NTE LLC v. Kenny Construction Company et al
Filing
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MEMORANDUM Opinion and Order. Signed by the Honorable James B. Zagel on 10/21/2015. Mailed notice(ep, )
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
NTE LLC, a Nevada limited liability company,
Plaintiff,
v.
No. 14 C 9558
Judge James B. Zagel
KENNY CONSTRUCTION COMPANY, an Illinois
corporation, NALCOR ENERGY, a Canadian
corporation, AMEREN SERVICES COMPANY, a
Missouri corporation, ELECTRIC TRANSMISSION
TEXAS, LLC, a Delaware limited liability company,
and ARIZONA PUBLIC SERVICE COMPANY, an
Arizona corporation,
Defendants.
MEMORANDUM OPINION AND ORDER
Defendant Nalcor has moved to dismiss for lack of personal jurisdiction pursuant to Fed. R.
Civ. P. 12(b)(2). For the following reasons, Defendant’s motion is granted.
I. BACKGROUND
A. Factual Background
Plaintiff NTE LLC (“NTE”) is an Illinois-based software company that provides its clients
with computer systems to improve their supply chain efficiencies. To do so, NTE generates
proprietary data that clients can access through NTE’s servers. In 2013, Nalcor Energy (“Nalcor”), a
Canadian corporation, contracted with Granite Infrastructure Contractors, Inc. (“Granite”) in
connection with its hydroelectric construction project (the “Lower Churchill Project”) in
Newfoundland and Labrador, Canada. In the course of managing the project, Granite provided
Nalcor with the use of NTE software with the cooperation of Granite’s subsidiary, Defendant Kenny
Construction Company (“Kenny”).
NTE is an Illinois citizen with its headquarters and servers located in Illinois. Defendant
Kenny is an Illinois citizen with its principal place of business in Chicago. Defendant Nalcor is a
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Canadian corporation with its principal place of business in the Province of Newfoundland and
Labrador, Canada. Although Nalcor claims it never directly contracted with Kenny and is affiliated
only indirectly through Kenny’s contract with Granite, Plaintiff alleges that Nalcor did “effectively
[contract] with” Kenny to manage some of its projects. Granite is a Canadian corporation.
Pat Hussey, a Supply Chain Manager for Nalcor’s Lower Churchill Project, submitted an
affidavit in support of Nalcor’s motion to dismiss. Hussey asserts that the Lower Churchill Project is
located entirely within Canada and that Nalcor’s only connection to Kenny was through its contract
with Granite, which was formed in the Province of Newfoundland and Labrador, Canada and took
place entirely abroad.
Hussey claims that the parties’ contract does not name which software system Granite would
provide for the Lower Churchill Project and that Hussey did not know whether the software he was
using, which NTE claims to own, belonged to Granite itself or to a third party. In fact, Hussey claims
not to know of the existence or location of NTE until reviewing the First Amended Complaint in this
litigation. Like Nalcor itself, Hussey also asserts that to his knowledge Nalcor has never conducted
business, owned or managed property, maintained a bank account, or incurred tax liability in Illinois,
nor has it signed any contracts with Illinois companies in the last five years. Nalcor also offers six
other employee affidavits disavowing knowledge of NTE, its location, or the location of its servers.
B. Basis for Litigation
In December 2014, NTE filed a copyright infringement and misappropriation suit against
Kenny and certain of Kenny’s customers, including Nalcor, alleging that Kenny illegally extracted
proprietary data from NTE’s cloud-based software system and gave it to an NTE competitor. As a
result, NTE claims that Nalcor and others of Kenny’s clients have unlawfully and intentionally
accessed NTE’s proprietary data through the competitor’s system without obtaining an NTE license
or subscription. Nalcor is charged with both direct and vicarious copyright infringement arising
under 17 U.S.C. § 501 and unjust enrichment.
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II. DISCUSSION
Defendant Nalcor has moved to dismiss for lack of personal jurisdiction under Fed. R. Civ. P.
12(b)(2). Plaintiff does not allege that Nalcor is subject to general personal jurisdiction. As discussed
below, the court finds that Nalcor is not subject to specific personal jurisdiction in Illinois.
A. Legal Standard
The plaintiff bears the burden of establishing personal jurisdiction when the defendant moves
to dismiss under Rule 12(b)(2). Tile Unlimited, Inc. v. Blanke Corp., 47 F.Supp.3d 750, 755 (N.D. Ill.
