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

Filing 53

MEMORANDUM OPINION AND ORDER Signed by the Honorable Robert M. Dow, Jr. on 11/2/2016. 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
This matter is before the Court on Plaintiffs’ motion for relief from judgment from the
Court’s February 5, 2016 order [41] granting Defendant’s motion to dismiss for lack of personal
jurisdiction. In that order, the Court concluded that it did not have specific personal jurisdiction
over Defendant and closed the case; however, the Court did not consider, in the alternative,
whether it could exercise general personal jurisdiction over Defendant based on its contacts with
the State of Illinois. Therefore, on February 22, 2016, the Court entered an order [46] reopening
the case to allow the parties to present their arguments concerning whether Plaintiffs should be
allowed to conduct discovery on the limited issue of general personal jurisdiction. Having fully
considering the parties briefs and supporting documentation, see [21], [26], [43], [47], and [48],
the Court concludes that Plaintiffs have failed to make a prima facie showing that the Court has
general personal jurisdiction over Defendant and therefore are not entitled to conduct discovery
on the limited issue of general personal jurisdiction. Because discovery into general personal

jurisdiction would be futile, and the Court has already determined that it does not have specific
personal jurisdiction, the Court dismisses Plaintiffs’ complaint for lack of personal jurisdiction
over Defendant.
I.

Background
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. (“Defendant”) for declaratory relief, fraudulent inducement, fraudulent
misrepresentation, and fraudulent concealment. The background of this case is set forth in the
Court’s February 5, 2016 order [41], knowledge of which is assumed here. Any additional
relevant facts identified by the parties are discussed in the Court’s analysis below.
II.

Legal Standard
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 Defendant 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.
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). Under Seventh

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Circuit case law, “it is within the discretion of the district court to allow a plaintiff to conduct
limited discovery in order to establish that jurisdiction exists.” Sanderson v. Spectrum Labs,
Inc., 248 F.3d 1159, 2000 WL 1909678, at *3 (7th Cir. 2000). However, the “plaintiff must
establish a colorable or prima facie showing of personal jurisdiction before discovery should be
permitted.” Cent. States, Se. & Sw. Areas Pension Fund v. Reimer Express World Corp., 230
F.3d 934, 946 (7th Cir. 2000). In other words, a plaintiff seeking jurisdictional discovery must
advance “proof to a reasonable probability” of the facts necessary to establish federal
jurisdiction. Anthony v. Sec. Pac. Fin. Servs., Inc., 75 F.3d 311, 316 (7th Cir. 1996); see also
Indag GmbH & Co. v. IMA S.P.A, 150 F. Supp. 3d 946, 971 (N.D. Ill. 2015).
“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).

The Court previously concluded that it did not have specific personal

jurisdiction over Defendant because Plaintiffs failed to establish that the effects of Defendant’s
allegedly tortious conduct would be felt in Illinois. In this order, the Court focuses on whether
Plaintiffs have made a prima facie showing of general personal jurisdiction, such that they
should be permitted to take limited discovery to establish jurisdiction. Reimer, 230 F.3d at 946.
“A defendant is subject to general jurisdiction when it has ‘continuous and systematic
general business contacts’ with the forum state.” uBID, 623 F.3d at 425 (citing Helicopteros
Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 415–16, (1984)). “This is a demanding
standard that requires the defendant to have such extensive contacts with the state that it can be
treated as present in the state for essentially all purposes.” Id. at 426. “The standard for general
jurisdiction is demanding because the consequences can be severe: if a defendant is subject to
general jurisdiction in a state, then it may be called into court there to answer for any alleged

