HAAN Corporation Korea and HAAN Corporation USA v. Sparkling Drink Systems Innovation Center Hong Kong et al.
Filing
24
MEMORANDUM Opinion and Order. Defendant Bueno's motion 13 is granted in that Haan's service of the amended complaint and summons on defendant Bueno is quashed. Plaintiffs are granted an additional 90 days to serve defendants. If plaintiffs are unable to serve defendants within 90 days and do not bring a motion before the Court, this matter will be dismissed. Signed by the Honorable Jorge L. Alonso on 12/15/2017. Notices mailed by judge's staff (ntf, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
HAAN CORPORATION KOREA and
HAAN CORPORATION USA,
Plaintiffs,
v.
SPARKLING DRINK SYSTEMS
INNOVATION CENTER HONG KONG,
SPARKLING DRINK SYSTEMS
INNOVATION CENTER LTD, AARON
SERGE BUENO (a/k/a “Serge Joseph
Bueno”), and TOMAS SCHWAB,
Defendants.
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
No. 16 CV 50311
Judge Jorge L. Alonso
MEMORANDUM OPINION AND ORDER
This matter is before the Court on defendant Aaron Serge Bueno’s motion to dismiss
plaintiffs’ amended complaint pursuant to Federal Rules of Civil Procedure 8(a), 9(b), 12(b)(1),
12(b)(2), 12(b)(3), 12(b)(4), 12(b)(5), and 12(b)(6). For the following reasons, the Court grants
the motion [13] pursuant to Fed. R. Civ. P. 12(b)(5). Plaintiffs are given an additional 90 days to
serve defendants.
BACKGROUND
Plaintiffs Haan Corporation Korea and Haan Corporation USA (collectively “Haan”) are
corporations formed by Romi Haan, a businesswoman based in Seoul, South Korea. Haan brings
this action against defendants Sparkling Drink Systems Innovation Center Hong Kong and
Sparkling Drink Systems Innovation Center Ltd (collectively “SDS”), Aaron Serge Bueno, and
Tomas Schwab. (Am. Compl., ECF No. 10.)
Haan alleges violations of the Racketeer Influenced and Corrupt Organizations Act
(“RICO”) (Count I) as well as a claim for common law fraud (Count II). Regarding the RICO
claim, Haan alleges that SDS is a criminal enterprise, that Bueno and Schwab operate it, and that
Bueno and Schwab used SDS to commit various acts of fraud, including mail and/or wire fraud.
(Id. ¶¶ 36-47.) For the common law fraud claim, Haan alleges that defendants committed fraud
when they stated that they operated a successful pod-based beverage system (akin to the wellknown Keurig system) and that they had secured large orders from prominent retailers like
Walmart, Target, and Bed Bath & Beyond. (Id. ¶¶ 25, 48-50.) Haan alleges that defendants
knew their pods were, in fact, worthless due to a “clumping” defect. (Id.) Haan says these
misrepresentations induced them to enter into business with defendants and pay defendants
millions of dollars. (Id.)
On December 5, 2016, Haan served Bueno with a copy of the complaint and summons
outside of a courtroom at the Dirksen United States Courthouse in Chicago, Illinois. Bueno, a
citizen of France and Israel, was in Chicago to attend an evidentiary hearing in a separate case,
Flextronics International USA, Inc. v. Sparkling Drink Systems Innovation Center Ltd, et al., No.
15 C 4904. (See Mem. Supp. Mtn. Dismiss at 3-4; ECF No. 16.) Bueno was a defendant in the
Flextronics suit, which involved claims of common law fraud, negligent misrepresentation, and
breach of contract.
ANALYSIS
After Bueno was served in this matter, he filed the instant motion to dismiss, which raises
various grounds for dismissal. The Court addresses only Bueno’s arguments related to service of
process because it finds the issue dispositive. Bueno argues that the Court must quash service
because he enjoyed process immunity at the time he was served and dismiss the complaint
2
because the Court does not have personal jurisdiction over him. Bueno cites the long-standing
rule that a non-resident is immune from service of process while in a forum for the purpose of
attending court proceedings. Stewart v. Ramsay, 242 U.S. 128, 129 (1916). Federal courts have
long recognized “[t]he true rule . . . that suitors, as well as witnesses, coming from another State
or jurisdiction, are exempt from the service of civil process while in attendance upon court, and
during a reasonable time in coming and going.” Id. at 129; accord Durst v. Tautges, Wilder &
McDonald, 44 F.2d 507, 508-11 (7th Cir. 1930) (recognizing “[a] suitor or witness is exempt
from service of process while without the jurisdiction of his residence for the purpose of
attending court in an action to which he is a party,” and extending the rule to a nonresident
attorney). This rule is intended to “promote the due and efficient administration of justice” by
ensuring that a court will not be hampered by wary, non-resident witnesses and parties who
refuse to attend the court’s proceedings for fear that they will be served in another suit while
attending the proceedings. Durst, 44 F.2d at 509; see also Lamb, 285 U.S. at 225 (explaining
reasoning underlying immunity).
