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Playboy Enterprises International, Inc.,A Delaware Corporation v. Smartitan (Singapore) Pte Ltd.

April 7, 2011

PLAYBOY ENTERPRISES INTERNATIONAL, INC.,A DELAWARE CORPORATION, PLAINTIFF,
v.
SMARTITAN (SINGAPORE) PTE LTD., A COMPANY ORGANIZED UNDER SINGAPORE LAW, ELTEX INTERNATIONAL, LTD., A COMPANY ORGANIZED UNDER HONG KONG LAW, AND GEORGE CHAN, AN INDIVIDUAL, DEFENDANTS.



The opinion of the court was delivered by: Marvin E. Aspen, District Judge:

MEMORANDUM OPINION AND ORDER

Playboy Enterprises International, Inc. ("Playboy") filed this complaint against Smartitan (Singapore) Pte. Ltd. ("Smartitan"), Eltex International, Ltd. ("Eltex"), and George Chan, alleging breach of contract against Smartitan and Eltex ("Count I"), unjust enrichment against Eltex ("Count II"), and tortious interference with contract against Chan ("Count III"). Smartitan and Eltex responded by filing a joint motion to dismiss Counts I and II due to lack of personal jurisdiction, improper venue, insufficient service of process, and forum non conveniens. (Smartitan Mem. at 1.) Chan filed a companion motion to dismiss Count III due to lack of personal jurisdiction, improper venue, and forum non conveniens. (Chan Mem. at 1.) We agree that we lack personal jurisdiction over Chan and dismiss Count III accordingly. We deny Smartitan and Eltex's motion with respect to Playboy's remaining counts against them.

I. BACKGROUND

On March 1, 2006, Playboy, a Delaware corporation with its principal place of business in Chicago, Illinois, entered into a Product License Agreement ("PLA") with Smartitan, a Singapore company organized under the laws of Singapore. (Compl. ¶¶ 1--3.) Playboy, through its publication of an internationally circulated magazine and worldwide distribution of multimedia entertainment, apparel, and accessories, has become an internationally recognized brand. (Id. ¶ 8.) Under the PLA, Playboy granted Smartitan the right to use several of the well-known Playboy trademarks for a narrowly defined group of products, such as apparel and women's bags, to be sold only in Japan. (Id. ¶ 10.)

Sometime in 2008, Playboy learned that Smartitan was selling unapproved products bearing the Playboy logo into unauthorized channels of distribution in violation of the PLA. (Id. ¶¶ 15--16.) Smartitan was also frequently late with its sales reports and fell behind with the payment of royalties. (Id. ¶ 17.) In August 2009, Playboy exercised its right under the PLA to audit Smartitan, resulting in findings that Smartitan owed Playboy more than $300,000. (Id. ¶ 19.) At the instruction of Smartitan's managing director and decision-maker, George Chan, the audit took place not in Singapore, but at Eltex's offices in Hong Kong. (Id.)

Playboy was aware of Eltex, for although the PLA was signed only by Smartitan, Eltex, a company organized under the laws of Hong Kong, had made all payments to Playboy that were due under the PLA since the onset of the contract. (Id. ¶ 11.) Eltex also used the Playboy trademarks in Japan, allegedly in accordance with the PLA. (Id.) Additionally, Smartitan and Eltex shared at least one common shareholder, Man Hon Mui. (Id.) Indeed, Playboy assumed "that Smartitan and Eltex were one and the same." (Id. ¶ 19.) Playboy thus believed "Eltex so controlled the affairs of Smartitan that Smartitan was a mere instrumentality of Eltex." (Id. ¶ 13.)

In 2008, unbeknownst to Playboy, Smartitan apparently dissolved and Eltex continued the contract in place of Smartitan.*fn1 (Id. ¶ 11.) There were no changes in business that would have alerted Playboy that Smartitan had been dissolved, as all contact between Playboy and Smartitan regarding the PLA remained with Chan, and all payments pursuant to the PLA continued to come, as they always had, from Eltex. (Id. ¶ 12.)

Chan was Smartitan's Managing Director, and was Playboy's primary contact at Smartitan. (Id.) Chan was not the Managing Director of Smartitan at the time the PLA was signed, but after he assumed this role, Chan signed all agreements with Playboy on behalf of Smartitan. (Id.) Despite the apparent dissolution of Smartitan in 2008, all of Playboy's communications regarding the PLA remained with Chan. (Id.) Chan was the point of contact when Playboy traveled to Hong Kong to perform the Smartitan audit held at the Eltex office. (Id.) Once Chan was appointed Managing Director, Playboy never communicated with anyone except Chan regarding the PLA, nor did Chan ever refer Playboy to any other officers or managers of Smartitan. (Id.) Playboy understood that Chan was Smartitan's decision-maker. (Id.)

On July 30, 2010, Playboy filed this complaint alleging breach of the PLA and unjust enrichment against Defendants Smartitan and Eltex (Counts I and II), and tortious interference with contract against Chan (Count III). (Id. ¶¶ 1--42.)

II. ANALYSIS

1. Personal Jurisdiction

Rule 12(b)(2) calls for dismissal where we lack personal jurisdiction over a party. Fed. R. Civ. P. 12(b)(2). Although a plaintiff need not anticipate a personal jurisdiction challenge in its complaint, once the defendant moves to dismiss the complaint for lack of personal jurisdiction, the plaintiff bears the burden of demonstrating the existence of jurisdiction. Purdue Research Found. v. Sanofi-Synthelabo, S.A., 338 F.3d 773, 782 (7th Cir. 2003). When we determine a Rule 12(b)(2) motion based on the submission of written materials without holding an evidentiary hearing, the plaintiff must make a prima facie case of personal jurisdiction. GCIU-Emp'r Ret. Fund v. Goldfarb Corp., 565 F.3d 1018, 1023 (7th Cir. 2009); Purdue, 338 F.3d at 782. As such, the plaintiff bears the burden of establishing that personal jurisdiction exists. GCIU, 565 F.3d at 1023; Purdue, 338 F.3d at 782. In determining whether the plaintiff has met its burden, we resolve all factual disputes in the plaintiff's favor. Purdue, 338 F.3d at 782 ("[T]he plaintiff is entitled to the resolution in its favor of all disputes concerning relevant facts presented in the record.").

A. Smartitan

Smartitan moves to dismiss the complaint pursuant to Rule 12(b)(2) for lack of personal jurisdiction. The Product Licensing Agreement ("PLA") between Playboy and Smartitan contained a forum selection clause, which provided that "any and all disputes arising out of or relating in any way to this [PLA] shall be litigated only in courts sitting in Cook County, Illinois." (Resp. (Chan) at 1.) Smartitan does not dispute the validity of this forum selection clause. Rather, Smartitan avoids addressing the PLA almost entirely, instead focusing its argument on its lack of minimum contacts with the forum state under International Shoe v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158 (1945). Smartitan admits, however, that "it is true that the PLA contains a clause in which the parties agreed to submit to personal jurisdiction in Cook County, Illinois." (Smartitan Mem. at 2.) Therefore, we ...


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