FRONING & DEPPE, INC., Plaintiff,
v.
CONTINENTAL ILLINOIS NATIONAL BANK & TRUST COMPANY, Defendant,
v.
VALLEY NATIONAL BANK, Third Party Defendant and Third Party
Plaintiff- Appellant,
v.
SOUTH STORY BANK & TRUST, Third Party Defendant-Appellee.
No. 82-1687.
United States Court of Appeals,
Seventh Circuit.
Argued Nov. 10, 1982.
Decided Dec. 9, 1982.
Steven H. Hoeft, McDermott, Will & Emery, Chicago, Ill., for third party defendant and third party plaintiff-appellant.
Michael Childress, Lev & Sneckenberg, Chicago, Ill., for third party defendant-appellee.
Before WOOD and ESCHBACH, Circuit Judges, and BARTELS, Senior District Judge.*
HARLINGTON WOOD, Jr., Circuit Judge.
This is an appeal from a district court order granting the third party defendant-appellee's motion to dismiss the third party complaint against it for lack of personal jurisdiction. Because we conclude that the district court properly applied the "minimum contacts" test of International Shoe Co. v. Washington,
I.
This case arises from the allegedly forged and unauthorized endorsement of six checks, totaling $229,077.28. The payee designated on the checks was Froning and Deppe, an Iowa corporation with its principal place of business in Iowa, and the checks were drawn upon an account at Continental Illinois Bank and Trust Co. (Continental) in Chicago, Illinois. The alleged forger cashed the checks at South Story Bank & Trust (South Story) in Slater, Iowa. South Story then remitted the checks for collection and credit to its clearing house bank, Valley National Bank (Valley National) in Des Moines, Iowa. Subsequently, Valley National remitted the checks for collection and credit to Continental in Illinois.
The payee Froning and Deppe initially brought suit against South Story and Continental in Iowa state court. Although Continental was dismissed from that case pursuant to the national bank exclusive venue provision of 12 U.S.C. Sec. 94, South Story is still a party to that suit. Froning & Deppe, as required by 12 U.S.C. Sec. 94, brought suit against Continental in federal district court in Illinois. Continental thereafter impleaded Valley National, alleging breach of warranty of good title under Illinois law, and in turn Valley National named South Story as a third party defendant, alleging breach of warranty of good title and conversion under Iowa law. South Story, served at its Iowa offices pursuant to the Illinois long-arm statute, entered a limited appearance to contest the validity of personal jurisdiction and moved to dismiss Valley National's complaint pursuant to Fed.R.Civ.P. 12(b)(3).
In ruling on South Story's motion, the district court relied upon a series of undisputed facts. First, the court noted, South Story maintains only two offices, both in Iowa, and the bank does not have any agents or offices in Illinois. Additionally, none of South Story's officers have traveled into Illinois for the purpose of transacting business within the last five years. Although South Story does maintain a bank account at Continental for limited tax and bond purposes, the court found, and Valley National concedes, that the existence of this account is irrelevant to the jurisdictional inquiry here. Finally, the court found, all of South Story's activities in connection with the transactions at issue here took place in Iowa; South Story had no contact with Continental, instead dealing solely with Valley National, another Iowa bank. The district court did not consider whether these facts supported exercise of jurisdiction under the Illinois Long Arm Statute, for it found these same facts insufficient to support the finding required under International Shoe Co. v. Washington,
In concluding that the assertion of personal jurisdiction over South Story would have offended due process, the court confronted two arguments put forth by Valley National: first, that, since South Story knew that the final destination of the checks was Continental in Illinois, it should have reasonably anticipated being haled into court there, thus satisfying the International Shoe test as elaborated in World-Wide Volkswagen Corp. v. Woodson,
II.
