Court Opinion

ID: 3001958
Source: CourtListenerOpinion
Date Created: 2015-09-24 20:23:03.286524+00
Date Added: 2024-06-11T12:23:11.201987
License: Public Domain

In the
 United States Court of Appeals
               For the Seventh Circuit
                          ____________

No. 07-2638
CITADEL GROUP LIMITED, A DELAWARE CORPORATION,
                                                  Plaintiff-Appellant,
                                  v.

WASHINGTON REGIONAL MEDICAL CENTER,
AN ARKANSAS NON-PROFIT CORPORATION,

                                                 Defendant-Appellee.
                          ____________
            Appeal from the United States District Court
        for the Northern District of Illinois, Eastern Division.
              No. 07 C 1394—Marvin E. Aspen, Judge.
                          ____________
    ARGUED FEBRUARY 26, 2008—DECIDED AUGUST 5, 2008
                          ____________

 Before KANNE, SYKES, and TINDER, Circuit Judges.
   TINDER, Circuit Judge. This case resulted from the
planned construction of a medical office building in
Arkansas. Washington Regional Medical Center
(“WRMC”) hired Citadel Group to develop the project,
but the project closing never occurred due to WRMC’s
concern over mounting costs. Citadel filed suit to recover
its development costs against WRMC in the Circuit Court
of Cook County, Illinois. WRMC removed the case to the
2                                               No. 07-2638

Northern District of Illinois based on diversity jurisdic-
tion and filed a motion to dismiss for lack of personal
jurisdiction, or in the alternative, for a change of venue to
the Western District of Arkansas. The district court dis-
missed the case for lack of personal jurisdiction. We
reverse.

                      I. Background
   WRMC, an Arkansas non-profit corporation with its
principal place of business in Arkansas, sent a “Request
for Proposal” to several developers in various states in
May 2005. WRMC’s request outlined a plan in which
Washington Regional Medical Foundation, an affiliated
non-profit corporation, would execute a ground lease for
unimproved land to a developer. The developer would
construct a medical office building on the land and, once
the construction was complete, would lease part of the
space back to WRMC. Citadel, a Delaware corporation
with its principal place of business in Illinois, received
WRMC’s request and responded with a proposal on
May 13, 2005. WRMC asked Citadel for additional infor-
mation on a few occasions during the following months.
In June, WRMC sent Citadel an email requesting that it
fill out two forms to provide additional details on the
project cost breakdown and a lease and operating rate
summary. In July, WRMC sent Citadel an email re-
questing some documentation for WRMC’s auditors. In
August, WRMC provided Citadel with information on the
potential of a shared parking arrangement between the
medical office building site and a neighboring site. In
September, WRMC sent Citadel an email asking for
clarification on the invoicing process that would be used
by Citadel and the entities it hired and the costs encom-
No. 07-2638                                                       3

passed by the authorization to proceed that Citadel had
asked WRMC to sign. Citadel responded to the June and
July requests; the record does not reflect what response,
if any, Citadel gave to WRMC in September. WRMC
signed the authorization to proceed on September 15,
2005, and sent a deposit to Citadel.1 During the negotia-
tions, representatives of WRMC never traveled to Illinois,
but representatives of Citadel traveled to Arkansas once.
  The authorization to proceed encompassed “project
development,” but the long-term relationship envisioned
by WRMC in the request for proposal was still in the
theoretical stage; the ground lease had not been executed,
which necessarily precluded actual construction. The
authorization was attached to Citadel’s proposal, which
touted its expertise in reducing costs through special
financing rather than just through “value engineering,”

1
    The authorization to proceed simply stated:
      Washington Regional Medical Center authorizes
      Citadel Group Limited to proceed with Project develop-
      ment at a fee of four percent (4%) of project costs
      according to the following schedule: (i) a 1% good faith
      deposit upon execution of this proposal, and (ii) the
      balance from Project funding. Washington Regional
      Medical Center is responsible for all legal expenses and
      other costs associated with Project development, except
      architectural and engineering fees, whether or not the
      Project is ultimately developed. Project costs and
      expenses may be included in the Project’s budget and
      hence, refunded to Washington Regional Medical
      Center at Project funding. Washington Regional Medi-
      cal Center will only be responsible for architectural and
      engineering fees in the event Washington Regional
      Medical Center does not execute its space leases and
      ground lease.
4                                               No. 07-2638

