Retreat Properties, LLC v. Underwood

2022 IL App (1st) 210220-UTHIRD DIVISION
June 30, 2022
No. 1-21-0220
NOTICE: This order was filed under Supreme Court Rule 23 and is not precedent except in the
limited circumstances allowed under Rule 23(e)(i).
_____________________________________________________________________________
IN THE APPELLATE COURT OF ILLINOIS
FIRST JUDICIAL DISTRICT
______________________________________________________________________________
RETREAT PROPERTIES, LLC, ) Appeal from
) the Circuit Court
Plaintiff-Appellant, ) of Cook County
)
v. ) 20-L-005533
)
JOHN UNDERWOOD, and LARRY STANGELAND, ) Honorable
) Margaret Ann Brennan,
Defendants-Appellees. ) Judge Presiding
JUSTICE McBRIDE delivered the judgment of the court.
Presiding Justice Gordon and Justice Burke concurred in the judgment.
ORDER
¶1 Held: Dismissal of complaint affirmed where Colorado home builders were not subject
to specific personal jurisdiction under Illinois’ long-arm statute based on unverified
allegations that they sent inflated construction invoices to the sole Illinois client of their
Colorado construction company.
¶2 Retreat Properties, LLC (Retreat Properties or client), an Alaskan company whose
principal place of business is in Illinois, hired a Colorado general contractor, Crystal Springs
Builders, Inc. (Crystal Springs Builders or builder), to construct a home in Colorado, and later
sued the company’s owner, Larry Stangeland, and project manager, John Underwood, alleging
fraudulent misrepresentation, negligent misrepresentation, and tortious interference with a
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prospective economic advantage due to construction defects and overbilling. The circuit court
granted Stangeland and Underwood’s motion to dismiss for lack of personal jurisdiction,
improper venue, and forum non conveniens. On appeal, Retreat Properties argues that the
Colorado defendants’ submission of inflated invoices to an Illinois resident were sufficient
minimum contacts with Illinois to satisfy this jurisdiction’s long-arm and venue statutes (735
ILCS 5/2-209, 5/2-101 (West 2018)). Retreat Properties also argues that the defendants failed to
carry their substantial burden of demonstrating that Colorado’s Pitkin County is a more
convenient forum than Illinois’ Cook County for resolving the dispute.
¶3 Retreat Properties’ unverified complaint indicated the following. Retreat Properties’
principal place of business is in Lincolnwood, Illinois. The members of this limited liability
company are Michael Klein and the Klein Family Fund, LLC, and the sole member of that
second company is Michael Klein. Klein resides in Cook County. After Retreat Properties and
Crystal Springs contracted in October 2017 for the construction of a new residence in Aspen,
Colorado, Stangeland and Underwood supervised the day-to-day operations of the project;
communicated with Klein, subcontractors, vendors, and the City of Aspen about the project; and
submitted pay applications to Retreat Properties to obtain progress payments. During the course
of construction, disagreements arose, primarily about the pool. The contract provided for the
project to be substantially completed by June 30, 2019, but it had not reached that stage when
Retreat Properties filed this suit in May 2020. Retreat Properties claimed that work performed by
the pool subcontractors was “incorrect” and “incomplete” and that it would cost $200,000 to
$500,000 to remediate the pool’s structural and aesthetic aspects and the surrounding patio and
landscaping. Retreat Properties also “identified roughly 342 outstanding punch list items to date”
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at the Colorado jobsite, such as “incorrect and incomplete” work by subcontractors responsible
for the roof, electricity, plumbing, drywall, paint, carpentry, driveway, storm sewers, and
landscaping. In Counts I and II, Retreat Properties claimed that the building company’s
September, October, and November 2019 pay applications were fraudulent misrepresentations
about the pool because Stangeland and Underwood were aware that the pool “was in an
unacceptable condition” and they were “permitting [their building company, Crystal Springs
Builders] to continue repair work on the pool.” Retreat Properties also alleged that the pay
applications were fraudulent misrepresentations about the roof because the roofing subcontractor
“did not have the necessary certifications to complete [its] work.” In Counts III and IV (Count III
was misdesignated as “Count IV”), Retreat Properties recast what had occurred as “negligent
misrepresentations.” In Counts V and VI, Retreat Properties contended that by failing to
complete the construction by November 2019, the defendants had tortiously interfered with
Retreat Properties’ reasonable expectations to begin renting the home for $100,000 or more per
week, resulting in losses of more than $1 million.
¶4 Retreat Properties also simultaneously demanded binding arbitration pursuant to the
parties’ contract. The arbitration demand was against Crystal Springs Builders, instead of the
company’s two owners. Although Retreat Properties requested that arbitration take place in
Illinois, the American Arbitration Association determined in June 2020 that Colorado was the
appropriate “locale.” Neither side expressly describes the status of the arbitration; however, the
defendants suggest that it is not actively progressing (for instance, they state that the arbitration
is “pending”).
