Illinois Appellate Court Expands Specific Personal Jurisdiction Analysis
ABSTRACT: The Illinois First District Appellate Court broadened its view of specific personal jurisdiction, holding that activities conducted in Illinois by a corporation may meet the standard even if those activities do not have any direct or indirect connection to the lawsuit at hand; and finding that direct shipment of the product to a distributor for resale in Illinois was sufficiently related to the cause of the plaintiff’s injury to satisfy specific personal jurisdiction.
After a litany of cases from the United States Supreme Court and the Illinois Supreme Court had limited the circumstances when a given court may have personal jurisdiction over a corporation, with cases including Aspen Am. Ins. Co. v. Interstate Warehousing, Inc., 2017 IL 121281; Bristol-Myers Squibb Co. v. Superior Court of California, San Francisco Cty., 137 S. Ct. 1773, 1780 (2017) and Rios v. Bayer Corp., 2020 IL 125020, Illinois’ First District Appellate Court recently took a significant step in the opposite direction. In Kothawala v. Whole Leaf, LLC, the First District broadened the standard of what constitutes sufficient corporate activity in Illinois to amount to “purposeful availment” under the United States Supreme Court’s analysis in Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985), also broadening the “relatedness” of business activities in the jurisdiction to the causation of the injury, building on the foundation of Ford Motor Co. v. Montana Eighth Judicial District Court, 141 S. Ct. 1017, 1024 (2021).
The Kothawala case was brought against LG Chem, a manufacturer of small lithium-ion batteries, whose batteries were used in a defective vape pen that caught fire and/or exploded while in the plaintiff’s pocket. There was no question that general personal jurisdiction was not met based on LG Chem’s physical presence and incorporation solely in South Korea. Plaintiff alleged that specific personal jurisdiction was met because the vape pen and batteries exploded and injured the plaintiff in Illinois. LG Chem argued that specific personal jurisdiction did not exist because LG Chem did not design, manufacture, or market the batteries in Illinois, and the company had restrictions not to sell to any company in the vape industry, instead selling the batteries to businesses in for a variety of other non-vape-related applications. Nevertheless, as the vape pens utilized the same type of battery as LG Chem made and some of the distributors of LG Chem’s batteries sold to vape industry companies, LG Chem’s batteries were used in the plaintiff’s vape pen and used in that application in Illinois generally.
LG Chem argued to the trial court and to the First District on appeal that it did not purposely avail itself of the consumer battery market in Illinois as it never intended for its batteries to be sold individually to end consumers like plaintiff. LG Chem further argued that it was unforeseeable for the battery to end up in plaintiff’s vape pen and therefore its actions could not be considered “purposeful availment” under the Ford standard. The First District disagreed, noting that LG Chem’s activities in Illinois did not have to be related in any way to the causation of the plaintiff’s injuries to satisfy purposeful availment; the activities of the corporation only need to be “significant” within a state or that have “created continuing obligations between himself and residents of the forum.” The Court found that LG Chem’s business activities in Illinois were significant and met the standard for purposeful availment, finding that LG Chem had availed itself of the privileges of doing business in Illinois generally. Specifically, the Court held that “[a]t the purposeful-availment stage, the law is unconcerned with a causal or even indirect relationship between the facts of this suit and the specifics of LG Chem's in-state activity.” In discussing the evidence of LG Chem’s business activities in Illinois, the Court further noted that “plaintiff need only show that LG Chem has directed some commercial activity at Illinois. It is undisputed that LG Chem has done so; it has sold millions of batteries to companies in Illinois.”
With the purposeful availment prong satisfied, the Kothawala Court also found that the facts satisfied the relatedness analysis under Ford Motor Co. because Illinois was one of two states where LG Chem sold and shipped the batteries to distributors for the purpose of resale in Illinois. Given this unique fact, the Court found that it did not need to analyze the issue further as the sales to a distributor who was known to be reselling the batteries was sufficient to show relatedness between LG Chem’s business activities and the causation of plaintiff’s injury. Equally, the Court found that it was also reasonable to require LG Chem to litigate in Illinois, particularly given the fact that the slippery slope of LG Chem’s argument would result in no court in the United States having jurisdiction over LG Chem, which the First District found was not a desired outcome.
This ruling by the First District signals a halt to, or even a reversal from the recent progress made in personal jurisdictional jurisprudence in protecting companies from being forced to litigate in Illinois without a substantial basis. While the general personal jurisdictional analysis of Aspen and its progeny has not been impacted, Kothawala allows plaintiffs to attempt to side-step the general jurisdictional analysis to argue that a company’s activities in Illinois are significant enough generally to rise to the level of purposeful availment of Illinois’ market and argue the relatedness of those activities to the causation of the plaintiff’s injury under specific jurisdiction if there is any evidence that the defendant company’s product at issue was in any way connected to the end consumer market. In other words, under the Kothawala analysis, if the defendant company did any significant amount of business generally in Illinois and there is any foreseeable stream for the defective product to lead to an end consumer, those circumstances may be sufficient for a court to find specific personal jurisdiction over the company in Illinois, regardless of whether the company was intending for its product to be sold to an end consumer in Illinois.
Going forward, we are advising our Illinois clients how to navigate this new approach as this ruling will have a significant impact on the number of companies that will be forced to litigate in Illinois, even if they had not intended for end consumers to use their products. We anticipate this ruling will also muddy the waters as to the presence of specific personal jurisdiction when looked at by a trial court, encouraging more creative arguments by the plaintiffs’ bar to claim purposeful availment and relatedness of a defendant’s business activities in Illinois, where those same activities had previously not been found to be relevant to the specific or general personal jurisdictional analysis. We hasten to add that the Appellate Court’s ruling may not be the final word on this subject, and that this ruling may well be further challenged at the Illinois Supreme Court.