Opinion ID: 3001938
Heading Depth: 2
Heading Rank: 4

Heading: Location of the subject matter

Text: The subject matter of the insurance policies at issue is not a tangible object, the location of which could be limited to one state. However, it should be noted that the insurer’s compliance with requirements with Illinois law for providing surplus line insurance indicates that Nautilus, through Jimcor, intended to insure risks located, to some extent, in Illinois. Additionally, the insurance policies themselves suggest that Nautilus committed to insuring risks in Illinois. The policies for each corporation identify the name and address of the insured. The policy period is listed, and is followed by the phrase “at your mailing address shown above.” The addresses shown above are Illinois addresses. Further, the policies ask for the “location of all premises you own, rent, or occupy,” and the policies state, “same as mailing address,” again, all of which are listed in Illinois. Nautilus argues that the Illinois addresses are shams, and that it would not have insured the small corporations had it known the truth about their relationships with ACS. This contention brings us to the next § 188 factor—if the small corporations are truly Indiana corporations, then Indiana law should apply. If, on the other hand, they are Illinois corporations, then Illinois law should apply. Nos. 06-4019 & 07-1400 15 E. Domicile, residence, nationality, place of incorporation and place of business of the parties Because the first four factors are so inconclusive, this factor becomes pivotal. All of the insureds—Phoenix Imagery, G.O. Innovators, and Unified Stars—are incorporated in the state of Indiana. However, “[a]t least with respect to most issues, a corporation’s principal place of business is a more important contact than the place of incorporation, and this is particularly true in situations where the corporation does little, or no, business in the latter state.” Restatement (Second) of Conflicts § 188 cmt. e. ACS, the additional insured on each of the policies, has its primary place of business in Indiana. The determination of the primary places of business for the three small corporations is more difficult. Lynn Harvey, President of Phoenix Imagery, stated in a declaration that the principal place of business for the corporation from the date of its formation until June 2004, was in Crete, Illinois. However, the address she provided for Phoenix’s principal place of business is that of the residential home of ACS’s founders, in Crete. The phone number Phoenix Imagery provides to customers is the Indiana number for ACS. These pieces of evidence together are suspicious—does Harvey work out of somebody else’s home? Is Phoenix Imagery truly a separate entity from ACS? Harvey’s declarations that she is the sole decision-maker and manager of Phoenix, and that Phoenix Imagery’s principal place of business is in Illinois, appear to conflict with other evidence suggesting that Phoenix is, in fact, an alter ego “shell” of ACS, operating out of Indiana. By failing to respond to Nautilus’s requests for admission, Phoenix Imagery admitted (via Fed. R. Civ. P. 36) to using the mailing address for 16 Nos. 06-4019 & 07-1400 ACS, in Indiana; obtaining its insurance through its contacts with ACS; allowing ACS to “terminate” its salespersons in the event of complaints of misconduct from customers; accepting advisement from ACS relating to the accounting, record keeping, and management of its business; and allowing its employees to wear ACS identification badges when selling magazines door-to-door. Ultimately, we cannot tell from the evidence whether Phoenix Imagery principally operates out of Illinois, or whether the corporation is a shell of ACS. Its links with Illinois are established by its President’s declaration and by its Independent Contractor agreement with ACS. But that evidence is weakened by other evidence that suggests the small corporation is not an independent entity and that its business address in Crete, Illinois, is a sham. As for G.O. Innovators and Unified Stars, these two small corporations did not respond to Nautilus’s complaint— they failed to file answers or to otherwise defend against the lawsuit. The record does not contain Independent Contractor agreements between ACS and these corporations (as it does for Phoenix Imagery), which would have been useful for identifying the corporations’ principal places of business. All we know about G.O. Innovators and Unified Stars with respect to this factor of § 188 is that they are both incorporated in Indiana and have registered agents in Indiana, but they listed their addresses on the insurance-policy materials in Illinois. These small corporations may have operated out of Illinois, but they also may have operated out of Indiana. The only definite evidence linking them to Illinois appears in their insurance materials. For the purposes of this § 188 factor, the scale tips in favor of applying Indiana law, because G.O. Innovators and Unified Stars are incorporated in Indiana. Nos. 06-4019 & 07-1400 17 F. Choice of law determination After considering the various Restatement factors, we find that “none of the § 188 factors is compelling or conclusive.” Coachmen, 838 N.E.2d at 1181. So, we will consider the “overall number and quality of