Haan says that service is proper and immunity does not apply. It cites Lamb v. Schmitt,
285 U.S. 222, 228 (1932), and Fur Baron, Inc. v. Smith Fine Furs, Ltd., No. 92 C 4726, 1993
WL 189948 (N.D. Ill. May 28, 1993), to support its position. In Lamb, the Supreme Court
limited the availability of process immunity. There, an Illinois attorney was attending court in
Mississippi for a suit involving fraudulent conveyances of property. See Lamb, 285 U.S. at 224.
While in court, the attorney was served with a second suit, which sought to recover fees paid to
the attorney in the first suit. Id. The attorney argued that service should be quashed based on
immunity. Id. The Supreme Court rejected the argument, reasoning that the “two suits, pending
in the same court, [were] not independent of each other or unrelated.” Id. at 227. The second
3
suit was brought to secure rights asserted in the first suit, and as such, the “later suit was so much
a part and continuation of the earlier one” that allowing the second to proceed could not possibly
hinder or delay the first suit. See id. at 227-28. Thus, the rationale underlying process immunity
did not apply. The Court noted that the immunity “is founded, not upon the convenience of the
individuals, but of the court itself.” Id. at 225. In determining whether to extend immunity,
“[t]he test is whether the immunity itself, if allowed, would so obstruct judicial administration in
the very cause for the protection of which it is invoked as to justify withholding it.” Id. at 228.
In applying this test to the present case, the Court finds that extending immunity to Bueno
is warranted here. Unlike the circumstances in Lamb, this case is not a continuation of or so
related to Flextronics, the case that brought Bueno to the district, such that granting immunity
would likely hinder the resolution of the Flextronics matter.1 Although both cases involve
claims of fraud and some of the alleged misrepresentations are similar—both plaintiffs allege
that Bueno insisted that the “clumping” problem was not an issue and that Bueno lied about
securing orders from large, well-known retailers—the cases are otherwise unconnected. (No. 16
C 50311, ECF No. 10; No. 15 C 4904, ECF No. 19.) The alleged misrepresentations in the
respective complaints took place at different times, involve different facts, and involve different
agreements. (Id.) None of the alleged agreements involve both Haan and Flextronics. The
claims in this case do not grow out of the Flextronics contract, or otherwise appear directly
related. Unlike the suits in Lamb, the actions here are unrelated and extending immunity would
1
The Court recognizes that the Flextronics matter has concluded. (See No. 15 C 4904, ECF No.
226.) However, the Court has not found any case which decided that immunity should be
withheld because the first suit ended after a party raised the immunity issue but before the court
ruled on the issue. Further, the rationale of process immunity explained in Stewart v. Ramsay
and Lamb v. Schmitt is, at least in part, forward-looking because its very purpose is to motivate
wary parties and witnesses to cooperate in court proceedings. That purpose would be
undermined if immunity could be denied solely because the first suit is resolved before the issue
of process immunity is formally decided in the second suit.
4
not impede judicial administration.
Similarly, the two actions in Fur Baron, a claim and
counterclaim, involved essentially the same parties. Fur Baron, 1993 WL 189948 at *1-2. And
the claims in both of those actions concerned the delivery and payment of certain goods and
therefore arose out of the same set of facts and circumstances. (Id.)
Moreover, this case illustrates the basic rationale underlying process immunity. The
process immunity exception allows a district court to shield an individual from service of process
so that he or she may travel to a different forum and participate in court proceedings. See N.
Light Tech., Inc. v. N. Lights Club, 236 F.3d 57, 63 (1st Cir. 2001). Generally, a court can only
protect the jurisdictional status of a party or witness who is hesitant to travel to a different forum
or state by issuing protective orders or subpoenas, but it can only do so in the cases before it. Id.
In this aspect, process immunity ensures that judicial administration is not impeded. Here,
Bueno is a non-resident who operates foreign companies, and he may not have chosen to come to
the forum to attend court proceedings in Flextronics if he feared being served in other lawsuits.
See Lamb, 285 U.S. at 225-27; cf. Greene v. Weatherington, 301 F.2d 565, 568 (D.C. Cir. 1962)
(denying immunity, in part, because the party was not voluntarily in the forum); Jessen v. Wein,
2008 WL 3914122 at *3 (D.V.I. Aug. 19, 2008) (same). Withholding immunity from Bueno in
this case could undermine rather than promote the due and efficient administration of justice in
this district. See Durst, 44 F.2d at 509. For these reasons, the Court finds that Bueno was
entitled to process immunity and quashes Haan’s service on him.
