Ritchie Capital Management LLC v. Costco Wholesale Corporation et al
Filing
57
MEMORANDUM Opinion and Order signed by the Honorable Edmond E. Chang. For the reasons stated in the Opinion, Defendants' motion 38 to dismiss is granted. The case is dismissed for lack of personal jurisdiction. A separate AO-450 judgment shall be entered. Status hearing of 04/18/2018 is vacated. Civil case terminated. Emailed notice(slb, )
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
RITCHIE CAPITAL MANAGEMENT, LLC, )
)
Plaintiff,
)
)
v.
)
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COSTCO WHOLESALE CORP. and
)
NATIONAL CLOTHING COMPANY, INC. )
d/b/a NATIONAL DISTRIBUTORS,
)
)
Defendants.
)
No. 17 C 4949
Judge Edmond E. Chang
MEMORANDUM OPINION AND ORDER
Ritchie Capital Management is an investment firm that is trying to recoup
losses that it attributes, at least in part, to a fraud scheme in which the Defendants
allegedly participated. The scheme was carried out by Thomas Petters, who agreed
to purchase various goods that ultimately would be supplied to Costco. R. 10, Am.
Compl. at 1-2 ¶¶ 3-5; 12 ¶¶ 26, 29; 15 ¶ 37.1 Petters funded the scheme with loans
from Lancelot hedge funds, in which Ritchie had invested. Id. at 3-4 ¶¶ 7-8; 17 ¶ 51.
In reality, Petters purchased very few goods, and Petters used new investor money
to pay off older loans. See Am. Compl. at 4 ¶ 11.2 After the Ponzi scheme was
revealed in 2008, Lancelot filed for bankruptcy. In re Lancelot Investors Fund, L.P.,
1Citations
to the record are noted as “R.” followed by the docket number and the
page or paragraph number.
2The mechanics of Petters’s Ponzi scheme are more fully described in Lancelot’s
bankruptcy litigation. See In re Lancelot Investors Fund, L.P., 408 B.R. 167, 169-70 (Bankr.
N.D. Ill. 2009).
408 B.R. 167, 169-70 (Bankr. N.D. Ill. 2009).3 Ritchie allegedly lost over $100
million in its investments, and now sues Costco (and one of its subsidiaries,
National Distributors) for fraud, aiding and abetting that fraud, and civil
conspiracy. Am. Compl. at 23-25 ¶¶ 78, 82, 86, 90. Costco and National Distributors
move to dismiss the Amended Complaint in its entirety. R. 38, Def. Mot. to Dismiss
at 1. For the following reasons, the motion is granted because the Court lacks
personal jurisdiction over the Defendants.
I. Background
For purposes of evaluating the dismissal motion, the Court accepts as true
the allegations in the Amended Complaint. Costco Wholesale Corporation is a
general retailer that operates warehouse stores throughout the United States,
selling wholesale goods at below-market prices. Am. Compl. at 7 ¶ 3. Costco and its
wholly-owned subsidiary, National Clothing Company (which does business under
the name National Distributors), are both incorporated and have principal places of
business in Washington. Am. Compl. at 5 ¶ 1b-c.4 Because of its discount retailer
status, Costco was unable to purchase (in order to resell) certain brand-name
consumer electronics—for example, plasma televisions—due to manufacturer
restrictions on selling to warehouse clubs. Id. at 7 ¶¶ 4-5. To get around those
constraints, Costco used a series of other businesses and people, called diverters, to
3This
Court has subject matter jurisdiction over the case under 18 U.S.C. § 1332.
Ritchie and the Defendants are citizens of different states and the amount in controversy is
much more than $75,000.
4For simplicity, the Opinion refers to both entities together as Costco, unless context
dictates otherwise.
2
purchase the products it wanted to sell and funneled the products through its own
subsidiary, National Distributors. Id. at 1 ¶ 2; see id. at 8 ¶ 11.
