Three years after the U.S. Supreme Court moved to significantly limit general personal jurisdiction over corporations, the Illinois Supreme Court at last has used that precedent to perhaps achieve legal venue reforms long sought by business groups and reform proponents - and long ignored by state lawmakers.
And lawyers, advocacy groups and academic researchers agree the decision likely will have a deep impact on busy litigation hotbeds like Cook, Madison and St. Clair counties, as litigation is steered to other states, and plaintiffs are forced to work harder to prove why out-of-state corporations should face potentially costly trials in the Land of Lincoln.
In late September, the Illinois Supreme Court found in Aspen American Insurance Co. v. Interstate Warehousing, Inc. that for an Illinois court to exercise general personal jurisdiction over a case, a defendant corporation must be incorporated in Illinois, have its principal place of business in Illinois or the “defendant’s contacts with Illinois are so substantial as to render this an exceptional case,” the court’s decision read.
Michigan-based Aspen had sued Ft Wayne, Ind.-based Interstate in Cook County Circuit Court after the roof collapsed at one of Interstate’s Michigan warehouses, costing Aspen big money when its New Jersey-based client, who leased space at Interstate’s warehouse, filed a damage claim. While the damage did not occur in Illinois, and none of the company’s involved were based in Illinois, Aspen argued the Cook County courts should be allowed to hear the case because Interstate owns a warehouse in Joliet- which is in Will County - and Interstate has conducted business in Illinois for more than 25 years.
A Cook County judge and state appeals court sided with Aspen. But when it reached the state’s highest court, justices said Interstate’s tenuous link to the state was not enough to warrant general personal jurisdiction. To support that conclusion, the Illinois Supreme Court cited the U.S. Supreme Court’s 2014 decision in Daimler AG v. Bauman, when the court significantly dialed back the ways in which a corporation could be considered “at home” in a particular jurisdiction.
Illinois is not the first state to take such steps in addressing personal jurisdiction in the wake of the Daimler decision, said Tom Caso, a professor at Chapman University's Fowler School of Law in Orange, Calif. Supreme courts in Missouri, Oregon, Utah and other states similarly have cited Daimler in deciding jurisdictional questions.
California state courts tried to buck the trend earlier this summer, but the California Supreme Court reaffirmed Daimler in June in Bristol-Meyers Squibb Co. v. Superior Court of California.
“For the most part, states are applying this rule as it was announced by the U.S. Supreme Court,” said Caso. “Illinois is doing the same thing the first time it gets up to its high court.”
However, this particular case may have garnered more attention because of amicus briefs filed by powerful interests on both sides of the debate, said Travis Akin, executive director of legal reform group Illinois Lawsuit Abuse Watch.
Several large out-of-state corporations - Honeywell International Inc., Union Carbide Corporation and CertainTeed Corp. – filed an amicus brief asking the Illinois Supreme Court to reverse the state appellate court’s finding, asserting the Daimler precedent established they should not face litigation in Illinois unless “plaintiffs can plead facts showing that theirs is a truly exceptional case where the ordinary presumption about where a corporation is ‘at home’ does not apply.”
The Illinois Trial Lawyers Association and American Association for Justice, meanwhile, argued that reversing the appellate court’s ruling “would be inconsistent with long-standing law on the impact of having a registered agent in the state as well as the well-established law on personal jurisdiction.”
Their participation in the case brought attention to the importance of its outcome, especially in Cook County, Akin said.
“Both sides recognized that the outcome of this case was going to be monumental; it was going to change the landscape of Illinois,” Akin said. “I think the Illinois Supreme Court has kind of done what the legislature has not been able to do, which is pass some kind of venue reform.”
Many lawsuits – some egregious, Akin said - have been filed in Cook, Madison and St. Clair counties for years. Many asbestos cases, in particular, were filed in places like Madison County, when most of the litigants were not from Illinois or were not injured in the state, Akin said.
“A judicial hellhole has been born and maintained in Cook County,” he said, noting both Cook and Madison counties have been fixtures on the American Tort Reform Foundation’s national list of “Judicial Hellholes” for years.
“If you’re a defendant and being sued and dragged into a Cook County court room, the idea is to force settlements because you don’t want to go too deeply into litigating a case in a place like Cook County - and that’s all by design,” Akin said. “The scales of justice are tipped toward the plaintiff often in Cook County.”
With the Aspen decision, however, it will be much harder for plaintiffs to find reasons for their cases to be heard in Illinois, he said – and that’s a good thing.
Chicago appellate attorney Leslie J. Rosen, of Leslie J. Rosen Attorney at Law P.C., authored an amicus brief on behalf of the Illinois Trial Lawyers Association in the Aspen case. While she believes Aspen was wrongly decided because it was unfair, Rosen agreed long arm jurisdiction seems to be on its way out of the courts.
Since 1945, when International Shoe Co. v. Washington set the precedent for corporations only having to do “enough business” in a state to file a lawsuit there, that’s how the courts – and lawyers - have understood general personal jurisdiction to work, she said.
“If you advertise in the state and you do business here and get the benefits of our money, why can’t you be sued here?” she said.
The Aspen decision has disrupted the “reasonable expectations we’ve all had for many years,” she said.
“The one thing needed for the law to work ... is for things to be reliable, so you know what to expect,” she said.
Now, the tables will be tipped the other way.
“A lot of times, people join class action suits … where even though the injury didn’t happen here, the defendant has a lot of business here, and now you can’t do that,” Rosen said. “If you’re the injured person, you want the convenience to sue in your own state. Now the defendants have an extra leg up, an extra piece to their arsenal.”
The ramifications of this judicial decision will be swift, Rosen said, noting at least some of these types of jurisdictional cases likely will leave Illinois and find hold in states like Delaware and New Jersey, where many corporations are registered.
Caso said, instead of alleging general personal jurisdiction, plaintiffs will have to allege specific jurisdiction to file their case in their desired state.
“They’re going to have to do extra work, but in a lot of these cases they’ll be able to prove specific jurisdiction,” Caso said. “I see it as a positive affect because this is really grounded in the due process clause … and the concept of federalism, that each state is basically a separate sovereign. Illinois has rules that only apply in Illinois; Indiana has rules that only apply in Indiana … . We have to make sure that we’re making the process as fair as possible under the due process clause.
“This cuts across ideological lines,” Caso added. “In the Daimler case, all nine justices voted for that result. The [Bristol-Meyers Squibb Co.] case out of California was 8-1. ... This is the way the due process clause is supposed to work.”