Even though defendants have actual notice of the instant suit, the Court is not permitted
to excuse service altogether. McMasters v. U.S., 260 F.3d 814, 817 (7th Cir. 2001). The Court
will allow Haan to effectuate service as Bueno’s motion to dismiss for lack of personal
jurisdiction under Fed. R. Civ. P. 12(b)(2) is denied. A motion to dismiss under Rule 12(b)(2)
5
challenges whether the court has jurisdiction over a party. “The plaintiff has the burden of
establishing personal jurisdiction, and where . . . the issue is raised by a motion to dismiss and
decided on the basis of written materials rather than an evidentiary hearing, the plaintiff need
only make a prima facie showing of jurisdictional facts.” Tamburo v. Dworkin, 601 F.3d 693,
700 (7th Cir. 2010). In analyzing personal jurisdiction, the court takes well-pleaded allegations
of the complaint as true unless they are refuted by the defendant in an affidavit. See id.
“A federal court exercising diversity jurisdiction has personal jurisdiction only where a
court of the state in which it sits would have such jurisdiction.” Philos Techs., Inc. v. Philos &
D, Inc., 645 F.3d 851, 855 n.2 (7th Cir. 2011). Illinois’s long-arm statute authorizes personal
jurisdiction to the extent permitted by the Illinois Constitution and the United States
Constitution. 735 ILCS 5/2–209(c). “[T]here is no operative difference between these two
constitutional limits,” so a single constitutional inquiry will suffice. Mobile Anesthesiologists
Chicago, LLC v. Anesthesia Assocs. of Houston Metroplex, P.A., 623 F.3d 440, 443 (7th Cir.
2010).
“The key question is therefore whether the defendants have sufficient ‘minimum
contacts’ with Illinois such that the maintenance of the suit ‘does not offend traditional notions
of fair play and substantial justice.’” Tamburo, 601 F.3d at 700–01 (quoting Int'l Shoe Co. v.
Washington, 326 U.S. 310, 316 (1945)).
There are two types of personal jurisdiction: general and specific. General jurisdiction
exists where a defendant has “continuous and systematic general business contacts” with the
forum, while specific jurisdiction refers to jurisdiction over a defendant in a suit “arising out of
or related to the defendant’s contacts with the forum.” RAR, Inc. v. Turner Diesel, Ltd., 107 F.3d
1272, 1277 (7th Cir.1997) (quoting Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S.
408, 416, 414 n.8 (1984)). A defendant is subject to general jurisdiction only where its contacts
6
with the forum state are so “continuous and systematic” or “at home” in the state. Goodyear
Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 131 S. Ct. 2846, 2851 (2011); see also
Tamburo, 601 F.3d at 701 (“The threshold for personal jurisdiction is high; the contacts must be
sufficiently extensive and pervasive to approximate physical presence.”). “Specific personal
jurisdiction is appropriate where (1) the defendant has purposefully directed his activities at the
forum state or purposefully availed himself of the privilege of conducting business in that state,
and (2) the alleged injury arises out of the defendant’s forum-related activities.” Tamburo, 601
F.3d at 702.
Bueno fails to develop his argument regarding minimum contacts with this forum. In its
amended complaint, Haan alleges that Bueno owns and/or controls both SDS entities and that the
SDS entities operated out of offices in Chicago at all material times. (Am. Compl. ¶¶ 4-5; ECF
No. 10.) Plaintiffs further allege that “a substantial part of the events giving rise to the claims
occurred in this district, including multiple meetings in person between Romi [Haan] and Bueno
in Chicago.” (Id. ¶ 9.) These allegations are taken as true for purposes of a motion to dismiss
and are, in any event, not contradicted by Bueno’s affidavit. See Tamburo, 601 F.3d at 700; see
also Adkins v. Nestle Purina PetCare Co., 973 F. Supp. 2d 905, 912 (N.D. Ill. 2013) (citing Rule
12(b)(2) motion to dismiss standard). Given the allegations of Bueno’s connections to the
forum, his motion to dismiss based on a lack of personal jurisdiction is denied at this time.
For the foregoing reasons, the Court finds that Bueno’s immunity renders Haan’s service
of process insufficient and quashes service pursuant to Fed. R. Civ. P. 12(b)(5). The Court will
extend time for Haan to serve defendants. See Brock v. City of Belleville, 2017 WL 4518354
(S.D. Ill. Oct. 10, 2017) (considering motions to quash service and exercising discretion to
extend time for service despite plaintiff’s failure to properly serve defendants in 90-day period).
7
The Court recognizes that Haan may need to effectuate service under Fed. R. Civ. P. 4(f)(1)
pursuant to the methods prescribed by the Hague Convention. Should Haan need additional time
beyond the 90 days granted herein to effectuate service of process on defendants, Haan may
bring an appropriate motion before the Court.
CONCLUSION
Based on the above, defendant Bueno’s motion [13] is granted in that Haan’s service of
the amended complaint and summons on defendant Bueno is quashed. Plaintiffs are granted an
additional 90 days to serve defendants. If plaintiffs are unable to serve defendants within 90
days and do not bring a motion before the Court, this matter will be dismissed.
SO ORDERED.
ENTERED: December 15, 2017
______________________
HON. JORGE ALONSO
United States District Judge
8
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?