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Logan Productions, Inc. v. Optibase

December 19, 1996






Appeal from the United States District Court for the Eastern District of Wisconsin.

No. 94-C-1169

Before POSNER, Chief Judge, and FLAUM and EVANS, Circuit Judges.

EVANS, Circuit Judge.

J.P. Stadtmueller, Chief Judge.



Jim and Beth Logan own Logan Productions, a small Milwaukee company which sells computer systems and creates video productions. In 1994 Logan Productions purchased a compact disc encoding machine to enable the company to create interactive compact disc productions. When the machine didn't perform up to par, Logan Productions sued the machine's manufacturer, Optibase, in Wisconsin state court. Optibase, a California corporation with its principal place of business in Texas, removed the case to federal court, where the district court dismissed the suit for lack of personal jurisdiction. Logan Productions, left without a Wisconsin forum for its suit, appeals.

In 1993 Jim Logan took a break from the cold weather and grey skies of Milwaukee in November and hopped a flight to Las Vegas. However, instead of scrounging for tickets to see a hot show at Caesar's Palace or trying his luck with the slots or skills at blackjack, Logan spent his time at COMDEX, the largest computer trade show in the country. Like each of the over 100,000 visitors attending the show, Logan wore a credit card-like identification badge which had his name and address encoded on it. Optibase, who manufactures a line of encoding machines used for transferring videos onto compact discs, was among the thousands of exhibitors peddling their wares at COMDEX. When Logan stopped to chat at Optibase's booth, Optibase's employees scanned his badge and Logan's name wound up on Optibase's mailing list.

About a month later, a customer asked Logan Productions to create an interactive compact disc production. Because Logan Productions didn't have the equipment necessary to perform the encoding work, Logan looked into farming out that part of the job. It must have been fate: while Logan was still looking into where he could send the work, he received a letter from Optibase. The letter began with the greeting, "Dear Multimedia Developer," thanked the reader for stopping by Optibase's booth at COMDEX, and stated, "We want your business and know how to earn it!" A glossy promotional flyer pitching Optibase's products -- including machines which could perform Logan's encoding work --accompanied the letter.

After one of the machines described in the flyer, the Lab Pro, caught Logan's eye, he reached out and touched Optibase's central region sales manager, Steve Unger. Three months of off-and-on correspondence followed. At a minimum, Unger called Logan three times, mailed him information, and faxed him the machine's specs. Logan later met Unger in Dallas to learn more about the Lab Pro. During these discussions Unger suggested that Logan become the first on his block to sign on as an Optibase distributor. In March 1994 Logan finally agreed to buy a Lab Pro for $15,600 -- the distributor's price. Optibase shipped the machine to Wisconsin and later sent Logan software updates and a promotional newsletter.

The sale to Logan was not Optibase's only contact with Wisconsin. By March 1994 Optibase was advertising in several national trade publications with Wisconsin subscribers and had made at least four other sales in the Badger State totaling over $22,000. In the months that followed, Optibase stepped up its advertising in the trade magazines and sent promotional newsletters to 144 people in Wisconsin. In September 1994 Optibase signed a Milwaukee-based distributor, Video Images, to market its products in Wisconsin and Illinois. In February 1995 Optibase sent Unger and another employee to Wisconsin to conduct dealer training. By April 1995 Optibase had at least a dozen customers in Wisconsin, whose purchases accounted for 1.88 percent of Optibase's nationwide sales through 1994 and 1.11 percent through 1995.

Meanwhile, all was not well in Milwaukee. According to Logan, the Lab Pro was a dud. Logan claims that the machine could not handle tasks Optibase assured him would be a piece of cake. As a result, Logan sued Optibase in state court in September 1994, alleging breach of contract, common law fraud, and consumer fraud under Wisconsin Statute sec. 100.18. A month later the case was removed to district court, where Optibase moved to dismiss based on a lack of personal jurisdiction. Optibase conceded it fell within the grasp of the Wisconsin long-arm statute, but claimed Wisconsin could not exercise jurisdiction without violating the Due Process Clause of the Fourteenth Amendment of the federal Constitution. The district court agreed with Optibase and dismissed the case.

We review the district court's decision to dismiss Logan's claim for lack of personal jurisdiction de novo, Klump v. Duffus, 71 F.3d 1368, 1371 (7th Cir. 1995), cert. denied 116 S. Ct. 2523 (1996), and because this is a diversity case, our task is to determine whether Wisconsin, the forum state, could exercise personal jurisdiction over Optibase. Giotis v. Apollo of the Ozarks, Inc., 800 F.2d 660, 664 (7th Cir. 1986), cert. denied 479 U.S. 1092 (1987). Because the case was dismissed without an evidentiary hearing, we also must resolve all relevant factual disputes in Logan's favor. Turnock v. Cope, 816 F.2d 332, 333 (7th Cir. 1987).

Wisconsin can exercise two types of personal jurisdiction over a nonresident defendant, general and specific. General jurisdiction is proper when a defendant has "continuous and systematic business contacts" with a state and it allows a defendant to be sued in that state regardless of the subject matter of the lawsuit. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 416 (1984). On the other hand, a state may exercise specific jurisdiction when the defendant has a lesser degree of contact with ...

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