In around 1992 (long before Ritchie entered the picture), Costco began a
business relationship with Thomas Petters, a diverter with ties to authorized
electronic distributors. Am. Compl. at 7 ¶ 5. To keep up with the volume of bulk
purchases that Costco required, Petters needed additional financing. See id. at 1
¶¶ 2-3. In around 2000, General Electric Capital Corporation (for convenience’s
sake, GE) issued a $50 million line of credit to Petters to finance the product
purchases for Costco, based on purchase orders that supposedly had been issued by
Costco and National Distributors; the purchase orders provided a guarantee of
payment. Id. at 8 ¶¶ 11-12.
According to Ritchie, GE’s issuance of the line of credit is when Costco
became aware of Petters’s fraud. Am. Compl. at 9 ¶ 14. In October 2000, GE
requested that Costco verify fourteen purchase orders, which totaled over $50
million. Id. at 8-9 ¶ 13. Costco discovered that the purchase order numbers touted
by Petters as proof of his creditworthiness were actually issued to other vendors. Id.
at 9 ¶ 14. Petters allegedly confirmed to Costco that he had used the purchase order
numbers to intentionally misrepresent to GE that Costco owed him around $50
million. Id. At this point, instead of informing GE of Petters’s fraud, Costco agreed
to help Petters refinance the GE debt to avoid disclosing the product diversion
scheme. Id. at 9 ¶ 17. Costco allegedly provided Petters with what appeared to be
checks totaling $48 million, so that Petters could verify to GE that Costco in fact
3
had owed Petters money. Id. at 10-11 ¶¶ 18-23. In truth, however, the checks had
already been issued to other payees in much smaller amounts, and had been altered
to name Petters as the payee in the inflated amounts. Id. at 11 ¶ 21.
Even after the GE debacle, Costco asked Petters to finance other diverters,
and to do so without revealing Costco as the ultimate purchaser. Am. Compl. at 1213 ¶¶ 29-30. Costco allegedly provided Petters with fake purchase orders in order to
induce lenders to finance loans to him, and Petters in turn would provide the fake
purchase orders to diverters, so in the end it looked like Petters was the actual
purchaser rather than an intermediate financer. Id. at 12-13 ¶ 33. To get financing
for the ongoing scheme, Petters created a number of special purpose entities based
out of Minnesota to appear as the purchaser of diverted goods. Id. at 15 ¶ 38.
Petters urged an associate, Greg Bell, to found Lancelot Investment Management,
another company created to provide financing for the Costco diversions. Id. ¶ 39-40.
This is where Ritchie Capital Management enters the picture. Ritchie is an
investment administrative manager and has its principal place of business in the
Cayman Islands. Am. Compl. at 5 ¶ 1a; id. at 6 ¶ 1. Ritchie relied on a
memorandum, prepared by Bell on behalf of Lancelot, detailing a low-risk
investment in Lancelot, because the goods to be purchased with investor money
already had a bound buyer—supposedly Petters. Id. at 16-17 ¶¶ 49-52. Ritchie
Capital invested in Lancelot based on these representations, as well as on Bell’s
claims that Lancelot had credit insurance (which was obtained using the fraudulent
purchase orders). Id. at 17-18 ¶¶ 53-56. Each year, Ritchie received audited
4
financial statements for Lancelot and relied on them to invest more money in
Lancelot. Id. at 18 ¶¶ 57-58. Eventually, in around 2007, Ritchie explored the sale
of its shares in a $1.1 billion restructuring, and the valuation opinion took the
Lancelot Fund values into account. Am. Compl. at 20 ¶¶ 64-66. The valuation
opinion set the interests in Lancelot at $50 million. Id. at 21 ¶ 69.
The fraud scheme began to unravel when the FBI discovered that Petters
was not actually selling merchandise to Costco, and had not been since around
2003. Am. Compl. at 19 ¶ 60. Once it became clear that the Lancelot funds were
worthless, Ritchie incurred a $50 million liability for the overvaluation. Id. at 21
¶ 72. Ritchie also lost its chance to collect around $44 million in deferred payments.
Id. at 21-22 ¶ 73.
