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AFI Holdings of Illinois, Inc. v. National Broadcasting Co.

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

March 9, 2017

AFI HOLDINGS OF ILLINOIS, INC., d/b/a HAPPY LEAVES, INC., Plaintiff,
v.
NATIONAL BROADCASTING COMPANY, and WATERMAN BROADCASTING, Defendants.

          MEMORANDUM OPINION AND ORDER

          Harry D. Leinenweber, Judge

         Defendant Waterman Broadcasting's (“Waterman”) Motion to Dismiss the Complaint pursuant to Rule 12(b)(2) [ECF No. 19] is granted. The case against Waterman is dismissed for lack of personal jurisdiction. Plaintiff Happy Leaves (“Happy Leaves”) is directed to serve the remaining Defendant, National Broadcasting Company (“NBC”), immediately if it has not done so and if a viable case remains against NBC given the dismissal of Waterman. See, Fed. R. Civ. P. 4(m).

         I. BACKGROUND

         This case is before the Court on diversity jurisdiction. Happy Leaves, an Illinois company, brings a defamation lawsuit against Waterman Broadcasting, a Florida corporation. ECF No. 16 (Am. Compl.) ¶¶ 2, 4. (The Court refers to Plaintiff as Happy Leaves, its doing-business-as name, because this is the name Plaintiff uses in its submissions to the Court.) Happy Leaves names NBC, a Delaware corporation headquartered in New York, as a second Defendant in the case, but it is unclear whether Happy Leaves has served NBC in the five months since the suit was instituted. Id. ¶ 2. In any event, NBC has not filed an appearance, and this Motion strictly concerns Waterman, not NBC.

         Happy Leaves alleges that on July 1, 2016, Waterman aired on its television station a segment about a product called Charlotte's Web. Am. Compl. ¶ 19. Charlotte's Web is a hemp oil extract manufactured by CW Hemp, Inc., a company located in Colorado that is not a party to this lawsuit. Id. ¶¶ 7-8. CW Hemp uses Happy Leaves as a distributor for its hemp oil extract. Id. ¶ 16. Happy Leaves alleges that before Waterman aired its broadcast, Happy Leaves was the only distributor of Charlotte's Web that sold the product via the website Groupon. Id. As it so happens, Groupon is headquartered in Illinois. Id.

         Waterman's allegedly defamatory news segment called Charlotte's Web “pot” and “medical marijuana.” Am. Compl. ¶ 21. It mentioned that the product can be purchased on Groupon, and “on numerous occasions, the newscast cuts to a screenshot of Groupon's Happy Leaves web page, which shows a picture of Charlotte's Web with text saying, ‘Charlotte's Web CBD Oil from Happy Leaves.'” Id. ¶¶ 21-22.

         The segment was investigated and reported on by a reporter by the name of Graham Hunter (“Hunter”). Before Waterman aired the piece, Hunter had sent an email to Happy Leaves and “reached out” to Groupon. Am. Compl. ¶¶ 25-26. The email to Happy Leaves consisted of two sentences: “What is in your product?” and “How is this legal to dispense in the U.S.?” Id. ¶ 27. There is no allegation as to how Hunter “reached out” to Groupon or what he communicated to the company, although the affidavit submitted by Happy Leaves' owner suggests that Waterman contacted Groupon just once. ECF No. 27-1 (Fligg's Decl.) ¶ 4 (attesting that Hunter contacted both Happy Leaves and Groupon on the date of the broadcast).

         In his affidavit, Hunter states that he did not connect with anyone at either Happy Leaves or Groupon before the segment aired. ECF No. 19-2 (Hunter's Decl.) ¶¶ 4, 6. He also attests that he did not know that either company is located in Illinois. Id. ¶¶ 3, 6. Hunter declares that he “did not rely on Illinois sources, ” something that Happy Leaves disputes. Id. ¶ 5; Fligg's Decl. ¶ 3. Finally, Hunter declares that he did not “have any reason to believe the impact of the report would be felt in Illinois.” Hunter's Decl. ¶ 5. This last statement presumably is because Waterman's broadcast is restricted to the area of Fort Myers/Naples, Florida and 100% of its viewership is in this area. ECF No. 19-2 (Pontius's Decl.) ¶¶ 3, 5. Not surprisingly then, Waterman has no offices or employees in Illinois. Id. ¶ 6.

