In Aspen American Insurance Co. v. Interstate Warehousing, Inc., 2017 IL 121281, the Illinois Supreme Court made clear that the United States Supreme Court’s decision in Daimler AG v. Bauman, 571 U.S. 117 (2014) substantially narrowed the scope of general personal jurisdiction over corporate defendants in Illinois. The Illinois Supreme Court held that one of the most-used subsections of the long arm statute, authorizing general jurisdiction over any entity “doing business” in Illinois, could not be used unless a corporate defendant was otherwise “at home” in Illinois under Daimler. The Illinois Appellate Court has followed suit.
In Aspen, a plaintiff asserted personal jurisdiction in Illinois over a warehouse company incorporated in Indiana with its principal place of business in Indiana relating to an accident in a warehouse in Michigan. The defendant also operated a warehouse in Illinois that was unconnected with the case.
Personal jurisdiction can take two forms — specific jurisdiction or general jurisdiction. Specific jurisdiction exists where the cause of action arises out of a defendant’s direct contacts with Illinois. Where general jurisdiction exists, a defendant can be sued even where the conduct at issue occurred entirely outside Illinois. In Aspen, the defendant’s actions at issue allegedly took place in Michigan, so only general jurisdiction was relevant.
The Illinois Supreme Court recounted the Daimler holding. There, the United States Supreme Court held that due process for general personal jurisdiction does not rest only on in-forum contacts by a corporation that are “continuous and systematic” in some sense. Rather, those “continuous and systematic” contacts must render the corporation “essentially at home” in the forum state.” 2017 IL 121281 at ¶ 16. The United States Supreme Court indicated that the “paradigm” for jurisdictions in which corporate defendants are “essentially at home” are the corporation’s place of incorporation and its principal place of business; a corporation would be considered “essentially at home” elsewhere only in an “exceptional case.” Id. ¶ 17.
In Aspen, the plaintiff conceded that defendant was neither incorporated in Illinois, nor had its principal place of business in Illinois, but nonetheless argued that general personal jurisdiction existed over defendant through its operation of the Illinois warehouse. The Illinois Supreme Court disagreed. It held, “if the operation of the warehouse was sufficient, in itself, to establish general jurisdiction, then defendant would also be at home in all the other states where its warehouses are located. The Supreme Court has expressly rejected this reasoning.” Id. ¶ 19. The Illinois Supreme Court pointed to the Supreme Court’s statement in AG Daimler that “[a] corporation that operates in many places can scarcely be deemed at home in all of them.” Id. (quoting AG Daimler, 571 U.S. at 139 n.20).
This holding is important for practitioners because it flies in the face of the Illinois long arm statute. As the Aspen plaintiff pointed out, subsection (b)(4) of the long arm statute authorizes Illinois courts to exercise general jurisdiction over defendants “doing business” in Illinois. 2017 IL 121281 ¶ 21 (citing 735 ILCS 5/2-209(b)(4)). The doing business standard has always been “quite high” and requires a defendant to do business in Illinois “not occasionally or casually, but with a fair measure of permanence and continuity.” E.g., Roiser v. Cascade Mountain, Inc., 367 Ill. App. 3d 559, 562-63 (1st Dist. 2006).
Now, however, in light of Aspen, even businesses with lengthy, continuous and significant relationships with Illinois may not meet the doing business standard. This consequence promises to be a boon for the defense bar. For example, in Campbell v. Acme Insulations, Inc., 2018 IL App (1st) 173051, ¶ 15, the appellate court found that General Electric was not subject to general jurisdiction in Illinois for an asbestos action. That was so even though “GE has been licensed to conduct business in Illinois since 1897, employs 3,000 employees at 30 facilities that it owns, leases, or operates in Illinois, and bases up to 6 business units in this State.” Campbell v. Acme Insulations, Inc., 2018 IL App (1st) 173051, ¶ 15. Campbell is the first reported Illinois decision to cite and follow Aspen’s personal jurisdiction analysis. Others will certainly follow suit.
At Novack and Macey, we have extensive experience advising shareholders involved in closely held company disputes, as well as advising companies on how to avoid disputes in the first place. For more information about our services, please contact John Haarlow at 312.419.6900 or email@example.com.