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Citadel Group Limited v. Washington Regional Medical Center

August 5, 2008

CITADEL GROUP LIMITED, A DELAWARE CORPORATION, PLAINTIFF-APPELLANT,
v.
WASHINGTON REGIONAL MEDICAL CENTER, AN ARKANSAS NON-PROFIT CORPORATION, DEFENDANT-APPELLEE.



Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 07 C 1394-Marvin E. Aspen, Judge.

The opinion of the court was delivered by: Tinder, Circuit Judge.

ARGUED FEBRUARY 26, 2008

Before KANNE, SYKES, and TINDER, Circuit Judges.

This case resulted from the planned construction of a medical office building in Arkansas. Washington Regional Medical Center ("WRMC") hired Citadel Group to develop the project, but the project closing never occurred due to WRMC's concern over mounting costs. Citadel filed suit to recover its development costs against WRMC in the Circuit Court of Cook County, Illinois. WRMC removed the case to the Northern District of Illinois based on diversity jurisdiction and filed a motion to dismiss for lack of personal jurisdiction, or in the alternative, for a change of venue to the Western District of Arkansas. The district court dismissed the case for lack of personal jurisdiction. We reverse.

I. Background

WRMC, an Arkansas non-profit corporation with its principal place of business in Arkansas, sent a "Request for Proposal" to several developers in various states in May 2005. WRMC's request outlined a plan in which Washington Regional Medical Foundation, an affiliated non-profit corporation, would execute a ground lease for unimproved land to a developer. The developer would construct a medical office building on the land and, once the construction was complete, would lease part of the space back to WRMC. Citadel, a Delaware corporation with its principal place of business in Illinois, received WRMC's request and responded with a proposal on May 13, 2005. WRMC asked Citadel for additional information on a few occasions during the following months. In June, WRMC sent Citadel an email requesting that it fill out two forms to provide additional details on the project cost breakdown and a lease and operating rate summary. In July, WRMC sent Citadel an email requesting some documentation for WRMC's auditors. In August, WRMC provided Citadel with information on the potential of a shared parking arrangement between the medical office building site and a neighboring site. In September, WRMC sent Citadel an email asking for clarification on the invoicing process that would be used by Citadel and the entities it hired and the costs encompassed by the authorization to proceed that Citadel had asked WRMC to sign. Citadel responded to the June and July requests; the record does not reflect what response, if any, Citadel gave to WRMC in September. WRMC signed the authorization to proceed on September 15, 2005, and sent a deposit to Citadel.*fn1 During the negotiations, representatives of WRMC never traveled to Illinois, but representatives of Citadel traveled to Arkansas once.

The authorization to proceed encompassed "project development," but the long-term relationship envisioned by WRMC in the request for proposal was still in the theoretical stage; the ground lease had not been executed, which necessarily precluded actual construction. The authorization was attached to Citadel's proposal, which touted its expertise in reducing costs through special financing rather than just through "value engineering," which Citadel warned could "result in compromising project quality." Citadel explained in its affidavit filed in response to WRMC's motion to dismiss that the special financing involved a public offering of commercial paper notes which would reduce finance costs as compared to a traditional mortgage. The goal of the financing was to provide WRMC with the opportunity to lease the finished space at attractive lease rates because the cost of capital for construction was lower.

After WRMC executed the authorization, it requested by email that Citadel provide it with a development calendar. Citadel responded with a calendar that spanned from October 2005 to May 2006 and encompassed activities such as the selection of an architect and general contractor, zoning review, design development, credit enhancement, appraisals, title commitment, legal drafting, and many scheduled conference calls. Citadel began to engage other entities to accomplish the activities set forth in the development calendar. Citadel, WRMC, and the other entities participated in conference calls to discuss the status of the project development in November 2005 and January, February, March, April, and May 2006.*fn2 WRMC sent Citadel questions by email on several occasions in the intervening months. WRMC also provided Citadel with information such as its past financial statements, a proposed ground lease, and a request that three Arkansas banks be permitted to participate in the financing. In March 2006, WRMC sent Citadel an email inquiring about financing costs, which "seem[ed] very high." On May 5, 2006, WRMC informed Citadel by fax that it was concerned about financing costs and directed Citadel not to incur further costs until WRMC's Board of Directors voted on whether to proceed with the project. At some point after May 15, 2006, WRMC informed Citadel that it would not be closing or proceeding with the project. Citadel filed suit to recover more than $500,000 in costs incurred in the development of the project.

