Hepler Broom, LLC

Illinois Supreme Court Analyzes Circumstances Where Illinois Courts May Obtain Jurisdiction Over Foreign Corporations

May 30, 2013

In Russell v. SNFA, 2013 IL 113909 (Ill. Apr. 18, 2013), the Illinois Supreme Court held that Illinois courts had jurisdiction over a French company despite the fact that the company had no offices, assets, property or employees in Illinois, no license to do business in Illinois, and did not specifically direct product sales in Illinois and was generally unaware its products were being distributed in the state.

On January 28, 2003, the sole occupant and pilot of a helicopter died after his helicopter crashed in Illinois. The decedent was a resident of Georgia who was living in Illinois and working for an Illinois company when the fatal accident occurred.  The decedent’s estate (“plaintiff”) sought recovery from a number of entities connected to the accident, including defendant SNFA, a French company that manufactured a custom tail-rotor bearing for the helicopter involved in the crash.

SNFA moved to dismiss plaintiff’s action, arguing that Illinois lacked personal jurisdiction. Section 2-209 of the Code of Civil Procedure, commonly referred to as the Illinois “long-arm” statute, governs the exercise of personal jurisdiction by an Illinois court over a nonresident.  See 735 ILCS 5/2-209.

The Illinois long-arm statute grants Illinois courts jurisdiction when, among other things, the nonresident defendant’s connection or contact with Illinois is sufficient to satisfy federal and Illinois due process.  To satisfy this standard, the court must consider whether the defendant has sufficient “minimum contacts” with Illinois and whether subjecting it to litigation in Illinois is reasonable under “traditional notions of fair play and substantial justice.”

SNFA argued that it did not have minimum contacts with Illinois because it was a French company that did not have any offices, assets, property, or employees in Illinois, and was not licensed to do business in Illinois.  SNFA only sold its helicopter ball bearings to Agusta, an Italian helicopter manufacturer, which then sold its completed product to various markets without SNFA’s knowledge or input.  As a result, the only way that defendant’s product would ever reach the final consumer, including consumers in the United States and Illinois, was through Agusta and Agusta’s American distributor AAC.

The circuit court of Cook County agreed with defendant’s jurisdictional challenge and dismissed the action for lack of “minimum contacts” to support personal jurisdiction. On appeal, the appellate court reversed, finding that defendant was subject to specific personal jurisdiction in Illinois.

Specific personal jurisdiction requires a defendant to have “purposefully directed its activities at the forum” and for the claim to “arise out of or relate to” the defendant’s contacts with the forum.  One way to show specific jurisdiction is under a “stream of commerce” theory which refers to a defendant’s placing a product in the stream of commerce that takes the product to the forum state.

On appeal to the Illinois Supreme Court, the court analyzed stream of commerce decisions issued by the United States Supreme Court over the last several decades.  The court recognized that those decisions reflect a split over whether the stream of commerce doctrine should be interpreted narrowly or broadly. The narrow view offered by some justices looks at whether a defendant “purposefully directed” its activities at the forum state and requires “something more” than placing a product into the stream of commerce, while the broader view considers whether a defendant knew or should have known that its products might ultimately be sold in the forum state.

Although the Illinois Supreme Court noted that it would not expressly adopt either theory, a 5-1 majority of the court affirmed the appellate court and held that defendant had the requisite minimum contacts with Illinois for purposes of specific personal jurisdiction.  The court based its decision on two main factors: first, the majority reasoned that defendant’s relationship with Agusta was enough to subject defendant to personal jurisdiction in Illinois because Agusta, through its American distributor AAC, “effectively operated as an American distributor for defendant’s tail-rotor bearings in the United States market.”

Second, the court considered the fact that SNFA had had an ongoing relationship with Hamilton Sundstrand, a manufacturer of aerospace machinery, in Rockford, Illinois.  SNFA argued that that its connection with Hamilton Sundstrand in Illinois was inconsequential because that location merely processed payments, the products identified in SNFA’s invoices were all shipped to California, and the Illinois location involved bearings destined for fixed-wing aircraft and airplanes, a completely distinct product line from the helicopter tail-rotor bearings underlying the case.

The majority rejected this argument and noted that by engaging a business entity located in Illinois, SNFA undoubtedly benefitted from Illinois’ system of laws, infrastructure, and business climate, and concluded that SNFA’s proposed distinction between subcategories of its primary product was “too restrictive and narrow for purposes of our jurisdictional inquiry.”  Accordingly, the court held that SNFA had the requisite minimum contacts with Illinois for purposes of specific personal jurisdiction.

In a vigorous dissent, Justice Garman argued that the majority’s opinion was contrary to U.S. Supreme Court precedent and due process: “[u]nder the majority holding, a foreign defendant can now be haled into court in Illinois for even the most fleeting and inconsequential business contact with this state. Indeed, defendant is now subject to Illinois jurisdiction even though it has never actually sold a single item to an Illinois consumer.”

The entire opinion can be read here.