FOURTH DIVI SION FIL ED: August 2, 2007

Nos. 1-06-1310, 1-06-1386, 1-06-1478 (Consolidated)

CRUM & FORSTER SPECIALTY INSURANCE ) CO. and DIAMOND STATE I NSURANCE CO., ) ) Counterp laintiff

s-Appell ants, ) Appeal f rom the Cir

cuit ) Court of Co ok County (Firemen’s Fund I

nsurance Co., Counterplaintiff.) ) ) v. ) ) No. 05 CH 1686 EXTENDED STAY AMERICA, I NC., EXTENDED ) STAY, INC., ESA MANAGEMENT L .L.C., HVM L .L.C., ) BRE/ESA PRO PERTI ES L.L .C., BRE/E SA PROPERTI ES ) L.L.C , BR E/E SA TX P ROP ER TIES L.P ., B RE /ES A FL ) Honorab le Julia M. N owicki, PROPERTI

ES L.L .C., BRE/E SA MN PROPERT IES ) Judge Presiding L.L .C., and B RE/ESA MD PRO PERTI ES BUSI NESS ) TRUST, ) ) Counterd efenda nts-Appe llees. ) ________________________________________________) ) (Transportation Insuranc e Company, ) ) Plaintiff, ) ) v. ) ) Quaker Window Products Co., Inc., Weather-T ite, Inc., ) Extended Stay America, I nc., Extended Stay, I

nc., ESA ) Management LLC, HVM LLC, BRE/ESA Properties L LC, ) BRE/ESA PA

Properti es LL

C, BRE/ESA

TX Proper

ties ) LL C, BRE/ESA FL Properties L LC, BRE/ESA MN ) Properti es LL

C, BRE/ESA

MD Proper

ties Mana gement ) Trust, Ha rtford F ire I

nsuranc e Co., Colum

bia Mutua

l ) Insurance Company

, Executive Risk Specialty I nsurance ) Co., Firemen’s Fund Insur ance Co., Crum & Forster ) Specialty I

nsurance Co., Diamond State Insura nce Co., )

)Nos. 1-06-1310, 1-06-1386, 1-06-1478 (Consolidated)

-2- Defendants.) ) JUSTICE MURPHY de livered

the opinion of the c ourt: Extended Stay America (E SA), Inc. filed numerous law suits ag ainst Weather-Tite, Inc. (Weathe r-Tite)and Quak

er Window Products Company , Inc . (Quake r) afte r purcha sing all egedly defective windows. Two of Quaker’s insurer s, Crum & Forster Specialty Insurance Company (Crum & Forst er) and Diamo nd St ate Insu rance C ompan y (Diamon d Sta te), t hrough counterclaims, sought a declaration that they did not have an obligation to defend or indemnify Quaker in the windows cases. The trial court dismissed the counterc laims on the grounds that (1) it lacked personal jurisdiction over certain ESA entities and (2) those entities we re necessary parties without which the case could not proceed. On appe al, Crum & Forster and Diamond State argue that the trial court erre d in dismissing the counterclaims for lack of personal jurisdiction because the entities had the requisite contacts with Illinois to establish jurisdiction and, even if jurisdiction did not exist, that the “doctrine of representation” applied. For the following reasons , we aff

irm. I. BACKGROUND

A. Windows Contract Before 2004, ESA, I

nc. operated a chain of hotels throughout the c ountry and owned propert y in all 50 stat

es. I n 1995, it e

ntered i nto a cont ract (national a

ccounts c ontract

) with Weather-Tite, an Illinois corpora tion, to supply windows for installation in ESA, I nc.’s hotels on a nationa l scale. Quaker , a Missour i corpor ation, ma nufactu red the w indows, a nd Weathe

r-Tite distributed them. Between 1996 and 2003, ESA, I nc. installed the windows in more than 200Nos. 1-06-1310, 1-06-1386, 1-06-1478 (Consolidated)

-3- hotels all over the country . The wind

ows leak ed, and in 2003, ESA, Inc . filed la

w suits ag ainst Quaker and Weather-Tite in 12 states. B. Changes in ESA’s Corporate Structure In 2004, during the pende ncy of the unde

rlying window litig ation, an affiliate of the Blackstone group acquired ESA, I nc. It merge d ESA, Inc. out of existence and cre ated Extended Stay, I nc., a real estate investment trust. Ownership of the ESA hotels was tra nsferred from ESA, Inc. to six new, indirect subsidiaries of Extended Stay , Inc.: BRE/ESA FL Properties L.L .C., BRE/E SA MN Prope rties L .L.C. , BRE/ESA

