Illinois v. Hemi Group, LLC, 622 F.3d 754 (7th Cir. 2010), was a personal jurisdiction case in which the United States Court of Appeals for the Seventh Circuit affirmed the United States District Court for the Central District of Illinois' ruling finding personal jurisdiction based on Internet transactions. In the initial filing, the state of Illinois sued Hemi Group LLC (Hemi) for selling cigarettes to Illinois residents over the Internet in violation of state law and for failing to report those sales in violation of federal law. Hemi moved to dismiss the suit for lack of personal jurisdiction, but the district court found that the Internet transactions provided a basis for Hemi to be sued in Illinois.
Facts
Hemi, based out of New Mexico and without any ties to Illinois, sold discount cigarettes through several websites. Customers could place orders online or through fax, mail, or telephone. Illinois alleged that Hemi sold cigarettes to Illinois residents via its websites, though the only sale Illinois identified in its complaint was instigated by a special agent of the Illinois Department of Revenue.
On several of its websites, Hemi stated that it would not sell cigarettes to New York residents due to ongoing litigation there, but no exception was made to Illinois residents. Hemi's website directed customers to check with their respective states to determine the amount, if any, of state taxes associated with their order.
Specifically, Illinois sued Hemi in Illinois state court for: Failing to comply with the Jenkins Act by not providing monthly reports of sales to Illinois residents; Violating the Prevention Act by shipping cigarettes to Illinois residents that were not licensed distributors or export warehouse operators; and Violating the Enforcement Act and the Consumer Fraud Act by selling brands of cigarettes to Illinois residents that were not in the Illinois Directory.
Procedural history
Hemi removed the suit from Illinois state court to federal district court and moved to dismiss the case for lack of personal jurisdiction. The district court found that Illinois could not exercise general jurisdiction over Hemi because Hemi lacked the "continuous and systematic general business contacts" to satisfy general jurisdiction. However, the district court held that Hemi could be amenable to specific jurisdiction, finding that Hemi purposefully availed itself of the opportunity of doing business with Illinois residents and that exercising personal jurisdiction over Hemi would not offend due process.
For a more in-depth discussion of the concept of personal jurisdiction and its sub-concepts of general and specific jurisdiction, see personal jurisdiction and International Shoe doctrine
Issue on appeal
The question on appeal before the Seventh Circuit was whether the Illinois district court could properly exercise personal jurisdiction over Hemi.
Holding
The Seventh Circuit affirmed the district court's denial of Hemi's motion to dismiss for lack of personal jurisdiction, finding that Internet transactions of cigarettes sufficed to establish personal jurisdiction over Hemi in Illinois.
Analysis
Federal vs. Illinois due process standards
Hemi argued that a line of Illinois appellate opinions demonstrated that Illinois law required more than federal law with regard to satisfying due process standards for personal jurisdiction. The Seventh Circuit rejected this argument, finding that none of the cases cited by Hemi even suggested a meaningful difference between the federal and Illinois due process standards, and that at least one of the cases cited by Hemi only discussed the distinction in the theoretical context. Though the Seventh Circuit noted that the district court may only exercise jurisdiction only if both federal and state constitutional elements are satisfied, it also stated that it was unaware of cases where personal jurisdiction could be satisfied under the U.S. Constitution, but not under the Illinois Constitution. Hence, the Seventh Circuit limited its analysis as to whether exercising personal jurisdiction over Hemi would comport with the federal guarantee of due process.