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wrong, committed in any place, no matter how unrelated to the defendant’s contacts with the
forum.” Id.
The Supreme Court has recently emphasized that the relevant inquiry “is not whether a
foreign corporation’s in-forum contacts can be said to be in some sense ‘continuous and
systematic,’ it is whether that corporation’s ‘affiliations with the State are so continuous and
systematic as to render [it] essentially at home in the forum State.’” Daimler AG v. Bauman, 134
S. Ct. 746, 761 (2014) (quoting Goodyear Dunlop Tires Operations, S.A. v. Brown, 546 U.S.
915, 919 (2011)). The Court recognized that “[a] corporation that operates in many places can
scarcely be deemed at home in all of them.” Id. at 762 n.20. “Otherwise, ‘at home’ would be
synonymous with ‘doing business’ tests framed before specific jurisdiction evolved in the United
States.” Id. This would be improper because “[n]othing in International Shoe and its progeny
suggests that ‘a particular quantum of local activity’ should give a State authority over a ‘far
larger quantum of . . . activity’ having no connection to any in-state activity.” Id. (citing Int’l
Shoe Co. v. State of Wash., Off. of Unempl. Compen. & Placement, 326 U.S. 310, 326 (1945)).
“[A]pprov[ing] the exercise of general jurisdiction in every State in which a corporation engages
in a substantial, continuous, and systematic course of business” would be “unacceptably
grasping” and insufficient to establish general personal jurisdiction. Id. at 761. Thus, the
general jurisdiction inquiry “calls for an appraisal of a corporation’s activities in their entirety,
nationwide and worldwide.” Id. at 762 n.20.
III.

Analysis
Applying the standards set forth above, the Court concludes that Plaintiffs have failed to

make a prima facie showing that Illinois courts may exercise general jurisdiction over Defendant
and therefore are not entitled to conduct discovery before their complaint is dismissed. Reimer,

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230 F.3d at 946. Plaintiffs improperly frame their analysis to focus solely on Defendant’s
contacts with Illinois. But as Daimler makes clear, the proper inquiry requires appraisal of
Defendant’s activities in their entirety. Daimler, 134 S. Ct. at 762 n.20. Plaintiffs fail to even
acknowledge Daimler in their briefs.

When the relevant inquiry is properly framed, it is

apparent that Plaintiffs have not made a prima facie showing that courts in Illinois may exercise
general personal jurisdiction over Defendant.
Defendant is headquartered in Tennessee and has twenty offices in eight U.S. states, plus
Washington D.C. and London, England.

But, according to the declaration of Defendant’s

Assistant General Counsel John Hicks (“Hicks”), Defendant has no offices, owns no real
property, and maintains no bank accounts in Illinois. Defendant does not pay, nor is it required
to pay, any income or property taxes in Illinois. Of Defendant’s 693 attorneys and advisors, only
four have active Illinois law licenses. None of those four attorneys resides in or has an office in
Illinois. In the past three years, only nineteen of Defendant’s attorneys have entered appearances
in state or federal court in Illinois, and five of those nineteen attorneys have not actually
participated in ligation in Illinois.
Even assuming, as Plaintiffs seek discovery to establish, that Defendant has performed
substantial additional transactional work for Illinois clients, has solicited or is soliciting business
from Illinois clients,1 has sponsored and solicited clients to attend a drug company’s seminar in
Illinois, and represents a number of Fortune 100 or Fortune 1000 companies that are located in

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The Court is not persuaded by Plaintiffs’ argument that, “[i]f Defendant actively solicited business in
Illinois, which it clearly has done, this alone can satisfy the standard that it ‘purposefully avails itself of
the privilege of conducting activities’ in Illinois.” [48] at 6 (citing Madison Consulting Group v. State of
S.C., 752 F.2d 1193, 1202-03, 1219 (7th Cir. 1985)). Madison was decided decades before Daimler,
which is controlling, and Madison involved specific personal jurisdiction and the purposeful availment
test, not general jurisdiction. See Madison, 752 F.2d at 1202 (“The question of which party initiated or
solicited a business transaction has long been considered pertinent to the constitutional propriety of
personal jurisdiction in a suit arising out of the transaction.” (emphasis added)).

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Illinois, these contacts would not bring the sum total of Defendant’s Illinois activities to the level
required to establish general jurisdiction. A comparison to the facts in Daimler is instructive.
The Supreme Court held that the Ninth Circuit erred by finding that Daimler, with its subsidiary
MBUSA’s contacts attributed to it, was “at home in California.” Daimler, 134 S. Ct. at 760, 762.
MBUSA’s contacts with California included operating “multiple California-based facilities,
including a regional office in Costa Mesa, a Vehicle Preparation Center in Carson, and a Classic
Center in Irvine”; being the “largest supplier of luxury vehicles to the California market”; and
making sales in California that account for 2.4% of Daimler’s total worldwide sales. Id. at 752.
However, neither Daimler nor MBUSA was incorporated in California or had a principal place
of business there. Id. at 761. The Court reasoned that if it allowed California to exercise general
jurisdiction over Daimler’s Argentina-based lawsuit, “the same global reach would presumably
be available in every other State in which MBUSA’s sales are sizable.”

