Kowal v. Westchester Wheels, Inc.

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Appellate Court Date: 2018.01.22
12:36:49 -06'00'
Kowal v. Westchester Wheels, Inc., 2017 IL App (1st) 152293
Appellate Court JANET KOWAL, Plaintiff-Appellee, v. WESTCHESTER WHEELS,
Caption INC., an Illinois Corporation, GIANT BICYCLE, INC., a Virginia
Corporation, HARTLEY’S CYCLE SHOPPE, an Illinois
Corporation, and GIANT MANUFACTURING COMPANY, LTD., a
Taiwan Corporation, Defendants (Giant Manufacturing Company,
Ltd., a Taiwan Corporation, Defendant-Appellant).
District & No. First District, Fifth Division
Docket No. 1-15-2293
Filed September 8, 2017
Decision Under Appeal from the Circuit Court of Cook County, No. 2013-L-13309;
Review the Hon. Daniel T. Gillespie, Judge, presiding.
Judgment Affirmed.
Counsel on Matthew J. Egan, Donald P. Eckler, and Scott L. Howie, of Pretzel &
Appeal Stouffer Chtrd., of Chicago, for appellant.
Kenneth Hoffman and J. Wesley Mitchell, of Mitchell Hoffman &
Wolf LLC, of Chicago, for appellee.
Panel PRESIDING JUSTICE REYES delivered the judgment of the court,
with opinion.
Justice Lampkin concurred in the judgment and opinion.
Justice Gordon specially concurred, with opinion.
OPINION
¶1 Defendant-appellant Giant Manufacturing Company, Ltd. (Giant Manufacturing), a
Taiwanese corporation, brings this appeal under Illinois Supreme Court Rule 306(a)(3) from
an order of the circuit court of Cook County, denying its motion to dismiss a complaint filed
by plaintiff Janet Kowal for lack of personal jurisdiction. Ill. S. Ct. R. 306(a)(3) (eff. Feb. 16,
2011). Plaintiff is a resident of Cook County, Illinois. She filed a complaint against Giant
Manufacturing in the circuit court of Cook County, seeking relief for injuries she sustained as
a result of an alleged defect in a bicycle manufactured by defendant-appellant. On appeal,
Giant Manufacturing argues that the trial court erred in denying its motion to dismiss because
(1) it is not subject to personal jurisdiction in Illinois under the stream-of-commerce theory
and (2) the exercise of personal jurisdiction does not comport with due process. For the
following reasons, we affirm.
¶2 I. BACKGROUND
¶3 The record on appeal discloses the following facts.1 Plaintiff filed a four-count complaint
against Giant Manufacturing, Giant Bicycle, Inc. (Giant Bicycle), Westchester Wheels, Inc.
(Westchester), and Hartley’s Cycle Shoppe (Hartley’s). The complaint alleged counts for
negligence, strict liability, and breach of express warranty. Specifically, the complaint
alleged that Giant Manufacturing, a Taiwanese corporation, manufactured Giant brand
bicycles and distributed the bicycles in the United States exclusively through Giant Bicycle, a
Virginia corporation. Meanwhile, plaintiff purchased a 2007 Giant brand bicycle from
Westchester, an Illinois corporation and authorized retailer of Giant brand bicycles. Plaintiff
then took the bicycle to Hartley’s, an Illinois corporation and authorized retailer of Giant
brand bicycles, for a tune-up and inspection in preparation for a 468-mile bicycle ride event.
A few weeks later, the carbon fiber front fork of the bicycle broke and led to plaintiff’s fall
and injuries during the event in Iowa.
¶4 Thereafter, Giant Manufacturing and Giant Bicycle were notified through service to the
Illinois Secretary of State.2 Giant Manufacturing then filed a motion to quash service of
summons pursuant to section 2-301 of the Code of Civil Procedure (735 ILCS 5/2-301(a)
(West 2014)), arguing (1) it is not registered with the Illinois Secretary of State as authorized
to do business in Illinois and therefore, service upon the Secretary of State is not valid under
section 5.25 of the Business Corporation Act of 1983 (805 ILCS 5/5.25(a) (West 2014)), and
(2) it has not transacted business in Illinois, so that service of process upon it through the
As the parties treat the “Supporting Record” in the interlocutory appeal as the record, we will also
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treat it as the record on appeal.
2
Giant Manufacturing is the only appellant in this appeal.
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Secretary of State is not valid under section 5.30 of the Business Corporation Act (805 ILCS
5/5.30 (West 2014)).
¶5 In support of its motion to quash, Giant Manufacturing included an affidavit of its chief
financial officer (CFO), Bonnie Tu. In her affidavit, Tu attested she was employed as CFO
with Giant Manufacturing for the last 21 years. She averred that Giant Manufacturing is a
Taiwanese corporation with its principal place of business in Taiwan. Tu also claimed Giant
Manufacturing had never sought authorization from the Illinois Secretary of State to conduct
business in Illinois and had never negotiated, performed, or entered into any contracts in
Illinois. She further averred that Giant Manufacturing has never shipped any products to
Illinois and never maintained any offices, employees, registered agents, or bank accounts in
Illinois. Tu alleged that Giant Manufacturing has never advertised in Illinois and never
solicited business from or transacted business with an Illinois resident or corporation. In
addition, she averred that Giant Manufacturing has never paid any incomes taxes in Illinois
or filed any returns in this state.
