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Kowal v. Westchester Wheels, Inc.

Court of Appeals of Illinois, First District, Fifth Division

September 8, 2017

JANET KOWAL, Plaintiff-Appellee,
v.
WESTCHESTER WHEELS, INC., an Illinois Corporation, GIANT BICYCLE, INC., a Virginia Corporation, HARTLEY'S CYCLE SHOPPE, an Illinois Corporation, and GIANT MANUFACTURING COMPANY, LTD., a Taiwan Corporation, Defendants (Giant Manufacturing Company, Ltd., a Taiwan Corporation, Defendant-Appellant).

         Appeal from the Circuit Court of Cook County No. 2013 L 13309 Honorable Daniel T. Gillespie, Judge Presiding.

          PRESIDING JUSTICE REYES delivered the judgment of the court, with opinion. Justice Lampkin concurred in the judgment and opinion. Justice Gordon specially concurred, with opinion.

          OPINION

          REYES PRESIDING JUSTICE.

         ¶ 1 Defendant-appellant Giant Manufacturing Co., Ltd. (Giant Manufacturing), a Taiwanese corporation, brings this appeal under Illinois Supreme Court Rule 306(a)(3) from an order of the circuit court of Cook County, denying its motion to dismiss a complaint filed by plaintiff Janet Kowal for lack of personal jurisdiction. Ill. S.Ct. R. 306(a)(3) (eff. Feb. 16, 2011). Plaintiff is a resident of Cook County, Illinois. She filed a complaint against Giant Manufacturing in the circuit court of Cook County, seeking relief for injuries she sustained as a result of an alleged defect in a bicycle manufactured by defendant-appellant. On appeal, Giant Manufacturing argues that the trial court erred in denying its motion to dismiss because (1) it is not subject to personal jurisdiction in Illinois under the stream-of-commerce theory and (2) the exercise of personal jurisdiction does not comport with due process. For the following reasons, we affirm.

         ¶ 2 I. BACKGROUND

         ¶ 3 The record on appeal discloses the following facts.[1] Plaintiff filed a four-count complaint against Giant Manufacturing, Giant Bicycle, Inc. (Giant Bicycle), Westchester Wheels, Inc., (Westchester), and Hartley's Cycle Shoppe (Hartley's). The complaint alleged counts for negligence, strict liability, and breach of express warranty. Specifically, the complaint alleged that Giant Manufacturing, a Taiwanese corporation, manufactured Giant brand bicycles and distributed the bicycles in the United States exclusively through Giant Bicycle, a Virginia corporation. Meanwhile, plaintiff purchased a 2007 Giant brand bicycle from Westchester, an Illinois corporation and authorized retailer of Giant brand bicycles. Plaintiff then took the bicycle to Hartley's, an Illinois corporation and authorized retailer of Giant brand bicycles, for a tune-up and inspection in preparation for a 468-mile bicycle ride event. A few weeks later, the carbon fiber front fork of the bicycle broke and led to plaintiff's fall and injuries during the event in Iowa.

         ¶ 4 Thereafter, Giant Manufacturing and Giant Bicycle were notified through service to the Illinois Secretary of State.[2] Giant Manufacturing then filed a motion to quash service of summons pursuant to section 2-301 of the Code of Civil Procedure (735 ILCS 5/2-301(a) (West 2014)), arguing (1) it is not registered with the Illinois Secretary of State as authorized to do business in Illinois and therefore, service upon the Secretary of State is not valid under section 5.25 of the Business Corporation Act of 1983 (805 ILCS 5/5.25(a) (West 2014)), and (2) it has not transacted business in Illinois, so that service of process upon it through the Secretary of State is not valid under section 5.30 of the Business Corporation Act (805 ILCS 5/5.30 (West 2014)).