¶5 Stangeland and Underwood filed a section 2-619 motion to dismiss the circuit court
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action (735 ILCS 5/2-619 (West 2018)), asserting lack of personal jurisdiction, improper venue,
forum non conveniens, or, in the alternative, that the court should compel arbitration. In support
of the motion, the defendants submitted their own sworn statements, as well as a sworn statement
from Robert Kaufmann, who had been Retreat Properties’ agent during the timeframe at issue.
See 735 ILCS 5/1-109 (West 2018) (providing for sworn statements under penalty of perjury).
¶6 Stangeland swore to the following. Stangeland started Crystal Springs Builders 23 years
ago and was its sole owner until Underwood become a 10% owner in 2018 and a 20% owner in
2019. (Underwood has been with the company for five of its 23 years.) Crystal Springs Builders
is a small general contractor that is incorporated in Colorado. Its principal place of business and
a registered agent are in Carbondale, Colorado. The company has never had an office or any
employees in Cook County, Illinois, and there are no documents or other evidence there. During
the 23 years of the company’s existence, Crystal Springs Builders, Stangeland, and Underwood
have never advertised in Illinois or directed any advertisement or mailings toward any person or
business in Illinois, never solicited any business in Illinois, never performed any construction
work in Illinois, and never had a client in Illinois, other than Retreat Properties. Crystal Springs
Builders, Stangeland, and Underwood did not solicit Retreat Properties or Klein. Rather, in 2017,
Retreat Properties’ agent, Kaufmann, a Colorado resident, initiated the first contact with
Stangeland and Underwood to talk about constructing a home in Aspen. At the time, Kaufmann
was interviewing multiple contractors on behalf of his client, whom Stangeland and Underwood
later learned was Retreat Properties. None of the contract negotiations occurred in Illinois. Klein
signed the contract first on behalf of Retreat Properties, and emailed the agreement to
Stangeland, who then signed on behalf of Crystal Springs Builders, in Colorado. All of the in-
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person meetings took place in Colorado, with Kaufmann and/or Klein. Stangeland has never
traveled to Illinois for business or to meet any client. Stangeland’s sworn statement included the
names and addresses of the 32 subcontractors who had worked on the Aspen home construction
project. All of those entities were located in Colorado. All of the builder’s pay applications had
been submitted to Kaufmann, who would review them, sometimes ask questions, and sometimes
come to the jobsite to inspect the work. Kaufmann would then submit the pay applications to his
principal, Klein, for payment to Crystal Springs Builders and the subcontractors.
¶7 Project manager Underwood’s sworn statement was consistent with Stangeland’s sworn
statement.
¶8 Robert Kaufmann swore as follows. Kaufmann is the president of Kaufmann
Construction, Inc., which is a company located in Basalt, Colorado (18.5 miles from Aspen) that
provides owner representation services. Klein hired Kaufmann to vet and interview general
contractors in Aspen for Klein’s home construction project, and Crystal Springs Builders was
one of the three companies that Kaufmann contacted. In the contract executed between Retreat
Properties and Crystal Springs Builders, Kaufmann is listed as “Owner’s representative.” Once
the project was underway, Kaufmann reviewed the builder’s monthly pay applications, made
comments about them, visited the Aspen job site (typically about once per pay application) and
forwarded the pay applications to Klein for his review and payment. Kaufmann specified, “It is
my understanding that Mr. Klein never issued any payment until after I had submitted my
comments.”
¶9 Retreat Properties’ response in opposition to the motion to dismiss was unverified.
Retreat Properties argued in relevant part that personal jurisdiction should be asserted by the
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Illinois circuit court because, “Per the allegations of the Complaint, [the building company and
two individual defendants] sent fraudulent payment applications to Retreat [Properties] and
Klein in Lincolnwood, Illinois, which Retreat [Properties] and Klein paid from Illinois.”
¶ 10 The circuit court granted the motion to dismiss based on findings that the court lacked
personal jurisdiction, venue was improper, and that the forum non conveniens argument was also
persuasive. The court denied the alternative request to compel arbitration pursuant to the contract
between Crystal Springs Builders and Retreat Properties, reasoning that the defendants were
individuals, Stangeland and Underwood, and their ownership of Crystal Springs Builders did not
make them intended third-party beneficiaries who could enforce the terms of the construction
contract. This appeal followed.
