Ford Motor Company et al v. Autel US Inc. et al
OPINION AND ORDER GRANTING 57 , 65 Ieon Chens' and Launch Tech Co. LTD's Motions to Dismiss for Lack of Personal Jurisdiction. Signed by District Judge Terrence G. Berg. (AChu)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
FORD MOTOR COMPANY, a Delaware
corporation, and FORD GLOBAL
TECHNOLOGIES, LLC, Delaware
Limited Liability Company,
AUTEL US INC, a New York corporation,
and AUTEL INTELLIGENT
TECHNOLOGY CO., LTD, a Chinese
Case No. 14-13760
Hon. Terrence G. Berg
LAUNCH TECH CO. LTD, a Chinese
INNOVA ELECTRONICS, CORP., a
California corporation, and IEON CHEN,
OPINION AND ORDER GRANTING IEON CHENS’ AND LAUNCH TECH
CO. LTD’S MOTIONS TO DISMISS FOR LACK OF PERSONAL
JURISDICTION (DKTS. 57 and 65)
In this this action alleging trade secret misappropriation and trademark and
copyright infringement, Ford claims that Autel obtained access to Ford’s proprietary
automobile-diagnostic software, hacked it, copied proprietary information, and
pasted that information into Autel’s own diagnostic software.1 Autel denies the
allegations, and contends in response that Counterclaim Defendants Launch Tech
Co. Ltd,2 Innova Electronics, and Ieon Chen teamed up with Ford to craft and spread
Ford’s allegations to damage Autel’s position in the marketplace—in essence to take
out the competition. Third Party Defendants Chen and Launch have moved to dismiss
the case against them on the ground that the Court lacks personal jurisdiction over
them. Because Autel has failed to present a prima facie case that the Court has
personal jurisdiction over Chen and Launch, Chen’s and Launch’s motions are
GRANTED and Autel’s claims against them are DISMISSED WITHOUT
Chen is the CEO of Innova, a Nevada corporation. Dkt. 57, Pg. ID 1595. He lives
in California. Dkt. 57, Pg. ID 1595. He does no business in Michigan and has not
entered into any contracts here. Dkt. 57, Pg. ID 1595. Twice, in connection with this
matter, Chen affirmatively contacted a Michigan resident by email. On August 23,
2013, Chen emailed Colin Fielding at Bosch Automotive. Dkt. 57, Pg. ID 1595. And
on October 3, 2013, Chen emailed Ken Dornoy of Ford. Dkt. 57, Pg. ID 1596. Both
emails concerned information Innova had obtained relating to Ford’s diagnostic
Throughout this Order, the Court refers to both Ford entities as “Ford” and to both
Autel entities as “Autel.”
2 Originally Autel sued two “Launch” entities: Launch Tech Co. Ltd. (a Chinese
corporation) and Launch Tech, Inc. (a California corporation). Autel then dismissed
Launch Tech, Inc., so only Launch Tech Co. Ltd. remains a party. Throughout this
Order, the Court refers to “Launch Tech Co. Ltd.” as simply “Launch.”
software and Autel’s diagnostic software. These emails set off a series of
communications between Chen and Ford’s lawyers, who are located in Utah. Dkt. 57,
Pg. ID 1597.
Launch is a Chinese corporation headquartered in Shenzhen, China. Dkt. 65,
Pg. ID 1838. It manufactures automotive diagnostic tools and sells them throughout
the world using third-party distributors. Dkt. 65, Pg. ID 1838. In the United States,
Launch sells to two third-party distributors, Matco Tools and Launch Tech, Inc.
Dkt. 65, Pg. ID 1838. Launch Tech, Inc. is a California corporation. Launch Tech, Inc.
is not a subsidiary of Launch; their relationship is that of customer and vendor.
Dkt. 65, Pg. ID 1839. Launch does no business in Michigan. Dkt. 65, Pg. ID 1839. It
has neither offices nor employees here, owns no property here, has no bank accounts
here, and neither ships nor sells here. Dkt. 65, Pg. ID 1839.
