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Bank of America, N.A v. Illumination Station

December 30, 2010


The opinion of the court was delivered by: Judge James B. Zagel


Bank of America ("BOA") seeks roughly $1.6 million in receivables it bought at auction. The debt was allegedly originally owed to Berman Industries, Inc., an Illinois corporation, by Illumination Station, Inc., ("ISI"), an Arkansas company. ISI moves to dismiss on the grounds that this court lacks personal jurisdiction over them. See Fed. R. Civ. P 12(b)(2). In the alternative, ISI moves to stay this action or transfer it to the U.S. District Court for the Western District of Arkansas, where ISI seeks declaratory relief against BOA and is also suing Berman on contract and unjust enrichment theories. See 28 U.S.C. § 1404; see also Illumination Station, Inc. v. Bank of America, N.A., No. 10 C 3047 (W.D. Ark. May 18, 2010).


ISI is a small, 10-employee company located in Harrison, Arkansas whose business is the design and sale of lighting fixtures and portable lighting. Berman is an Illinois corporation whose principal place of business is in Chicago, although most of its manufacturing capability is now in China. Berman designs, builds, and supplies the types of lighting products that ISI sells to its customers. For this reason, ISI initiated and, over an eighteen-year period, maintained a commercial relationship with Berman.

Sometime in 2007, officers at Berman became concerned that ISI's account was unacceptably past due. In order to continue to supply ISI on credit, Berman wanted collateral from ISI. The parties entered into a round of negotiations culminating, according to BOA, in a Security Agreement that created for Berman a security interest in assets of ISI. ISI disputes that the agreement was finalized, but concedes that it entered into the negotiations and that some sort of arrangement was made. Either way, Berman filed UCC-1 Financing Statement with the Secretary of State of Arkansas expressing its interest in ISI's assets.

Berman simultaneously had its own outstanding debts, in the form of a series of loans made by the LaSalle Bank, N.A. (LaSalle later merged into BOA). Berman defaulted on those loans and, in April of 2009, entered into a Liquidation Trust Agreement. The Trustee held a public auction of Berman's personal property on October 30, 2009, at which BOA bought ISI's alleged debts to Berman.

ISI disputes the underlying debts and has therefore resisted BOA's attempts to collect, culminating in two lawsuits filed on the same day, May 18, 2010. The first lawsuit to electronically post as filed was this case, at 2:25 p.m. CDT. The second, in which ISI is suing BOA for declaratory relief from the debt and also Berman on contract and tort theories, was filed at 3:36 the United States District Court for the Western District of Arkansas.


The Personal Jurisdiction Standard

Federal district courts exercising their diversity subject matter jurisdiction may only assert personal jurisdiction if a court of the state in which the court sits would have jurisdiction. See RAR, Inc. v. Turner Diesel, Ltd., 107 F.3d 1272, 1275 (7th Cir. 1997). The exercise of jurisdiction in Illinois must comply with the Illinois Long-Arm Statute, the Illinois Constitution and federal Due Process. See Citadel Group Ltd. v. Washington Reg'l Med. Ctr., 536 F.3d 757, 760-61 (7th Cir. 2008). Because the relevant state statute extends to the outer limits of the state and federal Constitutions, courts often proceed directly to the federal Due Process analysis. See id.

Personal jurisdiction is waivable by consent of the parties. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 n. 14 (1985). Put another way, the strictures of Due Process are satisfied when a party agrees to be brought into a specific forum.See id.

The plaintiff bears the burden of demonstrating personal jurisdiction. The complaint itself need not assert facts to meet this burden. See Steel Warehouse of Wis., Inc. v. Leach, 154 F.3d 712, 715 (7th Cir. 1998). Rather, the burden arises once the issue is raised via Rule 12(b)(2) motion.*fn1 If an evidentiary hearing is held, the plaintiff's burden is the "preponderance of the evidence" standard. Purdue Research Found. v. Sanofi-Synthelabo, S.A., 338 F.3d 773, 782 (7th Cir. 2003). If the motion is decided on the parties' submissions, the plaintiff must make a prima facie showing of personal jurisdiction. See id. Any factual conflicts in these submissions are resolved in favor of the plaintiff. See id. ("[U]nder the prima facie standard, the plaintiff is entitled to have any conflicts in the affidavits (or supporting materials) resolved in its favor." (parenthetical in original)).

The parties have filed ample briefings on the matter, with each brief containing multiple exhibits. I am therefore prepared to evaluate personal jurisdiction on the paper submissions and without an evidentiary hearing. Having considered these briefings, I find that the Plaintiff has met its burden of making a prima facie showing of personal jurisdiction.

A series of supporting documents submitted by the Plaintiff here are decisive. The first is an affidavit by Berman's former President, Ronald Armstrong. He has sworn that in or about 2007, ISI's accounts receivable had become "unacceptably past due" and that therefore Berman would need a security interest in order to continue selling products to ISI on a credit basis. Several rounds of negotiations ensued between Berman and Berman's representatives -all in Chicago - and ISI and several ...

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