TX Proper

ties L .P., BRE/E SA MD Properties Business Trust, BRE/ESA PA Properties L.L .C. (collectively, the state e ntities), and BRE/ESA Pr

opertie s L.L .C. The state entities b ecame owners of the ESA hot

els loca ted in Florida, Min

nesota, T exas, Mary land, and Pennsy lvania, r especti vely . BRE/ESA

Properti es L. L.C. b ecame t he owner of all other ESA hotels, including those located in Illinois. These hote ls were part of the national accounts contract, which was in place until 2003. BRE/ESA Mezz L.L.C. was the f irst direct owner of the state entities, followed by BRE/ESA Mezz 2 L.L .C., and so on throug

h BRE/ESA

Mezz 8 L .L.C. ESA Management L .L.C. owned the BRE/ESA Mezz 1 through 8 entities. Extended Stay, I nc. owned ESA Management L.L .C. The state entities leased their respective hotels to BRE/ESA Opera ting Lessee, I

nc., which conducted business in Illinois. The operating lease agreement define d the term “landlord” as the state entities and BRE/ESA Properties, L.L .C. The lease also provided that the landlordNos. 1-06-1310, 1-06-1386, 1-06-1478 (Consolidated)

-4- was an indirect, wholly

owned subsidiary of “Holdings,” which was defined to mean ESA. The state entities assigned to BRE/ESA Operating Lessee “to the maximum extent provided by law *** rights to proceed against any predecessors in title, contractors and materialmen f or breaches of warr anties or repres entation s or for la

tent def ects in the

Lea sed Prope

rty .” A third

-party manager, HVM L .L.C., operated and managed the hotels pursuant to a management ag reement between Operating L essee and HVM’s predecessor. Each sta te entity maintains

separa te books, f

iles its own

tax return s, and ke eps sepa rate financi al statements. The entities a re org anized und

er the la ws of Del aware , and they maintain their administrative offices in South Carolina and New York. None of the state entities owns property or a ssets, has offices or employ ees, has engage d in sales activities, or has received any earning s from activities in I llinois. F urther, none pay s taxes, is li censed t

o do busine ss, condu

cts any adve rtising, has registered ag ents, or maintains bank accounts in Illinois. In addition, an agr

eement provided that all ESA hotels, including those owned by the state entities and those owned in Illinois, were include d in ESA’s centralized marketing and

reserv ations sy

stem. C. Coverage Action After the restructuring, the ESA state entities also filed suits ag ainst Quaker and WeatherTite, in states outside of Illinois. In r esponse to the suits from all of the ESA entities, Quaker sought defense from its eight liability insurers, including Transportation, Crum & Forster, a nd Diamond State, under liability policies that were in place between 1996 and 2003. Trans porta tion , one o f the i nsure rs, fi led a d eclara tory acti on in Cook Coun ty seekin g aNos. 1-06-1310, 1-06-1386, 1-06-1478 (Consolidated)

-5- determination as to whether it owed Quaker a duty to defend or indemnify

against the window claims. T ranspor tation’s a ction named Quake

r, Weathe r-Tite, Quaker ’s other

liability insurer s, and all 10 ESA entitie s that wer

e plaintif fs in the u nderly ing tort actions, including

the state entities, as defe

ndants. Three of Quaker’s insurers, Crum & Forster, Diamond State, and American Automobile, filed counterclaims seeking similar declara tions. The ESA defendants moved to dismiss the complaint and all counterclaims on the basis that (1) the trial court lacked pe rsonal jurisdiction over the ESA state

entities b ecause

they had no contacts wi

th Ill inois and (

2) the ESA

state entities were necessary

parties without which the coverage ac tion could not proceed. Before the hearing

on the motion to dismiss, five of the insurers entered into a settlement agreement that resolved the ESA tort claims ag ainst Quaker and its claims for defense or indemnity under those insuranc e policies. The settlement agreement is not included in the record; however, trial-court pleading s described that ESA would become a judgment cre ditor of Quaker and would seek to satisfy the portion of the judgment not fully f unded by the settling insurers’ policies by f

iling a “reach and apply

” action against the proceeds on Qua ker’s insurance policies in Missouri. ESA reached a separate settlement with Weather- Tite. Crum & Forster, Diamond State, and American Automobile were the only insurers that refused to settle. Accord ingly, the tria

l court on ly h eard the

ESA defe

ndants’ motion to dism

iss the co untercl aims of Crum & Forster, Diamond State, and American A utomobile. The tria l court de termined that it did n

ot have pe

rsonal ju risdiction over the

ESA state entities. Furthermore, it dismissed the case in its entirety because the state entities wereNos. 1-06-1310, 1-06-1386, 1-06-1478 (Consolidated)

-6- necessary parties. Crum & Forster and Diamond State now appea l the trial court’s dismissal of their co untercl aims. Ame

rican Au tomobile di d not appe al the dism issal of it s counter

claim. II. AN ALYS IS A. Personal Jurisdiction For purposes of determining personal jurisdiction, a plaintiff c arries the burden of establishing a prima faci

e basis upon which jurisdiction over the defendant can be exercised. Palen v. Daewoo Motor Co., Ltd. , 358 I ll. App. 3d 649, 659 ( 2005). A p laintiff ’s prima faci

e case may be overcome by

a defendant’s uncontroverted evidenc e that defeats jurisdiction. Palen , 358 Ill. App. 3d at 659. When a trial court determines jurisdiction solely on the basis of documentary e

vidence and hears no courtroom testimony , we review the issue of jurisdiction de

novo . Palen , 358 Ill. App. 3d at 659.

