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QUANTUM COLOR GRAPHICS v. THE FAN ASSN. EVENT PHOTO

January 23, 2002

QUANTUM COLOR GRAPHICS, LLC, A LIMITED LIABILITY COMPANY, PLAINTIFF,
V.
THE FAN ASSOCIATION EVENT PHOTO GMBH, A GERMAN CORPORATION; FANS UNITED AG, A GERMAN CORPORATION; THE FAN ASSOCIATION USA, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY; AND GUIDO KARP, AN INDIVIDUAL, DEFENDANTS.



The opinion of the court was delivered by: Elaine E. Bucklo, United States District Judge:

MEMORANDUM OPINION AND ORDER

Quantum Color Graphics, LLC ("Quantum") sues The Fan Association Event Photo GmbH ("GmbH") and Fans United AG, both German corporations, as well as The Fan Association USA, LLC ("USA LLC"), a California limited liability corporation, and Guido Karp, a resident of Germany, for breach of contract. I have subject matter jurisdiction based on diversity and alienage under 28 U.S.C. § 1332. I entered a default judgment against the USA L.L.C., see Minute Order of June 8, 2001, and the record does not reflect that service has been made on Fans United AG. Karp and GmbH move to dismiss the complaint, and I deny the motion.

I.

Karp and GmbH argue that Quantum fails to state a claim for breach of contract and that Quantum has failed to sufficiently allege the requisite contacts with Illinois to support the exercise of personal jurisdiction over them. On a motion to dismiss for lack of jurisdiction, I read the complaint liberally and accept as true the well pleaded allegations of the complaint and the inferences that may be reasonably drawn from those allegations. Sapperstein v. Hager, 188 F.3d 852, 855 (7th Cir. 1999). I may consider evidence outside of the complaint, and "[t]he presumption of correctness . . accord[ed] to a complaint's allegations falls away on the jurisdictional issue once a defendant proffers evidence that calls the court's jurisdiction into question." Id. at 855-56. Once challenged with evidence, the "plaintiff has the obligation to establish jurisdiction by competent proof." Id. at 855.

A.

The first issue concerns whether Quantum can establish that the amount in controversy exceeds $75,000, as required for alienage jurisdiction. The defendants argue that by lumping all of the defendants together, Quantum engaged in artful pleading "to prevent [the] Court from reaching the inevitable conclusion that if plead[ed] properly, the Complaint cannot set forth the required amount in controversy for diversity jurisdiction against any one of the defendants." Motion at 5 n. 4. In their reply brief, the defendants argue that Quantum could not aggregate its claims against the defendants because it did not allege that they were jointly liable. Ordinarily, claims raised for the first time in reply are waived, see Kauthar SDN BHD v. Steinberg, 149 F.3d 659, 668 (7th Cir. 1998); United States v. Cherif, 943 F.2d 692, 700 (7th Cir. 1991) (same for footnote), but I have an independent duty to police subject matter jurisdiction even if the parties raise no objection, see Amgen, Inc. v. Kidney Center of Delaware County, Ltd., 95 F.3d 562, 567 (7th Cir. 1996).

Although Quantum contends that the defendants are alter egos, the defendants argue that, because Quantum failed to state specifically whether it seeks to hold the defendants jointly or severally liable, it has failed to properly plead jurisdiction. The Seventh Circuit has held that a plaintiff may aggregate claims against multiple defendants where it demonstrates a reasonable probability that the corporate veil should be pierced. Middle Tenn. News Co., Inc. v. Charnel of Cincinnati, Inc., 250 F.3d 1077, 1081-82 (7th Cir. 2001) (Indiana law). In Illinois, corporate "alter egos" are jointly and severally liable for breach of contract. See, e.g., Knickman v. Midland Risk Servs.-Ill., Inc., 700 N.E.2d 458, 460-62 (Ill.App. Ct. 1998). In order to pierce the corporate veil and hold alter egos jointly liable, a plaintiff must be able to prove "(1) a unity of interest and ownership that causes the separate personalities of the corporation[S] and the individual to no longer exist; and (2) the presence of circumstances under which adherence to the fiction of a separate corporate existence would sanction a fraud, promote injustice or promote inequitable consequences." Jacobson v. Buffalo Rock Shooters Supply, Inc., 664 N.E.2d 328, 331 (Ill.App. Ct. 1996).