II. Personal Jurisdiction

We review a district court's decision to dismiss a case for lack of personal jurisdiction de novo. TruServ Corp. v. Flegles, Inc., 419 F.3d 584, 589 (7th Cir. 2005). As the plaintiff, Citadel bears the burden of making a prima facie showing of the existence of personal jurisdiction. Purdue Research Found. v. Sanofi-Synthelabo, S.A.,338 F.3d 773, 782 (7th Cir. 2003). A federal court sitting in diversity has personal jurisdiction only where a court of the state in which it sits would have such jurisdiction. RAR, Inc. v. Turner Diesel, Ltd., 107 F.3d 1272, 1275 (7th Cir. 1997). Citadel suggests that WRMC is subject to personal jurisdiction in Illinois because the activities WRMC engaged in during the development process were sufficient to confer specific jurisdiction.*fn3

To determine whether personal jurisdiction exists over WRMC in Illinois, we consider the Illinois long-arm statute, the Illinois constitution, and the federal constitution. See id. at 1276. The Illinois long-arm statute grants specific jurisdiction in several enumerated instances. See, e.g.,735 Ill. Comp. Stat. 5/2-209(a)(1), (7) (including the "transaction of any business" within the state or the "making or performance of any contract or promise substantially connected" with the state). It also contains a "catch-all" provision which permits a court to "exercise jurisdiction on any other basis now or hereafter permitted by the Illinois Constitution and the Constitution of the United States." Id. § 2-209(c). Thus, the "catch-all" requirements are co-extensive with the state and federal constitutional requirements. RAR,107 F.3d at 1276.

The Illinois constitution requires that jurisdiction be asserted only where "it is fair, just, and reasonable . . . considering the quality and nature of the defendant's acts which occur in Illinois or which affect interests located in Illinois." Id. (quoting Rollins v. Ellwood,565 N.E.2d 1302, 1316 (Ill. 1990)). According to the Illinois Supreme Court, the Illinois and federal due process requirements "hypothetically might diverge in some cases." Hyatt Int'l Corp. v. Coco, 302 F.3d 707, 715 (7th Cir. 2002) (discussing Rollins, 565 N.E.2d at 1316). We have previously noted, however, that no case has yet emerged where due process was satisfied under the federal constitution but not under the Illinois constitution. Id.; RAR,107 F.3d at 1276. See Sabados v. Planned Parenthood of Greater Indiana, 882 N.E.2d 121, 125 & n.2 (Ill. App. Ct. 2007), appeal denied, 888 N.E.2d 1189 (Ill. 2008), for a federal due process analysis by the Illinois Court of Appeals, who noted that no case had yet found jurisdiction under the federal constitution where the Illinois constitution had not also been satisfied. We have no reason to believe, and neither party has advocated, that the types of contacts at issue in this case would not lead to the same result under both constitutional analyses; thus, we will proceed with the federal analysis.

The Due Process Clause of the Fourteenth Amendment prevents a state from exercising specific jurisdiction over a defendant, unless the defendant had "certain minimum contacts" with the forum 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)). A state has an interest in providing its residents with a forum for redressing harms caused by an out-of-state actor, particularly where the outof-state actor has "purposefully avail[ed] itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." Burger King Corp. v. Rudzewicz,471 U.S. 462, 473, 475 (1985) (quoting Hansen v. Denckla, 357 U.S. 235, 253 (1958)). The defendant's contacts must not be merely random, fortuitous, or attenuated; rather, the "defendant's conduct and connection with the forum State" must be such that it should "reasonably anticipate being haled into court there." Id. at 474-75 (quoting World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980)).

In analyzing whether the defendant's contacts are sufficient to establish specific jurisdiction, we do not employ a "mechanical or quantitative" test. Int'l Shoe, 326 U.S. at 319. Therefore, a contract between a state resident and an out-of-state defendant alone does not automatically establish sufficient minimum contacts. Burger King,471 U.S. at 478. Instead, we consider the parties' "prior negotiations and contemplated future consequences, along with the terms of the contract and the parties' actual course of dealing" in determining whether there were sufficient minimum contacts. Id. at 479. We do not ...


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