A. Foreseeability
As to Valley National's first argument based on the "foreseeability" of the checks' arrival in Illinois, the district court noted that similar reasoning was flatly rejected by the Supreme Court in World-Wide Volkswagen, where a plaintiff sought jurisdiction over a non-resident defendant automobile dealer in connection with a claim for injuries sustained in the forum state, on the theory that the non-resident could have foreseen that the automobile, transitory by its nature, would have caused injury there. The district court noted the Court's holding that
the foreseeability that is critical to due process analysis is not the mere likelihood that a product will find its way into the forum State. Rather, it is that the defendant's conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there.
World-Wide Volkswagen,
We agree with the district court that the fundamentals of substantial justice as articulated in International Shoe and World-Wide Volkswagen would be offended by basing jurisdiction over a non-resident bank upon the bank's mere acceptance of a check which indicates on its face its origin in the forum state. Here, as in World-Wide Volkswagen, the record contained no evidence that the defendant conducted sales or service in the forum state, solicited business through salespersons or advertising in the forum state, or sought to serve the forum state market indirectly. World-Wide Volkswagen,
Our conclusion finds support in an analogous case, Leney v. Plum Grove Bank,
The cases cited by Valley National on appeal to support its foreseeability argument are inapposite, for each one involved systematic and deliberate attempts by the defendant to penetrate the forum state's market for goods and services, rather than the routine acceptance and remittal of commercial instruments incidentally bound for the forum state. In Biltmoor Moving and Storage Co. v. Shell Oil Co.,
In contrast, here there is no evidence that South Story engaged in any conscious or systematic attempt to tap potential Illinois markets for its financial services; rather, it was a small Iowa bank which did not perform any direct interstate remittals, relying instead for this purpose on its Iowa clearinghouse bank, Valley National. We agree with the district court that there was no basis upon which the ultimate destination of the checks at issue could have reasonably been expected to notify South Story of its vulnerability to jurisdiction in Illinois.
B. Invocation of the Benefits and Protections of Illinois
Law
Valley National's second main argument is that South Story invoked the benefits and protections of Illinois law in a manner sufficient to justify personal jurisdiction, since any claim against Continental based on the presentment of the checks would have had to have been founded on Illinois law. In rejecting this argument, the district court reasoned that the existence of such a hypothetical possibility of an Illinois lawsuit against plaintiff initiated by defendant was irrelevant to the defendant's vulnerability to third party plaintiff's Illinois lawsuit. A contrary holding, the court noted, would potentially subject anyone who transacted business with a large national corporation to suit in any state in which the corporation did business, irrespective of the individual's contacts with that state, a result plainly at odds with International Shoe and its progeny. In support of its conclusion, the district court cited our decision in Lakeside Bridge & Steel Co. v. Mountain State Construction Co., Inc.,
The cases cited by Valley National in which the International Shoe standard was held satisfied by the non-resident defendant's invocation of forum state protection are readily distinguishable, for each involved extensive contacts with the forum state beyond a mere hypothetical possibility of the initiation of a lawsuit by the defendant in the forum state's courts. In Hutter Northern Trust v. Door County Chamber of Commerce,
C. The Balance of State and Federal Interests and Policies
The due process inquiry under International Shoe and its progeny is usually not exhausted, however, by an assessment of the burden placed upon the non-resident defendant. Other relevant factors to be considered include the forum state's interest in adjudication of the entire dispute, the plaintiff's and interstate judicial system's interest in expedited relief, and the interest of the states in advancing underlying substantive policies. World-Wide Volkswagen,
First, it is undisputed that all of the activities relevant to South Story's alleged liability took place in Iowa, and that its alleged liability is premised upon the Iowa law of title warranty and conversion. It is therefore difficult to imagine any special interest that Illinois could have in the resolution of a dispute between two Iowa banks about facts and law alien to Illinois. Cf. McGee,
Most importantly, however, as the district court found, maintenance of personal jurisdiction over South Story in this case would positively hinder the underlying policies of the several states which favor the free flow of commerce and of interstate banking transactions in particular. Upholding jurisdiction here on either Valley National's "foreseeability" theory or its "benefit and protection" theory would have the result of subjecting a bank to suit in any state from which a check cashed by one of its customers might originate, and would more broadly potentially subject anyone who did business with a large national corporation to suit in any state in which the corporation did business, irrespective of the individual's contacts with that state. Plainly, such a result would wreak havoc upon the orderly conduct of interstate business.
