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

Filing 41

MEMORANDUM OPINION AND ORDER Signed by the Honorable Robert M. Dow, Jr. on 2/5/2016. Mailed notice(cdh, )

IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
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.

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No. 15-cv-1885
Judge Robert M. Dow, Jr.

MEMORANDUM ORDER AND OPINION
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. (“Baker”) for declaratory relief, fraudulent inducement, fraudulent
misrepresentation, and fraudulent concealment. Before the Court is Baker’s motion [14] to
dismiss Plaintiff’s complaint for lack of personal jurisdiction and to dismiss the request for
declaratory relief for failure to join an indispensable party. Baker’s motion [14] is granted. As
explained below, Plaintiffs have failed to make a prima facie showing that Baker knew that the
effects of its allegedly tortious conduct would be felt in Illinois. The Court finds it unnecessary
to reach the other issues raised in Baker’s motion, namely: 1) whether the Court should decline
jurisdiction based on the fiduciary shield doctrine; 2) whether Plaintiffs’ claim for declaratory
relief should be dismissed for failure to join an indispensable party; or 3) whether Plaintiffs’ fraud

claims should be dismissed pursuant to Rule 12(b)(6) for failure to state a claim upon which relief may be
granted.1

I.

Background
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 Baker 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.
The Funds are pooled investment funds that invest in public and private companies. [1-1]
at 3. The Funds are organized and operate their principal place of business in the Cayman
Islands, a British Overseas Territory.
investment.

Id.

Pentwater manages the Funds and directs their

Pentwater is based in Evanston, Illinois.

Id. at 3-4.

Halbower is the Chief

Executive Officer (“CEO”) and Chief Investment Officer (“CIO”) of Pentwater and a resident of
Illinois. Id. at 3.
In 2012, the Funds and American Standard Energy Corporation (“ASEN”) entered into a
credit agreement under which the Funds loaned money to ASEN. [15-1] at 4. ASEN is a
Nevada corporation with its principal place of business in Texas and offices in Texas and
Arizona. [1-1] at 4. ASEN’s assets consisted primarily of oil and gas producing properties in
Texas and North Dakota. [15-1] at 4.
1

The Court requested that the parties defer briefing on Baker’s Rule 12(b)(6) arguments. Given its
finding that it lacks personal jurisdiction over Baker, the Court need not (and would lack authority to)
order further briefing on the 12(b)(6) arguments.

2

In early 2014, the Funds entered into another credit agreement with ASEN under which
ASEN borrowed an additional $46 million from the Funds (the “Credit Agreement”). [1-1] at 4.
Pentwater and its attorneys handled all of the negotiations on behalf of the Funds. See id. at 4-6.
Halbower and Francis Strezo, a Pentwater portfolio manager located in Illinois, participated in
the negotiations. See [30-1] at 3-5 (Halbower declaration); [30-2] at 2-3 (Strezo declaration).
See also [15-1] at 5 (Grindon declaration). Pentwater outside counsel Anthony Herrerra, an
attorney in Holland & Knight’s Dallas, Texas, office, represented the Funds and Pentwater. [11] at 4-5.
Baker acted as lead counsel for ASEN. [1-1] at 4. Baker is a law firm organized under
the laws of and with its principal place of business in Tennessee and offices in Alabama, Florida,
Georgia, Louisiana, Mississippi, Tennessee, and Texas. Id. at 3; [15-7] at 3 (Hicks declaration).
Baker has no offices, real property, or bank accounts in Illinois. Id. Four of Baker’s 693
attorneys and advisors have active Illinois law licenses. Id. The lead Baker attorney on the
ASEN transaction was Tonya Mitchem Grindon (“Grindon”), a partner in the firm’s Nashville,
Tennessee office. [1-1] at 4. Grindon is not and has never been licensed to practice in Illinois.
[15-1] at 2 (Grindon declaration).
At the time of the negotiations, Pentwater and the Funds knew that ASEN was a
financially distressed company. [1-1] at 4. Pentwater and the Funds also knew that ASEN
allegedly owed past due fees to Baker for legal work, unrelated to the Credit Agreement, that
Baker had previously performed. Id. at 5. Based on this knowledge, Pentwater demanded and
required that as a condition of the Funds entering into the Credit Agreement, ASEN would
refrain from paying Baker for past due legal fees or any future legal fees—other than $315,000
that ASEN was authorized to pay Baker upon closing the deal—until such time as ASEN had