2014). When, as here, the court relies only on the parties’ written materials to rule on the motion to
dismiss, the Plaintiff need only make a prima facie case for personal jurisdiction. Henneberger v.
Ticom Geomatics, Inc., 602 Fed.Appx. 352, 353 (7th Cir. 2015). In evaluating whether the Plaintiff
has met this burden, the court must accept all of the Complaint’s well-pleaded facts as true and draw
all reasonable inferences in favor of the plaintiff. Eagle Air Transport, Inc. v. National Aerotech
Aviation Delaware, Inc., 75 F.Supp.3d 883, 886 (N.D. Ill. 2014).
Federal district courts exercising diversity jurisdiction may only assert personal jurisdiction
if a court of the state in which the court sits would have jurisdiction. See RAR, Inc. v. Turner Diesel,
Ltd., 107 F.3d 1272, 1275 (7th Cir.1997). The exercise of jurisdiction in Illinois must comply with
the Illinois Long-Arm Statute, the Illinois Constitution, and Federal Due Process. See Citadel Group
Ltd. v. Wash. Regional Medical Center, 536 F.3d 757, 760–61 (7th Cir.2008). Because the relevant
state statute extends to the outer limits of the Illinois and United States Constitutions, 735 ILCS 5/2–
209(c), courts often proceed directly to the Federal Due Process analysis. Citadel Group, 536 F.3d at
760–61.
The Due Process Clause of the federal constitution asks whether a non-resident defendant has
“certain minimum contacts with [the forum state] such that the maintenance of the suit does not
offend traditional notions of fair play and substantial justice.” Int’l Shoe Co. v. State of Wash., Office
of Unemployment Comp. & Placement, 326 U.S. 310, 316 (1945). To give rise to minimum contacts,
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the defendant must have purposefully availed herself of the privilege of conducting activity within
the forum state, thus invoking the benefits and protections of the laws of the forum state. See World–
Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 299 (1980); Burger King Corp. v.
Rudzewicz, 471 U.S. 462, 475–76 (1985). Such activity should make it foreseeable that the defendant
would be haled into a court of that state. “[R]andom, fortuitous, or attenuated contacts” with the
forum state do not establish foreseeability. Daniel J. Hartwig Assoc., Inc. v. Kanner, 913 F.2d 1213,
1218 (7th Cir.1990) (internal quotes omitted).
B. Specific Personal Jurisdiction
The question of whether a State has specific jurisdiction over a defendant focuses “on the
relationship among the defendant, the forum, and the litigation.” Walden v. Fiore, 134 S. Ct. 1115,
1118 (2014) (quoting Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 775 (1984)). Minimum
contacts analysis looks to the defendant’s contacts with the State itself, not with persons who reside
there. Walden, 134 S. Ct. at 1118. Walden makes clear that these principles also apply when the
claim at issue is an intentional tort. 1 Id. at 1123. In tort cases, as in others, it is “insufficient to rely on
a defendant’s random, fortuitous, or attenuated contacts” with the forum. Id. (internal quotations and
citations omitted). Jurisdiction over an intentional tortfeasor “must be based on intentional conduct
by the defendant that creates the necessary contacts with the forum.” Id.
In this case, NTE alleges that Defendant accessed NTE’s Illinois-based servers to commit
copyright infringement, knowing the effects would be felt in Illinois. Eighty four of these occasions
allegedly occurred after Defendant had been served with this lawsuit. NTE lays out several
arguments urging an inference that Nalcor knew its conduct was aimed at Illinois. First, Defendant
received a handful of maintenance and customer service emails from Plaintiff with NTE’s Illinois
address in the signature block. Defendant also allegedly accessed the NTE system through a URL
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There may be debate on whether copyright infringement is, in fact, an intentional tort. Here, however, both parties have
treated these claims as intentional torts in their briefing, which resolves this issue for my purposes.
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that included NTE’s name (http://kccnalcor.nte.com), which NTE argues put Defendant on notice of
NTE’s existence. Finally, NTE alleges that Defendant’s contract with Granite contained references
to Granite’s sister corporation (and named Defendant) Kenny’s Northbrook, IL headquarters. The
contract also required amendments and other notices to be sent to Kenny’s Illinois headquarters.