¶ 11 We begin with the question of jurisdiction. The limits of a trial court’s jurisdiction are
well established. A court has power to decide a case only when it has both subject matter
jurisdiction over the controversy and personal jurisdiction over the parties. See In re Marriage of
Mitchell, 181 Ill. 2d 169, 174 (1998). Subject matter jurisdiction, which is not disputed in this
case, is the court’s authority to hear and decide cases of a general class. Jorgensen v. Berrios,
2020 IL App (1st) 191133, ¶ 22; Belleville Toyota, Inc. v. Toyota Motor Sales, U.S.A., Inc., 199
Ill. 2d 325, 335 (2002) (a justiciable matter is “a controversy appropriate for review by the court,
in that it is definite and concrete, as opposed to hypothetical or moot, touching upon the legal
relations of parties having adverse legal interests”). Personal jurisdiction is the court’s authority
to bind a particular party. Insurance Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee,
456 U.S. 694, 702 (1982). Stangeland, Underwood, and Retreat Properties have briefed the issue
of personal jurisdiction.
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¶ 12 The de novo standard of review governs the question of personal jurisdiction because the
circuit court decided the issue based solely on documentary evidence. Rios v. Bayer Corp., 2020
IL 125020, ¶ 16.
¶ 13 It is the plaintiff’s burden to establish a prima facie basis to exercise personal jurisdiction
over the nonresident defendants. Rios, 2020 IL 125020, ¶ 16.
¶ 14 An Illinois court has personal jurisdiction over a nonresident defendant when the long-
arm statute provides for it and the exercise of jurisdiction is consistent with the due process
guarantees of the federal and state constitutions. Knaus v. Guidry, 389 Ill. App. 3d 804, 813
(2009); Insurance Corp. of Ireland, 456 U.S. 694, 702 (1982); Madison Miracle Productions,
LLC v. MGM Distribution Co., 2012 IL App (1st) 112334, ¶ 42 (traditionally, personal
jurisdiction over a nonresident has involved a three-part analysis about the Illinois long-arm
statute, the due process clause of the United States constitution, and the due process clause of the
Illinois constitution).
¶ 15 Pursuant to the long-arm statute, a nonresident corporation is subject to personal
jurisdiction if the corporation is “ ‘doing business’ ” in Illinois, meaning that it “ ‘engages in a
continuous and systematic course of business in the State.’ ” Kostal v. Pinkus Dermatopathology
Lab., P.C., 357 Ill. App. 3d 381, 385 (2005) (quoting Kadala v. Cunard Lines, Ltd., 226 Ill. App.
3d 302, 314 (1992)); 735 ILCS 5/2-209(b)(4) (West 2018). When a nonresident corporation’s
“ ‘affiliations with the State are so continuous and systematic as to render’ it ‘essentially at
home’ in the State” then it may be sued on any cause of action, regardless of whether the action
arose out of the corporation’s contacts with Illinois. Rios, 2020 IL 125020, ¶ 19 (quoting
Goodyear Dunlop Tires Operations v. Brown, 564 U.S. 915, 919); Kostal, 357 Ill. App. 3d at 385
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(“the ‘doing business’ standard is quite high but once satisfied, a corporation is considered a
resident of Illinois and may be sued on any cause of action, regardless of whether it arose out of
the corporation’s contacts with the state”). This is known as “general or all-purpose jurisdiction.”
Rios, 2020 IL 125020, ¶ 19.
¶ 16 General personal jurisdiction contrasts with “specific or case-linked jurisdiction.” Rios,
2020 IL 125020, ¶ 19. For instance, under the “ ‘transaction of business’ ” theory, Illinois will
have personal jurisdiction “ ‘if the corporation transacts any business within the State and a
cause of action arises from that transaction.’ ” Kostal, 357 Ill. App. 3d at 385 (quoting Kadala,
226 Ill. App. 3d at 314); 735 ICLS 5/2-209(a)(1) (West 2018). The long-arm statute also allows
Illinois to exert personal jurisdiction when a nonresident commits “a tortious act within this
State” and a cause of action arises from that conduct. 735 ILCS 5/2-209(a)(2) (West 2018).
¶ 17 Previously, only the acts described in the long-arm statute could be the basis for asserting
personal jurisdiction over a nonresident defendant, but that changed when section (c) was added
to the statute in 1989. Kostal, 357 Ill. App. 3d at 387. Section 2-209(c) of the long-arm statute
“contains a ‘catch-all’ provision providing that an Illinois court may ‘exercise jurisdiction on any
other basis now or hereafter permitted by the Illinois Constitution and the Constitution of the
United States.’ ” Morris v. Halsey Enterprises Co., 379 Ill. App. 3d 574, 579 (2008)
(quoting 735 ILCS 5/2-209(c) (West 2004)). Stated another way, the long-arm statute reaches as
far as the federal and State constitutional requirements for due process allow. If due process is
satisfied, jurisdiction exists under section 2-209(c) and we need not consider the other sections of
the long-arm statute. Kostal, 357 Ill. App. 3d at 387. Furthermore, when the defendant has not
argued that the State constitution imposes a greater restriction than the federal constitution, then
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we need consider only the federal principles. Rios, 2020 IL 125020, ¶ 17.
