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North River Insurance Co. v. Marietta Drapery & Window Coverings Co.

September 5, 2007

THE NORTH RIVER INSURANCE COMPANY AND UNITED STATES FIRE INSURANCE COMPANY, PLAINTIFFS,
v.
MARIETTA DRAPERY & WINDOW COVERINGS CO., INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Stiehl, District Judge

MEMORANDUM & ORDER

This action for declaratory judgment is before this Court pursuant to 28 U.S.C. §2201. Defendant Marietta Drapery & Window ("Marietta Drapery") has filed several motions to which plaintiffs, The North River Insurance Company ("North River") and United States Fire Insurance Company ("U.S. Fire"), have filed joint responses.

Marietta Drapery has moved to dismiss plaintiffs' complaint for declaratory judgment for lack of jurisdiction and improper venue (Doc. 16), to which North River and U.S. Fire have filed a response (Doc. 27), and defendant has filed a reply (Doc. 29). In addition, Marietta Drapery filed an alternative motion to dismiss seeking to have the Court abstain from exercising jurisdiction over the matter or to stay the proceedings. (Doc. 30). North River and U.S. Fire responded to this motion (Doc. 33), and defendant filed a reply (Doc.34). Finally, Marietta Drapery filed a third motion to dismiss based on its assertion that the Court lacks subject matter jurisdiction. (Doc. 35). Again, North River and U.S. Fire responded to defendant's motion (Doc. 42), and defendant replied. (Doc. 43).

BACKGROUND

In 2005 Ronald Alsup ("Alsup"), Robert Crews ("Crews") and Magnum Properties initiated a class action lawsuit against Marietta Drapery in the Circuit Court for the Third Judicial Circuit, Madison County, Illinois (the "Alsup case"). Alsup, and a class of plaintiffs, sought damages from mini-blind manufactors, distributors and retailers, such as Marietta Drapery, for allegedly defective products they sold and an ineffective "retrofit program" to cure those defects. Plaintiffs have, at various times through the alleged class-period, insured defendant Marietta Drapery for commercial liability.

North River and U.S. Fire filed a complaint pursuant to 28 U.S.C. §2201 and 28 U.S.C. §1332 seeking declaratory judgment of their rights and obligations for the claims alleged in the Alsup case with regard to the various commercial general liability and umbrella liability insurance polices they respectively issued. Specifically, both parties seek declaratory judgment with respect to the duty to defend or indemnify Marietta Drapery, arguing that the allegations of the Alsup case fall outside the insurance coverage under these insurance policies.

ANALYSIS

1. Marietta Drapery's Motion to Dismiss for Lack of Jurisdiction (Doc. 16)

A. Lack of Personal Jurisdiction

Marietta Drapery first argues that this Court is without personal jurisdiction over it, and therefore cannot hear the declaratory judgment action. Marietta Drapery argues that the plaintiffs have failed to establish, by a preponderance of the evidence, that the Court has general (allowing defendant to be sued regardless of the subject matter of the litigation) or specific jurisdiction (allowing defendant to be sued for actions relating to defendant's specific contacts within the state). Defendant asserts that if an Illinois court would not have jurisdiction over this matter, the Southern District of Illinois, in this diversity action, also lacks jurisdiction.

Plaintiffs argues that the issue of personal jurisdiction is moot, because by filing a motion to dismiss in the state court action, Marietta Drapery submitted to jurisdiction in Illinois courts. Plaintiffs claim that by filing a motion to dismiss the Alsup case, a motion that did not raise the issue of lack of jurisdiction, Marietta Drapery subjected itself to all other potential legal actions. The Court is not persuaded by plaintiffs' interpretation of the effect of filings in state court on a federal court's jurisdiction, but does find that the defendant has established sufficient "minimum contacts" with the State of Illinois, such that this Court's personal jurisdiction over it is proper. Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) ("[D]ue process requires only that . [the defendant] have certain minimum contacts with [the State] such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'"). Under Int'l Shoe, a Court is to analyze the nature and quality of the defendant's contacts with the forum state (i.e. whether the defendant's connection with the forum state is continuous and systematic or isolated) as well as whether the cause of action arises out of in-state affairs. As plaintiffs point out, Marietta Drapery has both continuous and systematic connections with Illinois, and the cause of action arises out of in-state actions. The record reflects that the defendant conducts continual and systematic business within the Illinois borders, as evidenced by the fact that the various Illinois-class members are the defendant's customers and that defendant has for several years assigned two permanent salespersons to sell Marietta Drapery's products in Illinois. Additionally, the cause of action arises directly from in-state activity; not only does the declaratory judgment directly involve a case being adjudicated in Illinois, with Illinois class-members, but also the original Alsup case involves purchases made by Illinois customers and potential tortious actions related to those in-state purchases. See, e.g., Gray v. Am. Radiator & Standard Sanitary Corp, 176 N.E.2d 761 (Ill. 1961) (holding that a corporation that elects to sell its products for ultimate use in another state is answerable for any defects in those products); Asahi Metal Indus. Co., v. Superior Court of Cal., Solano County, 480 U.S. 102 (1987) (holding that a company which places a product within the stream of commerce directed toward a forum state may expect to be haled into court in that state).

Illinois' long arm statute confers jurisdiction over Marietta Drapery. 735 ILCS 5/2-209(a)(1) ("Any person, whether or not a citizen or resident of this State.submits.to the jurisdiction of the Courts of this state as to any cause of action arising from the doing of any such acts: (1) The transaction of any business within this State.") (emphasis added). The record reflects that Marietta Drapery conducts business within the State of Illinois (i.e. has salespersons and transactions within Illinois), so that Illinois' long-arm statute permits jurisdiction over this defendant-even if some or part of the action did not occur within Illinois. Therefore, the Court FINDS that it has personal jurisdiction over the defendant Marietta Drapery, and therefore, the Court DENIES that part of defendant's motion to dismiss based on lack of personal jurisdiction.

B. Marietta Drapery's Motion to Dismiss for Improper Venue

Marietta Drapery also asserts that the Southern District of Illinois is an improper venue for this action. 28 U.S.C §1391(a)(2) ("A civil action wherein jurisdiction is founded only on diversity of citizenship may be brought only in.a judicial district in which a substantial part of the events or omissions giving right to the claim occurred, or a substantial part of the property that is the subject of the action is situated."). Marietta Drapery contends that plaintiffs' declaratory action seeks determination of rights and obligations with regard to insurance policies promulgated and delivered in Georgia; as a result, defendant argues that the Northern District of Georgia is the proper forum of this declaratory judgment action. Moreover, even if the Southern District of Illinois were a proper venue, defendant argues that the Court should decline hearing the case based on the doctrine of forum non conveniens: that is, as an adequate and more convenient forum exists (Northern District of Georgia), this Court should transfer the case to another forum. As plaintiff correctly points out, pursuant to 28 U.S.C. §1391(a)(2), venue in a diversity suit is proper in a "judicial district in which a substantial part of the events or omissions giving rise to the claim occurred." Id. In this vein, the Southern District of Illinois is a proper venue for this declaratory judgment action, as a substantial part of the action occurred in the Southern District of Illinois. Not only is this case based in large part on the Alsup case (which is pending in a court in Southern Illinois), but also the very facts of the Alsup case itself involve citizens from, and events that occurred within, the Southern District of Illinois. The record reflects that not only ...


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