Schenk v. Knightscope, Inc.

Filing 24

MEMORANDUM Opinion and Order Signed by the Honorable Robert W. Gettleman on 4/10/2018: Defendant's motion to dismiss for lack of personal jurisdiction #6 is granted and the case is dismissed without prejudice. Status hearing set for 4/18/2018 is stricken. Civil case terminated. Mailed notice (cn)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
JACK SCHENK,

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Plaintiff
v.
KNIGHTSCOPE, INC.,
Defendant.

Case No. 17 C 7529

Judge Robert W. Gettleman

MEMORANDUM OPINION AND ORDER
Plaintiff Jack Schenk has brought a five count complaint against his former employer,
Knightscope, Inc., alleging claims for: (1) breach of his employment contract; (2) unjust
enrichment; (3) breach of Cal. Lab. Code § 200; (4) breach of fiduciary duty; and (5) accounting,
in Counts I through V respectively. Defendant has moved to dismiss pursuant to Rule 12(b)(2),
(3), (6) for lack of personal jurisdiction, improper venue, and failure to state a claim. For the
reasons discussed below, defendant’s motion to dismiss for lack of personal jurisdiction is granted
and the case is dismissed without prejudice.
BACKGROUND
Defendant Knightscope produces autonomous security robots designed to aid in physical
security processes. Defendant is incorporated in Delaware with its principal and only physical
place of business in Mountain View, California. Defendant is not registered to transact business
in Illinois, and has no office in Illinois.
On or about November 20, 2015, plaintiff, who resided in Illinois, travelled to defendant’s
office in California to discuss a possible employment agreement for plaintiff to become a “V.P.
Business Development.” The specific terms of the agreement were negotiated , on November 23,

2015, between plaintiff and defendant via either telephone (Skype) or email, with plaintiff in
Illinois and defendant in California. The parties executed the agreement electronically in
counterparts on November 25, 2015. The agreement was “at-will,” and provided that plaintiff
could work remotely from anywhere and that it should be interpreted under California law.
Plaintiff worked out of his home in Illinois. His job was essentially to sell defendant’s
robots to security companies. The parties’ dispute how much business plaintiff actually
generated, but it is undisputed that he sold no robots to or acquired any clients located in Illinois.
Plaintiff claims that the customers to whom he did sell robots began to complain about the
robots’ performance. He raised these concerns weekly with defendant’s Board of Management
(“BoM”). He claimed that the robots’ lack of reliability made his job more difficult, and tarnished
his reputation within the industry. His weekly complaints to the BoM resulted in a deterioration
of his relationship with the company and, in particular, with William Lei, its chairman and chief
executive officer. On August 17, 2017, defendant terminated plaintiff. Plaintiff claims that at
the time of termination defendant owed him $112,177.26 in earned but unpaid commissions,
including revenue generated by sales contracts generated by him under which the customers had
not yet begun to pay.
DISCUSSION
Defendant has moved to dismiss the complaint under Fed. R. Civ. P. 12(b)(2), arguing that
the court lacks personal jurisdiction over it. Plaintiff bears the burden of establishing a prima
facie case of personal jurisdiction. Hyatt Int’l Corp. v. Coco, 302 F.3d 707, 713 (7th Cir. 2002).
When ruling on a motion to dismiss for lack of personal jurisdiction, the court accepts as true “all