¶ 18 Federal due process requires courts to consider whether the nonresident defendant had
“certain minimum contacts” with the forum state “such that the maintenance of the suit does not
offend traditional notions of fair play and substantial justice.” Rios, 2020 IL 125020, ¶ 17
(quoting Daimler AG v. Bauman, 571 U.S. 117, 126 (2014)).
¶ 19 When determining whether a nonresident defendant has certain minimum contacts, our
analysis depends on whether the plaintiff is seeking general personal jurisdiction or specific
personal jurisdiction. See Rios, 2020 IL 125020, ¶¶ 19-20. For specific personal jurisdiction—
the only type of personal jurisdiction that was alleged by Retreat Properties—the defendants’
litigation-related “conduct must create a substantial connection with the forum State.” (Emphasis
added.) Zamora v. Lewis, 2019 IL App (1st) 181642, ¶ 46. In order to establish there is a
“substantial connection,” the plaintiff needs to show that “(1) ‘the defendant purposefully
directed its activities at [Illinois]’ and (2) ‘the cause of action arose out of or relates to the
defendant’s contacts with [Illinois].’ ” Zamora, 2019 IL App (1st) 181642, ¶ 46. Under the first
element, there must “be 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.” Zamora, 2019 IL App (1st) 181642, ¶ 46 (internal quotation marks
omitted). The “purposeful availment” requirement ensures that “a nonresident defendant is not
required to litigate in a forum due to attenuated or random contacts or the unilateral acts of a
consumer.” Zamora, 2019 IL App (1st) 181642, ¶ 46 (citing Burger King Corp. v. Rudzewicz,
471 U.S. 462, 475 (1985)). “If we determine that a nonresident defendant has purposefully
directed its activities at Illinois and the cause of action arose out of or relates to the defendant’s
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contacts with Illinois, we also must consider whether it is reasonable to require the defendant to
litigate in Illinois.” Zamora, 2019 IL App (1st) 181642, ¶ 48.
¶ 20 When determining whether these defendants purposefully availed themselves of the
benefits of doing business in Illinois, relevant considerations may include who initiated the
transaction, where the contract was negotiated, where it was formed, and where performance was
to take place. Madison Miracle Productions, 2012 IL App (1st) 112334, ¶ 57. However, the
United States Supreme Court advocates a broad, general approach to a federal minimum contacts
analysis. Madison Miracle Productions, 2012 IL App (1st) 112334, ¶ 62 (citing Burger
King, 471 U.S. at 478-79, as reason to reject the defendant’s argument that a court should limit
its minimum contacts analysis to the initiation, negotiation, formation and contemplated
performance of the contract in question).
“[The United States Supreme Court] ‘[l]ong ago rejected the notion that personal
jurisdiction might turn on “mechanical” tests, [citation] or on “conceptualistic…theories
of the place of contracting or of performance,” [citation]. Instead, [the court has]
emphasized the need for a “highly realistic” approach that recognizes that a “contract” is
“ordinarily but an intermediate step serving to tie up prior business negotiations with
future consequences which themselves are the real object of the business
transaction.” [citation]. It is these factors—prior negotiations and contemplated future
consequences, along with the terms of the contract and the parties’ actual course of
dealing—that must be evaluated in determining whether the defendant purposefully
established minimum contacts within the forum.’ ” Madison Miracle Productions, 2012
IL App (1st) 112334, ¶ 55 (quoting Burger King, 471 U.S. at 478-79).
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¶ 21 In addition, in order to show there is personal jurisdiction in Illinois due to a defendant’s
tortious conduct in Illinois (e.g., fraud), the plaintiff must allege that the defendant performed
an act or omission which caused injury in Illinois and that the conduct w a s tortious. Aasonn,
LLC v. Delaney, 2011 IL App (2d) 101125, ¶ 16. When the tortious injury is alleged to be
economic rather than physical or emotional, the plaintiff must also allege facts showing that the
defendant intended to affect an Illinois interest. Aasonn, 2011 IL App (2d) 101125, ¶ 16.
¶ 22 Retreat Properties argues that specific personal jurisdiction exists over Stangeland and
Underwood, because, as alleged in the complaint, they submitted fraudulent invoices to an
Illinois resident. In our opinion, this argument misapplies the precedent that Retreat Properties
relies upon and addresses but one of many relevant contacts. Furthermore, Stangeland and
Underwood’s uncontroverted sworn statements establish that they did not purposefully establish
minimum contacts within Illinois.