1. Spe cifi c Juri sdict ion Un der Se ction 2-209 (a) In determining whe

ther an Illinois court may assert personal jurisdiction over a nonresident defendant, we traditionally use a two-prong analy

sis, evaluating whether the facts of the case meet the r

equirements for

(1) per sonal jur

isdiction u

nder the Illinois long- arm statu

te and (2) due process under both the United States and I llinois constitutions. Commerce Trust Co. v. Air 1st Aviation Companies, Inc. , 366 I ll. App. 3d 135, 140 ( 2006). The long- arm statu te enumerates 14 specific acts upon which jurisdiction over a nonr esident defendant can be exercised. 735 IL CS 5/2-209(a) (West 2004). Crum & Forster and Diamond State assert two of those acts as base s for juri sdiction o ver the s tate enti ties: the t ransaction of bus iness with in Illinois and the

making or performance

of a cont ract sub stantiall

y c onnecte d with I llinois.Nos. 1-06-1310, 1-06-1386, 1-06-1478 (Consolidated)

-7- The two-step analy sis has been considered unnecessary , however, because section 2- 209(c), commonly re ferred to as a “catch-a ll provision,” extends the scope of the statute to allow a court t o “exerc ise jurisd

iction on a

ny o ther bas is now or h ereaf ter per mitted by the I llinois Constitution and the Constitution of the United States.” 735 ILCS 5/2-209(c) (West 2004); Kostal v. P

inkus De rmatopath ology Labo ratory, P. C. , 357 I ll. App. 3d 381, 383 ( 2005). Th

us, the long-arm statute has been held to be coe xtensive with the due process requirements of the Illinois and United States Constitutions. Kostal , 357 Ill. App. 3d at 383. For the sake of thoroughness, we will employ the traditional two-step approach to address the arg uments raised by Crum & F orster and Diamond State. See LaRochelle v. Allamanian , 361 Ill. App. 3d 217, 222 n. 1 (2005). Crum & Forster and Diamond State first assert that the exercise of personal jurisdiction over the state entities is proper because the national ac count contract between ESA, I nc. and Weather -Tite wa s perfor

med, in pa

rt, in I llinois and

the hotel s transfe

rred to the state e

ntities in 2004 were subject to the national account contract. I n determining whether a defenda nt’s conduct relative to a contract was sufficie nt to establish jurisdiction, the court analyzes three factors: (1) who initiated the transaction, (2) where the contract was formed, and (3) whe re performance was to take place

. Viktron Ltd. Partnership v. Program Data Inc. , 326 Ill. App. 3d 111, 118 (2001). Where the contract was neg otiated is also relevant. Viktron , 326 Ill. App. 3d at 118. Crum & Forster and Diamond State rely heavily on the fa

ct that Weather-Tite, the company with whom ESA, I nc. contracted in 1995, is an Illinois corpor ation and that theNos. 1-06-1310, 1-06-1386, 1-06-1478 (Consolidated)

-8- windows were to be installed nationwide, including in I llinois. However, they make no mention of the other factors, i.e. , who initiated the national account contract, where it was e xecuted, and where it was negotiated. The ESA/Weather- Tite contract is not included in the record. Furthermore, the national account contra ct was between Weather-Tite and ESA, I nc. The state en tities wer e not par ties to the contract, which w as in eff ect fro m 1995 to 200 3. While Crum & Forster and Diamond State arg ue that the state entities can sue for breach of the national

accoun ts contra ct beca use they were thi rd-par ty b enefic iaries of

it, the sta te entitie s’ only

interest as benef iciarie s of the c ontract

is in the ho tels in the ir respe ctive sta tes--no t the hote ls in I llinois. Crum & Forster and Diamond State arg ue that the trial court also had jurisdiction under section 2-209(a)(1) because the state entities transacted business in Illinois through their a gent. “The focus of our inquiry is not upon the amount of commercial activity oc curring between the parties outside of Illinois, but rather, it is upon the defenda nt’s activities within the State and whether those activities are sufficient to subject it to the in personam jurisdict ion of the Illinois courts.” Kalata v. H

ealy , 312 Ill. App. 3d 761, 767 (2000). Crum & F orster a

nd Diamon

d State poi

nt to a pro vision of the lease that provides, “La ndlord he reby assigns to Tenan t all L andlord’ s rights

to proce ed aga

inst any predec essor in title, contractors and materialmen for breac hes of warranties or representa tions or for latent defect s in the L eases Pr

operty .” Ther

efore, they

contend, the lesse e could e nforce the state entities’ contractual rights as to all of the hotels owned by ESA, Inc., including those in I llinois. We disagree. Because

the state entities do not own any prope rty in Illinois, they likewise did not assign the lessee contractual rig hts with respect to any I

llinois hotels. See Kalata , 312 Ill. App.Nos. 1-06-1310, 1-06-1386, 1-06-1478 (Consolidated)