which Citadel warned could “result in compromising
project quality.” Citadel explained in its affidavit filed
in response to WRMC’s motion to dismiss that the
special financing involved a public offering of com-
mercial paper notes which would reduce finance costs
as compared to a traditional mortgage. The goal of the
financing was to provide WRMC with the opportunity
to lease the finished space at attractive lease rates be-
cause the cost of capital for construction was lower.
  After WRMC executed the authorization, it requested
by email that Citadel provide it with a development
calendar. Citadel responded with a calendar that
spanned from October 2005 to May 2006 and encom-
passed activities such as the selection of an architect
and general contractor, zoning review, design develop-
ment, credit enhancement, appraisals, title commitment,
legal drafting, and many scheduled conference calls.
Citadel began to engage other entities to accomplish the
activities set forth in the development calendar. Citadel,
WRMC, and the other entities participated in conference
calls to discuss the status of the project development in
November 2005 and January, February, March, April,
and May 2006.2 WRMC sent Citadel questions by email
on several occasions in the intervening months. WRMC
also provided Citadel with information such as its past
financial statements, a proposed ground lease, and a
request that three Arkansas banks be permitted to partici-
pate in the financing. In March 2006, WRMC sent Citadel
an email inquiring about financing costs, which “seem[ed]

2
  The record is unclear as to the number of telephone confer-
ences in which WRMC participated, but WRMC does not deny
that it participated in some of them.
No. 07-2638                                                        5

very high.” On May 5, 2006, WRMC informed Citadel by
fax that it was concerned about financing costs and di-
rected Citadel not to incur further costs until WRMC’s
Board of Directors voted on whether to proceed with
the project. At some point after May 15, 2006, WRMC
informed Citadel that it would not be closing or pro-
ceeding with the project. Citadel filed suit to recover
more than $500,000 in costs incurred in the development
of the project.

                   II. Personal Jurisdiction
  We review a district court’s decision to dismiss a case
for lack of personal jurisdiction de novo. TruServ Corp.
v. Flegles, Inc., 419 F.3d 584, 589 (7th Cir. 2005). As the
plaintiff, Citadel bears the burden of making a prima
facie showing of the existence of personal jurisdiction.
Purdue Research Found. v. Sanofi-Synthelabo, S.A., 338 F.3d
773, 782 (7th Cir. 2003). A federal court sitting in diversity
has personal jurisdiction only where a court of the state
in which it sits would have such jurisdiction. RAR, Inc. v.
Turner Diesel, Ltd., 107 F.3d 1272, 1275 (7th Cir. 1997).
Citadel suggests that WRMC is subject to personal juris-
diction in Illinois because the activities WRMC engaged
in during the development process were sufficient to
confer specific jurisdiction.3

3
  “When a State exercises personal jurisdiction over a defendant
in a suit not arising out of or related to the defendant’s con-
tacts with the forum, the State has been said to be exercising
‘general jurisdiction’ over the defendant.” Helicopteros Nacionales
de Colombia, S.A. v. Hall, 466 U.S. 408, 415 & n.9. General jurisdic-
                                                      (continued...)
6                                                  No. 07-2638

   To determine whether personal jurisdiction exists over
WRMC in Illinois, we consider the Illinois long-arm statute,
the Illinois constitution, and the federal constitution. See id.
at 1276. The Illinois long-arm statute grants specific
jurisdiction in several enumerated instances. See, e.g., 735
Ill. Comp. Stat. 5/2-209(a)(1), (7) (including the “transac-
tion of any business” within the state or the “making
or performance of any contract or promise substantially
connected” with the state). It also contains a “catch-all”
provision which permits a court to “exercise jurisdiction
on any other basis now or hereafter permitted by the
Illinois Constitution and the Constitution of the United
States.” Id. § 2-209(c). Thus, the “catch-all” requirements
are co-extensive with the state and federal constitutional
requirements. RAR, 107 F.3d at 1276.
  The Illinois constitution requires that jurisdiction be
asserted only where “it is fair, just, and reasonable . . .
considering the quality and nature of the defendant’s
acts which occur in Illinois or which affect interests located
in Illinois.” Id. (quoting Rollins v. Ellwood, 565 N.E.2d
1302, 1316 (Ill. 1990)). According to the Illinois Supreme
Court, the Illinois and federal due process requirements
“hypothetically might diverge in some cases.” Hyatt Int’l
Corp. v. Coco, 302 F.3d 707, 715 (7th Cir. 2002) (discussing
Rollins, 565 N.E.2d at 1316). We have previously noted,

