Tai Matlin v. Spin Master Corp.
Opinion
Tai Matlin and James Waring appeal the district court's dismissal of their suit against Spin Master Corporation, Spin Master Ltd., and Swimways Corporation for lack of personal jurisdiction and improper venue. Because the defendants have insufficient contacts with Illinois to establish specific personal jurisdiction, we affirm.
I. BACKGROUND
Along with other business partners, two Illinois residents, Tai Matlin and James Waring, co-founded a company called Gray Matter Holdings, LLC, in 1997. 1 Matlin and Waring developed certain products for Gray Matter, including an inflatable beach mat known as the "Snap-2-It" and a radio-controlled hang glider called the "Aggressor."
In 1999, after learning that the company faced failure, Matlin and Waring entered into a Withdrawal Agreement with Gray Matter wherein they sold their partnership shares of the company and forfeited their salaries. The Withdrawal Agreement also included a provision that assigned Matlin and Waring's intellectual property and patent rights to Gray Matter, but entitled them to royalties on the sale of the products. In the years following the Withdrawal Agreement, Matlin and Waring frequently brought Gray Matter to arbitration to enforce their royalty rights.
In 2002, Gray Matter filed an assignment of the products' intellectual property rights with the United States Patent and Trademark Office. Matlin and Waring allege that Gray Matter filed the assignment without their knowledge and that the company forged Waring's signature on the paperwork. The following year, Gray Matter sold assets to Swimways, including the patent rights to Matlin and Waring's products. A 2014 binding arbitration between Gray Matter and the plaintiffs determined that Gray Matter did not assign the Withdrawal Agreement to Swimways upon sale of the products and that the plaintiffs were *704 owed no further royalties. Accordingly, Swimways never paid royalties to Matlin or Waring. Then in 2016, Spin Master acquired Swimways and the intellectual property rights at issue here.
In 2017, Matlin and Waring filed this suit against Swimways, Spin Master Corp., and Spin Master Ltd. in the Northern District of Illinois. They argued they were still entitled to royalties for the products and brought claims of fraud and breach of contract against Swimways, and unjust enrichment against all defendants. Swimways is a Virginia corporation with its principal place of business in Virginia Beach. The Spin Master defendants are Canadian companies with their principal places of business in Toronto. None of the defendants are registered to conduct business in, have employees in, or have registered agents for service of process in Illinois.
The defendants moved to dismiss Matlin and Waring's complaint under Federal Rule of Civil Procedure 12(b)(2) for lack of personal jurisdiction and Rule 12(b)(3) for improper venue. The defendants submitted declarations from their respective corporate officers in support of their motion, outlining how the companies lacked sufficient contact with Illinois to establish personal jurisdiction. In response to defendants' motion to dismiss, plaintiffs' counsel submitted an online purchase receipt from Swimways' website and a declaration stating that he purchased and received a single patented product in Illinois. Matlin and Waring believed that, along with the complaint's allegations, this purchase of a royalty-generating product sufficiently established personal jurisdiction over the defendants.
The district court rejected Matlin and Waring's argument and granted the defendants' Motion to Dismiss. The court determined that because Matlin and Waring asserted only common law claims against the defendants, Illinois law governed whether it had personal jurisdiction over the defendants. The court then turned to the Illinois Long Arm Statute and the state's case law to determine whether asserting personal jurisdiction over the defendants would violate their right to due process. Accordingly, it held that the defendants had insufficient contacts with Illinois to establish either general or specific personal jurisdiction in that state. The defendants subsequently filed a Motion for Sanctions against plaintiffs under Federal Rule of Civil Procedure 11.
Matlin and Waring appealed the court's dismissal. We note that defendants' Motion for Sanctions against Matlin and Waring, pending before the district court, has no impact on our jurisdiction over Matlin and Waring's appeal.
See
Cleveland v. Berkson
,
II. ANALYSIS
On appeal, Matlin and Waring argue that the district court erred in holding that it had no personal jurisdiction over the defendants. Specifically, they maintain that the defendants established sufficient contacts in Illinois by selling the royalty-generating products online and shipping them into the state. Additionally, they believe that the district court misinterpreted our case law in the wake of
Walden v. Fiore
,
We review dismissal for lack of personal jurisdiction de novo .