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disposed of sufficient assets to allow it to repay at least $20 million toward the principal balance
of the loan. Id. Pentwater’s and the Funds’ rationale was that they did not want cash to leave
ASEN to pay unsecured creditors like Baker when the Funds would be in the position of being
secured creditors under the Credit Agreement. Id. Pentwater and Herrerra communicated the
Condition to ASEN and Baker orally and in writing in January 2014. Id. See also [30-2] at 3
(Strezo declaration). “Pentwater and Mr. Herrera made it absolutely clear that unless this
Condition was satisfied in a signed agreement between ASEN and Baker in a form satisfactory to
Pentwater, no loan would be made by the Funds to ASEN.” [1-1] at 5.
On January 30, 2014, ASEN’s CEO, J. Steven Person, and Grindon executed an
agreement (the “First Letter Agreement”), which provided in relevant part:
You, acting on behalf of Baker Donelson, and with authorization to act in such
capacity and to bind Baker Donelson accordingly, are offering to accept $315,000
in cash as the first payment due and payable in relation to ASEN’s existing debt
to Baker Donelson at the closing of ASEN’s financing with Pentwater Capital,
and then to defer a second payment of an additional $315,000 owed, along with
the amount of any other legal fees hereinafter incurred, until such time as ASEN
has liquidated assets and through such liquidation received at least $20,000,000 in
proceeds and at least $20,000,000 has been utilized to repay debt owed to
Pentwater. Please confirm our understanding of your offer with your signature
below. In addition, you, acting on behalf of Baker Donelson, and with
authorization to act in such capacity and to bind Banker Donelson accordingly,
agree that Baker Donelseon will continue to represent ASEN without attempting
to withdraw from any representation of ASEN, subject to and except as required
to comply with any ethical obligations under the applicable Rules of Professional
Conduct, or demanding any further cash payments from ASEN until at least
$20,000,000 has been utilized to repay debt owed to Pentwater.
[1-1] at 29-30 (emphasis added). Grindon signed the First Letter Agreement on behalf of Baker.
Id. at 30.
On January 31, 2014, Grindon emailed a copy of the “fully executed” First Letter
Agreement to Herrera (Plaintiffs’ outside counsel in Texas) and copied Strezo (Pentwater’s
portfolio manager in Illinois). [1-1] at 19.
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Later the same day, Baker and ASEN replaced the First Letter Agreement with another
agreement (the “Second Letter Agreement”). [1-1] at 6. The above-quoted language from the
First Letter Agreement was replaced with the following language in the Second Letter
Agreement:
You, acting on behalf of Baker Donelson, and with authorization to act in such
capacity and to bind Baker Donelson accordingly, are offering to accept $315,000
in cash as the first payment due and payable in relation to ASEN’s existing debt
to Baker Donelson, and then to defer a second payment of an additional $315,000
owed, along with the amount of any other legal fees hereinafter incurred, until
such time as ASEN has liquidated assets and through such liquidation received at
least $20,000,000 in proceeds. Please confirm our understanding of your offer
with your signature below. In addition, you, acting on behalf of Baker Donelson,
and with authorization to act in such capacity and to bind Banker Donelson
accordingly, agree that Baker Donelseon will continue to represent ASEN without
attempting to withdraw from any representation of ASEN, subject to and except
as required to comply with any ethical obligations under the applicable Rules of
Professional Conduct.
[1-1] at 239-40. Grindon and Baker did not send a copy of the Second Letter Agreement to
Herrerra or Plaintiffs. [1-1] at 6. See also [30-1] at 4-5 (Halbower declaration); [30-2] at 4
(Strezo declaration); [15-1] at 7-8 (Grindon declaration).
During the closing of the Credit Agreement, Baker represented that the First Letter
Agreement “was the agreement between Baker and ASEN related to any past due fees and future
fees ASEN owed Baker,” even though Baker knew at this time “that it has entered into and/or
agreed to the Second Letter Agreement.” [1-1] at 10. On February 5, 2014, Pentwater, relying
on the First Letter Agreement, allowed the Funds to close on the Credit Agreement with ASEN.