Not surprisingly, Petters was charged in a federal criminal case. In 2009,
during Petters’s criminal trial, a senior-management Costco executive testified that
Costco did “very little” business with Petters in 2000; Costco had stopped working
with Petters by 2008; and Costco had never issued fake purchase orders or
guarantees. Am. Compl. at 22 ¶ 74. More recently, in 2014, Ritchie learned that
Costco allegedly did conduct “substantial” business with Petters, even after
discovering the false purchase orders, and issued additional guarantee letters to
Petters after 2006. Id. at 22 ¶ 75.
Ritchie’s direct losses from its Lancelot investments exceed $94 million. Am.
Compl. at 19 ¶ 60. Now, Ritchie claims Costco contributed to the wrongful acts of
Petters, Bell, and Lancelot. The Amended Complaint asserts claims for aiding and
5
abetting, fraud, and conspiracy. See id. at 23 ¶ 78; 24 ¶ 86; 25 ¶¶ 90-94. Ritchie
alleges that Costco’s involvement with Petters gave an “air of legitimacy” to
Lancelot’s actions. Id. at 19 ¶ 59. Finally, Ritchie argues that Costco fraudulently
concealed its relationship with Petters during the criminal trial. Id. at 22 ¶ 76.
Costco and National Distributors move to dismiss, arguing that this Court lacks
personal jurisdiction over them; that Ritchie lacks standing to bring the suit; and
that the Amended Complaint fails to state a claim. See Def. Mot. to Dismiss. As
explained below, the defense is right that there is no personal jurisdiction over them
in this District, so the case is dismissed on that ground.
II. Standard of Review
“[A] complaint need not include facts alleging personal jurisdiction.” Steel
Warehouse of Wis., Inc. v. Leach, 154 F.3d 712, 715 (7th Cir. 1998). However, the
plaintiff bears the burden of establishing that personal jurisdiction is proper once
challenged by the defendant. Purdue Research Found v. Sanofi-Synthelabo, S.A.,
338 F.3d 773, 782 (7th Cir. 2003). When evaluating personal jurisdiction on a
motion to dismiss, the plaintiff “need only make out a prima facie case of personal
jurisdiction.” Id. at 782 (quoting Hyatt Int’l Corp. v. Coco, 302 F.3d 707, 713 (7th
Cir. 2002)). In considering the prima facie case, the plaintiff is “entitled to the
resolution in its favor of all disputes concerning relevant facts presented in the
record.” Id. at 782 (quoting Nelson by Carson v. Park Indus., Inc., 717 F.2d 1120,
1123 (7th Cir. 1983)). This is in contrast to what is “[n]ormally [done] on review of a
motion to dismiss,” where the Court “accepts all well-pleaded allegations in the
6
complaint as true.” Hyatt, 302 F.3d at 713. A defendant can submit affidavits or
other materials challenging personal jurisdiction, which a plaintiff must
affirmatively refute with supporting evidence. But a defendant’s uncontested
assertions will be accepted as true. See Purdue Research Found., 338 F.3d at 78283.
III. Analysis
A. Personal Jurisdiction
Personal jurisdiction refers to a court’s “power to bring a person into its
adjudicative process.” N. Grain Mktg., LLC v. Greving, 743 F.3d 487, 491 (7th Cir.
2014). Courts may exercise either general or specific personal jurisdiction. Daimler
AG v. Bauman, 571 U.S. 117, 134 S. Ct. 746, 754 (2014). General jurisdiction refers
to a court’s authority to hear “any and all” claims against a defendant, regardless of
where the pertinent events took place. Goodyear Dunlop Tires Operations., S.A. v.
Brown, 564 U.S. 915, 919 (2011). In contrast, specific jurisdiction is confined to
adjudicating an “activity or an occurrence” that takes place in the forum. Id. States
can only haul non-resident defendants into court to the extent allowed by due
process. Asahi Metal Indus. Co. v. Super. Ct. of Cal., 480 U.S. 102, 108 (1987);
World–Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 291 (1980). Due process
requires that a defendant have “certain minimum contacts with [the state] such
that” the suit does not “offend ‘traditional notions of fair play and substantial
justice.’” Int’l Shoe, 326 U.S. 310, 316 (1945) (quoting Milliken v. Meyer, 311 U.S.
457, 463 (1940)).
7
A district court sitting in diversity has personal jurisdiction over a nonresident defendant only if a court in the state where it sits would have jurisdiction.