3
   (...continued)
tion is appropriate where the defendant’s contacts with the
forum state are “continuous and systematic.” Id. at 416. Citadel
does not claim that general jurisdiction is applicable here. An
analysis of “specific jurisdiction” is appropriate where a
suit arises out of or is related to the defendant’s contacts with
the forum. Id. at 414 & n.8.
No. 07-2638                                                   7

however, that no case has yet emerged where due process
was satisfied under the federal constitution but not under
the Illinois constitution. Id.; RAR, 107 F.3d at 1276. See
Sabados v. Planned Parenthood of Greater Indiana, 882
N.E.2d 121, 125 & n.2 (Ill. App. Ct. 2007), appeal denied,
888 N.E.2d 1189 (Ill. 2008), for a federal due process
analysis by the Illinois Court of Appeals, who noted that
no case had yet found jurisdiction under the federal
constitution where the Illinois constitution had not also
been satisfied. We have no reason to believe, and neither
party has advocated, that the types of contacts at issue in
this case would not lead to the same result under both
constitutional analyses; thus, we will proceed with the
federal analysis.
  The Due Process Clause of the Fourteenth Amendment
prevents a state from exercising specific jurisdiction over
a defendant, unless the defendant had “certain mini-
mum contacts” with the forum state “such that the mainte-
nance of the suit does not offend ‘traditional notions of
fair play and substantial justice.’ ” Int’l Shoe Co. v. Washing-
ton, 326 U.S. 310, 316 (1945) (quoting Milliken v. Meyer,
311 U.S. 457, 463 (1940)). A state has an interest in provid-
ing its residents with a forum for redressing harms
caused by an out-of-state actor, particularly where the out-
of-state actor has “purposefully avail[ed] itself of the
privilege of conducting activities within the forum State,
thus invoking the benefits and protections of its laws.”
Burger King Corp. v. Rudzewicz, 471 U.S. 462, 473, 475 (1985)
(quoting Hansen v. Denckla, 357 U.S. 235, 253 (1958)). The
defendant’s contacts must not be merely random, fortu-
itous, or attenuated; rather, the “defendant’s conduct and
connection with the forum State” must be such that it
should “reasonably anticipate being haled into court
8                                              No. 07-2638

there.” Id. at 474-75 (quoting World-Wide Volkswagen
Corp. v. Woodson, 444 U.S. 286, 297 (1980)).
  In analyzing whether the defendant’s contacts are
sufficient to establish specific jurisdiction, we do not
employ a “mechanical or quantitative” test. Int’l Shoe,
326 U.S. at 319. Therefore, a contract between a state
resident and an out-of-state defendant alone does not
automatically establish sufficient minimum contacts. Burger
King, 471 U.S. at 478. Instead, we consider the parties’
“prior negotiations and contemplated future conse-
quences, along with the terms of the contract and the
parties’ actual course of dealing” in determining whether
there were sufficient minimum contacts. Id. at 479. We
do not count, however, the “unilateral activity” of parties
who have some relationship with an out-of-state defen-
dant. Id. at 474 (citing Hansen, 357 U.S. at 253).
  In determining the parties’ “prior negotiations and
contemplated future consequences, along with the terms
of the contract and the parties’ actual course of dealing,”
id. at 479, the district court considered several factors,
including who initiated the transaction, where the con-
tract was entered into, where the performance of the
contract was to take place, and where the contract was
negotiated. The district court concluded that, on balance,
Citadel did not establish sufficient minimum contacts:
“the contract here plainly reflects an explicitly ‘prelimi-
nary’ relationship—between an Arkansas corporation
that seriously considered using an Illinois company to
administer the construction of a building in Arkansas—that
never came to fruition.” Citadel Group Ltd. v. Wash. Reg’l
Med. Ctr., No. 07 C 1394, 2007 WL 1772262, at *4 (N.D. Ill.
June 18, 2007). This is true; the parties’ transaction
never closed and, therefore, they never executed ground
No. 07-2638                                                        9

or space leases and never began construction of the build-
ing. In that sense, the parties’ relationship was truly
preliminary, but, of course, Citadel brings this litigation
because it incurred a great deal of expense on behalf of
WRMC in preparation for these later anticipated activities.
  Citadel claims that WRMC engaged in sufficient mini-
mum contacts and lists twenty-four “contacts”—primarily
consisting of correspondence by mail, fax, phone, and
email—that should collectively give rise to specific juris-
diction in Illinois. WRMC counters that these contacts
are nearly all “unilateral activities” of Citadel or responses
to Citadel’s requests for information; the remaining
contacts are minimal and insufficient to establish juris-
diction.4