Autel alleges that Launch asked Chen to establish an ongoing relationship with
Ford and that Launch supplied information to Chen that Chen then relayed to Ford.
Dkt. 38, Pg. ID 814. Autel further alleges that the information Launch supplied
included a false claim: that Autel used a program called PARSEALL.EXE to hack
Ford’s diagnostic software. Dkt. 38, Pg. IDs 814-815. And Autel alleges that Launch,
Chen, and Ford knew or should have known that the PARSEALL.EXE hacking claim
was false. Dkt. 38, Pg. ID 815.
Chen and Launch filed their motions to dismiss in September of 2016. Dkts. 57,
65. Autel opposed both motions. Dkts. 69, 75. Following full briefing, the Court held
oral argument on November 30, 2016.
Chen and Launch argue that this Court lacks both general and specific
jurisdiction over them. Dkt. 57, Pg IDs 1601-1615; Dkt. 65, Pg. IDs 1844-1849. Autel
concedes that this Court lacks general jurisdiction, but maintains that it has specific
jurisdiction over them. Dkts. 69, 75.
A. Standard of Review.
A federal court’s exercise of jurisdiction over litigants must be both “(1) authorized
by the law of the state in which it sits, and (2) in accordance with the Due Process
Clause of the Fourteenth Amendment.” Neogen Corp. v. Neo Gen Screening, Inc.,
282 F.3d 883, 888 (6th Cir. 2002). Michigan’s long-arm statute, Mich. Comp. Laws
§§ 600.715 (corporations) and 600.705 (individuals), governs issues of personal
jurisdiction and gives the “maximum scope of personal jurisdiction permitted by the
due process clause of the Fourteenth Amendment.” Chrysler Corp. v. Fedders Corp.,
643 F.2d 1229, 1236 (6th Cir. 1981). Accordingly, if jurisdiction is proper under the
Fourteenth Amendment, it is also proper under Michigan's long-arm statute.
Due process is satisfied if a defendant has “sufficient minimum contacts” with the
forum 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) (citation omitted). “But the plaintiff cannot be the only link between the
defendant and the forum. Rather, it is the defendant's conduct that must form the
necessary connection with the forum State.” Walden v. Fiore, 134 S. Ct. 1115, 1122
(2014) (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 478 (1985)). For the
Court to find that it has specific personal jurisdiction over Chen and Launch, three
factors must be met: (1) the defendant must “purposefully avail himself [or itself] of
the privilege of acting in the forum state;” (2) “the cause of action must arise from the
defendant's activities there;” and (3) “the acts of the defendant ... must have a
substantial enough connection with the forum state to make the exercise of
jurisdiction over the defendant reasonable.” Southern Mach. Co. v. Mohasco Indus.,
Inc., 401 F.2d 374, 381 (6th Cir. 1968).
As counterclaimant, Autel bears the burden of establishing the Court’s personal
jurisdiction over Chen and Launch. Neogen Corp., 282 F.3d at 883. Because the Court
has not held an evidentiary hearing on this issue, Autel need only present a prima
facie case for jurisdiction. Audi AG v. Volkswagon of Am., Inc., 341 F. Supp. 2d 734,
741 (E.D. Mich. 2004). Autel can meet this burden by “establishing with reasonable
particularity sufficient contacts between [the Third-Party Defendants] and the forum
state to support jurisdiction.” Neogen 282 F.3d at 887. Thus, the Court must consider
all affidavits and pleadings in a light most favorable to Autel. Audi AG,
341 F. Supp. 2d at 741. Even under this favorable standard of review, Autel has not
met its burden.
