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PREUSSAG INTERNATIONAL STEEL v. IDEAL STEEL & BUILDERS' S.

January 20, 2004.

PREUSSAG INTERNATIONAL STEEL CORP., d/b/a INFRA-METALS CO., Plaintiff,
v.
IDEAL STEEL AND BUILDERS' SUPPLIES, INC., Defendant



The opinion of the court was delivered by: MARVIN ASPEN, Chief Judge, District

MEMORANDUM OPINION AND ORDER

Plaintiff, Preussag International Steel Corporation, doing business as Infra-Metals Company ("Infra-Metals") filed a two-count complaint against Defendant Ideal Steel and Builders' Supplies, Inc. ("Ideal Steel") alleging breach of contract and quantum meruit. Ideal Steel moved to dismiss for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2), or in the alternative, for transfer of venue to the Eastern District of Michigan pursuant to 28 U.S.C. § 1404(a). For the reasons set forth below, Ideal Steel's motion to dismiss for lack of personal jurisdiction is denied. Its motion to transfer to the Eastern District of Michigan is granted.

STANDARD OF REVIEW

  In a motion to dismiss under Federal Rule of Civil Procedure 12(b)(2) based on lack of personal jurisdiction, plaintiff bears the burden of showing the existence of personal jurisdiction. See RAR, Inc. v. Turner Diesel, Ltd., 107 F.3d 1272, 1276 (7th Cir. 1997). In determining whether this court has personal jurisdiction over the defendant, we may receive and consider affidavits and other materials submitted by the parties. See Turnock v. Cope, 816 F.2d 332, 333 (7th Cir. 1987). The court resolves factual disputes in plaintiff's favor but may accept as true those facts presented in defendant's affidavits Page 2 that remain uncontested by plaintiff. RAR, 107 F.3d at 1275. Based on the parties" submissions, the facts relevant to the motion are as follows.

  BACKGROUND

  Plaintiff Infra-Metals is a Georgia corporation but is registered to do business in Illinois. Its Central Division office is located in Marseilles, Illinois. Defendant Ideal Steel is a Michigan corporation with its principal places of business in Howell and Hamburg, Michigan. According to the complaint, Infra-Metals is one of the largest suppliers of structural steel in the United States. The company operates numerous distribution centers, including the two that are involved in this dispute, located in Marseilles, Illinois and East Chicago, Indiana. Ideal Steel is in the business of fabricating and reselling steel and other building materials.

  According to the complaint, between June 6, 2002 and March, 2003, Ideal Steel, through its agents, ordered approximately $50,000 worth of steel from Infra-Metals' East Chicago, Indiana facility to be shipped to its Howell, Michigan location. Between December 30, 2002 and April 18, 2003, Ideal Steel ordered approximately $150,000 worth of steel from Infra-Metals' Marseilles, Illinois facility to be shipped to Howell, Michigan. Finally, between December 30, 2002 and February 3, 2003, Ideal Steel, through its agents, ordered approximately $40,000 worth of steel from Infra-Metals to be used on a project at Michigan Hazel Park Junior High School. (Compl. ¶ 19). Infra-Metals asserts it delivered, and Ideal Steel accepted, each of these shipments. Ideal Steel did not reject the steel provided, object to the quality of the steel, or dispute the amounts owed for the steel. Infra-Metals contends it issued, and Ideal Steel received, numerous invoices for the steel deliveries, and that Infra-Metals subsequently made several demands to Ideal Steel to pay the amounts past due. Infra-Metals claims Ideal Steel has refused to pay for $249, 522.15 worth of steel it delivered to Ideal Steel. (Compl. ¶ 25). Page 3

  DISCUSSION

 I. Personal Jurisdiction

  In a case based upon diversity of citizenship, a federal court sitting in Illinois may exercise personal jurisdiction over a nonresident defendant only to the extent that an Illinois court could do so. See Michael J. Neuman & Assoc., Ltd. v. Florabelle Flowers, Inc., 15 F.3d 721, 724 (7th Cir. 1994). Under Illinois law, to exercise personal jurisdiction over a nonresident party, the court must determine that the exercise of such jurisdiction complies with the Illinois long-arm statute, the Illinois state constitution, and federal due process. See RAR, Inc. v. Turner Diesel, Ltd., 107 F.3d 1272, 1276 (7th Cir. 1997).

  The Illinois long-arm statute permits the exercise of jurisdiction by an Illinois court on any basis permitted by the state or federal constitution. 735 III. Comp. Stat. 5/2-209(c); Central States, Southeast and Southwest Areas Pension Fund v. Reimer Express World Corp., 230 F.3d 934, 940 (7th Cir. 2000). Therefore, the analysis is collapsed into a two-part inquiry based on the Illinois Constitution and federal constitutional law. RAR, 107 F.3d at 1276.