contacts,” id., to decide whether we agree that the district court should have applied Indiana law to the insurance policies. The first factor—place of contracting—while not determinative, involved the states of Indiana (ACS), New Jersey (Sun Insurance), Pennsylvania (Jimcor), and Illinois (Illinois Department of Insurance). The negotiations for the contracts—factor two—took place over the phone and through other means of long-distance communication, between the parties in Indiana, New Jersey, and Pennsylvania. The place of performance was unknown at the time of contracting because the magazine-sales corporations conducted their business in various states. The fourth factor—location of the subject matter—tips the analysis slightly in favor of the application of Illinois law, because the insurance policies indicate that they are for a certain time period, “at” the specified locations in Illinois. Additionally, Jimcor referred to the policies as “IL policies” in some of its communications, which indicates an intention to insure risks in Illinois. Finally, under the fifth factor, we identified a factual dispute about Phoenix Imagery’s principal place of business; we could not determine the principal places of business of G.O. Innovators and Unified Stars, both of which are incorporated in Indiana. The fact that we know nothing about the principal places of business of G.O. Innovators and Unified Stars makes it difficult for us to conclude that anything other than Indiana law applies to their insurance policies. What we know about these two corporations ties them to 18 Nos. 06-4019 & 07-1400 Indiana—except for the Illinois addresses that were used on the insurance applications, which are not corroborated by any other documentation or evidence. They are incorporated in Indiana and ACS procured the insurance contracts on their behalf from its base in Indiana. If we were to apply Illinois law for the insurance policies involving these two corporations, we would effectively replace the multi-factor approach outlined in § 188 with a singlefactor determination by which the law of the state identified on the insurance policy would automatically govern a contract dispute, absent a choice-of-law provision. We agree with the district court that, based on the factors enunciated in § 188, the state of Indiana had the most intimate contacts with the insurance policies of G.O. Innovators and Unified Stars. And, the district court correctly interpreted Indiana law to preclude coverage under the CGL insurance policies for claims of negligent hiring, see Am. Painting Co., 678 N.E.2d at 846. Summary judgment in favor of G.O. Innovators and Unified Stars was proper. With respect to Phoenix Imagery, on the other hand, there is evidence suggesting that the small corporation might be legitimate, and that it might have its principal place of business in Illinois. Though, conflicting evidence calls into question the truthfulness of Lynne Harvey’s declaration to that effect. We, as an appellate court, cannot resolve this factual dispute. Because the district court decides as a preliminary matter which substantive law to apply, see Gramercy Mills, Inc., 63 F.3d at 570, we are of the opinion that the district court must also resolve factual disputes that bear on the choice-of-law determination. See Vaz Borralho v. Keydril Co., 696 F.2d 379, 386 (5th Cir. 1983) (upholding judicial resolution of facts affecting Nos. 06-4019 & 07-1400 19 choice-of-law determination); but cf. Marra v. Bushee, 447 F.2d 1282, 1284-85 (2nd Cir. 1971) (deciding that resolution of factual issues bearing on choice-of-law determination belonged to jury). In this case, the district court needs to decide whether Phoenix Imagery is a legitimate corporation operating out of Illinois—if it is, then Illinois law should govern its insurance policies. The most direct way to make such a determination would be for the district court to hold an evidentiary hearing to assess the veracity of Lynne Harvey’s statements. It might seem odd to charge the district court with resolving a factual dispute that could affect the rights and liabilities of the litigants—such disputes are ordinarily within the province of the jury. But, presenting the choiceof-law factual issue to a jury in this instance is even more problematic. As we pointed out in Gramercy Mills, “it would make little sense to let a jury decide which facts are true and then to say that there was never a dispute to begin with.” Id. And, as we noted recently in Pavey v. Conley, 528 F.3d 494, 496-97 (7th Cir. 2008), “not every factual issue that arises in the course of a litigation is triable to a jury as a matter of right.” We explained that matters of subject-matter jurisdiction, personal jurisdiction, venue, and abstention are often decided by the judge “even if there are contestable factual questions bearing on the decision.” Id. Without knowing which state’s substantive law governs this dispute, the case cannot move forward. But without resolving the contested issues of Phoenix’s corporate status and its principal place of business, the choice-of-law determination cannot be made. Thus, we vacate in part and remand for the district court to make factual findings about Phoenix Imagery, and then to reconsider the choiceof-law analysis based on the results of its inquiry. 20 Nos. 06-4019 & 07-1400