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Bentel & Company, LLC v. Schraubenwerk Zerbst GmbH

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

August 2, 2017

BENTEL & COMPANY, LLC, a Texas Limited Liability Company, Plaintiff,
SCHRAUBENWERK ZERBST GmbH, a Foreign Limited Liability Company, Defendants.


          Harry D. Leinenweber, Judge

         Before the Court is Defendant's Motion to Dismiss under Rule 12(b)(2) and Rule 12(b)(3) [ECF No. 10]. For the reasons stated herein, the Motion under Rule 12(b)(3) is granted on forum non conveniens grounds. The Court will issue an Order of Dismissal upon receipt of Schraubenwerk Zerbst GmbH's written statement agreeing to the conditions enumerated herein.

         I. BACKGROUND

         A. Factual Background

         Plaintiff Bental & Company, LLC (“Bental”) is a Texas management and consulting company with a principal place of business in Toledo, Ohio. (ECF No. 1 (“Compl.”) ¶ 1; ECF No. 15 (“Pl.'s Br.”) at 2.) Bental's sole member and owner, Lothar Bauerle (“Bauerle”), resides in the Toledo, Ohio area. (Pl.'s Br., Ex. B (“Bauerle Decl.”) ¶ 3.) Early in 2010, Bauerle contacted several component and subsystem manufacturers in the wind power industry, including Defendant Schraubenwerk Zerbst GmbH (“SZ”), to see if they would be attending an upcoming wind power exhibition in the U.S. (Compl. ¶¶ 12-13; Bauerle Decl. ¶¶ 7-8.) SZ is a German company that manufactures forged bolts and hot-formed fasteners for use in various industries, including the wind power industry. (ECF No. 11 (“Def.'s Mem.”), Ex. A (“Schmidt Decl.”) ¶ 10.) One of SZ's principals informed Bauerle that no SZ representative would be attending but that SZ was willing to follow up with him after the exhibition to discuss the state of the American wind power market. (Bauerle Decl. ¶¶ 9-10.)

         At some point after the exhibition and during the summer of 2010, Bauerle proposed to SZ that he scout for new potential SZ customers in the three NAFTA countries - Mexico, the U.S., and Canada. (Schmidt Decl. ¶¶ 14-15.) In July 2010, Bauerle traveled to SZ's place of business in Germany to begin negotiating an agreement that would govern the Bental-SZ relationship. (Id. ¶¶ 17-19; Bauerle Decl. ¶¶ 13-14.) Bauerle returned to Ohio, engaged in additional telephone and email discussions with SZ, and ultimately signed an August 1, 2010 final version of the agreement (“the Commission Agreement”) upon its transmission from SZ's German office to him in Ohio. (Schmidt Decl. ¶¶ 19-20; Bauerle Decl. ¶¶ 13-14.) As relevant, the Commission Agreement provided that “Bental shall with immediate effect act as representative of [SZ] in the Nafta states (USA, Canada, Mexico), in the fastener product groups ‘Wind Power, ' ‘Rail Track, ' and other ‘Industrial Applications'.” (Pl's Br., Ex. B at Att. 1 ¶ 1.) Bental's duties were “perform[ing] market analyses, establish[ing] customer contacts, receiv[ing] relevant client inquiries and subsequent projects, and forward[ing] them to [SZ].” (Id. ¶ 3; see, Schmidt Decl. ¶ 22.) SZ agreed to provide informational support to Bental and bear travel costs Bauerle incurred in carrying out his duties. (Id. ¶ 4.) The Commission Agreement also provided that SZ would “pay Bental a performance-based commission of 5% after conclusion of each quarter of the calendar year” but, because no commissionable projects existed at the time of execution, SZ agreed to pay “Bental monthly a retainer of 1, 000.00 U.S. Dollars” to be adjusted based on SZ's prospects for successful projects and Bental's “acquisition expenses.” (Id. ¶ 5.) The $1, 000 payment along with travel reimbursements were to cease once SZ commenced commission payments on eligible projects - that is, once Bental's efforts bore fruit in the form of SZ sales to new clients. (Ibid.) Each party had the right to terminate “subject to a three-month period of cancellation, ” and in such a scenario, Bental was to receive commission payments “for the worked-on projects, provided they lead to a contract within 24 months from the termination date of the agreement.” (Id. ¶¶ 6-7.) The Commission Agreement did not specify a governing law or choice of forum.