-9- 3d at 767 (a plaintiff’s claim must be one that lies in the wake of commercia l activities by which the defendant submitted to the jurisdiction of Illinois courts). Furthermore, the lessee leases hotels in I llinois from BRE/ESA Properties L.L .C., not from any of the sta te entitie s, which d

o not own pr

operty in Ill inois. Jurisd

iction doe s not resu

lt simply because the entity that leas es the sta

te entitie s’ hotels i

n other st ates also happens to lease hotels in Illinois from another entity . Additionally, the lessee does not oper ate hotels in any state, but rathe r, lease s hotels tha

t HVM mana

ges and operat

es. We find that Crum & Forster and Diamond State failed to show that the state entities committed one of the enumerated acts described in sec tion 2-209(a). 2. General Jurisdiction Under Section 2-209(b) (4) Crum & Forster and Diamond State assert that the trial cour t had jurisdiction over the state en tities pur suant to se ction 2-2 09(b)(4 ) becau se they were “ doing bu siness” in Illinois. There is no preci se test for deter

mining whether a

foreig n corpor ation is “d

oing bus iness” in Illinois. Haubner v. Abercrombie & Kent International, Inc ., 351 Ill. App. 3d 112, 119 (2004). Rather, a court mus t perfor

m a case -by-case a

naly sis to dete

rmine if t he corpo ration is conducting business of such character and extent as to warrant the inference that the cor poration has subjected itself to the jurisdiction and laws of the foreign state. Haubner , 351 Ill. App. 3d at 119. The corporation must transact its business within the state “not occasionally or casually, but with a fair measure of permanenc e and continuity.” Haubner , 351 Ill. App. 3d at 119. The “doing business” standard is “quite high.” Haubner , 351 Ill. App. 3d at 119. Crum & F orster a

nd Diamon

d State cl aim that th e state e ntities we re “doin g busine ss” inNos. 1-06-1310, 1-06-1386, 1-06-1478 (Consolidated)

-10- Illinois in four

way s: (1) thr

ough the lease a greement, (2)through

the national acc ount contr act, (3) through an agre ement that required all ESA hotels to be included in centralized marketing a nd reservations syste

ms, and (4) through the parent company that indirectly owns the state e ntities. For the reasons articulated above, we reject Crum & Forster and Diamond State’s a rgument based on the first two gro unds. We also reject Crum & Forster and Diamond State’s ar gument that personal jurisdiction exists because an agreement require d all ESA hotels to be included in one centralized reservation system and national adve

rtising program. Crum & Forster and Diamond State have cited no evidence that Illinois residents made r eservations at the state entity-owned hotels or that any of those were advertised in I llinois. In addition, it is well-settled that mere advertisement or solicitation of business is not enough to sustain personal jurisdiction in Illinois. Riemer v. KSL Recreation Corp. , 348 Ill. App. 3d 26, 36 ( 2004); Kadala v. Cunard Lines, Ltd. , 226 Ill. App. 3d 302, 310 (1992). I n Excel Energy Co., Inc. v. Pittman , 239 Ill. App. 3d 160, 163 (1992), the court lacke d personal jurisdiction over the defendant in a suit regarding defective oil field equipment, even though the plaintiff responded to the defendant’s ad in a national mag azine. More recently , in Howard v. Missouri Bone and Joint Center, Inc. , No. 5-05-0476 (April 24, 2007), the plaintiff alleged negligence in providing a thletic training services in Missouri. The Fifth District found a lack of persona l jurisdic tion over

the defe ndant eve n though the defe ndant had an inter active w eb site that allowed people to make appointments, fill out survey s, and ask questions. Howard , No. 5- 05-0476, slip op. at 5. Here, the state entities’ participation in national marketing a nd reservationNos. 1-06-1310, 1-06-1386, 1-06-1478 (Consolidated)