Id.

The Court

concluded that this “exorbitant exercise[] of all-purpose jurisdiction would scarcely permit outof-state defendants ‘to structure their primary conduct with some minimum assurance as to
where that conduct will and will not render them liable to suit,’” and therefore would offend due
process. Id. at 761-62 (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985)).
Defendant’s contacts with Illinois are more minimal than Daimler/MBUSA’s contacts
with California, which were themselves found insufficient to establish general jurisdiction.
Defendant has no offices at all in Illinois; there is no evidence or suggestion that Defendant is a
significant supplier of legal services to the Illinois market; and there is no evidence or suggestion
that Defendant’s Illinois activities account for a substantial share of its profits (and Hicks’
declaration that Defendant does not pay and is not required to pay Illinois income or property
taxes suggests the opposite). If Defendant’s contacts with Illinois—including both those that are

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established and those on which Plaintiffs seek discovery—were found sufficient to allow Illinois
courts to exercise general jurisdiction over any lawsuit in which Defendant is named a party,
then Defendant could also be subject to suit in any other state in which it performs a substantial
amount of legal work for clients. As Daimler made clear, this would be an “exorbitant” exercise
of general jurisdiction that would not permit Defendant, or any similar national law firm in its
position, to have any assurance about where its practice of law would or would not render
Defendant liable to suit, and therefore would not comply with the requirements of due process.
134 S. Ct. at 762.
Not surprisingly, the post-Daimler cases in our Circuit support the conclusion that the
requisite prima facie case is lacking here. See, e.g., Kipp v. Ski Enter. Corp. of Wisconsin, Inc.,
783 F.3d 695, 698 (7th Cir. 2015) (Wisconsin ski resort operator was not subject to general
personal jurisdiction in Illinois in Illinois skier’s action to recover for injuries he sustained while
attempting to board chairlift, even though operator attended trade show in Illinois each year,
maintained website accessible by Illinois residents, offered “Chicagoland Express” package, and
had substantial percentage of its customers from Illinois, where website was mostly informative
and did not allow customers to purchase lift tickets, operator did not maintain Illinois office, had
no employees in Illinois, was not registered to do business in Illinois, did not advertise in Illinois,
and “Chicagoland Express” package was not restricted to Illinois residents); Patera v. Bartlett,
2016 WL 773225, at *2 (N.D. Ill. Feb. 29, 2016) (concluding based on Daimler that the court did
not have general personal jurisdiction over Citibank defendants, even though plaintiff contended
that “Citibank has employees and offices in Illinois, they operate under Illinois licensing
requirements, they solicit Illinois residents, they conduct extensive and deliberate business in
Illinois and their regional hub is located in Chicago,” where plaintiff made no allegations as to

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the City Defendants’ “activities in their entirety”); Demaria v. Nissan N.A., Inc., 2016 WL
374145, at *6 (N.D. Ill. Feb. 1, 2016) (concluding that, under Daimler, plaintiff’s allegations that
defendant “intentionally avails itself of the markets within Illinois through promotion, sale,
marketing and distribution of its vehicles” were insufficient to “establish that this is ‘one of those
rare situations’ where the exercise of [general personal] jurisdiction is justified” (quoting Kipp,
783 F.3d at 699)).
IV.

Conclusion
For these reasons, the Court concludes that Plaintiffs have failed to make a prima facie

showing that the Court has general personal jurisdiction over Defendant and therefore are not
entitled to conduct discovery on the limited issue of general personal jurisdiction. Because
discovery into general personal jurisdiction would be futile, and the Court has already
determined that it does not have specific personal jurisdiction, the Court dismisses Plaintiffs’
complaint for lack of personal jurisdiction over Defendant.

Dated: November 2, 2016

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

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