         ¶ 5 In support of its motion to quash, Giant Manufacturing included an affidavit of its chief financial officer (CFO), Bonnie Tu. In her affidavit, Tu attested she was employed as CFO with Giant Manufacturing for the last 21 years. She averred that Giant Manufacturing is a Taiwanese corporation with its principal place of business in Taiwan. Tu also claimed Giant Manufacturing had never sought authorization from the Illinois Secretary of State to conduct business in Illinois and had never negotiated, performed, or entered into any contracts in Illinois. She further averred that Giant Manufacturing has never shipped any products to Illinois and never maintained any offices, employees, registered agents, or bank accounts in Illinois. Tu alleged that Giant Manufacturing has never advertised in Illinois and never solicited business from or transacted business with an Illinois resident or corporation. In addition, she averred that Giant Manufacturing has never paid any incomes taxes in Illinois or filed any returns in this state.

         ¶ 6 Giant Manufacturing subsequently answered interrogatories limited to the issue of personal jurisdiction (initial answer). In its initial answer, the company acknowledged that while Tu was employed as its CFO since 1993, she was also a director at Giant Bicycle since 1994. Furthermore, Young Liu, a director with Giant Manufacturing since 1997, was also a director at Giant Bicycle since 1987. Giant Manufacturing stated in its answers to interrogatories that it designs, manufactures, and sells bicycles and bicycle components but does not sell bicycles directly to the public. Rather, Giant Bicycle is the exclusive distributor of Giant brand bicycles in the United States. Giant Manufacturing represented that Giant Bicycle is not its wholly-owned subsidiary. Giant Manufacturing further acknowledged that in 1988, "Giant brand bicycles were first sold in Illinois." It also stated that Westchester was authorized in 2006 and Hartley's was authorized in 2013 by Giant Bicycle to sell and service Giant brand bicycles.

         ¶ 7 In response to Giant Manufacturing's motion to quash, plaintiff asserted that personal jurisdiction existed under the Illinois long-arm statute (735 ILCS 5/2-209(a)(1) (West 2014)) because the company "is doing business within" Illinois through its subsidiary, Giant Bicycle. In support of its motion, plaintiff attached printouts of advertisements posted on the Internet on July 22, 2014, by dealers and retailers for Giant brand bicycles in Illinois. Plaintiff also attached a printout of a map from Giant Bicycle's public Internet website, which demonstrated that on July 23, 2014, approximately 40 "Giant Authorized Dealers" were present in Illinois. The printout of the website also states that Giant brand bicycles are "sold exclusively through Giant Authorized Dealers." In addition, plaintiff attached a copy of an advertisement for Giant brand bicycles in a magazine that the plaintiff's attorney purchased at a newsstand in Chicago, Illinois. Plaintiff also attached the National Bicycle Dealers Association's estimated statistics, that in 2012, approximately 312, 000 Giant brand bicycles were sold in the United States, 13% of the specialty bicycle market share nationwide.

         ¶ 8 Thereafter, Giant Manufacturing submitted supplemental answers to plaintiff's jurisdictional interrogatories, in which it added to and modified its initial answer. Unlike in its initial answer, Giant Manufacturing claimed it did not know which retailers in Illinois are authorized to sell Giant brand bicycles. Further, while it had previously answered that Westchester was authorized by Giant Bicycle to sell Giant brand bicycles in 2006, Giant Manufacturing now stated it did not have this information. It indicated it had never been a party to a contract with Westchester. While maintaining its previous answer that Hartley's was authorized by Giant Bicycles to sell Giant brand bicycles in 2013, Giant Manufacturing answered it had never been a party to a contract with Hartley's either. Giant Manufacturing stated it does not instruct Giant Bicycle where to distribute or sell Giant brand bicycles in the United States. Giant Manufacturing does not take part in authorizing retailers in Illinois to sell Giant brand bicycles. Giant Bicycle determines which retailers it chooses to do business with in Illinois, and the terms of its business relationship with each of those retailers. While Giant Bicycle shipped Giant brand bicycles to certain retailers in Illinois from 2005 to 2009, Giant Manufacturing has no information regarding the number of Giant brand bicycles sold or distributed to retailers in Illinois by Giant Bicycle during that period of time. In addition, Giant Manufacturing stated that its net profit from 2007 through 2013 was distributed to its shareholders, none of whom included Giant Bicycle or any Illinois resident or corporation. Giant Manufacturing also alleged that at the time plaintiff's Giant brand bicycle was manufactured, there was no formal agreement between Giant Manufacturing and Giant Bicycle for the distribution or sale of Giant brand bicycles in the United States. Giant Manufacturing, however, acknowledged it was informed that Giant Bicycle entered into agreements at various times with certain retailers in Illinois for the sale of Giant brand bicycles. Giant Manufacturing "first became aware that Giant brand bicycles were *** sold in Illinois by authorized retailers or dealers" in 1988. In addition, Giant Bicycle maintains a distribution warehouse in Elgin, Illinois, and employs individuals who work in the warehouse.