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well-pleaded facts alleged in the complaint and resolve[s] any factual disputes in the affidavits in
favor of the plaintiff.” Felland v. Clifton, 682 F.3d 665, 672 (7th Cir. 2012).
This court has personal jurisdiction over a non-resident, non-consenting defendant in a
diversity case if Illinois state courts would have jurisdiction. Purdue Research Found. v.
Sanofi-Synthelabo, S.A., 338 F.3d 773, 779 (7th Cir. 2003). An Illinois state court has personal
jurisdiction when authorized by: (1) the Illinois Long-Arm Statute; (2) the Illinois Constitution;
and (3) the due process clause of the United States Constitution. Central States, Southeast and
Southwest Areas Pension Fund v. Reimer Express World Corp., 230 F.3d 934, 939 (7th Cir. 2000).
The Illinois Long-Arm Statute authorizes courts to exercise jurisdiction to the fullest extent
allowed by the Illinois and Federal Constitutions. 735 ILCS 5/2-209 (c); Hyatt Int’l Corp., 302
F.3d at 714. Therefore, the inquiry collapses into an examination of whether jurisdiction over
defendant complies with the test as set forth in International Shoe Co. v. Washington, 326 U.S. 310
(1945), which requires that defendant, although not required to be physically present in the
territorial jurisdiction of the court, to have minimum contacts with the forum “such that the
maintenance of the suit does not offend traditional notions of fair play and substantial justice
embodied in the due process clause of the Fourteenth Amendment.” International Shoe Co., 326
U.S. at 316.
The test varies depending upon whether plaintiff asserts general or specific jurisdiction.
General jurisdiction, under which a court may hear any claim against the defendant, applies only
when the defendant has “continuous and systematic business contacts” in the forum state. Kohler
Co. v. Kohler Int’l, Ltd., 196 F.Supp.2d 690, 696 (N.D. Ill. 2002) (quoting Helicopteros
Nacionales de Columbia, S.A. v. Hall, 466 U.S. 408, 416 (1984)). The threshold test is high; the
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defendant’s affiliation with the forum must be so continuous and systematic as “to render [it]
essentially at home in the forum State.” Goodyear Dunlap Tires Operations, S.A. v. Brown, 564
U.S. 915, 919 (2011). “The ‘paradigm’ forums in which a corporate defendant is ‘at home,’ . . .
are the corporation’s place of incorporation and its principal place of business.” BNSF Ry. Co. v.
Tyrrell, __ U.S. __ 137 S.Ct. 1549, 1558 (2017) (quoting Daimler AG v. Bauman, 571 U.S. 117,
134 S.Ct. 746, 760 (2014)). “The exercise of general jurisdiction is not limited to these forums; in
an ‘exceptional case’ a corporate defendant’s operations in another forum ‘may be so substantial
and of such a nature as to render the corporation at home in that State.” Id.
Specific jurisdiction, on the other hand, refers to instances in which the defendant’s
contacts with the forum state “directly relate to the challenged conduct or transaction.”
Tamburo v. Dworkin, 601 F.3d 693, 702 (7th Cir. 2010). “The defendant’s suit-related conduct
must create a substantial connection with the forum State.” Waldon v. Fiore, __ U.S. __, 134
S.Ct. 1115, 1121 (2014). “The defendant, rather than the plaintiff or a third party, must create
these contacts.” ABN AMRO, Inc. v. Capital Int’l Ltd., 595 F.Supp.2d 805, 820 (N.D. Ill. 2008).
A federal court has specific jurisdiction when: “(1) the defendant has purposefully directed [its]
activities at the forum State or purposefully availed [itself] of the privilege of conducting business
in that state, and (2) injury arises out of the defendant’s forum related activities.” Tamburo, 601
F.3d at 702 (citing Burger King Corp. v. Rudzewicz, 471 U.S. 463, 472 (1985)).
In the instant case, it is unclear whether plaintiff is asserting specific or general
jurisdiction, or perhaps both. Indeed, as defendant has suggested, plaintiff’s brief appears to
conflate the two concepts. For example, plaintiff argues that defendant “is constructively present
in Illinois, and therefore amenable to suit, by virtue of the business that it conducted through
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[plaintiff] . . ..” It is unclear to the court if plaintiff is arguing that his mere presence in Illinois is
sufficient to subject defendant to general jurisdiction, open to suit in Illinois by anyone for any
claim, or whether he is attempting to suggest that his presence in Illinois means he can sue
defendant in Illinois based on the claims in the instant complaint. No matter, for jurisdiction is
lacking under either theory.
General jurisdiction is a non-starter. There is simply no evidence even to suggest, let