Id. at 6. (Pentwater and Baker are not parties to the Credit Agreement.) Section 9.1(s) of the
Credit Agreement provides that an “Event of Default” will exist under the Credit Agreement if:
except with respect to the payment of $315,000 to Baker, Donelson, Bearman,
Caldwell & Berkowitz, PC (“Baker Donelson”) to be made on the Closing Date,
Borrower shall make any payment to Baker Donelson unless such payment (i)
was made in connection with the successful disposition of assets of the Borrower,
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the net proceeds of which are at least equal to $20,000,000 or (ii) is otherwise
consented to in writing by the Lenders[.]
[1-1] at 90.
Between February 5, 2014 and December 2014, ASEN engaged in two asset disposals
and repaid $8.9 million to the Funds. [1-1] at 6. In December 2014, ASEN and a third party
signed a purchase and sale agreement (“Sale Agreement”) for a third asset disposal. Id. at 7.
The assets that were to be disposed of in the Sale Agreement were assets in which the Funds also
held liens and security interests pursuant to the Credit Agreement. Id.
Baker represented ASEN during the negotiation, documentation, and closing of the Sale
Agreement. [1-1] at 7. In order to close the transaction, ASEN needed to obtain lien releases
from the Funds authorizing the assets to be sold. Id. Baker prepared consents and partial lien
releases for the Funds to execute. Id. The Funds conditioned their consents and releases on
approving the allocation of the proceeds from the sale. Id. ASEN and Baker knew that the
Funds’ consents were conditioned on the proceeds of the sale being distributed in accordance
with the flow of funds previously approved by Pentwater and the Funds. Id. Plaintiffs allege on
information and belief that Baker released the Funds’ consents and partial lien releases to the
purchaser of the assets without the Funds’ permission. Id.
The Sale Agreement closed, but the Funds did not immediately receive the proceeds of
the sale. [1-1] at 7. Plaintiffs allege on information and belief that the delay was the result of
Baker’s efforts to recover payment from ASEN for its past-due fees. Id. The Funds attempted to
obtain the proceeds from the Sale Agreement. See id.
On January 5, 2015, Grindon informed Plaintiffs of the Second Letter Agreement
(allegedly for the first time) and emailed a copy to Strezo in Illinois. [1-1] at 7-8. Grindon
stated in her email to Strezo that the First Letter Agreement had been “revised * * * to comport
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with the terms of the credit agreement regarding the event of default for payments to Baker
Donelson, which terms were approved by your counsel Anthony Herrera and by ASEN’s special
committee.” [1-1] at 191.
On January 14, 2015, Baker’s General Counsel, John Hicks (“Hicks”), sent Pentwater’s
outside attorney, Steven Aldous, a letter stating that ASEN had made a disposition of assets of at
least $20 million and therefore Baker was entitled to be paid by ASEN prior to any “net
proceeds” of the sale being paid to Pentwater. [1-1] at 194. Hicks wrote that Pentwater’s actions
constituted an effort to interfere with Baker and ASEN’s attorney-client relationship, that
Pentwater had engaged in tortious interference and faced treble and punitive damages, and that
ASEN would “seek redress from the courts” if Pentwater did not “retract its demands
immediately.” Id.
On January 28, 2015, Halbower called and spoke with Hicks. [30-1] at 5. Hicks
confirmed that Baker had never sent a copy of the Second Letter Agreement to Pentwater, the
Funds, or their counsel until January 5, 2015. Id.
Plaintiffs filed suit against Baker in Cook County Circuit Court for declaratory judgment
(Count I), fraudulent inducement (Count II), fraudulent misrepresentation (Count III), and
fraudulent concealment (Count IV). See [1-1]. Plaintiffs’ theory is that: (1) Baker provided the
First Letter Agreement to Pentwater with the knowledge that Pentwater required it prior to
authorizing the Funds to close on the Credit Agreement; (2) Baker then entered into a Second
Letter Agreement with ASEN, which altered key terms of the First Letter Agreement, but
intentionally concealed the Second Letter Agreement from Plaintiffs and their counsel during the
closing of the Credit Agreement; (3) Plaintiffs relied on the First Letter Agreement and extended
credit to ASEN under the Credit Agreement, which Plaintiffs would not have done but for the