-11- sys tems was i

nsuffic ient for t

he trial c ourt to exe

rcise pe rsonal ju risdiction over the

m. Relying on Maunder v. DeHavilland Aircraft of Canada , 102 I ll. 2d 342 ( 1984), Cr um & Forster and Diamond State a

lso claim t

hat beca use ESA, I

nc. cre ated the

state en tities sole ly to facilitate refinancing of its mortga ge debt and maximize its tax advantages, the ESA entities are attempting to shield themselves from Illinois’ jurisdiction. I n Maunder , a foreign corporation designe d and manu

factur ed airpl anes, an

d its subsidi ary , a Dela

ware c orporat

ion with its principal place of business in Illinois, sold and distributed parts for a irplanes that the parent company manufa

ctured. Victims of an airplane crash filed suit in Illinois against both the parent and subsidiary companie s. Our supreme court held that the parent corpora tion was “doing business” in Illinois because it established a wholly owned subsidiary in I

llinois to provide product support for the users of the parent company ’s products. Maunder , 102 Ill. 2d at 350. The subsid

iary had bee n operat ing in Illinois as t

he pare nt’s suppl y de pot for 13 ye ars, and

these operations were continuous and systemic. Maunder , 102 I ll. 2d at 35 0. “We bel ieve tha t a corpora tion that ha s established a sup ply depot in I

llinois to su

pport an e nterpris e that ha s sold 885 airplanes in the United States and logged millions of passeng er miles should be subject to the jurisdiction of Illinois courts.” Maunder , 102 Ill. 2d at 354. In Haubner , relying

on Maunder , we held that “it is appropriate to assert jurisdiction over a paren t corpor ation if a subsidiar y is acting as the pa rent cor poration ’s Il linois ag ent in the sense of conducting the parent’s business rather tha n its own.” Haubner, 351 Ill. App. 3d at 122. Maunder relies on the fac t that par

ents of wh

olly owned sub sidiarie s “nece ssarily control, direct, and supervise subsidiaries to some extent.” Haubner, 351 Ill. App. 3d at 122. An I llinois courtNos. 1-06-1310, 1-06-1386, 1-06-1478 (Consolidated)

-12- may not asser t jurisdic tion over

a paren t company

, howeve r, if the s ubsidiar y is conducti ng its own business. Haubner, 351 Ill. App. 3d at 122. This case is unlike Haubner , where the parent corporation was doing business in I llinois through “mere conduits.” Maunder is also the factual opposite of this case. While Maunder and Haubner found jurisdict ion over t he pare nt corpor ation pro per base d on the sub sidiary doing bu siness in I

llinois, here, Crum & Forster and Diamond State cla im that jurisdiction exists over the subsidiaries based on the parent’s activities. They cite no authority for the ir proposed reverse- Maunder rule, which would find jurisdiction over the subsidiary ba sed on the acts of the parent. I n addition, there is n othing in the rec ord indic ating that the sta te entitie s failed t

o follow c orporat

e formalities. The state entities are organized and e xist as separate corporate and legal e ntities, and each sta te entity maintains

its own sep arate b ooks, file s its own ta x returns, and kee

ps separ ate financial statements. 3. Due Pro cess To satisfy fede

ral due process requirements, a nonresident de fendant must have sufficient minimum contacts with the forum state so that the exercise of jurisdiction does not offend “traditional notions of fair play and substantial justice.” International Shoe Co. v. Washington , 326 U.S. 31 0, 316, 66 S. Ct. 154, 158 , 90 L. Ed. 95, 102(1945). I n addition , feder

al due pr ocess requires that the action arise out of the defenda nt’s contacts with the forum state and that it be reasonable to require the defenda nt to litigate in the forum state. Burger King Corp. v. Rudzewicz , 471 U.S. 462, 472-77, 105 S. Ct. 2174, 2181-85, 85 L. Ed. 2d 528, 540-44 (1985). Crum & Forster and Diamond State first contend that I llinois has an interest in providingNos. 1-06-1310, 1-06-1386, 1-06-1478 (Consolidated)

-13- a forum for resolution of this dispute because Weather-Tite is an I llinois corporation. However, Weather-Tite and Transportation, the only Illinois citizens involved in the coverage a ction, settled with the ESA defendants and, therefore, ar e no longer parties to this dispute. In f act, there

are no Illinois residents that have a curre nt interest in this case. Furthermore, the hotels that the state entities own are located in Florida, Minnesota, Texas, Mary land, and Pennsylvania, not Illinois. They also conte

nd that due process is satisfied because the state entities, upon cre ation, had “fair warning” that the windows in their hote ls might be defective and that they could be joined in a coverage action in states other tha n their domiciling states. Crum & Forster and Diamond State fail to show how knowledge that windows manufacture d by a Missouri corporation were defective e quates to “fair warning” that they would be brought into an insurance-coverage

action in Illinois when none of the state entities owns proper ty in I llinois. We furthe

r reject the arg

ument tha t the state entities had “fai

r warnin g” of a law suit in

Illinois because “they assigne d their ri ghts to th e Le ssee with respect to any

allege d defects in their hotels.” As the state entities correctly note, the portion of the operating lease giving the lessee “rights to proceed *** for brea ches of warranties or repre sentations or for latent defects in the Lea sed Prope

rty ” contem plates the possibility

that the le ssee wou

ld pursue litigati on as a plaintiff , not that they

would be s

ued in a c overag e action

in Ill inois. Finally , Crum & F orster a

nd Diamond State ar

gue tha t requiri ng the st ate entit ies to litigate this dispute in Illinois would not be unduly burdensome because other ESA entities are subject to the jurisdiction of the Illinois court and are re presented by

the same counsel. EvenNos. 1-06-1310, 1-06-1386, 1-06-1478 (Consolidated)