alone establish a prima facie case, that defendant has such “continuous and systematic” activity in
Illinois that it can be said to be at home here. Indeed, defendant’s only activity in Illinois, outside
of plaintiff’s activity (of which the court knows very little), was to attend two meetings. The first,
on February 27, 2017, was a meeting with investors. The second was on September 14, 2017, to
attend a marketing event. This activity is not “so substantial and of such a nature” as to consider
defendant at home in Illinois. BNSF Ry. Co., 134 S.Ct. at 760.
Plaintiff fares no better under specific jurisdiction. To establish a prima facie case of
specific personal jurisdiction, plaintiff must show that defendant’s conduct in connection with
Illinois is substantial enough to make it reasonable for defendant to anticipate that it could be haled
into court here. Northern Grain Mkting, LLC v. Greving, 743 F.3d 487, 492 (7th Cir. 2014).
“This purposeful-availment requirement insures that a defendant’s amenability to jurisdiction is
not based on ‘random, fortuitous, or attenuated contacts’ but instead ‘on contacts that demonstrate
a real relationship with the state with respect to the transaction at issue.’” Id. (quoting Burger
King, 471 U.S. at 474).
“[C]ontracting with an out-of-state party alone cannot establish automatically sufficient
minimum contacts in the other party’s home forum.” Id. (citing Purdue Res. Found., 338 F.3d at
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781. Instead, the court must conduct a “context-sensitive analysis of the contract, examining
prior negotiations, contemplated future consequences, the terms of the contract, and the parties’
course of actual dealing with each other.” Id. “[W]hich party initiated or solicited a business
transaction has long been considered pertinent to the constitutional propriety of personal
jurisdiction and a suit arising out of the transaction.” Id.
In the instant case, it is unclear who initiated the talks between the parties, but it is
undisputed that plaintiff travelled to California to meet with and begin negotiating with defendant.
The remainder of the negotiations took place via telephone or email, with plaintiff apparently in
Illinois and defendant in California. The contract provides that California law governs, but
contains no forum selection clause. Plaintiff argues that this evidences that defendant anticipated
that it may be sued elsewhere. That may be true, but it does not establish a connection with
Illinois, particularly because the contract does not call for plaintiff to work in Illinois. The
contract provides for plaintiff to work remotely, meaning he could live and work wherever he
chose. It is simply fortuitous that he lives in Illinois. His residency was unrelated to his
employment duties, which included obtaining accounts across the nation. The evidence shows
that he often travelled outside of Illinois to perform his job, and spent much of his time in
California. Indeed, it appears that defendant’s only contacts with Illinois (outside of the two
meetings) are those of plaintiff. But it is defendant, not plaintiff, that must create the contacts
with the forum state. Waldon, 134 S.Ct. at 1126. These contacts are far more attenuated than
those that the Seventh Circuit found insufficient to support jurisdiction in Lakeside Bridge & Steel
Co. v. Mountain State Construction Co., 597 F.2d 596 (7th Cir. 1976), the case that the Seventh
Circuit uses as a benchmark for questions of personal jurisdiction in a contractual dispute. In
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Lakeside, the court found no personal jurisdiction in Wisconsin even though the defendant had
contracted and placed a purchase order with a Wisconsin manufacturer, and the terms of the
contract explicitly stated that the plaintiff would manufacture and ship the goods from its plant in
Milwaukee. Consequently, the court concludes that defendant lacks sufficient minimum contacts
with Illinois such that the exercise of jurisdiction over it would comply with the due process
clause. Defendant’s motion to dismiss for lack of personal jurisdiction is granted. 1
CONCLUSION
For the reasons described above, defendant’s motion to dismiss for lack of personal
jurisdiction [6] is granted and the case is dismissed without prejudice.
ENTER:

April 10, 2018

__________________________________________
Robert W. Gettleman
United States District Judge

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Because the court concludes that it lacks personal jurisdiction over defendant, it need not
consider defendant’s alternate arguments that venue is improper and the complaint fails to state a
claim.
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