¶6 Giant Manufacturing subsequently answered interrogatories limited to the issue of
personal jurisdiction (initial answer). In its initial answer, the company acknowledged that
while Tu was employed as its CFO since 1993, she was also a director at Giant Bicycle since
1994. Furthermore, Young Liu, a director with Giant Manufacturing since 1997, was also a
director at Giant Bicycle since 1987. Giant Manufacturing stated in its answers to
interrogatories that it designs, manufactures, and sells bicycles and bicycle components but
does not sell bicycles directly to the public. Rather, Giant Bicycle is the exclusive distributor
of Giant brand bicycles in the United States. Giant Manufacturing represented that Giant
Bicycle is not its wholly-owned subsidiary. Giant Manufacturing further acknowledged that
in 1988, “Giant brand bicycles were first sold in Illinois.” It also stated that Westchester was
authorized in 2006 and Hartley’s was authorized in 2013 by Giant Bicycle to sell and service
Giant brand bicycles.
¶7 In response to Giant Manufacturing’s motion to quash, plaintiff asserted that personal
jurisdiction existed under the Illinois long-arm statute (735 ILCS 5/2-209(a)(1) (West 2014))
because the company “is doing business within” Illinois through its subsidiary, Giant
Bicycle. In support of its motion, plaintiff attached printouts of advertisements posted on the
Internet on July 22, 2014, by dealers and retailers for Giant brand bicycles in Illinois.
Plaintiff also attached a printout of a map from Giant Bicycle’s public Internet website,
which demonstrated that on July 23, 2014, approximately 40 “Giant Authorized Dealers”
were present in Illinois. The printout of the website also states that Giant brand bicycles are
“sold exclusively through Giant Authorized Dealers.” In addition, plaintiff attached a copy of
an advertisement for Giant brand bicycles in a magazine that the plaintiff’s attorney
purchased at a newsstand in Chicago, Illinois. Plaintiff also attached the National Bicycle
Dealers Association’s estimated statistics, that in 2012, approximately 312,000 Giant brand
bicycles were sold in the United States, 13% of the specialty bicycle market share
nationwide.
¶8 Thereafter, Giant Manufacturing submitted supplemental answers to plaintiff’s
jurisdictional interrogatories, in which it added to and modified its initial answer. Unlike in
its initial answer, Giant Manufacturing claimed it did not know which retailers in Illinois are
authorized to sell Giant brand bicycles. Further, while it had previously answered that
Westchester was authorized by Giant Bicycle to sell Giant brand bicycles in 2006, Giant
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Manufacturing now stated it did not have this information. It indicated it had never been a
party to a contract with Westchester. While maintaining its previous answer that Hartley’s
was authorized by Giant Bicycles to sell Giant brand bicycles in 2013, Giant Manufacturing
answered it had never been a party to a contract with Hartley’s either. Giant Manufacturing
stated it does not instruct Giant Bicycle where to distribute or sell Giant brand bicycles in the
United States. Giant Manufacturing does not take part in authorizing retailers in Illinois to
sell Giant brand bicycles. Giant Bicycle determines which retailers it chooses to do business
with in Illinois, and the terms of its business relationship with each of those retailers. While
Giant Bicycle shipped Giant brand bicycles to certain retailers in Illinois from 2005 to 2009,
Giant Manufacturing has no information regarding the number of Giant brand bicycles sold
or distributed to retailers in Illinois by Giant Bicycle during that period of time. In addition,
Giant Manufacturing stated that its net profit from 2007 through 2013 was distributed to its
shareholders, none of whom included Giant Bicycle or any Illinois resident or corporation.
Giant Manufacturing also alleged that at the time plaintiff’s Giant brand bicycle was
manufactured, there was no formal agreement between Giant Manufacturing and Giant
Bicycle for the distribution or sale of Giant brand bicycles in the United States. Giant
Manufacturing, however, acknowledged it was informed that Giant Bicycle entered into
agreements at various times with certain retailers in Illinois for the sale of Giant brand
bicycles. Giant Manufacturing “first became aware that Giant brand bicycles were *** sold
in Illinois by authorized retailers or dealers” in 1988. In addition, Giant Bicycle maintains a
distribution warehouse in Elgin, Illinois, and employs individuals who work in the
warehouse.
¶9 Later, in Giant Manufacturing’s answers to plaintiff’s second set of jurisdictional
interrogatories, the company acknowledged that Giant Bicycle is a wholly-owned subsidiary
of Gaiwin B.V. and that Gaiwin B.V. is a wholly-owned subsidiary of Giant Manufacturing.
¶ 10 After the matter was fully briefed and argued, the trial court denied Giant
Manufacturing’s motion to quash. In denying the motion, the trial court initially noted that
Giant Manufacturing did not have the continuous and systematic contacts with Illinois to
establish general jurisdiction. The trial court, however, went on to find that Giant
Manufacturing had sufficient minimum contacts with Illinois to establish specific jurisdiction
under the Illinois long-arm statute, and thus service was proper. Giant Manufacturing filed a
petition for leave to appeal pursuant to Illinois Supreme Court Rule 306(a)(3) (Ill. S. Ct. R.