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First Letter Agreement; and (4) Plaintiffs were injured in an amount equal to the difference
between the $46 million the Funds lent to ASEN and the amount the Funds eventually recover
from ASEN.
Baker removed Plaintiffs’ action to federal court based on diversity jurisdiction. See [1].
Baker then moved to dismiss the case for lack of personal jurisdiction, failure to join and
indispensable party, and failure to state a claim upon which relief may be granted. See [14],
[15].

The Court ordered the parties to submit briefs on the personal jurisdiction and

indispensable party issues first. See [27]. While the parties were briefing Baker’s motion,
Plaintiffs voluntarily dismissed their claim for declaratory judgment (Count I) without prejudice.
See [35]. In addition, since Plaintiffs filed their motion, ASEN has filed for bankruptcy in the
U.S. Bankruptcy Court for the Western District of Texas (Case Nos. 15-bk-70104 & 15-bk70105). [30] at 16.
II.

Personal Jurisdiction
A.

Legal Standard

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). Where, as here, the
defendant moves to dismiss a complaint for lack of personal jurisdiction “based on the
submission of written materials, without the benefit of an evidentiary hearing, the plaintiff need
only make out a prima facie case of personal jurisdiction.” GCIU-Employer Ret. Fund v.
Goldfarb Corp., 565 F.3d 1018, 1023 (7th Cir. 2009).
In this case, Plaintiffs assert claims arising under Illinois common law. There is no
federal statute authorizing nationwide service of process in such cases; therefore this Court

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sitting in Illinois may exercise jurisdiction over Baker only if authorized both by the United
States Constitution and Illinois law. be2 LLC v. Ivanov, 642 F.3d 555, 558 (7th Cir. 2011)
(citing Fed. R. Civ. P. 4(k)(1)(A); Tamburo v. Dworkin, 601 F.3d 693, 700 (7th Cir. 2010)).
Illinois’ long-arm statute “permits its courts to exercise personal jurisdiction on any basis
permitted by the constitutions of both Illinois and the United States.” Id.; see 735 ILCS 5/2209(c). Thus, in this case, “the state statutory and federal constitutional inquiries merge.”
Tamburo, 601 F.3d at 700.
The federal test for personal jurisdiction under the Due Process Clause of the Fourteenth
Amendment authorizes a court to exercise jurisdiction over a non-resident defendant only if the
defendant has “certain minimum contacts with [the state] such that the maintenance of the suit
does not offend ‘traditional notions of fair play and substantial justice.’” Int’l Shoe Co. v.
Washington, 326 U.S. 310, 316 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)).
In other words, “it is essential in each case that there be some act by which the defendant
purposefully avails itself of the privilege of conducting activities within the forum State, thus
invoking the benefits and protections of its laws.” Hanson v. Denckla, 357 U.S. 235, 253 (1958).
The requirement that a defendant have “minimum contacts” with the forum ensures that a nonresident defendant will not be forced to litigate in a jurisdiction as a result of “random, fortuitous,
or attenuated contacts” with the forum or the unilateral activity of the plaintiff; the defendant
“should reasonably anticipate being haled into court” there. Burger King Corp. v. Rudzewicz,
471 U.S. 462, 474-75 (1985).
“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). Here, Plaintiffs do not assert that the Court has general personal jurisdiction

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over Baker; therefore, the Court’s inquiry will focus on specific personal jurisdiction only. To
establish specific personal jurisdiction, a plaintiff must show that its claims against the defendant
“arise out of the defendant’s constitutionally sufficient contacts with the state.” uBid, 623 F.3d
at 425.

