Find Legal Information

FOURTH DIVISION
December 23, 2004

No. 1-03-3578

Plaintiff, Morecambe Maritime, Inc., appeals from the circuit court's order grantingdefendant's motion to dismiss for lack of personal jurisdiction. Specifically, plaintiff argues thatthe Illinois courts' assertion of personal jurisdiction over defendant, National Bank of Greece.S.A., would not offend due process because defendant had previously conducted business inIllinois and currently has a local subsidiary. For the following reasons, we affirm.

Plaintiff is a Liberian corporation with its principal place of business in Liberia. Defendantis a Greek corporation with its principal place of business in Athens, Greece, and an office inLondon, England. Defendant also had an office in Chicago until December 31, 1998, when itsurrendered its certificate of authority to conduct business in Illinois. Atlantic Bank of New York(ABNY), a subsidiary of defendant, acquired the Chicago office from defendant for approximately$10 million worth of ABNY shares on January 1, 1999.

On January 16, 1998, plaintiff entered into a loan agreement with defendant. Under theloan agreement, plaintiff borrowed $4,531,250 from defendant to assist in refinancing existingdebt that plaintiff owed defendant. As collateral for the loan, plaintiff provided defendant with afirst mortgage on the M.V. Doxa (the Doxa), a motor tanker owned by plaintiff and registered inthe Bahamas. The entire formation of the contract occurred in defendant's London branch. Thecontract includes a choice of law provision specifying English law as the governing body of lawand a submission to jurisdiction provision which states that, "The parties further agree that onlythe Courts of England and not those of any other State shall have jurisdiction to determine anyclaim which the Borrower may have against the Bank arising out of or in connection with thisAgreement." In addition, the security agreement regarding the Doxa also specifies England as theforum for any claims that plaintiff may have against defendant regarding the mortgage.

In September 1999, the Doxa suffered severe engine damage and was taken to India to bemoored. Subsequently, an insurance claim for the damage to the Doxa was settled for$6,500,000. Following this settlement, plaintiff and John Makris, a representative of defendant,entered into an agreement that the insurance proceeds would be used to repair the ship and thatmortgage payments would stop for a brief period of time but later resume. Unbeknownst toplaintiff, Makris did not have the authority to enter into this agreement. Consequently, onFebruary 11, 2000, defendant's London office sent plaintiff a default notice claiming plaintiff hadfailed to pay installments of $156,250 in principal on November 9, 1999, and on February 9,2000. Plaintiff also failed to pay one installment of $61,457.09 in interest. As a result, the defaultnotice called the entire loan due.

In March 2002, plaintiff filed suit in the circuit court of Cook County alleging breach ofcontract. The complaint was served on defendant in Athens, Greece, on November 8, 2002. OnFebruary 7, 2003, defendant filed a motion to dismiss for lack of personal jurisdiction pursuant tosection 2-301 of the Code of Civil Procedure (735 ILCS 5/2-301 (West 2002)). The circuit courtheard oral arguments and reviewed the submitted documents solely on the issue of personaljurisdiction.

According to the declaration of Constantinos Othoneos, defendant's manager ofinternational network, division B, ABNY received "all right, title, and interest" to the Chicagooffice effective January 1, 1999. ABNY also assumed substantially all of the Chicago office'sliabilities. Defendant neither loaned nor assisted in the training of any of ABNY's employees inthe Chicago office. Moreover, Othoneos stated that as of January 1, 1999, defendant does notown any real property in Illinois and does not have an address, a phone number, bank accounts,employees, agents, or a registered representative for service of process in Illinois. Finally,Othoneos stated that defendant was organized under the laws of Greece and does not conduct anybusiness in Illinois.

In an affidavit, James Maxwell, executive vice president and general counsel of ABNY,described ABNY as "a separate, fully capitalized corporate entity distinct from [defendant]." Hestated that ABNY maintains separate books, corporate records, tax returns, and financialstatements. Moreover, ABNY pays its own bills and legal fees, generates its own business, andfunds its operations without capital contributions from defendant. Although plaintiff alleges thatdefendant's then-deputy of the board also served as an ABNY director, Maxwell stated that noneof ABNY's executives are executives of defendant. In addition, ABNY does not act asdefendant's agent in Illinois. Furthermore, defendant does not participate in any of ABNY's dailydecision-making.