306(a)(3) (eff. Feb. 16, 2011)), seeking leave from this court to appeal the denial of the
motion to quash. This court initially denied Giant Manufacturing’s motion but the supreme
court subsequently entered a supervisory order, directing this court to vacate our decision and
grant defendant leave to appeal. Kowal v. Westchester Wheels, Inc., No. 119993 (Ill. Jan. 20,
2016) (supervisory order). Having now granted Giant Manufacturing’s petition and reviewed
its contentions on the merits, we affirm the trial court’s denial of the motion to quash.
¶ 11 II. ANALYSIS
¶ 12 On appeal, Giant Manufacturing argues that the trial court erred in denying its motion to
dismiss because (1) it is not subject to personal jurisdiction in Illinois under the
stream-of-commerce theory and (2) the exercise of personal jurisdiction over it does not
comport with due process.
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¶ 13 In response, plaintiff argues that Giant Manufacturing is subject to personal jurisdiction
in Illinois because (1) it intentionally placed its bicycles into United States’ stream of
commerce, knowing they would be sold in Illinois; (2) its use of its “subsidiary,” Giant
Bicycle, to introduce defendant’s bicycles to the Illinois market suffices for the exercise of
personal jurisdiction in Illinois; and (3) it is reasonable for Illinois to exercise jurisdiction
over defendant.
¶ 14 Generally, it is the plaintiff’s burden to establish a prima facie basis to exercise personal
jurisdiction over a nonresident defendant. Cardenas Marketing Network, Inc. v. Pabon, 2012
IL App (1st) 111645, ¶ 28. On appeal, any conflict between the pleadings and affidavits must
be resolved in the plaintiff’s favor. Russell v. SNFA, 2013 IL 113909, ¶ 28. However, a
plaintiff’s prima facie case may be overcome by a defendant’s uncontradicted evidence that
defeats jurisdiction. Id. Where, as here, the circuit court determines the issue of personal
jurisdiction solely on documentary evidence without an evidentiary hearing, our review is
de novo. Id. Under de novo review, we perform the same analysis that a trial court would
perform. Khan v. BDO Seidman, LLP, 408 Ill. App. 3d 564, 578 (2011). Given this court’s
independent review, we may affirm on any basis that is supported by the record, regardless of
whether that basis was the reason for the circuit court’s judgment. Hess v. Flores, 408 Ill.
App. 3d 631, 636 (2011).
¶ 15 A. Applicable Statutory and Constitutional Provisions
¶ 16 Having set forth our standard of review, we turn to the legal principles applicable to our
determination of whether the courts of this state have personal jurisdiction over Giant
Manufacturing. Under section 2-209 of the Code of Civil Procedure, commonly referred to as
the Illinois long-arm statute, an Illinois court can exercise personal jurisdiction over a
nonresident defendant. 735 ILCS 5/2-209(a) (West 2014). The Illinois long-arm statute
contains a “catch-all provision” which permits Illinois courts to exercise personal jurisdiction
to the full extent allowed by the state and federal constitutions. 735 ILCS 5/2-209(c) (West
2014); Russell, 2013 IL 113909, ¶ 30. Thus, “if the contacts between a defendant and Illinois
are sufficient to satisfy both federal and state due process concerns, the requirements of
Illinois’ long-arm statute have been met, and no other inquiry is necessary.” (Internal
quotation marks omitted.) Cardenas, 2012 IL App (1st) 111645, ¶ 29.
¶ 17 While our supreme court has instructed us to consider the Illinois long-arm statute
separately from federal due process standards (Rollins v. Ellwood, 141 Ill. 2d 244, 271
(1990)), it is generally true that Illinois due process concerns regarding personal jurisdiction
are satisfied when its federal counterpart is satisfied. Russell, 2013 IL 113909, ¶ 32; Madison
Miracle Productions, LLC v. MGM Distribution Co., 2012 IL App (1st) 112334, ¶ 44. In the
case at bar, neither party contends the Illinois due process analysis here is different from the
due process analysis under our federal constitution. We, therefore, need only consider the
relevant federal due process concerns. Aasonn, LLC v. Delaney, 2011 IL App (2d) 101125,
¶ 13. Under a federal due process analysis, courts are required to consider whether (1) the
nonresident defendant had minimum contacts with the forum state such that the defendant
was fairly warned that it may be haled into court there, (2) the action arose out of or was
related to the defendant’s contacts with the forum state, and (3) it is reasonable to require the
defendant to litigate in the forum state. Wiggen v. Wiggen, 2011 IL App (2d) 100982, ¶ 22.
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¶ 18 B. Minimum Contacts
¶ 19 Giant Manufacturing claims it does not have sufficient minimum contacts with Illinois
for our courts to exercise personal jurisdiction because (1) there is no evidence that it did
anything more than to place its bicycles in the international stream of commerce and (2) there
is no evidence that it knew that its bicycles would enter Illinois.