Whether specific personal jurisdiction over a defendant exists depends on “the

relationship among the defendant, the forum, and the litigation.” Walden v. Fiore, 134 S. Ct.
1115, 1121 (2014) (quoting Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 775 (1984)).
Specific personal jurisdiction exists only if “the defendant’s suit-related conduct * * * create[s] a
substantial connection with the forum State.”

Id. The “three essential requirements” for

establishing specific personal jurisdiction are: “(1) the defendant must have purposefully availed
himself of the privilege of conducting business in the forum state or purposefully directed his
activities at the state; (2) the alleged injury must have arisen from the defendant’s forum-related
activities; and (3) the exercise of jurisdiction must comport with traditional notions of fair play
and substantial justice.” Felland v. Clifton, 682 F.3d 665, 673 (7th Cir. 2012) (citations omitted).
B.

Analysis

Plaintiffs allege three counts of fraud—an intentional tort—in their complaint against
Baker.

In cases involving intentional torts, the Court’s inquiry into the first “essential

requirement[]” for personal jurisdiction, Felland, 682 F.3d at 673, “focuses on whether the
conduct underlying the claim[ ] was purposely directed at the forum state.” Tamburo, 601 F.3d
at 702 (citation omitted). See also Walden, 134 S. Ct. at 1123 (“A forum State’s exercise of
jurisdiction over an out-of-state intentional tortfeasor must be based on intentional conduct by
the defendant that creates the necessary contacts with the forum.”).2 The Seventh Circuit has

2

In their briefs, the parties also analyze the personal jurisdiction issue as if Plaintiffs’ claims were for
breach of contract. The Court finds it unnecessary to consider those arguments, because Plaintiffs’ claims
are for fraud, not breach of contract, and different jurisdictional analyses are applicable to the two types
of actions. In Tamburo, the Seventh Circuit explained that “[p]ersonal jurisdiction in breach-of-contract

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characterized this inquiry as an “express aiming” test and explained that it requires “(1)
intentional conduct (or ‘intentional and allegedly tortious’ conduct; (2) expressly aimed at the
forum state; (3) with the defendant’s knowledge that the effects would be felt—that is, plaintiff
would be injured—in the forum state.” Tamburo, 601 F.3d at 703-04 (citing Calder v. Jones,
465 U.S. 783, 789-90 (1984)). “If the plaintiff makes these three showings, he has established
that the defendant ‘purposefully directed’ his activity at the forum state.” Felland, 682 F.3d at
675. He must then establish, as well, that “his injury ‘arises out of’ or ‘relates to’ the conduct
that comprises the defendant’s contacts,” id. at 676, and that exercising jurisdiction would not
“offend traditional notions of fair play and substantial justice,” id. at 677.
1.

Intentional and Allegedly Tortious Conduct

Baker does not challenge Plaintiffs’ showing as to the first element of the “express
aiming” test, although it denies as a factual matter that it committed any tortious acts. Plaintiffs
allege that Baker engaged in the following intentional tortious conduct: (1) making “a false
statement of material fact to Pentwater and the Funds during the closing of the Credit
Agreement” that the First Letter Agreement was in place; and (2) concealing “a material fact
from Pentwater and the Funds, namely that a Second Letter Agreement had been executed
between Baker and ASEN.” [30] at 11.
2.

Directed at Illinois

Baker argues that Plaintiffs cannot satisfy the second element of the “express aiming” test
because “the conduct about which Plaintiffs complain, the creation of the Second Letter
[Agreement], was directed to Texas” (where ASEN was located) and not to Illinois (where

actions often turns on whether the defendant ‘purposefully availed’ himself of the privilege of conducting
business or engaging in a transaction in the forum state,” but “where, as here, the plaintiff’s claims are for
intentional torts, the inquiry focuses on whether the conduct underlying the claims was purposely directed
at the forum state.” 601 F.3d at 702.

