contain the deposition testimony of several witnesses. In his deposition, Randall Harrison testified that he is employed by Southern Energy Resources. He was one of the employees primarily responsible for overseeing State Line Energy's purchase of the Power Plant. Discovery materials also reveal that, as of October 12, 1998, Harrison was a vice-president of Southern Energy and a vice-president of Southern Energy Resources. Harrison testified that at least part of the transaction required the approval of the Illinois Commerce Commission. It was his belief that State Line Energy's petition to the IURC was unsuccessful. Harrison testified that the Asset Sale Agreement required the approval of the board of directors of SEI and Southern Energy and the finance committee of the Southern board of directors. According to Harrison, SEI functioned as the manager of the Power Plant and oversaw its day-to-day operations.
At the time he was negotiating the purchase of the Power Plant, Harrison was not aware of where the electricity to be sold to Commonwealth Edison would ultimately be consumed. What Commonwealth Edison did with the electricity after purchasing it was not a concern of any of the Southern entities.
Harrison also testified that, in 1993, Southern Energy made a bid to purchase the Fisk generating station in Illinois, but was unsuccessful. In 1995, Southern Energy made an unsuccessful bid to purchase the Kincaid generating station, also in Illinois. *fn2 At the time Harrison gave the deposition, the Southern companies were considering purchasing other Illinois generating stations from Commonwealth Edison.
Harrison's deposition reveals that he and other employees of the various Southern Companies made several trips to Illinois during the course of the negotiations surrounding the purchase of the Power Plant and in connection with attempts to purchase other Commonwealth Edison generating stations. Harrison's testimony also referenced several trips he and other employees made to Illinois before the accident in this case. The purpose of these trips was to attend meetings or trade conferences which had no bearing on the Power Plant purchase or the Kincaid and Fisk proposals. According to Harrison, these meetings did not relate to any actual business being conducted in Illinois. For example, some of these meetings involved projects or business in other states or abroad.
In his deposition, Alan Harrelson testified that he is an employee of Southern Energy Resources and a vice-president of SEI and State Line Holding and has his office in Georgia. Discovery materials reveal that, as of October 12, 1998, Harrelson was a vice-president of Southern Energy and Southern Energy Resources. Harrelson's duties included overseeing the operations of the Power Plant.
Harrelson explained that there were times when the Power Plant's excess capacity was sold to other customers through Southern Company Energy Marketing, the successor-in-interest of Southern Energy Trading and Marketing. Answers to interrogatories reveal that, in July 1998, State Line Energy delivered power to a utility in Ohio. Also in July 1998, State Line Energy sold power to the Illinois Municipal Electric Agency (IMEA). According to answers to interrogatories, IMEA received and took title to the electricity on the Power Plant premises. Harrelson did not know whether any of this excess capacity was ultimately sold or consumed in Illinois. He also explained that the purpose of the Consulting Services Agreement was to help aid in the transition of the Power Plant's ownership by allowing State Line Energy to utilize the knowledge of certain Commonwealth Edison employees regarding the operation of the Power Plant.
Harrelson testified that Southern advertises nationally, including in Illinois, and maintains an Internet site accessible to Illinois residents. When asked why Southern would advertise in Illinois if it claimed that it did not do business there, Harrelson responded that the purpose of the advertising was to build name recognition in the event any Southern companies ever did conduct business in Illinois. It was Harrelson's belief that the explosion caused instability to Commonwealth Edison's system and resulted in some power outages in Illinois.
In his deposition, Thomas Boren testified that he is the president and chief executive officer of Southern Energy. He is also the president of State Line Holding and Southern Electric International and serves on the board of directors of SEI. Discovery materials reveal that, as of October 12, 1998, Boren served as a senior vice-president of Southern and the president and chief executive officer of Southern Energy Resources.
Boren described Southern Energy as an "umbrella" company that holds all of the common stock of about 200 companies. When asked about SEI and State Line Holding, Boren explained that, sometimes, Southern Energy will form a company "just to do bidding," for tax purposes, "and then ultimately we have companies that actually own the assets that we're doing business out of." Boren's involvement in the purchase of the Power Plant was limited to reviewing the investment opportunity in his capacity as president of Southern Energy and as a member of the Southern Energy board. He did not participate in the negotiations leading to the purchase.
Boren testified that, in the summer of 1998, Southern Company Energy Marketing entered into a power supply contract with the City of Springfield, Illinois (Springfield). However, Springfield defaulted on that contract, and Southern Company Energy Marketing ended up filing suit against Springfield.