         In furtherance of Bental's responsibilities, SZ printed and provided Bental with business cards containing SZ's logos, its website address, and titling Bauerle as “Project Manager” reachable at Bental's Ohio address. (Bauerle Decl. ¶ 20 & Att. 3.) SZ also listed designated Bental as its “US Representation” on letterhead and in certain presentation materials. (Id. ¶¶ 21-22 & Atts. 4-5.) Other than as detailed below, SZ has never had any contacts with Illinois. (See, e.g., Schmidt Decl. ¶¶ 5-9.)

         Bental proposed to SZ several potential Illinois targets, and SZ approved its approaching Nordex USA, Inc., a Chicago-headquartered division of Nordex Global. (Bauerle Decl. ¶¶ 23-24 (According to Bauerle, SZ also entered into non-disclosure agreements (“NDAs”) with two Illinois entities governed by Illinois law, but with whom SZ did not ultimately establish a relationship. (Id. ¶ 25.)) Since 2006, SZ has had a business relationship with Nordex Global, to whom it supplies various hardware and fastener components. (Schmidt Decl. ¶¶ 25, 27.)

         On August 16, 2010, Bauerle sent a letter to Nordex USA's purchasing manager, acknowledging SZ's gratitude for Nordex Global's business and that “[t]hrough my diligent work Zerbst would like to become an approved direct supplier to Nordex USA, Inc.” (Bauerle Decl. ¶¶ 26-27 & Att. 6.) He requested a meeting to determine the feasibility of SZ directly supplying Nordex USA, whose production facility was located in Jonesboro, Arkansas. (Ibid.; see, Schmidt Decl. ¶ 24.) Following the letter, Bental and SZ were granted access to Nordex USA's “electronic ‘ShareFile' folder maintained in Chicago, Illinois containing the necessary information for SZ to compete for Nordex business in the U.S.” (Pl.'s Br. at 4-5 (citing Bauerle Decl. ¶ 28).) Bental then prepared SZ-approved quotes and proposals, and submitted them to Nordex USA in Chicago. (Bauerle Decl. ¶ 29.) Bauerle alleges that his overtures to Nordex USA convinced it to partner with SZ, resulting in the placement of its first purchase orders for SZ products in February 2011. (Id. ¶¶ 30, 32 (“Prior to my contact with Nordex USA, SZ never sold any of its products directly to that entity.”).) Although ostensibly beyond the ambit of Bental's duties under the Commission Agreement, Bauerle also translated emails from English to German, and vice versa, for communications between SZ and its U.S. customers, including Nordex USA. (Id. ¶¶ 17-18.)

         When Nordex USA placed purchase orders for SZ products, it emailed them to Bental's Ohio office, and Bauerle then forwarded them to SZ along with Nordex USA's qualifications, specifications, and drawings. (Bauerle Decl. ¶ 31.) SZ then supplied Nordex USA's Arkansas facility with the requested products; no SZ product was ever shipped into Illinois. (Schmidt Decl. ¶ 24.) Thanks to Nordex USA's purchase orders, SZ and Bental amended the Commission Agreement effective February 14, 2012 through a course of dealing shorter than but otherwise similar to that characterizing its initial negotiation - in-person discussions in Germany and subsequent Ohio-Germany communications, with each party signing the final agreement from its home office. (Id. ¶¶ 32-34; Bauerle Decl. ¶¶ 14-15.) Gone were the $1, 000 monthly retainer and travel reimbursements, in favor of a fixed schedule of commissions under which Bental received 5 percent of sales per calendar year up to €400, 000, 4 percent of sales in the €400, 000-500, 000 range, and 3 percent of sales in excess of €500, 001. (Pl.'s Br., Ex. B at Att. 2.) When Bental's commission payments came due, SZ initiated wire transfers to Bauerle's Ohio bank account - sometimes paying him in Euros and other times in U.S. Dollars. (Compare, Bauerle Decl. ¶ 19; with, Schmidt Decl. ¶ 36.)