In a supplemental affidavit, James Maxwell described the sale of the Chicago branch fromdefendant to ABNY as a full, rather than cosmetic, transfer of power. Maxwell also denied thatABNY has performed any services for defendant in Illinois since the transfer of power. Finally,Chicago Community Bank acquired ABNY's Chicago office on October 25, 2001.

Plaintiff did not submit any documentary evidence to rebut either the declaration ofConstantinos Othoneos or the affidavits of James Maxwell. Subsequently, the circuit courtgranted defendant's motion, and plaintiff filed a timely notice of appeal.

Plaintiff argues that due process is not offended when a nonresident corporation that hadpreviously conducted business in Illinois and currently has a local subsidiary is required to defenda lawsuit in Illinois. Therefore, plaintiff argues, Illinois courts may assert personal jurisdictionover defendant. We disagree.

We review this issue de novo because the circuit court granted defendant's motion todismiss based only upon documentary evidence. Reimer v. KSL Recreation Corp., 348 Ill. App.3d 26, 33 (2004). Plaintiff bears the burden of establishing a prima facie case for the assertion ofpersonal jurisdiction over defendant; however, uncontradicted evidence may overcome the primafacie case and defeat jurisdiction. Reimer, 348 Ill. App. 3d at 33.

Under the following conditions relevant to this appeal, an Illinois court may assertpersonal jurisdiction over a nonresident defendant corporation if the cause of action arises out ofan act within the state, if the nonresident defendant corporation is doing business within the state,or on any other basis permitted by the Illinois Constitution and the United States Constitution. 735 ILCS 5/2-209 (West 2002); Alderson v. Southern Co., 321 Ill. App. 3d 832, 845-46 (2001). Because the cause of action in the instant case did not directly arise out of an act within Illinois,we first address whether defendant was doing business within the state, and then address whetherthe assertion of personal jurisdiction is permitted on any other basis under the Illinois Constitutionand the United States Constitution.

Under Illinois's "doing business" doctrine, personal jurisdiction is permissible if thenonresident defendant is conducting business in Illinois that is "of such a character and to such anextent as to warrant the inference that the corporation has purposefully availed itself of thejurisdiction and laws of Illinois." Reeves v. Baltimore & Ohio R.R. Co., 171 Ill. App. 3d 1021,1025 (1988), citing Cook Associates, Inc. v. Lexington United Corp., 87 Ill. 2d 190 (1981). Acorporation's activities need to be consistent and permanent, not sporadic or casual. Cook, 87 Ill.2d at 202-03. Whether or not a corporation is doing business in Illinois varies based upon thefacts of each case (Reeves, 171 Ill. App. 3d at 1025, citing Maunder v. DeHavilland Aircraft ofCanada, Ltd., 102 Ill. 2d 342, 350-52 (1984)), with the focus on the corporation's contactspurposely directed towards Illinois (Reeves, 171 Ill. App. 3d at 1025, citing Maunder, 102 Ill. 2dat 353).

If the nonresident defendant is a parent corporation of a local subsidiary, Illinois courtscannot assert personal jurisdiction over the nonresident parent corporation simply because theyhave personal jurisdiction over the local subsidiary. Alderson, 321 Ill. App. 3d at 854. Because aparent corporation necessarily controls, directs, and supervises its subsidiaries to a certain extent,courts must determine whether the subsidiary is conducting its own business or the parentcorporation's business. Alderson, 321 Ill. App. 3d at 854. If the subsidiary is effectively onlydoing business for the parent corporation, assertion of personal jurisdiction over the nonresidentparent corporation is permissible. Alderson, 321 Ill. App. 3d at 854. However, the existence ofcommon officers of both the parent and the subsidiary is not sufficient, by itself, to permitjurisdiction over the nonresident parent corporation. Alderson, 321 Ill. App. 3d at 854.

