Personal Jurisdiction – Sanctions

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Civil

7^th Circuit Court of Appeals

Officials: WOOD, Chief Judge, and POSNER and WILLIAMS, Circuit Judges

Personal Jurisdiction – Sanctions

No.12-3446; 14-2007; 14-3153 Philos Technologies, Inc. v. Philos & D, Inc.

Contracted executed in Ilinois insufficient to establish minimum contact for personal jurisdiction. Sanctions imposed on appellants improper

“The deal before us is categorically different from the franchise relationship held to confer personal jurisdiction on an out-of-state franchisee in Burger King. The defendant there had “entered into a carefully structured 20-year relationship that envisioned continuing and wide-reaching contacts with Burger King in Florida.” Burger King, 471 U.S. at 480. Here, the agreement was neither highly structured nor long-lasting; instead, it was in essence a contract for the provision of goods to a Korean company. The mere fact that Philos Tech produced those goods in Illinois (possibly at the behest of Korean-based PLST) is largely incidental to the jurisdictional analysis and does not automatically confer jurisdiction over foreign defendants who otherwise lack significant connections to Illinois. Cf. Walden, 134 S. Ct. at 1125 (defendant’s actions did not constitute sufficient contacts with forum state “simply because he allegedly directed his conduct at plaintiffs whom he knew had [forum state] connections”).”

“In the absence of a solid reason for condemning the joint venture reflected in P&D’s articles of incorporation as a “sham,” we cannot be confident that Philos Tech was untruthful in its filings about its dealings with P&D and the Parks. On such a murky record, where the legal implications of the parties’ actions are so uncertain, the court was wrong to characterize Philos Tech’s bid for personal jurisdiction in the Northern District of Illinois as unscrupulous or underhanded. Philos Tech’s argument that personal jurisdiction over Defendants existed was not baseless. If Philos Tech had not taken such a passive position at the critical hearing, then there would have been some chance that the district court might have found personal jurisdiction. (Several Korean courts have found that it was a joint venture partner of P&D, after all.) A court should not impose sanctions on a party that loses an argument, as long as the argument was not entirely groundless. See Nat’l Wrecking Co. v. Int’l Bhd. of Teamsters, Local 731, 990 F.2d 957, 963 (7th Cir. 1993). Philos Tech had enough support for its contentions related to personal jurisdiction to avoid Rule 11 sanctions.”

Affirmed in part

Vacated in part

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Attorney Derek A. Hawkins is the managing partner at Hawkins Law Offices LLC, where he heads up the firm’s startup law practice. He specializes in business formation, corporate governance, intellectual property protection, private equity and venture capital funding and mergers & acquisitions. Check out the website at www.hawkins-lawoffices.com or contact them at 262-737-8825.