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Pentwater, Halbower, and Strezo are located). [15] at 19. Baker characterizes the complaint too
narrowly, however. Baker’s creation and execution of the Second Letter Agreement is not the
only relevant conduct alleged in Plaintiffs’ complaint. According to Plaintiffs’ theory of the
case, Pentwater’s representatives (including CEO/CIO Halbower and portfolio manager Strezo,
who are based in Evanston, Illinois) told Baker during the negotiation of the Credit Agreement
that Pentwater conditioned its approval of the Funds’ loan to ASEN on Baker “refrain[ing] from
paying Baker for past due legal fees or any future legal fees (other than $315,000 that ASEN was
allowed to pay Baker at the time of the closing of the loan) until such time as ASEN had
liquidated assets and through such liquidation received at least $20 million in proceeds and that
at least $20 million was utilized to repay debt owed to the Funds.”

[30-2] at 3 (Strezo

declaration).
Grindon acknowledges that she was “advised that Mr. Halbower had told ASEN that the
Funds would not close the 2014 Credit Agreement unless ASEN deferred payment of its
outstanding legal invoices to Baker.” [15-1] at 5. Baker participated in conference calls, emails,
and letter correspondence with Pentwater executives and representatives in Illinois during
negotiation of the Credit Agreement and the First Letter Agreement.
(Halbower declaration); [30-2] at 2-3 (Strezo declaration).

See [30-1] at 3-5

See also [15-1] at 5 (Grindon

declaration). Strezo sent, received, or was copied on nearly three hundred emails with Baker
attorneys relating to the Credit Agreement, First Letter Agreement, and aspects of ASEN’s
financial situation as they related to Pentwater. On January 31, 2014, Grindon emailed a copy of
the executed First Letter Agreement to Strezo in Illinois.

[1-1] at 19.

The First Letter

Agreement directly concerned and stood to benefit Baker, which would receive $315,000 from
its financially distressed client ASEN for past-due legal fees when the Credit Agreement closed.

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According to Plaintiffs’ theory of the case, Baker engaged in a fraudulent omission by failing to
tell Pentwater about the Second Letter Agreement, which cut out the key language concerning
Pentwater, and a fraudulent misrepresentation by representing that the First Letter Agreement
was still in place at the time of closing on the Credit Agreement.
Baker’s contacts with Pentwater, Halbower, and Strezo in Illinois were not “random,
fortuitous, or attenuated”; instead, according to Plaintiffs’ allegations, those contacts were
intended to induce Pentwater to approve the Funds’ investment in ASEN without condition,
which resulted in the immediate payment of $315,000 to Baker. Walden, 134 S. Ct. at 1123
(quoting Burger King, 471 U.S. at 475). The fact that Baker attorneys never travelled to Illinois
as part of the transaction is not dispositive given the extensive phone and email communications
between Baker and Pentwater representatives in Illinois.

The Supreme Court has long

recognized that “[a]lthough territorial presence frequently will enhance a potential defendant’s
affiliation with a State and reinforce the reasonable foreseeability of suit there, it is an
inescapable fact of modern commercial life that a substantial amount of business is transacted
solely by mail and wire communications across state lines, thus obviating the need for physical
presence within a State in which business is conducted.”

Burger King, 471 U.S. at 476.

Therefore, the Court finds that Plaintiffs have made a prima facie showing that Baker’s allegedly
tortious conduct was directed toward Illinois. Cf., e.g., Felland, 682 F.3d at 676 & n.3 (emails
properly were considered as contributing to out-of-state defendant’s due process minimum
contacts with forum state, in purchasers’ action alleging intentional misrepresentation with
regard to contract to purchase condominium unit; even though email accounts generally can be
accessed in any state, emails went through computer server of internet service provider that had
been based in forum state and defendant purposefully sent these emails to residents in forum