In Reeves, 171 Ill. App. 3d 1021, B&O Railroad and Mize Construction entered into acontract in September 1978. On March 27, 1979, a Mize employee was injured in Ohio and fileda suit against the B&O in February 1980. On December 19, 1986, B&O filed a third-party actionagainst Mize in Illinois. Reeves, 171 Ill. App. 3d at 1023. Mize had derived 5% to 10% of itsincome from Illinois in the years 1979 and 1980, 5% to 6% in 1981, 2% in 1982, and nothingbetween 1983 and 1986. Mize had never maintained an office in Illinois, had no registered agentand owned no property in this state. Reeves, 171 Ill. App. 3d at 1028.

The Reeves court found that the relevant time period to be examined was from the time ofthe entry of the parties into the contract which was the basis of the claim in September 1978 andthe time that the complaint was filed against the nonresident corporate defendant in December1986, with "the critical focus of the inquiry being specifically in December 1986, when Illinoiswould have attempted to assert jurisdiction over the nonresident corporation." Reeves, 171 Ill.App. 3d at 1028.

The court further considered the fact that Mize had derived some sales from Illinois priorto 1982 but that in the years from 1983 to 1986, they did no business in the state. Reeves, 171 Ill.App. 3d at 1028. The Reeves court determined that, "Since the focus of our analysis is upon late1986, when Mize became a party to this suit and was served with process, and, since, at that time,Mize had been out of business and had had no contacts with Illinois for approximately three years,we find that Mize was not 'doing business' in Illinois during the relevant time period." Reeves, 171Ill. App. 3d at 1028.

Here, the parties entered into the loan agreement on January 16, 1998. On December 31,1998, defendant surrendered its certificate of authority to conduct business in Illinois. On January1, 1999, defendant sold its Chicago branch to its subsidiary, ABNY, transferring "all right, title,and interest" in the Chicago office as well as the branch's liabilities. The transfer of power wasnot cosmetic. ABNY is a separate, fully capitalized corporation, distinct from defendant, thatmaintains its own books, records, tax returns, and financial statements. ABNY also generates itsown business, pays its own bills and legal fees, and funds its operations without any type of capitalcontributions from defendant. None of ABNY's executives are the same as defendant's anddefendant does not participate in any of ABNY's daily decision-making. After the sale of theChicago branch to ABNY, defendant neither owned real property in Illinois nor had an address, aphone number, bank accounts, employees, agents, or a registered representative for service ofprocess in Illinois. ABNY did not act as defendant's agent in Illinois. Consequently, as ofJanuary 1, 1999, defendant ceased to do business in Illinois, either on its own or through itssubsidiary. The injury of which plaintiff complains did not occur until February 11, 2000, over ayear after the sale to ABNY. Defendant was made a party to the action in March 2002.

Using the Reeves formula, the critical focus of inquiry should be on March 2002, whenIllinois would have attempted to assert jurisdiction over defendant. Reeves, 171 Ill. App. 3d at1027. At that time, three years had passed since defendant had either derived income orconducted business in Illinois. Even if the Reeves focus was expanded to include the date of thealleged injury the outcome would be the same. In the case at bar, defendant had already ceased todo business in Illinois for over a year at the time of the alleged injury, while, in Reeves, thedefendant had a small amount of Illinois business at that time. Reeves, 171 Ill. App. 3d at 1028.

Therefore, we find that, even though defendant was conducting business in Illinois whenthe contract was entered into by the parties on January 16, 1998, because defendant had ceased allbusiness in Illinois before defendant was either made a party to the suit and served with process orplaintiff's injury occurred, an Illinois court may not exercise personal jurisdiction over defendantunder the "doing business" doctrine. See Reeves, 171 Ill. App. 3d at 1027.