-14- assuming that this factor weighs in favor of Crum & Forster and Diamond State, however, we still find that due process is not satisfied because, as explained above, minimum contacts do not exist. B. Doctrine of Representation Crum & Forster and Diamond State arg ue that even if the trial court properly found that persona l jurisdic tion did not

exist over t

he state entities, it errone ously

dismissed t

heir counterclaim because the remaining ESA defendants could adequately represent the interests of the state entities u nder the “doctri ne of re present ation.” T he doctr ine of re present ation wou ld have all owed the

trial cou rt to reta in jurisdiction over

the rema ining ESA

entities, whose interest s, accor

ding to Cr

um & Forster and

Diamond Sta

te, were identica l to those o f the stat

e entities. Both the state en tities and Crum & F orster a

nd Diamond State ag

ree tha t the state entities, as underlying

claimants to the insurance policies, are necessar y parties. See M.F.A. Mutual Insurance Co. v. Cheek

, 66 I ll. 2d 492, 4 95 (1977) ; Hapag-Lloyd (America), Inc . v. Home Insurance Co. , 312 Ill. App. 3d 1087, 1094 (2000) (underly ing claimants have a substantial interest in how insurance questions are resolved). A ne cessary party is one who ha s a legal or beneficial interest in the subject matter of the litigation and will be af fected by the action of the court. Holzer v. Motorola Lighting, Inc. , 295 Ill. App. 3d 963, 970 (1998). Holzer enumerates three reasons to consider a party “necessary

” such that a lawsuit should not proceed in his or her absence: (1) to protect an interest that the party has in the subject matter of the controversy that would be materially a

ffected by a judgment entered in his or her absence , (2) to protect theNos. 1-06-1310, 1-06-1386, 1-06-1478 (Consolidated)

-15- interest s of those

who are before the cour t, and (3) to enable the cour t to make a

complete determination of the controversy

. Holzer , 295 Ill. App. 3d at 970. In Oglesby v. Springfield Marine Bank , 385 Ill. 414 (1944), our supreme cour t found that the nece ssary

-party rule is: “inflexibl e, y

ielding only when the allega tions of the

bill disclo se a cas e so extraord inary and exceptional in c

haract er as tha t it is practically

impossible

to make all parties in interest parties to the suit, and further, the others ar e made parties w ho have the same in

terest a s have tho se not bro ught in, a nd are e qually certain to bring forward the entire merits of the controversy as would the absent persons.” Oglesby , 385 Ill. at 423-24. See also Holzer , 295 I ll. App. 3d at 979; Bovinett

v. Rollbe rg , 73 I ll. App. 3d 49 0, 495 (19 79); Sullivan v. Merchants Property Insurance Co. of Indiana , 68 Ill. App. 3d 260, 263 (1979). Therefore, Oglesby recognized an exception to the necessary -party rule , the “doctrine of representation,” which consists of two ele ments: (1) the practical impossibility of joinder, and (2) others can adequately protect the interests of the absent party

. Oglesby , 385 I ll. at 423-24. The state entities claim that the “doctrine of represe ntation,” as articulated in Oglesby , is inapplicable for two reasons: (1) impossibility of joinder is not satisfied, and (2) adjudicating the action without the state entities would adversely affect their interests. Crum & Forster a nd Diamond State do not contend that it is “practically impossible” to join all claimants; rather, they contend that the doctrine articulated in Oglesby has “evolved to the extent that a showing of theNos. 1-06-1310, 1-06-1386, 1-06-1478 (Consolidated)

-16- practical impossibility of joining all parties is no long er required for the doctrine to be applied.” Crum & Forster and Diamond State rely on Yorulmazoglu v. Lake Forest Hospital , 359 Ill. App. 3d 554 (2005), as evidence of the doctrine’s evolution. In Yorulmazoglu , the plaintiff and two other claimants pursued claims against the defe ndant in an arbitration and also filed an action against the defendant in the circuit cour t of Lake County . The arbitrator found the defendant to be the prevailing party on most of the claims, so it awarded the defendant attorney fees. The plaintiff filed a petition in the Cook County circuit court to vacate the attorney -fee award granted by

the arbitrator. The other two claimants, also represe nted by the plaintiff’s counsel, filed a motion to confirm the final arbitration award in the Lake County action, which was granted. The Cook County action was then dismissed on the basis that the confirmation award e ntered i n the L ake Count

y a ction col lateral ly e stopped the plaintif f from se eking to

vacate the final award. On appeal, the court determined that the plaintiff was not in privity with the other two claimants in the Lake County action for collateral estoppel purposes. Yorulmazoglu , 359 I ll. App. 3d at 561. In dicta containe d in a foot note, whi ch Crum &

