On The Case

New Illinois Supreme Court ruling should make ‘judicial hellhole’ less fiery

(Reuters) - In 2013, the roof of a refrigerated warehouse near Grand Rapids, Michigan, collapsed. Fish stored in the warehouse were contaminated. The fish owner’s insurer, Aspen American Insurance, paid a claim for the losses, then turned around and sued the warehouse owner, Interstate Warehousing, for causing the accident.

The insurance dispute went to the Illinois Supreme Court last May. Three asbestos defendants, Honeywell, Union Carbide and Certainteed, filed an amicus brief backing Interstate Warehousing. Two major trial lawyers’ groups, the American Association for Justice and the Illinois Trial Lawyers Association, responded with a brief backing Aspen American.

Why would a fight over insurance for a warehouse full of contaminated fish attract dueling amicus briefs from asbestos defendants and plaintiffs’ lawyers?

Because the issue in Aspen American Insurance v. Interstate Warehousing was whether plaintiffs from outside Illinois can sue corporations based in other states for alleged misconduct that took place elsewhere. And the reach of Illinois’ jurisdiction is of enormous consequence to personal injury lawyers and the corporations they sue.

Tort reform groups, as you’re probably aware, have been howling for years about “judicial hellholes” in Cook, Madison and St. Clair counties, where supposedly plaintiffs-friendly judges and juries have a reputation for delivering outsized verdicts against corporate defendants. That reputation, according to defendants, makes Illinois jurisdictions a magnet for personal injury suit. The American Tort Reform Foundation’s latest report on unfavorable locales for corporate defendants said that nearly one-third of all asbestos litigation in the U.S. is filed in Madison County – and most of those cases have no connection to the state of Illinois.

Interstate Warehouse and the asbestos defendants that backed the company at the Illinois Supreme Court told the state justices that it’s time for Illinois trial courts to follow the U.S. Supreme Court’s 2014 directive in Daimler v. Bauman and limit general jurisdiction to corporations that are at “at home” in Illinois – those that are incorporated or headquartered in the state. Under Daimler, the asbestos defendants argued, out-of-state plaintiffs bear the burden of showing in their complaints that some extraordinary circumstances exempt their suits from the general rule that Illinois does not have general jurisdiction over out-of-state corporations. Unless plaintiffs can make such a showing without conducting discovery, defendants said, their suits must be dismissed.

The trial lawyers’ amicus brief, in an implicit acknowledgment of the giant jurisdictional obstacle the U.S. Supreme Court erected in Daimler, urged the Illinois Supreme Court to stick closely to the facts in the Aspen case. The insurer established in its complaint that Interstate has continually done business in Illinois through the operation of a warehouse in Joliet. Interstate did not provide a factual record to deny Aspen’s allegations. Based on those facts, the trial lawyers said, Aspen made a prima facie case for Illinois jurisdiction.

The state Supreme Court’s Sept. 21 decision gives defendants everything they could have wanted. In a short opinion written by Justice Anne Burke for a unanimous court, the Supreme Court agreed that plaintiffs bear the burden “of establishing a prima facie basis to exercise personal jurisdiction over a nonresident defendant.” Under Daimler, the state court said, that means plaintiffs must show corporate defendants are either headquartered or incorporated in Illinois or else have, for some reason, set up a surrogate home in the state. Plaintiffs cannot establish jurisdiction, the court said, by arguing that the defendant has business presence, like Interstate’s Joliet warehouse, in the state.

But that wasn’t the only jurisdictional theory the state justices rejected. Aspen also argued that Illinois’ own long-arm statute allows state courts to exercise jurisdiction over any defendant doing business in the state. Not under Daimler, the justices said, when “as here, there is no evidence that defendant’s contacts with Illinois have rendered it ‘essentially at home’ in this state.”

What about Interstate’s registration to do business in Illinois? Aspen claimed Interstate effectively consented to the authority of state courts as a condition of operating in Illinois (a common argument by plaintiffs in the post-Daimler era). The state justices said the registration process does not require out-of-state corporations to submit to the jurisdiction of Illinois courts. “Nor do they indicate that, by registering in Illinois or appointing a registered agent, a corporation waives any due process limitations on this state’s exercise of general jurisdiction,” the opinion said. “Indeed, the act makes no mention of personal jurisdiction at all.”

The trial lawyers’ brief warned of the high stakes of the Supreme Court’s decision, which it said “could have wide-ranging impact on innumerable personal injury actions, ranging from strict product liability claims to claims involving asbestos manufacturers (and) claims arising under the Federal Employers’ Liability Act.”

Given that the state justices did exactly what trial lawyers were hoping they would not, issuing a broad prohibition on Illinois courts grabbing for jurisdiction over out-of-state defendants, I’m expecting a wave of motions to dismiss state court suits with only a tenuous connection to Illinois.

Interstate was represented by Hinshaw & Culbertson. The asbestos defendants’ amicus brief was by McDermott Will & Emery, Mayer Brown and Heyl Royster Voelker & Allen. Aspen had outside counsel from Swanson Martin & Bell.