¶ 20 Pursuant to federal due process standards, a nonresident defendant must have “certain
minimum contacts with [the forum state] such that the maintenance of the suit [in that forum]
does not offend ‘traditional notions of fair play and substantial justice.’ ” International Shoe
Co. v. Washington, 326 U.S. 310, 316 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463
(1940)). Further, when the defendant has certain minimum contacts, his “conduct and
connection with the forum State are such that he should reasonably anticipate being haled
into court there.” World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980).
Those minimum contacts must also be based on “some act by which the defendant
‘purposefully avails itself of the privilege of conducting activities within the forum State,
thus invoking the benefits and protections of its laws.’ ” J. McIntyre Machinery, Ltd. v.
Nicastro, 564 U.S. 873, 880 (2011) (quoting Hanson v. Denckla, 357 U.S. 235, 253 (1958)).
This requirement exists so that a nonresident defendant will not be forced to litigate in a
distant or inconvenient forum solely as a result of random, fortuitous, or attenuated contacts
or the unilateral act of a consumer or some other third person. Burger King Corp. v.
Rudzewicz, 471 U.S. 462, 475 (1985).
¶ 21 In addition, in determining whether the minimum contacts test has been satisfied, we
consider whether the forum asserts general or specific jurisdiction. Goodyear Dunlop Tires
Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011). General jurisdiction exists when the
minimum contacts requirement has been satisfied by the defendant’s “ ‘continuous and
systematic’ ” contacts with the forum state as to render them essentially at home in the forum
state. Id. Specific jurisdiction exists when the defendant has “ ‘purposefully directed’ ” his
activities at the forum state and the action directly arose out of or are related to the contacts
between the defendant and the forum. Burger King Corp., 471 U.S. at 472. Here, plaintiff
does not argue that general jurisdiction applies, and thus we limit our review to specific
jurisdiction.
¶ 22 One way to satisfy the requirements for specific jurisdiction is under the
stream-of-commerce theory, which the United States Supreme Court first discussed in
World-Wide Volkswagen, 444 U.S. 286. In that decision, the Supreme Court concluded that a
forum state is allowed to exercise personal jurisdiction over a nonresident defendant that
“delivers its products into the stream of commerce with the expectation that they will be
purchased by consumers in the forum State.” Id. at 297-98. The Supreme Court explained
that it is not unreasonable to subject a nonresident to suit in a forum state, if the sale of a
nonresident defendant’s product is not simply an isolated transaction but arises from the
efforts of the nonresident defendant to serve the forum state. Id. (Oklahoma state court could
not exercise personal jurisdiction over a nonresident automobile retailer and its distributor
where their only connection with Oklahoma was that a buyer in New York had taken their
automobile to Oklahoma where the accident occurred).
¶ 23 Thereafter, the United States Supreme Court addressed the stream-of-commerce theory
again in Asahi Metal Industry Co. v. Superior Court of California, 480 U.S. 102 (1987). In
that case, a Japanese manufacturer Asahi was aware that the components it manufactured,
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sold, and delivered to a Taiwanese manufacturer were being sold in California. Id. at 107.
Asahi, however, took no other action specifically directed at the forum state. Id. at 112-13
(opinion of O’Connor, J., joined by Rehnquist, C.J., and Powell and Scalia, JJ.). Based on
these facts, the Court unanimously held that California could not exercise personal
jurisdiction over Asahi because it would be unreasonable. Id. at 113. The Court, however,
was split on the separate issue of whether sufficient minimum contacts with California had
been established and issued three separate opinions. Id. at 116 (Brennan, J., specially
concurring, joined by White, Marshall, and Blackmun, JJ.); 121 (Stevens, J., joined by White
and Blackmun, JJ.)
¶ 24 Justice O’Connor and three other justices advanced the narrow stream-of-commerce
theory, concluding that minimum contacts with a forum state requires “[a]dditional conduct”
that is beyond merely placing products into the stream of commerce and knowing that the
products will make their way into the forum state. Id. at 112 (opinion of O’Connor, J., joined
by Rehnquist, C.J., and Powell and Scalia, JJ.). The four justices explained that examples of
additional conduct that indicate an intent or purpose to serve the market in the forum state
include designing the product for the market in the forum state, advertising in the forum
state, establishing channels for providing regular advice to customers in the forum state, or
marketing the product through a distributor who has agreed to serve as the sales agent in the
forum state. Id. The four justices concluded that even if Asahi had been aware that its
component parts would be incorporated into products sold in California, that knowledge
alone did not establish that Asahi purposefully availed itself of the California market. Id. at
112-13.
¶ 25 Justice Brennan and three other justices adopted the broad stream-of-commerce theory.
Id. at 117 (Brennan, J., specially concurring, joined by White, Marshall, and Blackmun, JJ.).
Under this theory, the forum state can assert personal jurisdiction over a nonresident
defendant as long as the defendant is involved in “the regular and anticipated flow of
products from manufacture to distribution to retail sale” and is “aware that the final product
is being marketed in the forum State,” i.e., the fairness-and-foreseeability test. Id. Based on
this theory, the four justices concluded that Asahi’s regular and extensive sales of component
parts to a manufacturer it knew was making regular sales of a product in California was
sufficient to establish minimum contacts for California. Id. at 121.