Forster and Diamond State r

ely on, the court noted that the rule requiring joinder of indispensable parties does not apply whe n a party, “thoug

h not before the court in person, is so represented by others that his interest receives actual and efficient protection.” Yorulmazoglu , 359 Ill. App. 3d at 561, n. 4. However, the two claimants who sought to confirm the attorney fee award did not have the same intere sts as the plaintiff, who sought to vacate the award. Yorulmazoglu , 359 Ill. App. 3d at 561, n. 4. Crum & F orster a

nd Diamon

d State pur

port that t his “appl ication w as rece ntlyNos. 1-06-1310, 1-06-1386, 1-06-1478 (Consolidated)

-17- reaffirmed” in Caparos v. Morton , 364 Ill. App. 3d 159 (2006). I n Caparos , the court found that 35 limited partners who filed a derivative suit against ge neral partners for breach of fiduciary duty sought to protect the financial interests of all limited partners. Caparos , 364 Ill. App. 3d at 176. The limited partners did not suffer a distinct individual harm; rather, they sustained a common injury. Caparos , 364 Ill. App. 3d at 169. Therefore , the absent limited partners were not necessary

parties in the action. Caparos , 364 Ill. App. 3d at 176. Similarly , in Bill Marek’s The Competitive Edge v. Mickelson Group , 346 Ill. App. 3d 996, 1011 (2004), the court found that a company was not a necessary party bec ause it had no interest in the subject matter of the litigation. The court proceeded to note that even if the company had a

n interest in the subject matter of the litigation, it was adequately represented because the funds identified in the plaintiff’s complaint irrefutably belonged to either the plaintiff or the defenda nt and the proper party in interest “w

ill possess the funds.” It is tr ue that r ecent c ases such as Yorulmazoglu , Caparos , and Bill Marek’s do not discuss the impossibility of joinder requirement, nor do they cite Oglesby

for such a rule. But see Holzer , 295 Ill. App. 3d at 979 (“Previous cases ha ve also recognized that the rules requiring joinder may ‘be

nd’ when it is ‘next to impossible to join all the parties indispensable to the litigation.’ ”). However, neither Yorulmazoglu , Bill Mare

k’s, nor Caparos involved a situation where the trial court proceeded w ith a case after finding a lac k of personal jurisdiction over necessary parties, the result that Crum & Forster and Diamond State contend would have been the corr ect one. Nor did the

y in volve an i nsuranc e cover

age de clarato

ry action. M ore impor

tant, the passages that Crum & Forster a nd Diamond State cite constitute obiter dic ta , remarks orNos. 1-06-1310, 1-06-1386, 1-06-1478 (Consolidated)

-18- opinions uttered by the way , and are not binding authority

. Ko v. Eljer Industries, Inc. , 287 I ll. App. 3d 35, 41 (1997). Accordingly, we find that Crum & Forster and Diamond State were

re qu ir ed to sa ti sf

y th e i mp os si bi li ty o f j oi nd er re qu ir em en t a rt ic ul at ed by Oglesby

. In a further a

ttempt to avoid the impossibility of joinder requirement, Crum & F orster and Diamond State cast this case as a involving “a larg e number of necessary parties as often happens in mass tort litigation.” They c ite Zurich Insurance Co. v. Baxter International, Inc. , 275 I ll. App. 3d 30 (1995) ( Zurich I ), affirmed as modified , 173 Ill. 2d 235 (1996) ( Zurich II ), as repres enting t

hat a show

ing of pr actica l impossibili

ty is no longe r requir ed, espe cially

“in masstort and similar types of dec laratory judg ment litigation.” We reject their suggeste d interpretation of Zurich for two reasons. First, the supreme court disavowed tha t portion of the appellate court opinion: “[T]he appellate court’s discussion of necessary parties in mass-tort litigation cannot stand and is of no precedential value.” Zurich II , 173 Ill. 2d at 243. Second, the Secon d Dist rict a ppell ate cou rt opi nion , citi ng Oglesby , specifically he ld that “the necessary parties rule yie lds only when the two emphasized requir ements are fulfilled.” Zurich I , 275 I ll. App. 3d at 37. The court went on to find that due to the “extraordinary and exceptional character” of the case

and the unity of intere sts between the 17 joined and 7,500 underly ing claimants, joinder of all the underly ing claimants was not required. Zurich I , 275 Ill. App. 3d at 41. Therefore, Zurich I

actually underscores the vitality of the impossibility of joinder require ment. Fur

thermore , here, u

nlike a ma ss tort litig ation invo lving a l arge n umber of parties, there is a definite and finite

number of

known cla

imants. On appeal, Crum & Forster and Diamond State do not dispute the trial cour t’s finding thatNos. 1-06-1310, 1-06-1386, 1-06-1478 (Consolidated)