         Nordex USA's purchases from SZ were governed by General Purchasing Conditions (“GPC”), which applied “in relations with companies, public law bodies and any other third party entity providing Services (‘Supplier').” (Pl.'s Br., Ex. B at Att. 8 ¶ 1.1.) The terms of the GPC were “governed by and construed in accordance with the laws of the state of Illinois, ” and initially the parties agreed to “submit to exclusive personal jurisdiction in Illinois” and “waive any and all personal right under the law of any jurisdiction to object on any basis (including inconvenience of the forum) to jurisdiction or venue within Illinois for the purpose of litigation to enforce these GPC.” (Id. ¶¶ 15-16.) However, on March 22, 2011 - six weeks after initial execution of the GPC - SZ and Nordex USA replaced the forum selection clause with language mandating that disputes exceeding $1, 000, 000 “shall be submitted by either Party to the American Arbitration Association for binding arbitration in Chicago, Illinois.” (Id. ¶ 16.1 (Revised).)

         In September 2012, Nordex USA informed Bental of missing parts it had purchased from SZ related to installation of wind turbines for a project in Beebe, Michigan. (Bauerle Decl. ¶¶ 48-50.) SZ prepared a letter to Nordex USA confirming that Bental “was acting as an ‘agent' of SZ and that SZ was ‘directly and exclusively liable for all activities' performed” by Bental related to this issue. (Id. ¶ 50.)

         SZ terminated the Commission Agreement (as amended) in April 2015. By then, Bauerle had traveled to Chicago “on at least eight (8) separate occasions on behalf of SZ” since initiating contact with Nordex USA in August 2011. (Bauerle Decl. ¶ 40.) SZ sold approximately $2.3 million of products to Nordex USA between 2011 and 2013, paying Bental an estimated €42, 000 and over $10, 000 in commissions on those sales. (Id. ¶¶ 41-42.) However, Bental claims that SZ still owes it some $50, 000 in commissions on sales to Nordex USA (and over $100, 000 on sales to Florida-based Siemens). (Id. ¶¶ 43-47.)

         B. Procedural Background

         To recover at least some of these allegedly unpaid commissions, Bental retained German counsel to issue a demand letter on May 21, 2015, making claims on SZ under specific provisions of German law. (See, generally, Pl.'s Br. at Ex. A.) In a June 22, 2015 response letter, SZ's counsel asked for substantiation of Bental's claims and asserted that SZ had in fact remitted unearned commission payments to Bental in 2013 and 2014. (See, Id. § 2.) SZ thus sought repayment of those commissions under German “tort law” and “law of unjust enrichment.” (Ibid.)

         Bental then filed suit against SZ on September 9, 2015 in the Northern District of Ohio. See, Bental & Co., LLC v. Schraubenwerk Zerbst GmbH, No. 3:15 C 1833 (N.D. Ohio). The parties fully briefed the issue of SZ's personal jurisdiction, and on September 21, 2016, the court dismissed the case for lack of personal jurisdiction under Ohio's long-arm statute. See, generally, Bental, 2016 WL 5173327 (N.D. Ohio Sept. 21, 2016). The court found that Bental failed to demonstrate that “SZ's contacts with Ohio, either directly or through Bental as its alleged agent, give rise to its cause of action for failure to pay commissions.” Id. at *3. The court noted the absence of evidence that Bental's “activities were commissionable under the parties' contract, and (2) if so, that its cause of action ‘arises from' those activities as required per Ohio Revised Code § 2307.382(C).” Ibid. (“[E]ven if I found SZ transacted business in Ohio, [Bental] does not show its causes of action ‘arise from' those contacts.”) (citation omitted).

         Bental filed its Complaint in this case on December 20, 2016, asserting the same four causes of action: breach of contract, violation of the Ohio and Illinois statutes governing sales commissions, and unjust enrichment. SZ seeks dismissal of these claims for lack of personal jurisdiction under Rule 12(b)(2) or, in the alternative, pursuant to the forum non conveniens doctrine under Rule 12(b)(3).

