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Pentwater Equity Opportunities Master Fund, Ltd v. Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C.

United States District Court, N.D. Illinois, Eastern Division

November 2, 2016

PENTWATER EQUITY OPPORTUNITIES MASTER FUND, LTD., PWCM MASTER FUND LTD., PENTWATER CAPITAL MANAGEMENT L.P., and MATTHEW HALBOWER, Plaintiffs,
v.
BAKER, DONELSON, BEARMAN, CALDWELL & BERKOWITZ, P.C., Defendant.

          MEMORANDUM ORDER AND OPINION

          Robert M. Dow, Jr., United States District Judge

         This matter is before the Court on Plaintiffs' motion for relief from judgment from the Court's February 5, 2016 order [41] granting Defendant's motion to dismiss for lack of personal jurisdiction. In that order, the Court concluded that it did not have specific personal jurisdiction over Defendant and closed the case; however, the Court did not consider, in the alternative, whether it could exercise general personal jurisdiction over Defendant based on its contacts with the State of Illinois. Therefore, on February 22, 2016, the Court entered an order [46] reopening the case to allow the parties to present their arguments concerning whether Plaintiffs should be allowed to conduct discovery on the limited issue of general personal jurisdiction. Having fully considering the parties briefs and supporting documentation, see [21], [26], [43], [47], and [48], the Court concludes that Plaintiffs have failed to make a prima facie showing that the Court has general personal jurisdiction over Defendant and therefore are not entitled to conduct discovery on the limited issue of general personal jurisdiction. Because discovery into general personal jurisdiction would be futile, and the Court has already determined that it does not have specific personal jurisdiction, the Court dismisses Plaintiffs' complaint for lack of personal jurisdiction over Defendant.

         I. Background

         Plaintiffs Pentwater Equity Opportunities Master Fund, PWCM Master Fund Ltd. (collectively, the “Funds”), Pentwater Capital Management L.P. (“Pentwater”) and Matthew Halbower (“Halbower”) bring suit against Defendant Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C. (“Defendant”) for declaratory relief, fraudulent inducement, fraudulent misrepresentation, and fraudulent concealment. The background of this case is set forth in the Court's February 5, 2016 order [41], knowledge of which is assumed here. Any additional relevant facts identified by the parties are discussed in the Court's analysis below.

         II. Legal Standard

         For the purposes of the instant motion, the Court accepts as true the factual allegations relevant to jurisdiction made in Plaintiffs' complaint, and draws all reasonable inferences in Plaintiffs' favor. Cent. States, Se. & Sw. Area Pension Fund v. Phencorp Reinsurance Co., Inc., 440 F.3d 870, 878 (7th Cir. 2006). The Court also resolves any disputes concerning relevant facts in Plaintiffs' favor. Purdue Research Found. v. Sanofi-Synthelabo, S.A., 338 F.3d 773, 782 (7th Cir. 2003). To the extent that Defendant has submitted affidavits opposing jurisdiction or contradicting Plaintiffs' allegations, however, Plaintiffs must go beyond the pleadings and submit affirmative evidence supporting the exercise of jurisdiction. Id. at 783.

         A complaint need not allege personal jurisdiction, but once a defendant moves to dismiss on that ground, the plaintiff bears the burden of establishing that jurisdiction is proper. Purdue Res. Found v. Sanofi-Synthelabo, S.A., 338 F.3d 773, 782 (7th Cir. 2003). Under Seventh Circuit case law, “it is within the discretion of the district court to allow a plaintiff to conduct limited discovery in order to establish that jurisdiction exists.” Sanderson v. Spectrum Labs, Inc., 248 F.3d 1159, 2000 WL 1909678, at *3 (7th Cir. 2000). However, the “plaintiff must establish a colorable or prima facie showing of personal jurisdiction before discovery should be permitted.” Cent. States, Se. & Sw. Areas Pension Fund v. Reimer Express World Corp., 230 F.3d 934, 946 (7th Cir. 2000). In other words, a plaintiff seeking jurisdictional discovery must advance “proof to a reasonable probability” of the facts necessary to establish federal jurisdiction. Anthony v. Sec. Pac. Fin. Servs., Inc., 75 F.3d 311, 316 (7th Cir. 1996); see also Indag GmbH & Co. v. IMA S.P.A, 150 F.Supp.3d 946, 971 (N.D. Ill. 2015).

         “Personal jurisdiction can be either general or specific, depending on the extent of the defendant's contacts with the forum state.” uBID, Inc. v. GoDaddy Grp., Inc., 623 F.3d 421, 425 (7th Cir. 2010). The Court previously concluded that it did not have specific personal jurisdiction over Defendant because Plaintiffs failed to establish that the effects of Defendant's allegedly tortious conduct would be felt in Illinois. In this order, the Court focuses on whether Plaintiffs have made a prima facie showing of general personal jurisdiction, such that they should be permitted to take limited discovery to establish jurisdiction. Reimer, 230 F.3d at 946.