4
   Citadel directs our attention to the case of Citadel Group Ltd. v.
Merle West Medical Center, Inc., No. 06-C-6162, 2007 WL 5160444
(N.D. Ill. June 13, 2007), in which Citadel was involved in a
similar dispute with a medical center in Oregon. The district
court noted the difficulty of determining personal jurisdiction
in cases like these: “Merle West argues, correctly, that none of
[the factors cited by the parties] alone is necessarily sufficient
for the court to exercise personal jurisdiction, while Citadel
responds (also correctly) that each is relevant and can support
an exercise of jurisdiction in an appropriate case. Not surpris-
ingly . . . both parties were able to cite cases in which courts
have found in their favor regarding the sufficiency of these
factors in supporting an exercise of jurisdiction.” Id. at *3. The
court ultimately determined, as we have here, that the out-of-
state defendant must be subject to personal jurisdiction in
Illinois because of the nature of the contract, the types of
contacts that occurred during Citadel’s performance, and
the defendant’s knowledge (and authorization) of Citadel’s
                                                      (continued...)
10                                                No. 07-2638

  WRMC relies upon two cases in bolstering its argument
that the bulk of the contacts in this case were the uni-
lateral actions of Citadel and are irrelevant for purposes
of establishing personal jurisdiction, Lakeside Bridge & Steel
Co. v. Mountain State Construction Co., 597 F.2d 596 (7th
Cir. 1979) and Sungard Data Systems, Inc. v. Central Parking
Corp. 214 F. Supp. 2d 879 (N.D. Ill. 2002). In Lakeside Bridge,
a West Virginia construction company contracted with
a Wisconsin corporation to purchase structural assem-
blies for a dam and reservoir in West Virginia. When
the West Virginia company received the assemblies, it
claimed they were defective and withheld payment. The
Wisconsin corporation filed a lawsuit in Wisconsin,
claiming personal jurisdiction was proper because the
West Virginia company had knowledge that the manufac-
ture of the goods would take place in Wisconsin, and the
parties had contacts by telephone and mail. We found
there was no personal jurisdiction over the West Virginia
company because the primary contacts with Wiscon-
sin stemmed from the unilateral acts of the Wisconsin
corporation: “Although [the West Virginia company] in
a sense caused the activity in Wisconsin by placing the
order, the contract between the parties left [the Wisconsin
corporation] in absolute control over where it would
conduct that activity, and it made this decision and con-
ducted the activity unilaterally.” Lakeside Bridge, 597 F.2d
at 603.
  In Sungard, a Tennessee corporation contracted for
business continuity and disaster services to be provided
by an Illinois business. The Illinois business filed suit in

4
  (...continued)
engagement of the other entities. Id. at *5.
No. 07-2638                                               11

Illinois over contract payments that were not received,
claiming jurisdiction based on phone calls and payments
received, as well as services provided in Illinois such as
contract preparation, processing, and billing. The district
court noted that “making telephone calls and mailing
payments into the forum state are insufficient bases for
jurisdiction.” Sungard, 214 F. Supp. 2d at 881 (quoting
Federated Rural Elec. Ins. Corp. v. Inland Power & Light Co.
18 F.3d 389, 395 (7th Cir. 1994)). The court concluded
that there were not minimum contacts, emphasizing
that the contract was not substantially connected to Illi-
nois and noting that it was analogous to an insurance
contract centered on a place of business outside of Illinois.
Id. at 883. It reasoned that the contract was for business
continuity services for a business located in Tennessee,
and the administrative services provided in Illinois
were too insignificant to establish minimum contacts. Id.
   We first note that Lakeside Bridge was decided prior
to two key Supreme Court decisions, Worldwide Volkswagen
and Burger King, which provided us with a more robust
understanding of personal jurisdiction. Additionally, this
court has frequently distinguished Lakeside from other
cases, “based on the unique circumstances of each case.”
Madison Consulting Group v. South Carolina, 752 F.2d 1193,
1200-01 (7th Cir. 1985) (collecting cases). Lakeside has
never been overruled, though, and there are some sim-
ilarities between Lakeside and this case. Namely, WRMC
caused the actions to be taken by signing the authoriza-
tion from Citadel, and it retained no control over whom
Citadel could hire. However, the case is easily distinguish-
able from Lakeside on two grounds. First, the nature of the
contract is entirely different. Lakeside’s contract was to
complete a discrete task: to make and ship structural
12                                               No. 07-2638