-19- since this case involves a de finite an d finite nu

mber of c laimants, it is not pra ctically impossible to join all claimants. In their trial court pleading s, the insurers contended that if there was no personal jurisdiction over the state entities, then it is practically impossible to join all of the parties in any state. T o the contrary , Missouri is an alternative forum, as Quaker, the window manufacturer, is

a Missour

i company

and the st

ate entit ies conte nd that the

insuranc e contra

cts were issued in Missouri. Indeed, the se ttlement agreement between ESA and Qua ker is based on the Missou

ri “rea ch and a pply ” statute , and the E SA entitie s have sou ght to enforce t

heir rig hts under the agreement by

filing such an action in Missouri. As for the second factor, Crum & Forster and Diamond State argue that the ESA entities over whi ch the tr

ial cour t had juris diction c ould have fully repres ented the

state en tities’ int erests in the coverage action. Specifica lly, they contend, the state entities are beneficiaries of the national account contract that ESA, I nc. negotiated with Weather-Tite and of the litiga tion undertaken by

Extended Stay, I

nc. against Quaker. For e xample, the ESA entities not challenging jurisdiction brought a unified c omplaint in the U.S. District Court for the Central District of California. All of the ESA entities share “the similar goal of re couping damages sufficient to repair the hotel properties for the alleg ed damages caused by Quaker windows.” In a ddition, Cr

um & Forster and

Diamond Sta

te point ou

t that the s tate enti

ties are wholly owned sub sidiarie s of ESA. T hey claim tha t the state entities a nd the othe

r ESA enti

ties would be equally impacted by any rulings on each coverag e defense, since Transportation’s complaint and Diamond State and Crum & Forster’s counterc laims did not distinguish among the entities. In addition, they

cite the lease agreeme

nt and management and operating contracts asNos. 1-06-1310, 1-06-1386, 1-06-1478 (Consolidated)

-20- demonstrating privity be

tween the state entities and the ESA entities that have not contested jurisdiction. The st ate ent itie s, cit ing Flashner Medical Partnership v. Marketing Management , Inc. , 189 I ll. App. 3d

45 (1989) , respond

that the “ identica

l interes t” analy

sis has ne ver bee n applied in insurance coverage a

ctions. In Flashner , a medical group brought a de claratory coverage action aga in st it s m edi cal -ma lp rac ti ce i nsu rer s, i nsu ran ce b rok ers , an d i nsu ran ce- pro gra m d eve lo per s. It also alleged that the insurers enga ged in fraud and neglig ent misrepresentation and that the brokers and developers committed fraud, negligence, neglige nt misrepresentation, breach of contract, and a violation of the I llinois Insurance Code. On appea l, the court found that the tort claimants in the underlying suits, who were not named in the suit, were necessary parties to the action because a declaration of nonc overage would eliminate a source of funds. Flashner , 189 Ill. App. 3d at 53-54. I

t rejected the medical group’s conte ntion that the tort claimants were adequately

represented by

parties before the court: “Plaintiffs cite no cases, nor have we found any , apply

ing the d octrine to tort cla

imants in a

declar atory judgmen t action to determine liability insurance coverage.” Flashner , 189 Ill. App. 3d at 54. Further, althoug h the tort claimants and the insured had similar interests in a determination of coverag e under the policy , the success of the insured’s claims against the other defenda nts might depend upon a determination of noncoverage. Flashner , 189 Ill. App. 3d at 54. The insureds, “there fore, might choose to pursue a litigation strategy

that could adversely

affect the absent tort claimants.” Flashner , 189 Ill. App. 3d at 54. There are important distinctions between the case a t bar and Flashner . For exa mple, inNos. 1-06-1310, 1-06-1386, 1-06-1478 (Consolidated)

-21- Flashner , no under

lyin g claimant was ma

de a par ty, while in th e instant c ase, othe r ESA enti

ties, in addition

to the stat

e entitie s, were

underly ing cla imants. Furthermore, the o ther ESA e ntities, the state entities’ fellow claimants, have a similar interest in the outcome of the litiga tion, unlike the insur ed, whose interest s may

not be suf

ficientl y a ligned w ith an unde

rly ing cla imant to represent its interests. Therefore, under these circumstances, the fact that this is a declara tory action do es not pre clude the applica tion of the

“identic al intere st” anal

ysi s. Nevertheless, we

find that p

roceed ing with t his case could adv ersely

affec t the state entities’ interests. The state entities have filed a suit in Missouri against Crum & For ster, Diamond State, and American Automobile for the settlement amount that was not fully funded by proceed s from the

settling insurer policies. Proceed

ing with t his cover age c ase coul d lead to inconsistent judgments and would also encourage piec emeal litigation. Furthermore, as we explained above, Illinois’ interest in Crum & Forster and Diamond State’s complaint and counterclaim is minimal at best. III. CONCL USION For the foregoing r

easons, we affirm the dismissal of Crum & Forster a nd Diamond State’s c ounterc laims. Affirmed. QUINN, P.J., and NEVI

LLE, J., concur.