  Under the Illinois Constitution, a court may exercise personal jurisdiction "only when it is 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." Rollins v. Ellwood, 141 III.2d 244, 275 (1990). The Illinois Supreme Court has stated that this standard offers protections independent from those offered by the federal due process clause. Id. As the Seventh Circuit has explained, however, Illinois courts "have given little guidance as to how state due process protection differs from federal protection in the context of personal jurisdiction." RAR, 107 F.3d at 1276; Hyatt Int'l Corp, v. Coco, 302 F.3d 707, 715 (7th Cir. 2002) (explaining there is "no operative difference between the limits imposed by the Illinois Constitution and the federal limitations Page 4 on personal jurisdiction."). Some Illinois courts have upheld personal jurisdiction under the Illinois Constitution "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." RAR, 107 F.3d at 1276 (quoting Autotech Controls Corp. v. K.J. Elec. Corp., 256 Ill. App.3d 721, 727 (1993)); see also G.M. Signs, Inc. v. Kirn Signs, Inc., 231 Ill. App.3d 339, 343 (1992) (finding personal jurisdiction existed over an active nonresident purchaser who initiated and negotiated an ongoing commercial relationship with an Illinois seller). In both Autotech and G.M Signs, the courts distinguished between "`passive purchasers,' who merely place orders at the seller's price as stated in advertising or other forms of solicitation, and `active purchasers,' who dictate or vigorously negotiate contract terms or inspect production facilities." G.M Signs, 231 Ill. App.3d at 343.

  Ideal Steel contends that it is a passive buyer like the defendants in Chalek v. Klein, 193 Ill. App.3d 767 (1990). In Chalek, the defendants (individuals located in California and New York) read an advertisement for plaintiff's software, inquired via telephone about the software, and then placed their respective orders for the software with the plaintiff, a company located in Illinois. One defendant placed his order over the telephone and mailed a check to Illinois; the other mailed an order form and check to Illinois. Id. at 769. Both defendants were unsatisfied with the merchandise, returned it to Illinois, and stopped payment on their checks. Id. The court, applying the active/passive purchaser distinction, found that the record demonstrated that both defendants were "classic passive purchasers" who merely ordered a product from an Illinois business. Id. at 773. Ideal Steel argues that, as in Chalek, it placed orders over the telephone and did not negotiate any terms or conditions of the agreement. According to defendant, no Ideal Steel employee or representative ever visited Illinois to inspect plaintiff's facilities or to discuss the orders. (Venegas Aff. ¶¶ 15-21). Ideal Steel asserts that it was Mike Dean, an Infra-Metals representative from Michigan who initiated the relationship between the parties in 2000. Page 5 (Venegas Aff. ¶¶ 13-14). Infra-Metals does not specifically contest that it was the party who initiated contact, but asserts that it did not employ Mike Dean until December 2002, and that Ideal Steel and Infra-Metals were "conducting business . . . prior to Mr. Dean's employment with Infra-Metals." (Laudani Aff. ¶¶ 6-7). Infra-Metals also responds that Ideal Steel regularly contacted Infra-Metals in Illinois via telephone, sent written correspondence to Illinois in order to discuss or dispute invoices, negotiate credits for steel previously provided, and to discuss the execution of lien waivers for steel provided by Infra-Metals and used by Ideal Steel. (Response, at 7; Laudani Aff. ¶ 4). Drawing all inferences in favor of plaintiff, we find that Ideal Steel was more than the classic passive purchaser as discussed in Chalek and thus it appears we may exercise personal jurisdiction over Ideal Steel under Illinois due process requirements. However, given that Illinois courts have not provided much guidance in determining when it is "fair, just, and reasonable" to subject a nonresident defendant to personal jurisdiction in Illinois, we turn to the federal constitutional analysis for additional guidance. See RAR, Inc. v. Turner Diesel, Ltd., 107 F.3d 1272, 1277 (7th Cir. 1997).

  The Due Process Clause of the Fourteenth Amendment permits an Illinois court to exercise jurisdiction over a nonresident defendant if the defendant has "certain minimum contacts with [the state] 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 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)). We must determine if defendant has "purposefully established minimum contacts with the forum State" and consider whether those contacts would make personal jurisdiction fair and reasonable. Hyatt Int'l Corp. v. Coco, 302 F.3d 707, 716 (7th Cir. 2002) (quoting Burger King v. Rudzewicz, 471 U.S. 462, 476 (1985)). Defendant should "reasonably anticipate being haled into court" when defendant has "purposefully avail[ed] itself of the privilege of conducting activities" in the forum state. Id. (quoting Burger King, 471 U.S. at 474-75). Although contracting with an in-state party is Page 6 alone not enough to establish minimum contacts, "`prior negotiations and contemplated future consequences, along with the terms of the contract and the parties' actual course of ...


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