assemblies. Second, the West Virginia company did not
have continuing obligations and contacts with the Wis-
consin corporation; they only needed to accept and pay
for the assemblies. The contract in this case was for
Citadel to provide a service; Citadel was to undertake
“project development” in preparation for the construction
of a medical office building. (The authorization is not
particularly detailed regarding the extent of “project
development,” but we are not concerned with analyzing
the scope of the parties’ obligations at this juncture.) While
the formation of the contract alone is not sufficient to
confer personal jurisdiction on WRMC, the parties had
continuing obligations and repeated contacts from the
authorization’s signing in September 2005 to WRMC’s
decision not to proceed in May 2006. At some point, a
party’s contacts must cross the threshold from offending
due process to sufficient minimum contacts. WRMC’s
contacts have reached that point.
  The district court concluded and WRMC argues that, like
Sungard, the focus here should be on the property that
the contract is centered on and not on the admin-
istrative services provided in Illinois. In Sungard, the
purpose of the contract was for business continuity
services in Tennessee, and the administrative services
were incidental. Here, while the end result would have
been construction of a building in Arkansas, the authoriza-
tion was not for Citadel to begin construction. The authori-
zation encompassed only project development, which
consisted entirely of administrative services carried out
(for the most part) in Illinois. Citadel took steps on
WRMC’s behalf, with WRMC’s authorization, to procure
the necessary prerequisites to constructing a building,
and so its actions were not the “unilateral activities” of a
No. 07-2638                                              13

party having some relationship with an out-of-state
defendant. Burger King, 471 U.S. at 474. Although WRMC
notes that it did not have the power to direct whom Citadel
should hire, it did authorize Citadel to begin project
development, it received a development calendar out-
lining the steps that Citadel would be taking, and it
proceeded toward closing with Citadel from September
2005 to May 2006 with knowledge that the other entities
were working on its behalf to complete the actions listed
in the development calendar. It continued to have indi-
vidually insignificant, but collectively important, con-
tacts with Citadel. And although the parties had not
finalized a long-term relationship yet, during the months
prior to closing they were certainly contemplating that
one would exist. We reiterate that we are not com-
menting on the scope of the authorization, which will
likely be contested on remand; we are merely looking at
the parties’ “prior negotiations and contemplated future
consequences, along with the terms of the contract and
the parties’ actual course of dealing.” Id. at 479.
   Citadel has satisfied its burden of proof that WRMC
engaged in sufficient minimum contacts. WRMC should
have reasonably anticipated being haled into court in
Illinois if Citadel ever claimed that WRMC had failed to
pay for obligations incurred under the authorization:
“[T]he Due Process Clause may not readily be wielded as
a territorial shield to avoid interstate obligations that
have been voluntarily assumed.” Id. at 474. Likewise,
we conclude that it would comport with fair play and
substantial justice for WRMC to be subject to personal
jurisdiction in Illinois. The state has a strong interest in
protecting Citadel and the other Illinois organizations that
were engaged in the project development for WRMC, and
14                                              No. 07-2638

it is fair for WRMC to answer for any obligations it in-
curred in Illinois.

                     III. Conclusion
We conclude that Citadel satisfied its burden of making
a prima facie showing of the existence of personal juris-
diction over WRMC in Illinois. We REVERSE and REMAND
for proceedings consistent with this opinion.5

5
  We do not express any opinion on WRMC’s motion to transfer
venue for the convenience of the parties and witnesses, which
the district court previously denied as moot; however, the
district court may want to revisit that issue in light of the
disposition of this appeal.

                    USCA-02-C-0072—8-5-08