¶ 26 Justice Stevens, joined by two other justices who had joined Justice Brennan’s concurring
opinion, expressed no opinion as to whether the narrow or broad stream-of-commerce theory
was correct. Id. at 121-22 (Stevens, J., joined by White and Blackmun, JJ.). He instead
concluded that, even under the narrow version of the stream-of-commerce theory, the regular
course of dealing that resulted in a large volume of Asahi’s products going into California’s
market constituted minimum contacts. Id. at 122.
¶ 27 Following the decision in Asahi, the Illinois Supreme Court addressed the
stream-of-commerce theory in Wiles v. Morita Iron Works Co., 125 Ill. 2d 144 (1988). In
Wiles, our supreme court recognized the two competing standards for the
stream-of-commerce theory presented in Asahi but declined to decide which approach is
correct. Id. at 159-60. The Wiles court went on to determine, however, that under either
interpretation of the theory, “it is clear that purposeful availment of the forum’s market
requires, at a minimum, that the alien defendant is ‘aware that the final product is being
marketed in the forum State.’ ” (Emphases in original.) Id. at 160 (quoting Asahi, 480 U.S. at
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117 (Brennan, J., specially concurring, joined by White, Marshall, and Blackmun, JJ.)). In
applying this standard, the Wiles court found that the Japanese defendant in that case did not
have the requisite minimum contacts with Illinois. Id. at 161.
¶ 28 In Wiles, an employee was injured while cleaning a machine at his employer’s plant in
Illinois. Id. at 147. The employee brought an action against the Japanese defendant that had
sold the machine to the employer in Japan. Id. at 146-47. The Wiles court noted the record
was “totally devoid” of any evidence that the Japanese defendant was aware that the
employer intended to transport the machines it had purchased in Japan to Illinois, or that the
employer had a facility in Illinois. Id. at 160. The Wiles court noted that, accordingly, the
machines were brought into Illinois solely by the unilateral act of the employer. Id. The Wiles
court also noted that a single isolated transaction had occurred between the Japanese
defendant and the employer. Id. at 161. The Wiles court concluded that the mere presence of
a product in a state, without more, is insufficient to subject a foreign manufacturer to the
jurisdiction of the Illinois courts. Id.
¶ 29 Recently, in J. McIntyre, 564 U.S. 873, the United States Supreme Court revisited the
stream-of-commerce theory. There, the plaintiff was injured at his workplace in New Jersey,
while operating a machine manufactured by a defendant based in England. Id. at 878 . The
defendant sold its products exclusively through an independent Ohio-based distributor to sell
its products in the United States. Id. at 896 (Ginsburg, J., dissenting, joined by Sotomayor
and Kagan, JJ.). The defendant did not have any control over the distributor. Id. at 878
(plurality opinion). The defendant’s company officials attended trade shows in states other
than New Jersey. Id. at 886. Further, the plaintiff’s employer had purchased a single machine
from the Ohio-based distributor. Id. at 888. Moreover, defendant did not have a single
contact with New Jersey, short of the machine in question that caused the accident. Id. at 886.
In light of these facts, six justices of the J. McIntyre court held that the New Jersey court
could not exercise specific personal jurisdiction over the defendant. Id. at 887-88. The six
justices, however, did not agree on the application of the stream-of-commerce theory. Id. at
893 (Ginsburg, J., dissenting, joined by Sotomayor and Kagan, JJ.).
¶ 30 A plurality advanced by Justice Kennedy rejected the broad stream-of-commerce theory’s
fairness-and-foreseeability test. Id. at 883. The plurality stated that a forum state may
exercise jurisdiction on a nonresident defendant “only where the defendant can be said to
have targeted the forum.” Id. at 882. The plurality further stated, “it is not enough that the
defendant might have predicted that its goods will reach the forum State.” Id.
¶ 31 In a concurring opinion, Justice Breyer, joined by Justice Alito, agreed with the Kennedy
plurality’s decision that the New Jersey court did not have jurisdiction over the defendant,
but for different reasons. Id. at 893 (Breyer, J., concurring, joined by Alito, J.). Justices
Breyer and Alito agreed with the judgment because no court precedents had held that a single
isolated sale was sufficient to assert jurisdiction. Id. at 888. Justices Breyer and Alito,
however, disagreed with the plurality’s “strict no-jurisdiction rule.” Id. at 890. According to
Justices Breyer and Alito, the outcome of the case should have been decided on precedents,
and the Kennedy plurality’s “broad pronouncements that refashion basic jurisdictional rules”
was inappropriate. Id.
¶ 32 In dissent, Justice Ginsburg, joined by two other justices, argued that the New Jersey
court had jurisdiction over the defendant because the defendant had targeted the entire United
States market. Id. at 898 (Ginsburg, J., dissenting, joined by Sotomayor and Kagan, JJ.). The
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defendant had made arrangements with an American-based distributor to market its products
throughout the United States and regularly attended trade shows to reach customers
nationwide. Id. at 896.