¶ 23 Stangeland and Underwood’s unrefuted sworn statements specify that they have never
transacted business in Illinois, traveled to Illinois for business, advertised in Illinois, or solicited
business in Illinois. Retreat Properties was the first and only client of Stangeland and Underwood
(or Crystal Springs Builders) that resided in Illinois, and it was Retreat Properties that initiated
the construction contract by hiring a Colorado resident, Kaufmann, to find and screen suitable
general contractors within the vicinity of Aspen, Colorado. Kaufmann’s interview with Crystal
Springs Builders and all of the pre-contract negotiations concerning the proposed project
occurred in Colorado, not Illinois.
¶ 24 The sworn statements also established that the contract itself was formed in Colorado, as
Stangeland was the last person to sign it and was located in Colorado at the time of execution.
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Ideal Insurance Agency, Inc. v. Shipyard Marine, Inc., 213 Ill. App. 3d 675, 681 (1991) (where
the last act necessary to give validity to the contract is done is the place where the contract is
made).
¶ 25 Performance of the construction contract—the real object of the business transaction—
was to take place entirely in Aspen and no work was contemplated to be performed in Illinois.
“A defendant transacts business in Illinois ‘when substantial performance of contractual duties is
to be rendered in Illinois or when the defendant invokes the benefits and protections of Illinois
law in the contractual relationship.’ ” Khan v. Van Remmen, Inc., 325 Ill. App. 3d 49, 57 (2001)
(quoting Poplar Grove State Bank v. Powers, 218 Ill. App. 3d 509, 518 (1991)). As the
contracting parties intended, Crystal Springs Builders hired at least 32 Colorado subcontractors
to perform tasks on the Aspen building site. The gravamen of the complaint is that Stangeland
and Underwood billed for the subcontractors’ “incomplete and incorrect” work on the Aspen
home’s pool, roof, plumbing, heating, ventilation, and air conditioning systems, tile, masonry,
drywall, paint, carpentry, electric wiring, landscaping, driveway, and storm sewers. All of these
allegations relate to the work that was performed in Colorado, which further underscores Illinois’
lack of connection to the lawsuit. During the course of the contract, Stangeland and Underwood
did not travel to Illinois or perform any work in Illinois. Klein, the principal of Retreat
Properties, did, however, travel to Colorado for several meetings about the performance.
¶ 26 Although this is essentially a dispute about the general contractor’s performance of the
construction contract in Colorado, the complaint contains vague and strained allegations about
the parties’ course of dealing, in order to indicate that Stangeland and Underwood purposefully
directed activities at Illinois and that the cause of action arose out of or relates to these contacts
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with Illinois. As examples:
“16. Stangeland and Underwood regularly communicated with [Retreat Properties],
and particularly with Klein in Illinois, regarding the status of the Property.
***
19. On information and belief, Stangeland and Underwood have each submitted
and/or allowed to be submitted Pay Applications certifying progress payments during the
course the of [(sic)] construction project. Defendants caused these Pay Applications to be
transmitted to Illinois.
***
33. In spring 2019, Klein and Defendants had numerous conversations, including
phone calls that Defendants made to Klein in Illinois, regarding how to correct the pool
defects. Over the course of roughly seven months, *** Underwood and Stangeland
continued to submit invoices for payments for [the general contractor] and its
subcontractors, including the pool subcontractor, to Retreat [Properties] for the pool
work. Defendants submitted all invoices to [Retreat Properties]’ Illinois address, and
Retreat [Properties] paid those invoices from Illinois. Underwood and Stangeland
repeatedly represented to Klein in meetings on site and in phone calls and other
communication that work to repair the pool was ongoing and successful.”
¶ 27 These allegations lack specific dates and other facts indicating how the allegedly
fraudulent pay applications were submitted to Retreat Properties. These allegations were not
verified. These allegations were refuted by three specific and unopposed sworn statements which
indicated that Retreat Properties’ agent in Colorado was the actual recipient of the pay requests.
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The court must accept as true any facts stated in affidavits submitted by the defendants that the
plaintiff does not contradict by a counter-affidavit, despite any contrary allegations in the
plaintiff’s complaint. Khan v. Van Remmen, Inc., 325 Ill. App. 3d 49, 56 (2001); Kutner v.
DeMassa, 96 Ill. App. 3d 243, 247-248 (1981). Stangeland and Underwood’s unopposed sworn
statements specified that they submitted the pay applications to another person in Colorado,
Kaufmann, for his review and follow-up. In turn, Kaufmann’s unopposed sworn statement
indicated that he received, verified, commented on, and then forwarded the pay applications to
Klein and that it was Kaufmann’s “understanding that Mr. Klein never issued any payment until
after I had submitted my comments.” Thus, the record shows that the defendants did not
purposefully direct activities at Illinois. Instead, because the defendants were not purposefully
establishing contacts with Illinois, the plaintiff had to use a Colorado agent to find and personally
interview general contractors, receive and evaluate the subsequent pay applications, and
periodically visit the job site during the project in order to verify the construction work.