         Nonetheless, Waterman has a website, and on this website, it posted the news segment. Happy Leaves alleges that “as a direct result of NBC-2 reporter Graham Hunter ‘reaching out' to Groupon about the story in Illinois, Groupon's management and legal department in Chicago saw the segment.” Am. Compl. ¶ 30. Groupon thereafter “discontinued all sales of Charlotte's Web on its website” and “Happy Leaves' sales of Charlotte's Web sales were devastated.” Id. ¶¶ 31, 36. Although Waterman retracted the story from its website just two weeks after the original air date, Happy Leaves claims that harm, calculated to be “in an amount in excess of $1, 000, 000.00, ” has been done. Id. ¶¶ 35, 42, 49, 57.

         Happy Leaves now sues Waterman and NBC in the Northern District of Illinois, alleging violations of Illinois law. NBC is in this lawsuit because Waterman is one of its local affiliates. Waterman, speaking for itself, asks the Court to dismiss the case against it for lack of personal jurisdiction. The Court grants this request and so does not address the alternative prayer to transfer the case to the Middle District of Florida.

         II. LEGAL STANDARD

         As the Plaintiff, Happy Leaves bears the burden of establishing a prima facie case for jurisdiction. Citadel Grp., Ltd. v. Wash. Reg'l Med. Ctr., 536 F.3d 757, 760 (7th Cir. 2008). Since Waterman has submitted affidavits in its Rule 12(b)(2) motion to dismiss, Happy Leaves must “go beyond the pleadings and submit affirmative evidence supporting the exercise of jurisdiction.” Purdue Research Found. v. Sanofi-Synthelabo, S.A., 338 F.3d 773, 782 (7th Cir. 2003).

         The Court considers the pleadings and the parties' affirmative evidence in making its ruling. Where these papers raise a factual dispute, the Court resolves them in Happy Leaves' favor. Id. However, it accepts as true “any facts contained in the defendant's affidavits that remain unrefuted by the plaintiff.” GCIU-Emp'r Ret. Fund v. Goldfarb Corp., 565 F.3d 1018, 1020 n.1 (7th Cir. 2009).

         Although Waterman urges the Court to disregard any statement not based on an affiant's personal knowledge, the Court finds doing so unnecessary in this case. See, Contrak, Inc. v. Paramount Enters. Int'l Inc., 201 F.Supp.2d 846, 851-52 (N.D. Ill. 2002) (“Several courts have suggested that affidavits submitted in response to a motion to dismiss under Rule 12(b)(2) must be based on personal knowledge or comply with Rule 56(e), . . . but the Seventh Circuit has not addressed this issue.”). The disposition of Waterman's Motion does not hinge on whether the Court strikes some of the statements from Happy Leaves' affidavit.

         The Court may deny the Motion and exercise personal jurisdiction over Waterman only if an Illinois state court can do so. Citadel, 536 F.3d at 760. Under the Illinois long-arm statute, a state court may exercise jurisdiction on any basis allowed by the Illinois and federal constitution. See, 735 ILCS 5/2-209(c). The Court proceeds under the federal analysis because the parties have agreed that the requirements of due process under the U.S. Constitution control their case and because “no case has yet emerged where due process was satisfied under the federal constitution but not under the Illinois constitution”. Citadel, 536 F.3d at 761.

         Finally, federal due process requires that, in order to subject a non-resident like Waterman to personal jurisdiction in Illinois, Waterman must “have certain minimum contacts with [Illinois] such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.'” Int'l Shoe Co. v. Wash., 326 U.S. 310, 316 (1945).

         III. ANALYSIS

         Before it can engage with the substance of the Motion, the Court must dispose of Happy Leaves' Complaint that Waterman's Motion is too long. Happy Leaves claims that due to the use of “excessive” single spacing and other horrors, Defendant's 15-page brief actually is 17 pages and so does not conform to a local rule. On this ground, Happy Leaves asks the Court to strike the Motion. The Court sees nothing out of the ordinary in the formatting of Waterman's brief and finds no reason to strike any part of it.

         In any case, Waterman needed no more than the first ten pages of its brief to argue that the Court does not have personal jurisdiction over it. Happy Leaves disagrees and asserts two independent bases for haling Waterman into court: (1) Waterman is an affiliate of NBC, and (2) Waterman's tort is aimed at Illinois and caused harm to Happy Leaves in that state.

         A. Jurisdiction Based on ...


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