¶ 33 Following the decision in J. McIntyre, our supreme court revisited the
stream-of-commerce theory in Russell, 2013 IL 113909. Having carefully reviewed
J. McIntyre, the Russell court rejected the defendant’s argument that the Kennedy plurality’s
opinion and Justice Breyer’s concurrence in J. McIntyre should be construed as adopting
Justice O’Connor’s narrow stream-of-commerce theory articulated in Asahi. Id. ¶ 70; Asahi,
480 U.S. at 112 (opinion of O’Connor, J., joined by Rehnquist, C.J., and Powell and Scalia,
JJ.). The Russell court explained that while the Kennedy plurality in J. McIntyre certainly
favored that theory, Justice Breyer explicitly declined to announce any new jurisdictional
rules and instead believed “ ‘the outcome of this case is determined by our precedents.’ ”
Russell, 2013 IL 113909, ¶ 70 (quoting J. McIntyre, 564 U.S. at 887 (Breyer, J., concurring,
joined by Alito, J.)). In recognizing this disagreement, the Russell court declined to state
whether Justice Breyer intended to endorse Justice O’Connor’s narrow stream-of-commerce
theory, and accordingly, declined to adopt either the broad or narrow version of the theory.
Russell, 2013 IL 113909, ¶ 71.
¶ 34 The Russell court, however, deciphered three points from the three separate opinions in
J. McIntyre. Id. ¶ 67. First, although the proper application of the stream-of-commerce theory
is not settled, the United States Supreme Court unanimously endorsed the continued validity
of the theory from World-Wide Volkswagen to establish specific jurisdiction. Id. Second,
specific jurisdiction should not be exercised based on a single sale in a forum, even when a
manufacturer “ ‘knows or reasonably should know that its products are distributed through a
nationwide distribution system that might lead to those products being sold in any of the fifty
states.’ ” (Emphasis omitted.) Id. ¶ 68 (quoting J. McIntyre, 564 U.S. at 891 (Breyer, J.,
concurring, joined by Alito, J.)). The Russell court noted this is consistent with the decision
in Wiles, that the competing opinions in Asahi required that the nonresident defendant be
aware that the final product is being marketed in the forum state. Id. Third, a minority of the
United States Supreme Court believes that a broader stream-of-commerce theory should be
applied and is warranted under International Shoe’s focus on “ ‘notions of fair play and
substantial justice.’ ” Id. ¶ 69 (quoting J. McIntyre, 564 U.S. at 910 (Ginsburg, J., dissenting,
joined by Sotomayor and Kagan, JJ.)). In applying these standards to the facts of the case, the
Russell court determined that the defendant had the requisite minimum contacts with Illinois.
Id. ¶ 85. The Russell court reasoned defendant was a French manufacturer of custom-made
bearings for the aerospace industry, defendant knowingly used an American distributor to
distribute and market its products throughout the United States including Illinois, the
distributor made multiple sales of defendant’s products in Illinois, and defendant had a
business relationship with a buyer in Illinois for its custom-made bearings. Id.
¶ 35 In light of the above discussion, we find that under either version of the
stream-of-commerce theory, Giant Manufacturing has the requisite minimum contacts with
Illinois. Under the broad stream-of-commerce theory, as previously examined, Illinois can
assert personal jurisdiction as long as defendant is involved in “the regular and anticipated
flow of products from manufacture to distribution to retail sale” and is “aware that the final
product is being marketed in the forum State.” Asahi, 480 U.S. at 117 (Brennan, J., specially
concurring, joined by White, Marshall, and Blackmun, JJ.). We initially note that Giant
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Manufacturing’s claim that it did not know its bicycles were being sold in Illinois is
disingenuous. In its initial answer to plaintiff’s interrogatories, it acknowledged that Giant
brand bicycles were first sold in Illinois in 1988. In that answer, Giant Manufacturing also
stated Giant Bicycle had authorized Westchester in 2006 and Hartley’s in 2013 to sell and
service Giant brand bicycles. Later, in its supplemented answers, Giant Manufacturing
further acknowledged it knew that Giant Bicycle had shipped Giant brand bicycles to certain
retailers in Illinois from 2005 to 2009. Moreover, at least two individuals, Tu and Liu, were
decision makers or top management employees at both defendant and Giant Bicycle. Tu was
employed as CFO with Giant Manufacturing since 1993 and was a director at Giant Bicycle
since 1994; Liu was a director at Giant Bicycle since 1987 and a director with Giant
Manufacturing since 1997. In addition, Giant Bicycle’s public website indicates that in 2014,
when defendant was served with summons, approximately 40 retailers in Illinois were
authorized to sell Giant brand bicycles in Illinois. Morecambe Maritime, Inc. v. National
Bank of Greece, S.A., 354 Ill. App. 3d 707, 713 (2004) (questions of personal jurisdiction
depend on the contacts the foreign defendant has with the forum state at the time the
defendant is made a party to the litigation). Also, Giant Manufacturing does not contend that
the sale of Giant brand bicycles in Illinois was an isolated event. Thus, while the record does
not disclose the volume of Giant brand bicycles marketed in Illinois, it is reasonable to infer
that its commercial transactions, like those of other manufacturers, result in more than an
insubstantial use and consumption in this state. See Gray v. American Radiator & Standard
Sanitary Corp., 22 Ill. 2d 432, 442 (1961) (where the defendant did not claim that the present
use of its product in Illinois is an isolated instance, it is a reasonable inference that its
commercial transactions, like those of other manufacturers, result in substantial use and
consumption in Illinois); see also Saia v. Scripto-Tokai Corp., 366 Ill. App. 3d 419, 427
(2006) (same). We thus find there is sufficient evidence that there was a “regular and
anticipated flow” of Giant brand bicycles in Illinois and that defendant was aware that its
bicycles were being marketed in Illinois. Asahi, 480 U.S. at 117.