Quantum "believes that Karp has utilized the three corporate defendants interchangeably in an attempt to avoid the amounts due and owing via a corporate shell game." Compl. ¶ 17. Quantum says as well that Karp is a principal of the three corporate defendants. Id. ¶ 5. The defendants do not challenge the underlying facts, only the legal conclusion that they should be subject to joint liability, so I must accept the factual allegations as true. Sapperstein, 188 F.3d at 855-56. Moreover, based on the correspondence submitted by Quantum in its surreply, which I may consider in ascertaining whether I have subject matter jurisdiction, id., it appears that Karp identified himself with all three corporate defendants and that orders were submitted by GmbH but billed to USA LLC. I may reasonably infer for the purposes of this motion that Quantum could prove a unity of interest that destroys the separate personalities of the defendants, and if Karp has abused the corporate form to avoid obligations to Quantum, that would certainly "promote injustice." If Quantum can establish alter ego liability, the defendants may be held jointly liable, so the claims against each defendant could be aggregated for jurisdictional purposes. Quantum has sufficiently alleged the required amount in controversy for alienage jurisdiction.

B.

Both GmbH and Karp move to dismiss for lack of personal jurisdiction under Fed.R.Civ.P. 12(b)(2). I have personal jurisdiction over a defendant "only if a court of the state in which [I] sit[] would have such jurisdiction." Klump v. Duffus, 71 F.3d 1368, 1371 (7th Cir. 1995). The plaintiff has the burden of showing that jurisdiction is proper under (1) the Illinois long-arm statute, 735 ILCS 5/2-209, (2) Illinois constitutional law, and (3) federal constitutional law. RAR, Inc. v. Turner Diesel, Ltd., 107 F.3d 1272, 1276 (7th Cir. 1997). The Illinois long-arm statute authorizes personal jurisdiction to the limits of the Illinois and federal constitutions, § 2-209(c), so the inquiry collapses into two constitutional inquiries — state and federal. 107 F.3d at 1276.

I must attempt to avoid reaching federal constitutional questions where the case can be disposed of on state law grounds, so I address the Illinois constitutional question first. Id. The Illinois Supreme Court has held that Illinois due process is not necessarily co-extensive with federal due process, though federal law may inform the state inquiry. Rollins v. Ellwood, 565 N.E.2d 1302, 1316 (Ill. 1990). Illinois courts have given little guidance on how Illinois due process varies from federal concerns, RAR, Inc., 107 F.2d at 1276-77, but they "have upheld (under the state constitution) personal jurisdiction "over a non-resident corporate purchaser engaged in a commercial relationship with an Illinois corporation through the placing of purchase orders to the plaintiff in Illinois for products manufactured in Illinois.'" Id. at 1276 (citing Autotech Controls Corp. v. N.J. Elec. Corp., 628 N.E.2d 990, 995-96 (Ill.App. Ct. 1993); G.M. Signs, Inc. v. Kirn Signs, Inc., 596 N.E.2d 212, 214-15 (Ill.App. Ct. 1992)). These are the same operative facts on which Quantum relies to establish personal jurisdiction, so RAR might be read to mean that Illinois due process would not be offended by the exercise of personal jurisdiction in this case.

In Autotech, the court found no violation of Illinois due process where the non-resident defendant had a distributorship agreement with an Illinois company under which it submitted orders by telephone and facsimile, returned some goods to Illinois for repairs, and breached the contract by failing to pay. 628 N.E.2d at 994-95. The only basis for distinguishing Autotech is the return of non-conforming goods for repair; however, that is roughly comparable to the present defendants' shipment of a CD-rom to Quantum for use in one printing job, so there is no meaningful distinction to be ...


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