13

state knowing that they most likely would be read and have their effect in forum state); Linkepic
Inc v. Vyasil, LLC, 2015 WL 7251936 (N.D. Ill. Nov. 17, 2015) (internet and technology
companies and their owner showed by preponderance of evidence at evidentiary hearing that
alleged partner of software developer’s registered agent committed intentional and allegedly
tortious conduct aimed at Illinois, where it was more likely than not that alleged partner prepared
invoices sent to owner in Illinois while knowing that invoiced work had not been completed);
Levin v. Posen Found., 62 F. Supp. 3d 733 (N.D. Ill. 2014) (scholar sufficiently alleged, in fraud
action against editor, that editor’s email, phone, and fax communications to the scholar in
Illinois, which “contained the allegedly fraudulent and misleading information on which [the
scholar] based his claim,” were “sufficient to constitute activities purposes directed at Illinois”).
3.

With Knowledge the Injury Would Be Felt In Illinois

Next, Baker argues that Plaintiffs cannot satisfy the third element of the “express aiming”
test because “even if there was an injury resulting from the Second Letter [Agreement], that
injury would have been felt in the Cayman Islands,” where the Funds are located. [15] at 19.
The Court agrees and concludes that Plaintiffs have failed to make a prima facie showing that
Baker knew the effects of its allegedly tortious conduct would be felt in Illinois.
Plaintiffs allege that Baker’s fraudulent misrepresentations and omissions caused
Pentwater and the Funds to suffer damages in an amount equal to “the difference between the
$46,350,000 that the Funds lent to ASEN and the amount that the Funds eventually recover from
ASEN” under the Credit Agreement. [1-1] at 11, ¶ 49; 12-13, ¶ 54; & 14. As Pentwater
concedes, however, only the Funds are parties to the Credit Agreement.

The Funds are

organized and operate their principal place of business in the Cayman Islands, not Illinois. There
is no evidence that the Funds have suffered or will suffer any injury in Illinois as a result of

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Baker’s alleged fraudulent actions. The only injury to Pentwater that Plaintiffs have identified is
the loss of $2 million in profits that Pentwater expected to receive in incentive fees from the
Funds. See [30] at 13; [30-1] at 2-3. However, under Plaintiffs’ theory of the case, if Pentwater
had not approved the Credit Agreement, then the Funds would not have made the loan, and
Pentwater would not have earned any incentive fee at all. More importantly, assuming that
Pentwater’s $2 million in lost profits constitutes an injury arising from Baker’s alleged fraud,
there is no evidence that Baker knew anything about Pentwater’s incentive fees or otherwise
knew that, if ASEN defaulted on the loan, Pentwater would suffer an injury in Illinois. Cf.
Montel Aetnastak, Inc. v. Miessen, 998 F. Supp. 2d 694, 711 (N.D. Ill. 2014) (court did not have
personal jurisdiction over employer’s claim against former employee for tortious interference
with prospective customer (an intentional tort) where there was no evidence that (1) the former
employee knew that the employer was injured in Illinois or (2) that the employer actually was
injured in Illinois; rejecting as “beside the point” plaintiff’s argument that Illinois was the
“central point of contact” between the employer, former employee, and prospective customer,
because it did “not establish that any injury occurred in Illinois”).
In short, Plaintiffs have failed to establish that Baker knew that the effects of its allegedly
tortious conduct would be felt in Illinois. Plaintiffs therefore cannot satisfy the Seventh Circuit’s
“express aiming” test and the Court cannot exercise personal jurisdiction over Baker. Tamburo,
601 F.3d at 697. Given this conclusion, the Court finds it unnecessary to consider separately
whether Plaintiffs’ alleged injury arose from Baker’s forum-related activities or whether the
exercise of jurisdiction would comport with traditional notions of fair play and substantial
justice, see Felland, 682 F.3d at 673, or to address Baker’s arguments concerning the fiduciary
shield doctrine or failure to join indispensable parties.

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III.

Conclusion
For the reasons stated above, the Court grants Baker’s motion [14] to dismiss for lack of

personal jurisdiction.

Dated: February 5, 2006

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

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