At the time of the accident, Sheri Marcelene Fuller was the president of SEI and a vice-president of State Line Holding. She also was a senior vice-president of Southern Energy and Southern Energy Resources. She was on the board of directors of State Line Holding and SEI, a director and executive vice-president of Southern Energy Trading and Marketing, a vice-president of Southern Electric International, and a director and vice-president of Southern Energy North America. In her deposition, Fuller testified that she is currently an employee of Southern Energy Resources and a director of State Line Energy. She also testified that she was the person ultimately in charge of the Power Plant purchase. She has traveled to the Power Plant twice, both times to attend board meetings.
Fuller estimated that she has traveled to Illinois for business reasons approximately 10 times since 1993. She traveled to the Chicago Board of Trade once because Southern Energy was contemplating entering the commodity trading business. She visited the offices of Duff & Phelps, a credit rating agency in Illinois, to obtain a credit rating for Southern Energy. She also visited Chicago on several occasions in connection with the proposed purchase of power plants from Commonwealth Edison. Fuller also attended meetings in Chicago regarding projects in other states or countries.
Fuller testified that, in August 1997, Southern Energy Trading and Marketing contracted for an option to purchase power from Springfield for delivery in Ohio, and vice versa. Southern Company Energy Marketing exercised the option in the summer of 1998, but Springfield failed to deliver the power as requested. According to Fuller, the suit against Springfield was filed in Georgia.
Also, Southern Company Energy Marketing entered into an alliance with Kinder-Morgan, Inc. (Kinder-Morgan) granting Southern Company Energy Marketing access to Kinder-Morgan's facility in Cora, Illinois, to purchase and sell coal. Finally, Fuller was of the belief that the IURC rejected State Line's petition and asserted jurisdiction over the Power Plant.
Steven Owen testified that he is an Illinois resident and an employee of Southern Energy Resources. He was a business unit manager of State Line Energy at the time of the accident. He explained that, before it purchased the Power Plant, State Line Energy established a Chicago post office box address near the Power Plant. After the purchase, State Line Energy established its official Hammond address. It was Owen's belief that, as of late in June or early in July 1998, State Line no longer maintained the Illinois address. The record contains a memo from Owen to a Commonwealth Edison employee dated June 11, 1998. The memo contains a notice of State Line Energy's change to the Hammond post office box. The letter was printed on State Line Energy's letterhead, which contains the Southern name and logo.
Owen also testified that, in the course of his employment with Southern Energy Resources, he has traveled to Illinois airports and has attended two to three conferences in Illinois. According to Owen, neither Southern nor any of its affiliates maintained a booth at these conferences. Owen's purpose for attending these trips was merely to gather technical information and to network with others in the industry. Also, on three or four occasions, Owen met in Illinois with employees of Commonwealth Edison.
Owen testified that State Line Energy pays $3,672 per month to store 200 to 225 pallet loads of spare parts at Commonwealth Edison's centralized warehouse. He explained that State Line Energy acquired these parts in connection with the purchase of the Power Plant and that it was in the process of moving them to the Power Plant. It was Owen's understanding that State Line Energy did not pay taxes on the spare parts while they were in Illinois but would have to pay a personal property tax once the parts were moved to Indiana. According to Owen, pursuant to the consulting services agreement, Commonwealth Edison has performed services for State Line Energy, such as testing, that took place in Illinois.
According to Owen, the main entrance to the Power Plant lies just on the Indiana side of the state line, and the private road that leads to the main entrance lies partly in Illinois. It was Owen's understanding that State Line Energy possesses an easement over the road to allow access to the main entrance. The Power Plant has a connection to the City of Chicago sewer system, and the Chicago police and fire departments responded on the day of the explosion. Owen estimated that the sale of electricity to Commonwealth Edison accounted for about $20 to $25 million in annual revenue while sales to other utilities generated less than $1 million in annual revenue.
In his deposition, John Long testified that he is a vice-president of Commonwealth Edison and, before the sale, served as an assistant manager and plant manager at the Power Plant. Long confirmed that Commonwealth Edison takes possession of the electricity at the Power Plant and eventually sells it either to retail or wholesale customers. All of Commonwealth Edison's retail customers are in Illinois. According to Long, the explosion at the Power Plant did not result in any power outages in Illinois, but did cause momentary decreases in voltage across the Commonwealth Edison system.
Long also explained that the Power Plant supplies its own electricity needs as long as it is in service. If the Power Plant were not in service, then Commonwealth Edison would supply the Power Plant with electricity. The electricity Commonwealth ...