Plaintiff bases much of its legal argument on Tamburo v. Dworkin, 601 F.3d 693, 703 (7th
Cir. 2010), a case detailing what was then the Seventh Circuit’s approach to specific jurisdiction for
intentional torts. However, that case attached great weight to the effects or injury felt in the forum
state. Id. After Walden, this approach is likely no longer good law. See Walden, 134 S. Ct. at 1125
(“The proper question is not whether the plaintiff experienced a particular injury or effect but
whether the defendant’s conduct connects him to the forum in a meaningful way.”); Advanced
Tactical Ordnance Sys., LLC v. Real Action Paintball, Inc., 751 F.3d 796, 802 (7th Cir. 2014), as
corrected (May 12, 2014) (“[A]fter Walden there can be no doubt that ‘the plaintiff cannot be the
only link between the defendant and the forum.’ Walden, 134 S.Ct. at 1122. Any decision that
implies otherwise can no longer be considered authoritative.”).
In this case, Plaintiff has adequately pleaded they suffered damage in Illinois, but not that
Defendant connected itself to Illinois in any meaningful way. I will address each of Plaintiff’s
minimum contacts arguments in turn.
1. The Granite-Nalcor Contract
Plaintiff alleges that Defendant’s contract with Granite meaningfully links Defendant to
Illinois because Defendant presumably saw the references in the contract to Kenny’s Illinois
headquarters and was aware that any amendments or notices to the contract had to be mailed to
Kenny in Illinois. But the Granite-Nalcor contract was a contract between two Canadian companies
for services in Canada. The mere mailing of notices into Illinois is purely “fortuitous” and does not
purposefully avail Defendant of the protection of Illinois law. Similarly, the fact that Patrick Kenny,
who signed some amendments to the contract, is an Illinois resident does not constitute purposeful
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availment, since any contact between Nalcor and Patrick Kenny or Kenny Construction Company
was merely incidental to the contract with Granite. Advanced Tactical, 751 F.3d at 796 (“Contacts
between the plaintiff or other third parties and the forum do not satisfy this requirement.”). Contacts
with third parties are the type of “attenuated contacts” declared insufficient in Walden. 134 S. Ct. at
1123. The slight connection between the Granite-Nalcor contract and Illinois does not link Nalcor to
the forum for purposes of personal jurisdiction.
2. NTE’s Website and Emails
Likewise, the emails from NTE to Defendant are insufficient to establish jurisdiction, as they
are “unilateral activity” of the plaintiff. See Walden, 134 S. Ct. at 1223. Nor does accessing a URL
with “NTE” in the text establish that Defendant aimed its actions at Illinois. The URL itself does not
indicate where NTE is located and, even drawing all reasonable inferences in favor of the Plaintiff, it
is not reasonable to expect that anyone who accesses that URL will then research where NTE is
located.
Moreover, even if Defendant knew NTE was located in Illinois, email and URL activity
would not necessarily affect personal jurisdiction. The Seventh Circuit recently noted that “email
does not exist in any location at all; it bounces from one server to another... and it winds up wherever
the recipient happens to be at that instant.” Advanced Tactical, 751 F.3d at 803. The same is true of
visiting a website where the user, operating only from a foreign state, has no control over or notice of
the web server’s physical location. This online activity is unlike other examples of minimum contacts
because the act of visiting a website that is not situated in a specific geographical location does not
purposefully avail the user of the protection and benefit of the server state’s laws.
3. Accessing NTE’s Illinois-Based Servers
Post-Walden, purposeful availment for intentional torts depends on whether the defendant
knows he is committing a tort in the forum. Therefore, determining whether accessing Illinois-based
servers constitutes targeting the forum raises the question of whether or not Nalcor knew of the
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servers’ location at the time of the activity. This is consistent with the approach of two cases in this
district dealing with questions of personal jurisdiction and server access. See Stat Imaging, LLC v.
Medical Specialists, Inc., P.C., 2013 WL 3811643 (N.D. Ill. July 22, 2013) (rejecting the argument
that a party’s accessing of servers in the forum state constitutes targeting that state); Experian Info.
Solutions, Inc. v. I-Centrix LLC, No. 04 C 4437, 2004 WL 2643459 (N.D. Ill. Nov. 19, 2004)
(holding that unknowing use of Illinois-based servers does not on its own create minimum contacts).
Plaintiff cites several cases in which courts found personal jurisdiction as a result of
accessing servers, but at least two of these cases notably involved defendants who clearly knew
where the servers in question were located. See, e.g., Rhapsody Solutions, LLC v. Cryogenic Vessel
Alternatives, Inc., No. H–12–1168, 2013 WL 820589, at *5 (S.D. Tex. Mar. 5, 2013) (finding
personal jurisdiction because evidence showed defendant knew of server location); MacDermid, Inc.
v. Deiter, 702 F.3d 725, 730 (2d Cir. 2012) (finding personal jurisdiction over a former employee
who knew the location of servers). The remaining cases cited by Plaintiff are either ambiguous as to
whether the defendant knew of the server’s location, or were decided on principles that are no longer
apposite post-Walden.