1. Autel has not made a prima facie showing that Chen has
purposefully availed himself of the privilege of acting in Michigan
Purposeful availment, the “constitutional touchstone” of personal jurisdiction,
exists where the defendant's contacts with the forum state “proximately result from
actions by the defendant himself that create a ‘substantial connection’ with the forum
state,” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475, (1985) (emphasis in
original), and are such that he “should reasonably anticipate being haled into court
there.” World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 295 (1980). This
requirement ensures that a defendant will not be subject to the jurisdiction of a forum
solely as a result of “random, fortuitous, or attenuated contacts.” Burger King Corp.,
471 U.S. at 475.
Chen argues that he has not purposefully availed himself of the privilege of acting
in Michigan. Dkt. 57, Pg. IDs 1603-1611. Chen submits that he has never personally
sold anything in Michigan and has never entered into any agreement with a Michigan
resident, Dkt. 57, Pg. ID 1604, and that Autel’s counterclaims reference neither the
two communications he affirmatively sent to Michigan nor any statements within
those communications. Dkt. 57, Pg. ID 1605.
Chen likens this case to the Sixth Circuit’s decision in Rice v. Karsch, where the
Sixth Circuit affirmed a district court’s order dismissing a defendant for lack of
personal jurisdiction in part because the only reason that the defendant’s
communications went to the forum state was because the corporation that received
the communications was located in the forum state. 154 F. App’x 454, 462—63
(6th Cir. 2005). Chen argues that he did nothing to further his personal business in
Michigan or to create continuous and substantial connections in Michigan, and that
his email communication with Bosch US and Ford caused consequences in this forum
solely because those companies chose to have offices in Michigan. Dkt. 57,
Pg. ID 1607.
In response, Autel argues that Chen’s contact with Ford was the event that
precipitated a series of continuous and systematic contact between the two. Dkt. 69,
Pg. ID 1889. Autel also points to one of Ford’s interrogatory responses, where Ford
states that it was Chen who reported that Autel hacked Ford’s software by using a
program called PARSEALL.EXE. This one statement by Chen, Autel asserts, should
itself be sufficient to meet the purposeful availment test. Dkt. 69, Pg. ID 1888.
Moreover, Autel suggests that Chen sought to establish an ongoing relationship with
Ford, conduct which would also constitute purposeful availment. Dkt. 69, Pg. ID 1889.
Autel’s arguments are unavailing. Despite a flurry of emails between Ford’s
lawyers and Chen, Chen initiated communication with parties in Michigan only
twice. And nothing about those two emails shows an intention to further his
connections in Michigan or to take advantage of privileges available to those who act
in Michigan. Chen’s communications were directed to employees of Bosch US and
Ford because his subject matter pertained to those companies. The only reason those
communications arrived in Michigan is because the employees to whom Chen sent
his emails were employed in Michigan. Bosch is headquartered in Germany, with its
U.S. subsidiary headquartered in Michigan. And Ford is headquartered in Michigan,
but operates in every continent except Antarctica. An employee in another state—
perhaps even in another country—could have opened Chen’s emails. What tied Chen’s
communications to Michigan was the decision by each company to locate some of its
offices here and to dedicate portions of its Michigan office space to employees whose
responsibilities included the subject of Chen’s emails: Ford’s diagnostic software. This
connection is attenuated, random, and fortuitous; it depends on the office-location
decisions of two corporations whose operations span the globe.
The weakness of Chen’s connection to Michigan is further demonstrated by the
content of his two messages. Chen did not solicit business from Bosch or Ford in
Michigan, nor did he sell goods or services to them; he simply passed along
information about Ford’s and Autel’s diagnostic software. Once Ford received the
information, Ford’s attorneys reached out to Chen and commenced what became an
ongoing dialogue. Understandably, Ford had questions. Unlike traditional cases
where a defendant is found to have purposefully availed himself through targeting
his communications and conduct toward the forum state, Chen’s contact with the
forum state was not motivated by a desire to affect this forum. Chen’s purpose was to
alert Ford to a problem and assist in solving it, not to engage in activities in Michigan
or to have an impact here. Such conduct, alone, does not create a connection to the
forum state so substantial that Chen would reasonably anticipate being haled into
court here. The record does not support a finding of purposeful availment.
