International Shoe got the boot

Corporations are often named as defendants or respondents in litigation, but there are frequent disagreements about whether an Illinois court has jurisdiction over non-Illinois companies. For decades, the United States Supreme Court decision in International Shoe was the controlling authority on this issue. The “minimum contacts” standard announced in International Shoe gave courts guidance on determining if personal jurisdiction over a foreign corporation existed. In 2014, however, the Court again ruled on this issue in the Daimler case, and the “minimum contacts” test was forever altered. This article will discuss Illinois’ long-arm statute, and how Daimler impacts the analysis that must be conducted by courts and litigants regarding foreign corporations.

Long-arm jurisdiction in Illinois is allowed by statute found at 735 ILCS 5/2-209. There are essentially two types of long-arm jurisdiction—specific and general.

Specific jurisdiction under 2-209(a) may exist over an out-of-state resident if the lawsuit arises out of or is connected to the party’s purportedly wrongful activities within the forum state.¹ In other words, the underlying lawsuit itself must have been based on the party’s conduct in order for a court to have specific jurisdiction over that party. In Roiser v. Cascade Mountain, Inc., the court found that because the lawsuit at issue was not based on any activity of the defendant in Illinois, specific jurisdiction principles did not apply.

Unlike specific jurisdiction, general jurisdiction does not pertain to the specific acts of the party. “When a suit neither arises from nor relates to a defendant’s activities within the state where suit has been filed, the court is limited to exercising general jurisdiction of the out-of-state defendant.”² A plaintiff bears the burden of establishing a prima facie basis for exercising a court’s in personam jurisdiction over a party.³ To determine if a prima facie case for personal jurisdiction has been met, courts are to evaluate personal jurisdiction under the long-arm statute, and due process under both the Illinois and United States Constitutions.⁴ If the contacts between the party and Illinois are sufficient to satisfy both federal and state due process concerns, the requirements of Illinois’ long-arm statute have been met, and no other inquiry is necessary.⁵ Illinois limits general jurisdiction over nonresidents to instances in which the nonresident was present and doing business in the forum. Id. The “doing-business” standard requires a showing that a nonresident party was carrying on business activity in Illinois not occasionally or casually, but with a fair measure of permanence and continuity.⁶ The doing-business standard is high, and generally, “doing business” means conducting business in Illinois of such a character and to such an extent that it may be inferred that the defendant has subjected itself to the jurisdiction and laws of this state and is bound to appear when properly served.⁷ In effect, the foreign entity has taken up residence in Illinois and, therefore, may be sued on causes of action both related and unrelated to its activities in Illinois.⁸ Almost all Illinois cases determining the existence of personal jurisdiction over foreign entities have based their findings upon the existence of facts such as offices or sales activities in Illinois.⁹

“In almost all cases, when federal due process concerns regarding personal jurisdiction are satisfied, so are Illinois due process concerns regarding personal jurisdiction.”¹⁰ Because both state and federal due process requirements must be met for a court to have general jurisdiction, federal decisions applying federal due process concerns are applicable. Federal due process requires that the defendant has sufficient “minimum contacts” with the forum state such that the exercise of jurisdiction does not offend traditional notions of fair play and substantial justice.¹¹

How Daimler Changed the Analysis for Corporations

Under federal due process standards, a corporation may be subject to general jurisdiction in a state only where its contacts are so continuous and systematic, judged against the corporation’s national and global activities, that it is essentially at home in that state.¹² “A corporation is at home (and thus subject to general jurisdiction, consistent with due process) only in a state that is the company’s formal place of incorporation or its principal place of business.”¹³

Also under Daimler, a court could have general jurisdiction in the exceptional case of when a party’s contacts are so continuous and systematic as to render it essentially “at home” in the forum. Such exceptional cases, however, are likely difficult to find. For example, in Gucci America, the court found that even though a bank had two branches in the State of New York, the New York District Court lacked general jurisdiction over the bank (who was not a party to the case, but was served with a subpoena by one of the parties) because only a small portion of the bank’s business was conducted in New York (the bank had 10,145 domestic branches, 689 overseas branches and subsidiaries in 27 countries around the world and 1200 correspondent banks). The court held that the subpoena-recipient bank’s activities, like the defendant in Daimler, plainly did not approach the required level of contact with the forum state.¹⁴

Another example of the rarity of this exception is the Hill case. In Hill v. Capital One Bank (USA), N.A., the district court in Chicago found that Capital One operated bank branches only in Connecticut, Delaware, Louisiana, Maryland, New Jersey, New York, Texas, Virginia and Washington D.C. and noted how Daimler held that, with respect to a corporation, affiliations supporting general jurisdiction are typically limited to the corporation’s place of incorporation and principal place of business.¹⁵ Hill held that the court did not have general jurisdiction over Capital One Bank, despite some evidence of business activity in Illinois. Following Daimler, the court found that Capital One Bank was neither incorporated in Illinois nor had its principal place of business in Illinois, and that Illinois courts lacked general jurisdiction over it. In quoting Daimler, the court said “a corporation that operates in many places can scarcely be deemed at home in all of them.”¹⁶

The evolution of personal jurisdiction over corporations is clear when comparing the tests derived from International Shoe and Daimler. The difference between “minimum contacts” and being “at home” in the forum state is stark. Courts and counsel should note the difference and then decide whether a court can have jurisdiction over a foreign corporation, or if the corporation can only be named a party in its home state.