Plaintiff argues that individual facts, each of which fail to grant personal jurisdiction on their
own, can be taken together to show that Nalcor knew NTE’s servers were in Illinois at the time it
accessed them. But the clues that NTE claims should have put Nalcor on notice of their location,
such as a mailing address in a contract with a third party or a signature line at the bottom of a few
mass emails, are too unobtrusive and speculative to raise a reasonable inference that Nalcor knew of
NTE’s or its server’s Illinois location. In fact, the only facts related to location in the record are in
affidavits by Nalcor employees disclaiming any knowledge that NTE was based in Illinois. These
affidavits may be given weight when the plaintiff does not rebut them with affirmative evidence.
Hill v. Capital One Bank (USA), N.A., No. 14-CV-6236, 2015 WL 468878, at *3 (N.D. Ill. Feb. 3,
2015). Thus, even taking all reasonable inferences in favor of the Plaintiff, I am not able to infer that
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Defendants knew that NTE’s servers were located in Illinois and could reasonably expect to be haled
into court as a result of their activities.
Plaintiff’s final argument is that Defendant accessed NTE’s servers 84 times after being
served with this lawsuit, indicating that they knew of NTE’s location at that time yet continued to
intentionally access the NTE server. This raises two questions: a case-specific inquiry into whether
the lawsuit put Nalcor on notice of NTE’s server locations, and a general question of whether actions
that occur after a lawsuit begins can ever subject a defendant to personal jurisdiction in that lawsuit.
On the first question, I find no language in either the First Amended Complaint or the original
Complaint stating the location of NTE’s servers. The Complaint does say that NTE’s principal place
of business is in Illinois, but as Defendant has pointed out, the nature of cloud-based computing is
such that servers are not necessarily in the same physical location as the company. Thus, Plaintiff
has not pleaded facts showing that Nalcor knew NTE’s servers were in Illinois.
Regardless of whether or not the lawsuit put Defendant on notice that NTE’s servers were
also located in Illinois, I do not consider post-filing access to the servers to be relevant for
jurisdictional purposes. The question of whether post-filing contacts can invest a forum with personal
jurisdiction has not been addressed by the Seventh Circuit, but that court has said that it will not
weigh post-filing facts in deciding whether or not to divest jurisdiction. See Grinnell Mut.
Reinsurance Co. v. Shierk, 121 F.3d 1114, 1116 (7th Cir. 1997) (“requirements for diversity
jurisdiction must be satisfied only at the time a suit is filed.”); Johnson v. Burken, 930 F.2d 1202,
1205 (7th Cir. 1991) (entertaining post-filing facts “would be an invitation to strategic behavior.”);
see also Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 830 (1989) (“The existence of
federal jurisdiction ordinarily depends on the facts as they exist when the complaint is filed.”).
Furthermore, at least two courts in this district have found that post-filing contacts cannot be
counted towards personal jurisdiction. See Haggerty Enterprises, Inc. v. Lipan Indus. Co., No. 00 C
766, 2001 WL 968592, at *4 (N.D. Ill. Aug. 23, 2001) (finding that product sales after a suit had
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been filed could not be considered because they invite strategic behavior); United Phosphorus, Ltd. v.
Angus Chem. Co., 43 F. Supp. 2d 904, 910 (N.D. Ill. 1999) (declining to consider post-filing contacts
for purposeful availment analysis). In part, this is because post-filing contacts cannot serve the Due
Process purpose of the minimum contacts doctrine—that is, they cannot give the defendant fair
warning that he could be “haled into court in the forum state” before the lawsuit is filed. Id.
I join my colleagues in deciding that post-filing contacts are not relevant for personal
jurisdiction analysis. This approach minimizes the risk of parties strategizing to generate jurisdiction
and ensures that a defendant has the fair warning Due Process requires before a suit is filed, not after.
For the above reasons, I find this court does not have specific personal jurisdiction over
Defendant Nalcor.
III. CONCLUSION
Defendant Nalcor’s motion to dismiss for lack of personal jurisdiction is granted. Plaintiff
NTE’s request for additional limited discovery to prove jurisdiction is denied.
ENTER:
James B. Zagel
United States District Judge
DATE: October 21, 2015
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