¶ 36 Further, even under the narrow stream-of-commerce theory, we find Giant Manufacturing
has purposefully availed itself of the Illinois market, such that it has sufficient minimum
contacts with Illinois. Id. at 112 (opinion of O’Connor, J., joined by Rehnquist, C.J., and
Powell and Scalia, JJ.). The record establishes that Giant Manufacturing indirectly shipped
its Giant brand bicycles into the United States market, including Illinois, through Giant
Bicycle, its second-tier subsidiary; that is, Giant Bicycle was a wholly owned subsidiary of
Gaiwin B.V., which was in turn a wholly owned subsidiary of Giant Manufacturing. Giant
Manufacturing does not deny that Giant Bicycle is its sole distributor in the United States
market. Giant Bicycle’s public website also states that Giant brand bicycles are “sold
exclusively through Giant Authorized Dealers.” As such, the only way that Giant
Manufacturing’s bicycles would ever reach a final consumer in United States was through
Giant Bicycle and its authorized retailers. Thus, the fact that there were approximately 40
Giant Bicycle authorized retailers in Illinois further demonstrates that defendant continuously
and intentionally serves or targets this market. Moreover, the retailers in Illinois were
authorized to not only sell but also service Giant brand bicycles. In other words, channels
were established for servicing and providing regular advice to customers regarding Giant
brand bicycles in Illinois. Id. (establishing channels for providing regular advice to customers
in the forum state is an example of “[a]dditional conduct” under the narrow
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stream-of-commerce theory). Therefore, given the continuous nature of Giant
Manufacturing’s relationship with Giant Bicycle and its authorized retailers in Illinois, the
presence of Giant Manufacturing’s products in Illinois was not random, fortuitous, or
attenuated. See Soria v. Chrysler Canada, Inc., 2011 IL App (2d) 101236, ¶ 30.
¶ 37 We further find that Giant Manufacturing’s reliance on J. McIntyre and Wiles is
misplaced as the facts in the two cases are distinguishable. As aforementioned, in J.
McIntyre, the foreign defendant did not have a single contact with the forum state, short of
the machine in question that caused the accident. J. McIntyre, 564 U.S. at 886. Here, as
previously discussed, the record establishes that Giant Manufacturing has purposefully
availed itself of the Illinois market through its 40 authorized retailers.
¶ 38 Furthermore, unlike Wiles, where the court found the record was “totally devoid” of any
evidence that the Japanese manufacturer was aware that its products might be destined for
Illinois, there is ample evidence here that Giant Manufacturing was aware that its Giant
brand bicycles were being marketed in Illinois. Wiles, 125 Ill. 2d at 160. Additionally, we are
not dealing with a single isolated transaction by a foreign defendant as in Wiles. Id. at 161.
¶ 39 We also find Giant Manufacturing’s reliance on Bristol-Myers Squibb Co. v. Superior
Court of California, 582 U.S. ___, 137 S. Ct. 1773 (2017) to be misplaced. In Bristol-Myers,
the Supreme Court found that due process did not permit exercise of specific personal
jurisdiction in California over nonresident consumers’ claims. Id. at ___, 137 S. Ct. at 1782.
Here, plaintiff is a resident of Illinois. Accordingly, Bristol-Myers is not applicable in this
case.
¶ 40 For these reasons, we find that Giant Manufacturing had sufficient minimum contacts
with Illinois for purposes of specific personal jurisdiction. World-Wide Volkswagen, 444 U.S.
at 297-98.
¶ 41 C. Arises-Out-of Requirement
¶ 42 Having determined that Giant Manufacturing has the requisite minimum contacts with
Illinois, we turn to consider whether plaintiff has demonstrated that the action arose out of or
was related to the company's contacts with Illinois. Morgan, Lewis & Bockius LLP v. City of
East Chicago, 401 Ill. App. 3d 947, 954 (2010). The “arising out of” or “related to” standard
is a lenient and flexible standard. Russell, 2013 IL 113909, ¶ 83. We find that this
requirement has been met in this case. Here, plaintiff’s injuries clearly arose out of and were
directly related to her use of a bicycle manufactured by Giant Manufacturing and sold to
plaintiff through a Giant brand authorized retailer in Illinois. In other words, the cause of
action directly arose out of Giant Manufacturing’s contacts with Illinois. See Soria, 2011
App (2d) 101236, ¶ 34 (the “arising out of” or “related to” requirement was met where the
plaintiff’s injuries clearly arose out of and were directly related to her use of a vehicle
assembled by the nonresident defendant).
