Supreme Court Charts When Foreign Companies May Be Sued in Illinois: Is the Stream of Commerce Overflowing?

The Illinois Supreme Court recently issued a decision that will significantly affect when foreign corporations may be sued in Illinois courts. In Russell v. SNFA, 2013 IL 113909 (Ill. Apr. 18, 2013), the court held that an Illinois court had jurisdiction over a French company, even though the company did not sell the product at issue in Illinois and was unaware that its products generally were being distributed there. According to the court, it was enough that the company sold other products to distributors having a presence in Illinois.

In Russell, the plaintiff died in a helicopter crash in Illinois. The plaintiff was a Georgia resident living in Illinois who worked for an Illinois air ambulance service at the time of his death. The defendant French company made custom-made rotor bearings for helicopters. It sold its bearings to an Italian company that built the helicopter in Italy in 1989. Several companies outside of Illinois owned the helicopter before it was eventually sold to an Illinois air ambulance service in 2002. The crash occurred in 2003.

The Italian company that manufactured the helicopter also had an Illinois subsidiary that sold some of the defendant's other products, though there was no evidence that the defendant knew that these products were being sold in Illinois. The rotor bearings at issue in the crash were not sold in Illinois. In addition, the defendant sold an entirely different product - bearings for airplanes - to another distributor that did business in Illinois.

The trial court dismissed the plaintiff's complaint against the French company for lack of "minimum contacts" to support personal jurisdiction. Yet the appellate court reversed and the Supreme Court affirmed in a five to one decision. At the outset, the Supreme Court found no "general jurisdiction," which would have required the defendant's contacts to have been "sufficiently extensive and pervasive to approximate physical presence." The defendant had no offices, property, or employees in Illinois.

The court then turned to whether there was "specific jurisdiction," which looks to whether a party has purposefully directed its activities at the forum and whether the cause of action relates to the party's contacts there. The court's analysis centered on the United States Supreme Court's stream of commerce decisions over the past 33 years. The court recognized that the Supreme Court's own decisions reflect a split over whether the stream of commerce doctrine should be interpreted narrowly or broadly. The narrow view adopted by some justices requires a defendant to have "purposefully directed" its activities at the forum state. The broader view asks whether a defendant knew, or should have known, that its products, through a nationwide distribution system, might be sold in the forum state.

While the court did not expressly adopt either approach, it tacitly favored the broad approach. In Russell, even though the defendant was unaware that any of its products were being sold in Illinois, it was enough that it sold some products to a distributor that did business there. The court also relied on the fact that the defendant sold bearings for airplanes to another distributor that did business in Illinois. In doing so, the court gave an expansive reading to U.S. Supreme Court decisions requiring that a defendant's activity in the forum actually relate to the cause of action - especially since the crash involved a helicopter, not an airplane.

Justice Garman wrote a lengthy dissent arguing that the court's opinion was contrary to U.S. Supreme Court precedent and concluded: "Under the majority holding, a foreign defendant can now be haled into court in Illinois for even the most fleeting and inconsequential business contact with this state. Indeed, defendant is now subject to Illinois jurisdiction even though it has never actually sold a single item to an Illinois consumer."

The Russell decision will have a major impact on when a foreign company may be sued in Illinois courts. It remains to be seen if the federal courts in Illinois, or courts in other states, will follow it.

For more information, please contact E. King Poor at (312) 715-5143 / king.poor@quarles.com, William Walden at (312) 715-5111 / william.walden@quarles.com or your Quarles & Brady attorney.