Jennings v. AC Hydraulic A/S, 383 F.3d 546, 548 (7th Cir. 2004). On the surface,
Illinois law governs this Court’s personal jurisdiction over the Defendants. The
Illinois long-arm statute authorizes personal jurisdiction over a non-resident
defendant doing business or committing tortious acts within the state. 735 ILCS
5/2-209. It also permits the Court to exercise jurisdiction “on any other basis”
allowed by the Illinois and federal Constitutions. Id. at 5/2-209(c). So the Illinois
long-arm statute puts the inquiry back into federal-law hands: whether exercising
personal jurisdiction would comply with federal constitutional due process. Ritchie
argues that both general and specific personal jurisdiction apply to Costco, R. 45, Pl.
Resp. Pers. Jurs. at 5, 10, so the Court examines each in turn.
1. General Jurisdiction
A court may exercise general jurisdiction over a defendant only when its
connections with the state are so “continuous and systematic” as to render it
“essentially at home” in the forum state. Goodyear, 564 U.S. at 919 (quoting Int’l
Shoe, 326 U.S. at 317). As of late, the Supreme Court has emphasized that general
jurisdiction “should not lightly be found,” because that would mean that the
defendant can be sued for anything in the particular forum, no matter the case’s
lack of connection to the state. Kipp v. Ski Enter. Corp. of Wis., Inc., 783 F.3d 695,
698 (7th Cir. 2015) (citing Goodyear, 564 U.S. at 919). So far, the Supreme Court
has deemed a corporation at home only in the state (or states) of its incorporation
8
and principal place of business. Kipp, 783 F.3d at 698 (citing Daimler, 134 S. Ct. at
760). Outside of those states, the “Due Process Clauses of the Fifth and Fourteenth
Amendments permit courts, federal and state, to exercise general jurisdiction only
when the continuous corporate operations within a state are so substantial and of
such a nature as to justify suit on causes of action arising from dealings entirely
distinct from those activities.” Kipp, 783 F.3d at 698 (quoting Daimler, 134 S. Ct. at
761) (cleaned up).5
The Illinois activities of Costco and National Distributors do not come close to
triggering general jurisdiction. In Daimler, sizable California sales did not
constitute continuous and systematic activities in that state, where the Defendant’s
incorporation and principal place of business were elsewhere. Daimler, 134 S. Ct. at
752, 761-62. Costco is neither incorporated nor based here; it has only ten Illinois
warehouse stores; and the Illinois stores comprise 2% of its over-700 warehouse
stores worldwide. R. 47, Def. Reply Pers. Jurs. at 10 n.6; R. 48, Pentelovitch Decl.,
Exhs. B, C. Ritchie seems to suggest that Daimler and Goodyear created a business
percentage threshold that Costco surpassed by having a certain number of stores or
reaping a certain percentage of sales. Pl. Resp. Pers. Jurs. at 12. But neither case
says that, and indeed Goodyear rejected the “sprawling view of general jurisdiction”
that would allow large corporations to be sued essentially everywhere that its
products are distributed. See Goodyear, 564 U.S. at 929 (refusing to hold that “any
substantial manufacturer or seller of goods would be amenable to suit, on any claim
5This
opinion uses (cleaned up) to indicate that internal quotation marks,
alterations, and citations have been omitted from quotations. See, e.g., United States v.
Reyes, 866 F.3d 316, 321 (5th Cir. 2017).
9
for relief, wherever its products are distributed.”). And if Costco is “at home” in
every state where it has 10 or more stores, then it probably would be subject to
general jurisdiction in several other populous states—it has 514 locations in 44
states. So a slip-and-fall personal injury case in, say, Costco’s Anchorage, Alaska
store could be brought in courts in Illinois, California, Texas, Florida, and so on,
because Costco presumably would be subject to general jurisdiction in any of those
states. The Due Process Clause cannot be stretched so far.