¶ 43 D. Reasonableness
¶ 44 Next, having determined that plaintiff has established that the action arose out of or was
related to Giant Manufacturing’s contacts with Illinois, we must consider whether it would be
reasonable to require Giant Manufacturing to litigate in Illinois. Wiggen, 2011 IL App (2d)
100982, ¶ 22. In making this decision, we must consider (1) the burden on Giant
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Manufacturing, (2) the forum state’s interest in resolving the dispute, (3) the plaintiff’s
interest in obtaining relief, and (4) the interest of the affected forums in the efficient judicial
resolution of the dispute and advancement of substantive social policies. Russell, 2013 IL
113909, ¶ 87 (citing Wiles, 125 Ill. 2d at 152).
¶ 45 In the case at bar, Illinois has a strong interest in providing its citizens effective redress
for torts caused by products distributed here. Illinois cannot protect this interest unless it
asserts jurisdiction over foreign corporations that use subsidiaries to distribute the products
they have manufactured. Illinois also has a strong interest in providing a forum in which its
residents may seek relief from wrongs they have suffered. Further, plaintiff has a strong
interest in obtaining relief for her injuries that were allegedly caused by Giant
Manufacturing.
¶ 46 While we are mindful that Giant Manufacturing is a foreign corporation, it is no stranger
to the United States legal system, as it has been a party to litigation in several states and has
retained local counsel.3 We also recognize that the United States Supreme Court in both
Asahi and J. McIntyre focused, in part, on the burden imposed on foreign defendants when
concluding that the exercise of jurisdiction would be unreasonable. However, unlike in
Asahi, we are not dealing solely with indemnification claims between Taiwanese and
Japanese companies. Here, plaintiff’s products liability claim against Giant Manufacturing
remains before this court. See Russell, 2013 IL 113909, ¶ 90. Also, unlike in J. McIntyre, we
are not dealing with a single isolated sale by the foreign defendant. See id. ¶ 91; J. McIntyre,
564 U.S. at 886. In this case, although Giant Manufacturing claims it has no information
regarding the number of Giant brand bicycles shipped to Illinois by Giant Bicycle between
2005 and 2009, it acknowledged that Giant brand bicycles were shipped to certain retailers in
Illinois during that time period. In sum, although we acknowledge that having to litigate in
Illinois may be a burden on Giant Manufacturing as an alien defendant, the other factors
nevertheless outweigh this factor. We thus conclude that it is reasonable for Illinois to
exercise personal jurisdiction over Giant Manufacturing. See Russell, 2013 IL 113909,
¶¶ 90-91.
¶ 47 CONCLUSION
¶ 48 In light of the foregoing, we affirm the judgment of the circuit court of Cook County.
¶ 49 Affirmed.
¶ 50 JUSTICE GORDON, specially concurring.
¶ 51 I agree with the well-written opinion of the majority that, under either version of the
stream-of-commerce theory, Giant Manufacturing has the requisite minimum contacts with
Illinois, but I write separately to clarify and add to the reasoning of the majority opinion.
¶ 52 In Giant Manufacturing’s corporate structure, it was in effect the owner of Giant Bicycle,
its exclusive distributor of Giant-brand bicycles. Giant Bicycle is a wholly-owned subsidiary
of Gainin B.V., which is wholly owned by Giant Manufacturing. Giant Bicycle had
3
See Giant Manufacturing Co. v. BikeE Corp., No. Civ. 02-6222-TC, 2004 WL 1698056, at *1 (D.
Or. July 28, 2004); see Naumann v. Giant Bicycle Inc., 516 N.W.2d 20 (Wis. Ct. App. 1994) (table).
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approximately 40 “Giant authorized dealers present in Illinois.” Giant Bicycle maintained a
distribution warehouse in Elgin, Illinois, where the bicycles manufactured by Giant
Manufacturing were shipped. It was from this warehouse the bicycles were distributed to its
authorized dealers. In 2012, approximately 312,000 Giant-brand bicycles were sold in the
United States, which represented 13% of the specialty bicycle market in the United States.
All of the distribution of the bicycles came through the warehouse under the evidence
produced by Giant Manufacturing or Giant Bicycle. Giant Bicycle authorized Westchester in
2006 and Hartley in 2013 to sell and service Giant-brand bicycles. Since Giant
Manufacturing in effect owned and controlled Giant Bicycles, it was involved in “the regular
and anticipated flow of products from manufacture to distribution to retail sale” (Asahi, 480
U.S. at 117 (Brennan, J.,specially concurring, joined by White, Marshall, and Blackmun, JJ.))
and had to be “aware that the final product is being marketed in the forum State” (id.). Even
if this court adopted the broader stream-of-commerce theory under International Shoe, which
focused on “ ‘notions of fair play and substantial justice’ ” (International Shoe, 326 U.S. at
316 (quoting Milliken, 311 U.S. at 463)), Giant Manufacturing had more than the requisite
minimum contacts with Illinois. Giant Manufacturing in effect set up its business to cover the
entire United States through its ownership and control of its exclusive distribution of
Giant-brand bicycles. It needed no formal agreement with Giant Bicycles because it owned
and control the distribution of its product. As a result, it is reasonable for Illinois to exercise
personal jurisdiction over Giant Manufacturing.
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