We next address whether personal jurisdiction may be asserted on any other basis underthe Illinois Constitution and the United States Constitution. A state's power to assert jurisdictionover a nonresident defendant is limited by the fourteenth amendment's due process clause of theUnited States Constitution. Maunder, 102 Ill. 2d at 348.

For a state's assertion of personal jurisdiction to comport with federal due processrequirements, the defendant must have minimum contacts with the forum state so that traditionalnotions of fair play and substantial justice are not offended. International Shoe Co. v.Washington, 326 U.S. 310, 316, 90 L. Ed. 95, 102, 66 S. Ct. 154, 158 (1945); Maunder, 102 Ill.2d at 348. Because the cause of action does not directly arise from defendant's activities inIllinois, defendant's contacts with Illinois must be continuous and systematic. See HelicopterosNacionales De Colombia, S.A. v. Hall, 466 U.S. 408, 415, 80 L. Ed. 2d 404, 411, 104 S. Ct.1868, 1872 (1984).

Where a business contract is involved, several factors are considered to determine whetherminimum contacts with the forum state exist. Burger King Corp. v. Rudzewicz, 471 U.S. 462,479, 85 L. Ed. 2d 528, 545, 105 S. Ct. 2174, 2185 (1985). These factors include who initiated thecontract, where the negotiations occurred, where payments were made, and where the decisionmakers were located. Burger King, 471 U.S. at 479, 85 L. Ed. 2d at 545, 105 S. Ct. at 2185. Furthermore, a choice of law provision, although not by itself a sufficient basis to determinejurisdiction, is relevant. Burger King, 471 U.S. at 482, 85 L. Ed. 2d. at 547, 105 S. Ct. at 2187.

Here, the entire formation of the contract entered into between plaintiff and defendantoccurred in defendant's London, England, office. All of the negotiations, all of the documentationand all of the meetings occurred in London. Defendant's London office administered the loan andsent the default notice to plaintiff. In addition, the contract includes both a choice of law provisionand a choice of forum provision which indicate that any claim which plaintiff has against defendantarising out of or in connection to the contract is to be governed by English law in English courts. No evidence shows that defendant's Chicago branch or ABNY's Chicago branch was everinvolved in any part of the contract; nor does the evidence reveal that payment for the loan was tobe made in Illinois. Therefore, because defendant lacked the requisite minimum contacts withIllinois, federal due process does not allow Illinois courts to assert personal jurisdiction overdefendant .

Furthermore, it would be unreasonable and unfair to require defendant to defend thislawsuit in Illinois. Where the assertion of personal jurisdiction would force the defendant todefend in a foreign forum under a foreign legal system, significant weight must be given to theburden on the defendant when assessing the reasonableness of "stretching the long arm of personaljurisdiction over national borders." Asahi Metal Industry Co., Ltd. v. Superior Court, 480 U.S.102, 114, 94 L.Ed. 2d 92, 105, 107 S. Ct. 1026, 1033 (1987). The court must consider theinterests of those nations affected by the assertion of personal jurisdiction as well as the interest ofour federal government in its foreign relations policies. Asahi, 480 U.S. at 115, 94 L. Ed. 2d at106, 107 S. Ct. at 1034. These interests are "best served by a careful inquiry into thereasonableness of the assertion of jurisdiction in the particular case, and an unwillingness to findthe serious burdens on an alien defendant outweighed by minimal interests on the part of theplaintiff or the forum State." Asahi, 480 U.S. at 115, 94 L. Ed. 2d at 106, 107 S. Ct. at 1034.

In the case at bar, both plaintiff and defendant are foreign-owned entities without anysubstantial contacts in Illinois either when the cause of action arose or when the suit was filed. Because of this, Illinois's interest in adjudicating this claim is extremely diminished, especially inlight of the heavy burden that would be placed upon defendant to defend a lawsuit here. Therefore, we find it would violate the federal guarantee of due process to assert personaljurisdiction over defendant.

Accordingly, for the reasons set forth above, we affirm the circuit court's order grantingdefendant's motion to dismiss the complaint for lack of personal jurisdiction.

Affirmed.

THEIS and QUINN, J.J., concur.