*705
Tamburo v. Dworkin
,
A. Due Process Requirements for Specific Personal Jurisdiction
Because Matlin and Waring bring claims based in state common law, "a federal court sitting in Illinois may exercise jurisdiction over [the defendants] in this case only if authorized both by Illinois law and by the United States Constitution."
be2 LLC v. Ivanov
,
We previously observed that although the Illinois Constitution may theoretically provide greater due process protections for nonresident defendants, no Illinois case has provided a definitive explanation of the differences between federal and Illinois due process.
See
Hemi Group
,
"The Due Process Clause of the Fourteenth Amendment constrains a State's authority to bind a nonresident defendant to a judgment of its courts."
Walden
,
Although two types of personal jurisdiction (general and specific) exist, the parties agree that only specific personal jurisdiction applies here. For specific personal jurisdiction, "the defendant[s'] contacts with the forum state must directly relate to the challenged conduct or transaction."
Tamburo
,
In
Hemi Group
and other cases, we cautioned that courts "should be careful in resolving questions about personal jurisdiction involving online contacts to ensure that a defendant is not haled into court simply because the defendant owns or operates [an interactive] website that is accessible in the forum state."
B. The District Court Properly Distinguished Hemi Group
Plaintiffs rely heavily on language in our decision in
Hemi Group
to support their claim that personal jurisdiction exists in this case. In
Hemi Group
, we held that a New Mexico cigarette distributor who sold over 300 packages of cigarettes to an Illinois Department of Revenue agent through an interactive website over the course of multiple years was subject to personal jurisdiction in Illinois.
The first is the scale of contact with Illinois.
Hemi Group
involved a defendant's systematic contact with the forum state through repeated sales of a regulated product over a period of multiple years, not a single incident conjured up by the plaintiffs' attorney for the exclusive purpose of establishing personal jurisdiction over the defendants.
See also
Russell
,
Second, the relationship between the defendants' conduct and the State differs significantly. In Hemi Group , the defendant's systematic contact with Illinois involved unregistered sales of a regulated product, tobacco, in violation of state law. There, the defendant's offending activities significantly related to the forum state and its laws. Here, however, the plaintiffs bring claims with an attenuated relationship to Illinois and any sales that occurred there. In other words, this case is not "a suit arising out of or related to the defendant[s']
*707
contacts with the forum."
Helicopteros Nacionales de Colombia, S.A. v. Hall
,
Third, the
Hemi
defendant's contacts with Illinois occurred over a period of time before the state filed suit. In this case, Matlin and Waring attempted to salvage personal jurisdiction-
after
the defendants moved to dismiss-by luring them into shipping a product into Illinois. Because specific personal jurisdiction derives from the plaintiffs' relevant contacts with the forum, we cannot allow plaintiffs to base jurisdiction on a contact that did not exist at the time they filed suit. The plaintiffs' tactics flout the due process limitations on personal jurisdiction, which restrict courts' jurisdiction over certain defendants if haling them into court would "offend traditional notions of fair play and substantial justice."
Int'l Shoe
,
We conclude that the district court correctly declined to exercise personal jurisdiction over the defendants. As we previously explained, in a minimum contacts analysis "[t]he relevant contacts are those that center on the relations among the defendant, the forum, and the litigation."
Advanced Tactical Ordnance Sys.
,
III. CONCLUSION
Based on the foregoing, we believe the district court correctly dismissed plaintiffs' claims for lack of personal jurisdiction over the defendants. AFFIRMED.
Although Gray Matter eventually changed its name to 180s LLC, we refer to it as "Gray Matter" for clarity.
Reference
- Full Case Name
- Tai MATLIN and James Waring, Plaintiffs-Appellants, v. SPIN MASTER CORP., Spin Master Ltd., and Swimways Corporation, Defendants-Appellees.
- Cited By
- 158 cases
- Status
- Published