2. Specific Jurisdiction
The true question in this case is whether the Defendants are subject to
specific personal jurisdiction in this Court. Whether minimum contacts justify
specific personal jurisdiction turn on “the relations among the defendant, the forum,
and the litigation.” Adv. Tactical Ordnance Sys., LLC v. Real Action Paintball, Inc.,
751 F.3d 796, 801 (7th Cir. 2014) (citing Walden v. Fiore, 134 S. Ct. 1115, 1121
(2014)). Due process requires that a defendant’s “suit-related conduct” must create
“a substantial connection with the forum State.” Walden, 134 S. Ct. at 1121. There
is a fine line between the defendant’s conduct in the state and where effects of the
conduct are felt. The mere fact that a defendant’s conduct “affected plaintiffs with
connections to the forum State” does not trigger specific jurisdiction. Id. at 1126.
The defendant itself must “in each case” commit some act by which it “purposefully
avails itself of the privilege of conducting activities” in the state, thereby “invoking
the benefits and protections of its laws.” Burger King Corp. v. Rudzewicz, 471 U.S.
462, 475 (1985) (quoting Hanson v. Denckla, 357 U.S. 235, 253 (1958)).
10
The whole point of the “purposeful availment” doctrine is to ensure
defendants will not be “haled into a jurisdiction solely as a result of random,
fortuitous, or attenuated contacts.” Burger King, 471 U.S. at 475 (cleaned up). To
repeat: the minimum contacts supporting jurisdiction must “arise out of contacts
that the ‘defendant himself’ creates with the forum.’” Walden, 134 S. Ct. at 1122
(quoting Burger King, 471 U.S. at 475). Regardless of the size or complexity of a
plaintiff’s connection with the forum state, a plaintiff’s or other third parties’
contacts with the forum do not satisfy the requirement. Adv. Tactical, 751 F.3d at
801 (citing Burger King, 471 U.S. at 475). These same requirements apply when
intentional torts form the foundation of a claim. Walden, 134 S. Ct. at 1123 (citing
Calder v. Jones, 465 U.S. 783 (1984)).
Here, Ritchie appears to present three tests that supposedly confer specific
jurisdiction over Costco. Pl. Resp. Pers. Jurs. at 5. But really the analysis boils
down to the purposeful-availment test reiterated by the Supreme Court in Walden.
For example, Ritchie first cites Calder to argue that there is an intentional-tort test
for specific jurisdiction. Id. at 6; see Calder, 465 U.S. at 789-90. It is true that a
defendant’s intentional conduct, directed at a particular state, can support specific
jurisdiction. But the effects of an intentional tort do not count, despite Ritchie’s
reliance on its own alleged damages. As the Supreme Court emphasized in Walden,
intentional torts do not automatically confer specific jurisdiction by virtue of where
the plaintiff got injured—rather, an injury is “jurisdictionally relevant only insofar
11
as it shows that the defendant has formed a contact with the forum State.” 134 S.
Ct. at 1125.
Turning to this case, Ritchie argues that its injuries arise from Costco’s
Illinois activities. Pl. Resp. Pers. Jurs. at 6. But that is not what Ritchie alleges, nor
has it offered evidence in support of Costco’s acts in Illinois. Yes, Costco allegedly
created fraudulent purchase orders and misleading checks to help Petters lure
unsuspecting investors, and Petters and Bell engaged in fraud in Illinois. But there
is neither an allegation nor evidence that Costco itself did anything in Illinois or
directed any act into Illinois. The purchase orders were not created or issued in
Illinois, and Costco made no representations in Illinois. See Am. Compl. at 8-10
¶¶ 9-19.
Ritchie tries to overcome this hurdle by saddling Costco with Petters’s and
Bell’s jurisdictional baggage. As a legal matter, Ritchie points out that Illinois’s
long-arm statute authorizes jurisdiction over an entity for acts done through its
agent. 735 ILCS 5/2-209(a); Pl. Resp. Pers. Jurs. at 7. As a factual matter, according
to Ritchie, Costco recruited Petters to act as its “agent” to obtain financing for the
diversion scheme, and Petters in turn recruited Bell to obtain investors for the
loans. Pl. Resp. Pers. Jurs. at 6-7. It was Bell who met with Ritchie Capital in
Chicago to urge it to invest in Lancelot. And that is really the extent of the Illinois
connection. Id. At the end of the day, then, Ritchie argues that Costco knew Bell
was meeting with Ritchie in Chicago, and that is enough for specific jurisdiction. Id.
at 7; see Am. Compl. at 9 ¶ 14.
