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Personal Jurisdiction Over Nonresidents Gets a Shot in the ‘Long-Arm’

By Jonathan R. Ksiazek

In Illinois, the exercise of personal jurisdiction over nonresident defendants is authorized under the “long-arm” statute found in section 2-209 of the Code of Civil Procedure (735 ILCS 5/2-209 (West 2012)). The United States Supreme Court has held that the federal due process clause permits a state court to exercise personal jurisdiction over a nonresident defendant only when the defendant has “certain minimum contacts with [the state] such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.’ ” International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 85 L.Ed. 278 (1940)).

For a forum to exercise specific jurisdiction consistent with due process, the defendant’s litigation-related “conduct must create a substantial connection with the forum State.” Walden v. Fiore, 571 U.S. 277, 284 (2014). To establish this substantial connection, the plaintiff must show that (1) “the defendant purposefully directed its activities at the forum state” and (2) “the cause of action arose out of or relates to the defendant’s contacts with the forum state.” Russell v. SNFA, 2013 IL 113909, ¶ 40.

While the internet has presented a wrinkle in the personal jurisdiction analysis, the general framework has not changed, as the “ultimate analysis is what it has always been—whether the quality and nature of the defendant’s contacts with the forum are such that it is fair and reasonable to assert personal jurisdiction.” Innovative Garage Door Co. v. High Ranking Domains, LLC, 2012 IL App (2d) 120117, ¶ 20.

Four recent state and federal cases show the difficulty in applying this standard.

In Dixon v. GAA Classic Cars, LLC, 2019 IL App (1st) 182416, the plaintiff, an Illinois resident, saw an online ad from GAA, a North Carolina corporation, listing a 1973 Ford Bronco for sale. Dixon and GAA exchanged multiple e-mails and text messages about the car and spoke on the phone regarding an auction of the Ford Bronco on two occasions. Dixon won the auction for the Bronco. When Dixon received the Bronco on May 13, 2018, he realized that it required a significant amount of repair. Dixon brought a lawsuit alleging fraudulent misrepresentation against GAA in Illinois, and GAA challenged the court’s jurisdiction over GAA. In September 2019, the Illinois appellate Court in Dixon found that Illinois courts had jurisdiction over GAA because GAA’s ad and website were sent into Illinois and GAA had multiple phone calls, text and e-mails with Dixon before he purchased the Bronco.

A month after the Dixon case, the appellate court issued a decision in Zamora, Jr. et. al v. Lewis, et al. 2019 IL App (1st) 181642-U. The facts in Zamora involved homeowners in Maine who created an AirBnB account and rented their property to an Illinois resident. During the renter’s stay, a child accidentally set a couch on fire resulting in the death of another child. The communications between the homeowners and renters were minimal and occurred through the AirBnB website. The Appellate Court in Zamora found that the court did not have jurisdiction over the homeowners in Maine because they never directly advertised or solicited business in Illinois and only rented their home to one Illinois resident. The most important factor in Zamora was that the parties had one minimal contact as compared to the repeated, multiple contacts between the parties in Dixon.

Federal Courts have also recently examined long-arm jurisdiction. Judge Feinerman recently examined the Northern District of Illinois’ jurisdiction over an out-of-state bitcoin exchange in Greene v. Karpeles, 2019 WL 1125796, N.D. Ill. March 12, 2019. In Greene, the online bitcoin exchange website allowed users to create an account and agree to terms of use. The plaintiffs in Greene were two of over 7,000 Illinois residents who created user accounts on the exchange. The bitcoin exchange communicated regularly with the plaintiffs about their accounts before the exchange shut down in February 2014. The court thus determined that Defendants subjected themselves to jurisdiction by operating a website that allowed Illinois users to submit payment online in exchanges for goods and services and encouraged users to create and maintain accounts.

Lastly, the Seventh Circuit most recently weighed in on the jurisdiction issue in Matlin v. Spin Master Corp., 921 F.3d 701 (7th Cir. April 22, 2019). The Plaintiffs, Illinois residents, co-founded a company that made products whose royalty rights which were subsequently acquired by Spin Master, a Canadian company. The Plaintiffs alleged that they were owed unpaid royalties from Spin Master. In response to a motion to dismiss for lack of jurisdiction, Plaintiff’s counsel submitted a purchase receipt showing he bought a single patented product in Illinois. The Court in Matlin found that the court lacked jurisdiction over the defendant because there was no systematic contact with the forum state through repeated sales of a regulated product, and that the case did not arise out of Spin Master’s contacts with Illinois because nationwide royalties were at issue.

These cases show that in the context of internet-based businesses repeated, systematic contacts with a forum state will likely result in a finding of proper jurisdiction under the long-arm statute. However, minimal contacts with a forum state or a lack of connection to the claim at issue will very often result in a lack of jurisdiction.

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