         “A defendant is subject to general jurisdiction when it has ‘continuous and systematic general business contacts' with the forum state.” uBID, 623 F.3d at 425 (citing Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 415-16, (1984)). “This is a demanding standard that requires the defendant to have such extensive contacts with the state that it can be treated as present in the state for essentially all purposes.” Id. at 426. “The standard for general jurisdiction is demanding because the consequences can be severe: if a defendant is subject to general jurisdiction in a state, then it may be called into court there to answer for any alleged wrong, committed in any place, no matter how unrelated to the defendant's contacts with the forum.” Id.

         The Supreme Court has recently emphasized that the relevant inquiry “is not whether a foreign corporation's in-forum contacts can be said to be in some sense ‘continuous and systematic, ' it is whether that corporation's ‘affiliations with the State are so continuous and systematic as to render [it] essentially at home in the forum State.'” Daimler AG v. Bauman, 134 S.Ct. 746, 761 (2014) (quoting Goodyear Dunlop Tires Operations, S.A. v. Brown, 546 U.S. 915, 919 (2011)). The Court recognized that “[a] corporation that operates in many places can scarcely be deemed at home in all of them.” Id. at 762 n.20. “Otherwise, ‘at home' would be synonymous with ‘doing business' tests framed before specific jurisdiction evolved in the United States.” Id. This would be improper because “[n]othing in International Shoe and its progeny suggests that ‘a particular quantum of local activity' should give a State authority over a ‘far larger quantum of . . . activity' having no connection to any in-state activity.” Id. (citing Int'l Shoe Co. v. State of Wash., Off. of Unempl. Compen. & Placement, 326 U.S. 310, 326 (1945)). “[A]pprov[ing] the exercise of general jurisdiction in every State in which a corporation engages in a substantial, continuous, and systematic course of business” would be “unacceptably grasping” and insufficient to establish general personal jurisdiction. Id. at 761. Thus, the general jurisdiction inquiry “calls for an appraisal of a corporation's activities in their entirety, nationwide and worldwide.” Id. at 762 n.20.

         III. Analysis

         Applying the standards set forth above, the Court concludes that Plaintiffs have failed to make a prima facie showing that Illinois courts may exercise general jurisdiction over Defendant and therefore are not entitled to conduct discovery before their complaint is dismissed. Reimer, 230 F.3d at 946. Plaintiffs improperly frame their analysis to focus solely on Defendant's contacts with Illinois. But as Daimler makes clear, the proper inquiry requires appraisal of Defendant's activities in their entirety. Daimler, 134 S.Ct. at 762 n.20. Plaintiffs fail to even acknowledge Daimler in their briefs. When the relevant inquiry is properly framed, it is apparent that Plaintiffs have not made a prima facie showing that courts in Illinois may exercise general personal jurisdiction over Defendant.

         Defendant is headquartered in Tennessee and has twenty offices in eight U.S. states, plus Washington D.C. and London, England. But, according to the declaration of Defendant's Assistant General Counsel John Hicks (“Hicks”), Defendant has no offices, owns no real property, and maintains no bank accounts in Illinois. Defendant does not pay, nor is it required to pay, any income or property taxes in Illinois. Of Defendant's 693 attorneys and advisors, only four have active Illinois law licenses. None of those four attorneys resides in or has an office in Illinois. In the past three years, only nineteen of Defendant's attorneys have entered appearances in state or federal court in Illinois, and five of those nineteen attorneys have not actually participated in ligation in Illinois.

         Even assuming, as Plaintiffs seek discovery to establish, that Defendant has performed substantial additional transactional work for Illinois clients, has solicited or is soliciting business from Illinois clients, [1] has sponsored and solicited clients to attend a drug company's seminar in Illinois, and represents a number of Fortune 100 or Fortune 1000 companies that are located in Illinois, these contacts would not bring the sum total of Defendant's Illinois activities to the level required to establish general jurisdiction. A comparison to the facts in Daimler is instructive. The Supreme Court held that the Ninth Circuit erred by finding that Daimler, with its subsidiary MBUSA's contacts attributed to it, was “at home in California.” Daimler, 134 S.Ct. at 760, 762. MBUSA's contacts with California included operating “multiple California-based facilities, including a regional office in Costa Mesa, a Vehicle Preparation Center in Carson, and a Classic Center in Irvine”; being the “largest supplier of luxury vehicles to the California market”; and making sales in California that account for 2.4% of Daimler's total worldwide sales. Id. at 752. However, neither Daimler nor MBUSA was incorporated in California or had a principal place of business there. Id. at 761. The Court reasoned that if it allowed California to exercise general jurisdiction over Daimler's Argentina-based lawsuit, “the same global reach would presumably be available in every other State in which MBUSA's sales are sizable.” Id. ...


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