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This is not enough to establish that Bell was Costco’s agent or that Costco
directed Bell to commit the fraud in Illinois. See ABN AMBRO, Inc. v. Capital Int’l
Ltd., 595 F. Supp. 2d 805, 822-23 (N.D. Ill. 2008) (requiring “enough evidence to
support its prima facie case of an agency relationship” to overcome personal
jurisdiction barrier). An agency relationship requires, as pertinent here, that a
corporation and a person agree that the putative agent will act on the principal’s
behalf, under its control, and with the power to “affect the legal relations of the
principal.” Clarendon Nat. Ins. Co. v. Medina, 645 F.3d 928, 935 (7th Cir. 2011)
(cleaned up). But the Amended Complaint does not allege that Petters or Bell were
agents of Costco, nor does it allege facts that would establish an agency
relationship. See Am. Compl. For one, Ritchie alleges that Petters originally used
the Costco purchase order numbers without Costco’s knowledge to obtain the GE
loan. See Am. Compl. at 9 ¶ 14. Later, Costco did allegedly agree with Petters to
help refinance the debt, but supposedly in an effort to hide the diversion scheme,
Am. Compl at 9 ¶ 17—not to enter into an agreement to make Petters an agent of
Costco on its brand-name electronics purchases. Petters only acted at Costco’s
“request[]” to continue financing the diversion efforts, Am. Compl. at 12-13 ¶¶ 2930, and Costco allegedly later “agreed to provide” Petters with additional purchase
orders, Am. Compl. at 13 ¶ 33. Those facts do not comprise a principal-agent
relationship in which Costco is directing Petters and in which Petters is acting
primarily for the benefit of Costco (like an employee).6 To be sure, there is a working
6See
Krug v. Machen, 321 N.E.2d 85, 90 (Ill. App. Ct. 1974) (“Additionally, the
Restatement (Second) of Agency has distinguished an agent from a supplier or seller in the
13
relationship between Costco and Petters, but each performed its own actions in its
own interest.
Even if Petters somehow was Costco’s agent, Ritchie needs to go one step
further and make the case that Bell was Costco’s agent. But the Amended
Complaint asserts that Bell founded Lancelot “at the urging” of Petters, Am. Compl.
at 15 ¶¶ 39-40—not Costco. And Bell “made all significant decisions” for Lancelot,
without any input, guidance, or control from Costco. Id. at 15-16 ¶ 42; Def. Reply
Pers. Jurs. at 5 (undisputed as to Costco). There is no hint that Costco directed Bell
to set up the meeting with Ritchie and to do so in Chicago. Imputing personaljurisdiction contacts from one person onto the defendant requires that the
defendant exercise “an unusually high degree of control” of the other person. Abelesz
v. OTP Bank, 692 F.3d 638, 658-59 (7th Cir. 2012) (cleaned up). That level of control
is not established here.
Ritchie also argues that its damages were suffered here in Illinois, so specific
jurisdiction is proper. But that argument incorrectly attributes its own forum
connections to Costco. See Walden, 134 S. Ct. at 1125. Even if every single dollar
was lost in Illinois, that would not count toward the jurisdictional analysis. Ritchie’s
approach to the minimum contacts analysis “impermissibly allows a plaintiff’s
contacts with the defendant and forum to drive the jurisdictional analysis.” Walden,
134 S. Ct. at 1125.
following manner: ‘One who contracts to acquire property from a third person and convey it
to another is the agent of the other only if it is agreed that he is to act primarily for the
benefit of the other and not for himself.’” (quoting Restatement (Second) of Agency § 14K
(1957)).