         ¶ 9 Later, in Giant Manufacturing's answers to plaintiff's second set of jurisdictional interrogatories, the company acknowledged that Giant Bicycle is a wholly-owned subsidiary of Gaiwin B.V. and that Gaiwin B.V. is a wholly-owned subsidiary of Giant Manufacturing.

         ¶ 10 After the matter was fully briefed and argued, the trial court denied Giant Manufacturing's motion to quash. In denying the motion, the trial court initially noted that Giant Manufacturing did not have the continuous and systematic contacts with Illinois to establish general jurisdiction. The trial court, however, went on to find that Giant Manufacturing had sufficient minimum contacts with Illinois to establish specific jurisdiction under the Illinois long-arm statute, and thus service was proper. Giant Manufacturing filed a petition for leave to appeal pursuant to Illinois Supreme Court Rule 306(a)(3) (Ill. S.Ct. R. 306(a)(3) (eff. Feb. 16, 2011)), seeking leave from this court to appeal the denial of the motion to quash. This court initially denied Giant Manufacturing's motion but the supreme court subsequently entered a supervisory order, directing this court to vacate our decision and grant defendant leave to appeal. Kowal v. Westchester Wheels, Inc., No. 119993 (Ill. Jan. 20, 2016). Having now granted Giant Manufacturing's petition and reviewed its contentions on the merits, we affirm the trial court's denial of the motion to quash.

         ¶ 11 II. ANALYSIS

         ¶ 12 On appeal, Giant Manufacturing argues that the trial court erred in denying its motion to dismiss because (1) it is not subject to personal jurisdiction in Illinois under the stream-of-commerce theory and (2) the exercise of personal jurisdiction over it does not comport with due process.

         ¶ 13 In response, plaintiff argues that Giant Manufacturing is subject to personal jurisdiction in Illinois because (1) it intentionally placed its bicycles into United States' stream of commerce, knowing they would be sold in Illinois; (2) its use of its "subsidiary, " Giant Bicycle, to introduce defendant's bicycles to the Illinois market suffices for the exercise of personal jurisdiction in Illinois; and (3) it is reasonable for Illinois to exercise jurisdiction over defendant.

         ¶ 14 Generally, it is the plaintiff's burden to establish a prima facie basis to exercise personal jurisdiction over a nonresident defendant. Cardenas Marketing Network, Inc. v. Pabon, 2012 IL App (1st) 111645, ¶ 28. On appeal, any conflict between the pleadings and affidavits must be resolved in the plaintiff's favor. Russell v. SNFA, 2013 IL 113909, ¶ 28. However, a plaintiff's prima facie case may be overcome by a defendant's uncontradicted evidence that defeats jurisdiction. Id. Where, as here, the circuit court determines the issue of personal jurisdiction solely on documentary evidence without an evidentiary hearing, our review is de novo. Id. Under de novo review, we perform the same analysis that a trial court would perform. Khan v. BDO Seidman, LLP, 408 Ill.App.3d 564, 578 (2011). Given this ...


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