         II. ANALYSIS

         A. SZ'S Rule 12(b)(2) Motion to Dismiss

         The issue presented is whether SZ's business relationship with Chicago-based Nordex USA and its other contacts with potential customers headquartered in Illinois - alone or through Ohio-based Bental as its putative agent - subject SZ to personal jurisdiction in this case for breach of the Commission Agreement, under which allegedly unpaid commissions are keyed to SZ's sales to Nordex USA. The Court finds that SZ indeed has minimum contacts in Illinois sufficiently related to the conduct giving rise to the alleged breach of contract to justify exercising specific jurisdiction. Doing so is not inconsistent with traditional notions of fair play and substantial justice.

         1. Rule 12(b)(2) Legal Standard

         A complaint need not include facts alleging personal jurisdiction but when a defendant challenges personal jurisdiction under Fed.R.Civ.P. 12(b)(2), the plaintiff bears the burden of proving that jurisdiction exists. Purdue Res. Found. v. Sanofi-Synthelabo, S.A., 338 F.3d 773, 782 (7th Cir. 2003). Where, as here, the Court rules on a motion to dismiss for lack of personal jurisdiction based on the submission of written materials - and not based on evidence presented at an evidentiary hearing - the plaintiff “need only make out a prima facie case of personal jurisdiction.” Hyatt Int'l Corp. v. Coco, 302 F.3d 707, 713 (7th Cir. 2002). In evaluating whether the prima facie standard has been satisfied, the plaintiff “is entitled to the resolution in its favor of all disputes concerning relevant facts presented in the record.” Purdue, 338 F.3d at 782 (citations, quotation, and internal quotation marks omitted).

         A district court may exercise jurisdiction only if both the state and federal constitutional requirements are satisfied. Illinois v. Hemi Group LLC, 622 F.3d 754, 756 (7th Cir. 2010). Where subject matter jurisdiction rests on diversity under 28 U.S.C. § 1332, personal jurisdiction turns on the law of the forum state. Hyatt, 302 F.3d at 713. The Illinois long-arm statute authorizes personal jurisdiction to the full extent permitted by the federal Constitution. 735 Ill. Comp. Stat. 5/2-209(c). However, because Illinois permits personal jurisdiction if it would be authorized by either the Illinois or United States Constitutions, the state statutory and federal constitutional requirements merge. uBID, Inc. v. The GoDaddy Group, Inc., 623 F.3d 421, 425 (7th Cir. 2010).

         There are two variants of personal jurisdiction: “general” and “specific.” General jurisdiction is proper only when the defendant has “continuous and systematic” contacts with the state in question such that a district court may exercise personal jurisdiction over the defendant even in cases that neither arise out of nor relate to the defendant's forum contacts. Specific jurisdiction, on the other hand, is a more limited assertion of state power in which personal jurisdiction exists for controversies that arise out of or are related to the defendant's forum contacts. See, Hyatt, 302 F.3d at 713.

         Finally, even if a court finds that the minimum contacts and specific jurisdiction requirements have been met, its due process inquiry does not end. It must also consider whether the exercise of personal jurisdiction comports with “fair play and substantial justice.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476 (1985) (quoting Int'l Shoe Co. v. State of Washington, 326 U.S. 310, 320 (1945)).

         2. Specific Jurisdiction over SZ

         Bental concedes that this Court does not have general jurisdiction over SZ. (See, Pl.'s Br. at 9 (“BENTAL suggests application and analysis of only specific jurisdiction is necessary in the present case.”).) Even if it didn't make this concession, Bental could not advance a colorable general jurisdiction argument. See, Hyatt, 302 F.3d at 713 (explaining that the plaintiff's only option is to establish specific jurisdiction where a defendant's contacts with the forum state are more limited). If jurisdiction inheres in this controversy, it is on the basis of specific jurisdiction such that the harm to Bental must have arisen out of SZ's contact with Illinois.

         Exercise of specific jurisdiction is appropriate where (1) the defendant has purposefully directed its activities at the forum state or purposefully availed itself of the privilege of conducting business in that state, and (2) the alleged injury arises out of the defendant's ...

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