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In its final bid to trigger specific jurisdiction, Ritchie invokes what it deems a
“conspiracy theory of jurisdiction,” which requires that Ritchie allege “both an
actionable conspiracy and a substantial act in furtherance” of it performed in
Illinois. Pl. Resp. Pers. Jurs. at 8. But Illinois courts do not recognize conspiracy
participation as a basis for long-arm jurisdiction, and the Seventh Circuit has
“dashed cold water on the prospect.” Hang Glide USA, LLC v. Coastal Aviation
Maint., 2017 WL 1430617, at *3 (N.D. Ill. April 18, 2017) (citing Smith v. Jefferson
Cty. Bd. of Educ., 378 Fed. App’x 582, 585-86 (7th Cir. 2010) (non-precedential
disposition)).7
Ultimately, Ritchie fails to allege or offer evidence that any Costco conduct is
connected to Illinois. None of Costco’s acts were purposefully directed at Illinois:
Ritchie and Costco never interacted in Illinois; Costco and Petters did not operate
their alleged scheme in Illinois; and Ritchie does not allege that Costco issued the
fraudulent purchase orders in Illinois. Specific jurisdiction does not apply in this
Court.
7Even
if the theory were viable, simply alleging a conspiracy with an Illinois
defendant, such as Bell, while making “no effort to connect” him with the out-of-state
defendant would not be enough. Smith¸ 378 Fed. App’x at 586 (non-precedential
disposition). In cases of alleged conspiracies, Illinois courts hold firm that “there is no
shortcut, and there is no substitute” for the standard personal jurisdiction analysis: “A
court should look at each defendant’s activities. If a conspirator’s actions were purposefully
aimed at the forum, then jurisdiction is present. If not, assertion of jurisdiction would be
unconstitutional.” Ploense v. Electrolux Home Prods., Inc., 882 N.E.2d 653, 668 (Ill App. Ct.
2007) (cleaned up). As explained above, the Amended Complaint does not directly connect
Costco with Bell, so Ritchie has failed to adequately allege that they were conspirators for
purposes of tagging Costco with Bell’s jurisdictional conduct.
15
B. Jurisdictional Discovery
One final note: in passing, Ritchie argues that if the Court concludes that
there is no personal jurisdiction over the Defendants, then Ritchie should be
allowed to take jurisdictional discovery. Pl. Resp. Pers. Jurs. at 9, 12. Ritchie barely
expounds on this argument, saying only that it would look for Costco’s relationship
“with the other documents provided by Bell to Plaintiff in Illinois,” and Costco’s
degree of contacts in Illinois “relative to their contacts out of the state.” Id.
The request for leave is denied, because Ritchie has forfeited it. It is generally
true that jurisdictional discovery should be granted when a plaintiff establishes a
prima facie case for personal jurisdiction. Purdue Research Found., 338 F.3d at 782.
But here, even reading the Amended Complaint expansively and resolving all
disputes in the record in Ritchie’s favor, see Cent. States, S.E. & S.W. Areas Pension
Fund v. Phencorp Reins. Co., 440 F.3d 870, 877-78 (7th Cir. 2006), the allegations
are not “ambiguous or unclear on the jurisdictional issue.” United Wholesale LLC v.
Traffic Jam Events, 2012 WL 1988273, at *1 (N.D. Ill. June 4, 2012).
What’s more, Ritchie delayed asking for jurisdictional discovery even after
the Court explicitly directed the parties to confer on whether personal jurisdiction
discovery was necessary. R. 44, 08/29/17 Minute Entry. Ritchie elected not to seek
discovery. R. 46, 10/04/17 Minute Entry (“As discussed during the hearing, Plaintiff
decided to forgo jurisdictional discovery and simply respond to the dismissal
motion.”); see also Def. Reply Pers. Jurs. at 2 n.1 (describing Ritchie’s decision not to
issue discovery requests). In its briefing, Ritchie made only a passing request for
16
discovery, and failed to explain concretely what it wanted to request and what it
expected to find. No jurisdictional discovery is warranted.
IV. Conclusion
For the reasons discussed, the motion to dismiss is granted. The Court lacks
personal jurisdiction over the Defendants. There is no need to address the other
merits-based arguments (which the parties can re-raise if suit is filed in the
Defendants’ home jurisdiction). The status hearing of April 18, 2018 is vacated.
ENTERED:
s/Edmond E. Chang
Honorable Edmond E. Chang
United States District Judge
DATE: March 30, 2018
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