¶ 28 Another consideration is that the parties purportedly included a Colorado choice-of-law
clause in their contract. A choice-of-law provision is considered relevant but not dispositive.
Aasonn, 2011 IL App (2nd) 101125, ¶ 16.
¶ 29 Thus, the pre-contract interaction, contemplated future consequences, terms of the
contract, contract performance, and actual dealings of the parties all indicate that Stangeland and
Underwood did not purposefully direct activities into Illinois.
¶ 30 Although not controlling, we note that after Retreat Properties filed a nearly identical
complaint against Crystal Springs Builders with the American Arbitration Association, that
organization determined that Colorado, not Illinois, was the appropriate “locale” for addressing
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the claims.
¶ 31 This case is no different from past decisions affirming the lack of personal jurisdiction
over nonresident defendants. In National Gun Victims Action Council v. Schecter, 2016 IL App
(1st) 152694, another panel of this appellate court found insufficient minimum contacts to
exercise jurisdiction over an Ohio company that had agreed to handle an Illinois organization’s
public relations event in Missouri. National Gun Victims Action Council, 2016 IL App (1st)
152694. The Illinois entity had reached out to the Ohio entity for assistance, the terms of their
oral agreement were negotiated over the phone or by e-mail, and the performance of the contract
was indisputably outside of Illinois. National Gun Victims Action Council, 2016 IL App (1st)
152694, ¶¶ 22-24. When it did not appear the Missouri event would go off as planned, the
Illinois client rescheduled the event, terminated the public relations contract, and filed suit.
National Gun Victims Action Council, 2016 IL App (1st) 152694, ¶ 7. Similar to Retreat
Properties, the Illinois plaintiff argued that there was personal jurisdiction over the Ohio entity
because it had directed Internet communication to the Illinois-based plaintiff knowing that it was
an Illinois resident, agreed to provide services for an Illinois resident, was paid for those
services, but never actually performed, resulting in damage that occurred in Illinois to the Illinois
plaintiff. National Gun Victims Action Council, 2016 IL App (1st) 152694, ¶ 7. The court
disagreed and held that the Ohio entity’s limited e-mail contacts with Illinois were “too random,
fortuitous, or attenuated to justify personal jurisdiction.” (Internal quotations omitted.) National
Gun Victims Action Council, 2016 IL App (1st) 152694, ¶ 21. The three Colorado sworn
statements negated Retreat Properties’ unverified allegations that Stangeland and Underwood
communicated with Retreat Properties in Illinois, but we also consider their alleged “regular[]
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communica[tions]” and payment requests to Illinois about the construction project progressing in
Colorado to be contacts that are too attenuated to Illinois to justify personal jurisdiction in this
forum.
¶ 32 Retreat Properties draws our attention to Aasonn, 2011 IL App (2d) 101125, a breach of
contract and fraud action that is factually distinguishable. The plaintiff was an Illinois consulting
company, Aasonn, and the defendants were a New York computer consultant, Delaney, and her
company. Aasonn, 2011 IL App (2d) 101125, ¶ 4. The claims concerned work product and
communications exchanged directly between the parties by telephone, fax, e-mail, Internet
messaging, and “Internet connections.” Aasonn, 2011 IL App (2d) 101125, ¶ 7. The Delaney
defendants e-mailed monthly invoices to Aasonn for work that had been performed and they
contemporaneously entered the details of those time records into the Aasonn online project
management system. Aasonn, 2011 IL App (2d) 101125, ¶ 7. Once Aasonn verified what had
been entered into its project management system, it electronically paid the New York defendants
from its Illinois bank account. Aasonn, 2011 IL App (2d) 101125. The Delaney defendants were
alleged to have submitted false billing statements for work they did not perform on five of the 20
or so Aasonn projects they handled. Aasonn, 2011 IL App (2d) 101125, ¶ 7.
¶ 33 Retreat Properties relies on Aasonn for the court’s conclusion that the New York
consultant and her company were subject to personal jurisdiction by virtue of having “voluntarily
entered into a contract creating a substantial connection with Illinois.” Aasonn, 2011 IL App
101125, ¶ 23. However, the court reached this conclusion only after thoroughly analyzing the
parties’ pre-contract relationship, the execution of the contract, and where performance was to
occur. Aasonn, 2011 IL App (2d) 101125, ¶¶ 17-23. For instance, although the New York
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consultant did not initiate the contract, she pursued the relationship by making presentations,
representing others who would benefit, and leading the contract negotiations. Aasonn, 2011 IL
App (2d) 101125, ¶¶ 17-18. There was even an Illinois choice-of-law provision in the contract.