Valley National attempts to understate the chilling effect of a ruling in its favor. First, it argues, the instant case does not involve the "simple act of accepting a check" but rather "special circumstances": the large monetary sum involved, South Story's hypothetical access to Illinois courts to resolve a dispute arising from the presentment of the check, and South Story's triggering of the instant dispute by failing to verify the allegedly forged endorsements. However, this court has plainly held that "the dollar amount of the transaction can hardly be a principled basis for distinguishing between one case and another, let alone for ignoring the requirement ... that the defendant, not the plaintiff, conduct activities in the forum state." Lakeside Bridge,
Valley National also attempts to downplay the economically chilling impact of a decision in its favor by noting that, under its proffered "foreseeability" test, a check-cashing bank such as South Story could not sue a payor bank such as Continental in the former's home state, in view of the payor bank's lack of knowledge as to where its checks will be deposited. But this does not mitigate the result that holding South Story to answer in Illinois would chill the return movement of checks from an accepting bank to a payor bank, thus severely hampering what is now the routine necessity of payees' negotiating of out-of-state checks. Such a result cannot be countenanced.
Even assuming arguendo, however, that the countervailing state and federal policies favoring expeditious adjudication and underlying substantive goals worked in favor of Valley National, we would still be unable to find valid jurisdiction over South Story. Where, as here, there is such an egregious absence of contacts, ties or relations between the defendant and the forum state, "the Due Process Clause, acting as an instrument of interstate federalism, may sometimes act to divest the state of its power to render a valid judgment" despite a balance of state and federal interests otherwise favoring the plaintiff. World-Wide Volkswagen,
D. The Illinois Long-Arm Statute
Although the district court found it unnecessary to determine whether the Illinois long-arm statute1 or its common law "doing business" rule purported to reach South Story in view of its holding that such a pretension would run afoul of International Shoe, it is likely that, had it addressed this question, it would have failed to find South Story amenable to jurisdiction under either state rationale. In Cook Associates, Inc. v. Lexington United Corporation,
CONCLUSION
Despite strenuous argument, appellant Valley National has failed to identify "minimum contacts" by appellee South Story with Illinois sufficient to warrant a finding that assertion of jurisdiction would satisfy due process requirements. Especially in view of the plainly illogical and economically disastrous effects that would flow from a finding of jurisdiction in this case, the district court's dismissal of Valley National's third party complaint is affirmed.
AFFIRMED.
ESCHBACH, Circuit Judge, concurring.
While I agree with the majority that the dismissal of the third party complaint for lack of personal jurisdiction should be affirmed, I write separately because I would affirm on statutory rather than on constitutional grounds.
The Illinois Supreme Court has recently indicated that its long arm statute will not necessarily be interpreted to reach the outer limits of due process. Cook Associates, Inc. v. Lexington United Corp.,
Faced with well-defined due process doctrines on one hand and as yet undeveloped statutory interpretation on the other, the district court and the majority understandably chose to apply familiar constitutional analysis rather than try to anticipate what gloss the Illinois courts will eventually add to the statute. As attractive as this choice may seem in the circumstances, I do not believe we should reach out to decide a constitutional issue when we can affirm on the basis of the long arm statute.
We know that the Illinois long arm statute "should have a fixed meaning without regard to changing concepts of due process, except, of course, that an interpretation which renders the statute unconstitutional should be avoided, if possible." Id. Since upholding personal jurisdiction over South Story would create the serious constitutional problems so ably discussed by the district court and the majority, I believe the Illinois courts would conclude that South Story is not amenable to service under the Illinois long arm statute. On that statutory basis, I would affirm.