2. Autel has not made a prima facie showing that Launch has
purposefully availed itself of the privilege of acting in Michigan
Launch’s contacts with this forum are even less substantial than Chen’s. Launch
also argues that it has not purposefully availed itself of the privileges of acting in
Michigan. Dkt. 65, Pg. ID 1846. According to the third-party claims, Autel merely
alleges that Launch contacted Chen, not Ford, Dkt. 65, Pg. ID 1847, and that Ford
later asked Launch to provide additional information to Ford but Launch declined to
do so. Dkt. 65, Pg. ID 1847. Launch also argues that Autel’s blanket allegation that
“the Counterclaim Defendants” made false statements in Michigan fails to
distinguish between the actions of each counterclaim defendant and does nothing to
demonstrate purposeful availment by Launch itself. Dkt. 65, Pg. IDs 1847-1848.
Autel responds that emails and other documents obtained in discovery and Ford’s
interrogatory responses demonstrate that Launch asked Chen to establish an ongoing
relationship with Ford and that Launch supplied information to Chen that Chen then
relayed to Ford. Dkt. 75, Pg. IDs 2450-2451. Accordingly, Autel argues, what matters
is that Launch intended the information it gave to Chen to be delivered into Ford’s
hands. Dkt. 75, Pg. ID 2452.
These responses fail to demonstrate purposeful availment. As previously
explained, a communication that simply conveys information and is made generally
to a multi-national corporation does not create a substantial enough connection to a
particular forum to demonstrate purposeful availment of that forum’s jurisdiction.
This is particularly so when the reason for the communication is not to develop a
commercial relationship but rather to warn that corporation of what is believed to be
an ongoing wrong perpetrated by another party. Launch’s connection to Michigan is
even more attenuated than Chen’s; it initiated no direct contact with Ford and even
refused to assist Ford when Ford asked for more information. Launch’s actions did
not create a connection to Michigan so substantial that Launch should have
reasonably anticipated being haled into court here.
Because the Court concludes that Chen’s and Launch’s conduct does not constitute
purposeful availment, the Court lacks personal jurisdiction and their motions to
dismiss must be granted. There is no need to discuss the other factors of the Southern
Machine test, nor to consider Launch’s arguments on insufficient service of process
and failure to state a claim.
From a review of this record, it appears to the Court that Chen and Launch were
acting as whistleblowers. They alerted Ford to what they considered blatant copying
of Ford’s diagnostic software. After its own investigation, Ford brought an action
against Autel on a number of theories, including trade secret misappropriation and
trademark and copyright infringement. This lawsuit will test the merits of those
claims. By trying to expand this case to include these third-party defendants,
however, Autel seeks to penalize them for blowing the whistle—roping Chen and
Launch into Ford’s lawsuit against Autel on the theory that their sharing of
information with Ford is proof of a purposeful effort to avail themselves of the
jurisdiction where Ford is headquartered. To hold that out-of-state entities evoke the
jurisdiction of this forum by alerting victims in the forum to alleged wrongdoings of
other parties, indeed to allow the alleged wrongdoers to hale the whistleblowers into
a far-away court to be sued—effectively punished—for reporting the misconduct,
would be both unreasonable and against public policy. Autel may or may not have
valid claims against Chen and Launch for what they did, but it must bring those
claims before a court with proper in personam jurisdiction over them.
For the foregoing reasons, Third Party Defendant Ieon Chen’s and Third Party
Defendant Launch’s motions to dismiss (Dkts. 57 and 65) are GRANTED. Autel’s
claims against Chen and Launch are therefore DISMISSED WITHOUT
Dated: February 13, 2017
s/Terrence G. Berg
TERRENCE G. BERG
UNITED STATES DISTRICT JUDGE
Certificate of Service
I hereby certify that this Order was electronically submitted on February 13,
2017, using the CM/ECF system, which will send notification to all parties.
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