Aasonn, 2011 IL App (2d) 101125, ¶ 24. These and other facts indicated there were sufficient
jurisdictional contacts with Illinois. The quality and nature of Delaney’s acts indicated that she
and her company “purposefully reached out beyond New York to create a deliberate affiliation
with an Illinois company from which they derived financial benefits by accepting in excess of 20
projects.” Aasonn, 2011 IL App (2d) 101125, ¶ 24.
¶ 34 Retreat Properties also argues that because their complaint includes tort claims, any
“communications” with Illinois residents, with an intent to affect Illinois residents, are sufficient
reason to exercise personal jurisdiction over defendants Stangeland and Underwood. The lack of
contacts emanating from Colorado into Illinois is why we reject Retreat Properties’ argument
that tort law supports specific personal jurisdiction in Illinois. To prevail under this theory, this
plaintiff would need to show that the defendants intended to affect an Illinois interest when they
allegedly engaged in fraudulent and negligent misrepresentations or tortiously interfered with a
prospective economic advantage for the Colorado residential property. Aasonn, 2011 IL App
(2d) 101125, ¶ 16 (when the tortious injury is alleged to be economic rather than physical or
emotional, the plaintiff must also allege facts showing that the defendant intended to affect an
Illinois interest); West Virginia Laborers Pension Trust Fund v. Caspersen, 357 Ill. App. 3d 673,
678 (2005). The requirement that the tort defendant intended to affect an Illinois interest is
another way of stating the requirement under the due process clause that the defendant
purposefully availed himself of this forum state’s benefits. Aasonn, 2011 IL App (2d) 101125,
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¶ 16.
¶ 35 The record, as discussed above, indicates that Crystal Springs Builders and its two
principals did not reach out beyond Colorado to conduct business with anyone in Illinois.
Instead, the pre-contract relationship occurred at Retreat Properties’ direction in Colorado and
then Retreat Properties and Crystal Springs Builders formed a contract in Colorado for the
Colorado contractor to build a Colorado residence. The key interactions between Crystal Springs
Builders and Retreat Properties occurred in Colorado and Stangeland and Underwood did not
purposefully avail themselves of the benefits of conducting business in Illinois. Retreat
Properties did not show that the defendants intended to affect an Illinois interest.
¶ 36 Also, none of the other tort cases that the appellant cites support its assertion of specific
personal jurisdiction. For instance, Retreat Properties mistakenly contends that a single piece of
deceptive mail into Illinois was sufficient in Zazove v. Pelikan, Inc., 326 Ill. App. 3d 798, 806
(2001), to exert personal jurisdiction over a nonresident corporation. Actually, the opinion
indicates the defendant sought and created a robust relationship with this forum. The defendant
was a Tennessee corporation, Pelikan-USA, that allegedly duped the plaintiff Illinois fountain
pen collector into buying a Pelikan brand limited-edition Toledo M900 fountain pen in the belief
that it would become a rare collectible. Zazove, 326 Ill. App. 3d at 800-01. The pen seller’s
extensive and purposeful contacts with this forum included (1) distributing its pens to
approximately 27 authorized retailers in Illinois, (2) selling tens of thousands of Pelikan brand
writing instruments in Illinois annually, (3) advertising in national periodicals, (4) advertising in
local periodicals such as Chicago Magazine, (5) sending marketing brochures to Illinois retailers,
and (6) sending direct mail to prospective buyers in Illinois. Zazove, 326 Ill. App. 3d 805. This is
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far more contact with Illinois than Retreat Properties would have us believe occurred between
Pelikan-USA and Illinois. Retreat Properties’ reliance on Zazove is perplexing because the
record before us does not show a comparable effort by Stangeland or Underwood to purposefully
direct activities into Illinois.
¶ 37 Another tort case that Retreat Properties mistakenly relies upon is Dixon v. GAA Classic
Cars, LLC, 2019 IL App (1st) 182416, which involved a Greensboro, North Carolina car dealer
and potential buyer in Illinois. The seller allegedly maintained a fraudulent website, sent
fraudulent advertisements, and made fraudulent statements in e-mails and phone conversations
with an Illinois resident who became interested in a 1973 Ford Bronco that was going up for
auction on the internet and by telephone. Dixon, 2019 IL App (1st) 182416. The seller’s alleged
falsehoods about the vehicle’s condition induced the Illinois plaintiff to become the highest
bidder and have his purchase shipped to Illinois, where he “immediately recognized that [the
Bronco] had significant problems” which the car dealer had misstated and/or concealed in its
messages and photos. Dixon, 2019 IL App (1st) 182416, ¶ 6. The case is not analogous and does
not support Retreat Properties’ argument that its complaint was erroneously dismissed for lack of
personal jurisdiction. The record does not indicate that Stangeland and Underwood created a
website and sent advertisements, e-mails, and phone calls into Illinois in order to induce Retreat
Properties to hire Crystal Springs Builders (and then subsequently send inflated pay
applications). Similarly, in Kalata v. Healy, 312 Ill. App. 3d 761, 728 (2000), a Californian used
phone calls and mail into Illinois to induce an investor to form a joint venture. And, Khan v.
Gramercy Advisors, LLC, 2016 IL App (4th) 150435, is another instance of alleged
misrepresentations into Illinois to induce investment, this time into tax shelters that were later
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disallowed by the Internal Revenue Service.
¶ 38 Nothing comparable to Dixon, Kalata, or Khan occurred here. There are no allegations of
a website, advertisement, e-mail, mail, or phone call soliciting Retreat Properties to hire Crystal
Springs Builders or its owners to build a home in Colorado. The record indicate that Retreat
Properties initiated, negotiated, and entered into a construction contract that was last signed in
Colorado. The resulting pay applications as the construction project proceeded in Colorado are
what Retreat Properties is disputing, but those invoices are too attenuated to Illinois and not a
sufficient basis for Illinois to assert specific personal jurisdiction over the Colorado defendants.
¶ 39 Retreat Properties’ other citations are also unhelpful. Retreat Properties relies on Wesly v.
Nat’l Hemophilia Foundation, 2020 IL App (3rd) 170569, ¶ 24, in which a Peoria, Illinois
physician was the target of an allegedly defamatory website posting and e-mails that were sent
by a Washington, D.C. physician to a Peoria colleague, a Peoria television station, and others.
The tort of defamation occurs where the defamatory statements are published. Wesly, 2020 IL
App (3d) 170569, ¶ 12.
¶ 40 Given the irrelevance of these Illinois cases, we decline to discuss the federal trial court
decisions which Retreat Properties has included in its brief, as federal decisions are, at best,
persuasive authority in this State court. Sears, Roebuck & Co. v. Nat'l Union, 331 Ill. App. 3d
347, 352 (2002).
¶ 41 The upshot is that Retreat Properties has failed to sustain its appeal. We find that Retreat
Properties has not met its burden of showing that Stangeland and Underwood had sufficient
contacts with Illinois for purposes of specific personal jurisdiction. In addition, because Retreat
Properties is arguing that Illinois has specific personal jurisdiction, Retreat Properties has the
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additional burden of demonstrating that its various claims arise out of or relate to Stangeland and
Underwood’s contacts with Illinois. Since we have found that Stangeland and Underwood did
not have sufficient contacts with Illinois for purposes of exerting personal jurisdiction, we need
not analyze whether Retreat Properties’ claims arose out of or were related to Stangeland and
Underwood’s contacts with Illinois, nor do we need to determine whether it would be reasonable
to require the defendants to litigate in this forum. Madison Miracle Productions, 2012 IL App
(1st) 112334, ¶ 98.
¶ 42 In its reply brief, Retreat Properties argues for the first time that after its relationship with
Crystal Springs Builders broke down, Stangeland and Underwood satisfied the minimum
contacts requirement when they “transmitted demand letters with intentionally inaccurate
statements, including false certifications for payment, directly to Plaintiff in Illinois” and “placed
numerous phone calls to Plaintiff in Illinois in furtherance of Defendants’ fraudulent and
inaccurate assertations.” Knaus v. Guidry, 389 Ill. App. 3d 804, 815 (2009) (a party may not
raise an argument for the first time on appeal). Points that are not argued in the opening brief are
forfeited and shall not be raised in the reply brief. Ill. S. Ct. R. 341(h)(7) (eff. July 1, 2017);
Robertsson v. Misetic, 2018 IL App (1st) 171674, n.3 (finding forfeiture in part because the
appellant did not develop an argument until the reply brief). In any event, the argument is
unpersuasive because Retreat Properties fails to cite any authority in which efforts at dispute
resolution were relevant in a minimum contacts analysis about the dispute.
¶ 43 We conclude that Retreat Properties has not shown that the Colorado construction project
invoices that Retreat Properties wants to litigate are a proper basis for Illinois to exert specific
personal jurisdiction over the Colorado defendants. Defendants Stangeland and Underwood do
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not have sufficient minimum contacts with Illinois for the purposes of asserting personal
jurisdiction against them.
¶ 44 Furthermore, we hold that the issue of specific personal jurisdiction is dispositive of the
appeal and that we need not reach Retreat Properties’ other arguments that venue and forum non
conveniens are grounds for reversal.
¶ 45 The circuit court’s dismissal of the complaint is affirmed.
¶ 46 Affirmed.
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