Herrmann International, Inc. et al v. Herrmann International Europe et al
Filing
23
ORDER denying Defts' 16 Motion to Dismiss for Lack of Jurisdiction. Signed by District Judge Martin Reidinger on 9/28/2018. (ejb)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
ASHEVILLE DIVISION
CIVIL CASE NO. 1:17-cv-00073-MR
HERRMANN INTERNATIONAL, INC. and
HERRMANN GLOBAL, LLC,
)
)
)
Plaintiffs,
)
)
vs.
)
)
HERRMANN INTERNATIONAL EUROPE,
)
HERRMANN TECHNOLOGIE, BRAIN
)
RESSOURCES, and LIONEL MARC
)
VUILLEMIN,
)
)
Defendants.
)
____________________________________ )
ORDER
THIS MATTER is before the Court on the Defendants’ Motion to
Dismiss for Lack of Jurisdiction. [Doc. 16].
I.
STANDARD OF REVIEW
Under Rule 12(b)(2), a defendant must affirmatively raise a personal
jurisdiction challenge.
The plaintiff, however, bears the burden of
demonstrating personal jurisdiction at every stage following such a
challenge. Grayson v. Anderson, 816 F.3d 262, 267 (4th Cir. 2016) (citing
Combs v. Bakker, 886 F.2d 673, 676 (4th Cir. 1989)). “[A] Rule 12(b)(2)
challenge raises an issue for the court to resolve, generally as a preliminary
matter.” Grayson, 816 F.3d at 267 (citation omitted).
When, as here, a district court considers a question of personal
jurisdiction based on the allegations of a complaint, motions papers,
affidavits, and supporting memoranda, the plaintiff has the burden of making
a prima facie showing in support of its assertion of jurisdiction. Universal
Leather, LLC v. Koro AR, S.A., 773 F.3d 553, 558 (4th Cir. 2014), cert.
denied, --- U.S. ---, 135 S.Ct. 2860 (2015); Grayson, 816 F.3d at 268. In
deciding whether the plaintiff has met this burden, “the district court must
construe all relevant pleading allegations in the light most favorable to the
plaintiff, assume credibility, and draw the most favorable inferences for the
existence of jurisdiction.”
Universal Leather, 773 F.3d at 558 (internal
quotation marks and citation omitted). If the existence of jurisdiction turns
on disputed factual questions and a prima facie showing of personal
jurisdiction has been made, a district court can proceed as if it has personal
jurisdiction over the matter, although factual determinations to the contrary
may be made at trial.1 Public Impact, LLC v. Boston Consulting Group, Inc.,
117 F.Supp.3d 732, 736 (M.D.N.C. Aug. 3, 2015) (citations omitted).
The parties presented many disputed facts for the Court’s review in determining this
motion. Much of these facts, however, go to the merits of the parties’ controversy and
not to whether personal jurisdiction lies under the applicable standard of review. The
Court specifically notes that the Ruling of the Commercial Court of Versailles submitted
by Defendants by way of a Notice of Supplemental Authority [Doc. 21] does not lend any
support to Defendants’ position within the framework the Court is to operate in deciding
the current motion.
1
2
“Nevertheless, either at trial or at a pretrial evidentiary hearing, the plaintiff
must eventually prove the existence of personal jurisdiction by a
preponderance of the evidence.” Id. at 737 (citing New Wellington Fin. Corp.
v. Flagship Resort Dev. Corp., 416 F.3d 290, 294 n. 5 (4th Cir. 2005)).
II.
FACTUAL AND PROCEDURAL BACKGROUND
Viewing the pleadings and affidavits in the light most favorable to the
Plaintiffs, the following is a summary of the relevant facts.
Plaintiffs
Herrmann International, Inc. (“HI”) and Hermmann Global, LLC (“HG”) are
North Carolina corporations with principal places of business in Rutherford
County, North Carolina. [Doc. 18-1 at ¶¶ 3, 4]. HI and HG are professional
services companies in the business of providing assessments of cognitive,
behavioral, and personality traits for education, business management
training, and leadership development. The assessments are “based on brain
research and the use of data generated by those assessments and other
research.” [Id.]. HG owns the intellectual property developed by HI. [Id. at
¶ 4]. HI and HG are herein collectively referred to as Plaintiffs. Before 2011,
HI was known variously as The Ned Herrmann Group, Inc., Whole Brain
Corporation, and Applied Creative Services. [Id.].
Defendants Herrmann International Europe (“HIE”), Herrmann
Technologie (“HT”), and Brain Ressources are French companies organized
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and registered under the laws of France. They have no offices, facilities or
employees in the State of North Carolina. [Doc. 1 at ¶¶ 3, 4, 5; Doc. 17-16
at ¶ 13]. Defendants HIE and HT have conducted business with Plaintiffs as
licensees of Plaintiffs’ suite of intellectual property and proprietary
information. [Doc. 1 at ¶¶ 4, 5]. Defendant Brain Ressources develops
applications in the field of education using Herrmann products and services.
[Doc. 17-1 at ¶ 27]. Defendant Lionel Marc Vuillemin (“Vuillemin”) is a
resident of France. [Id. at ¶ 6]. Vuillemin is the president of HIE and HT and
“controls” Brain Ressources. [Id.]. Plaintiffs contend that Vuillemin regularly
conducted business with Plaintiffs in North Carolina on behalf of HIE and HT
and for the benefit of himself personally, HIE, HT, and Brain Ressources.
[Doc. 1 at ¶ 6]. Plaintiff alleges Defendant Brain Ressources is “affiliated
with Defendants HIE, HT and [ ] Vuillemin, and has participated and
conspired with them in the acts described [in the Complaint].” [Id. at ¶ 5].
Plaintiffs and their predecessors have operated for more than 35 years.
[Id. at ¶ 5]. Beginning in the early 1960s, Ned Herrmann pioneered the field
of brain research as it relates to business management and performance.
[Doc. 18-1 at ¶ 6]. Mr. Herrmann is the father of Ann Herrmann-Nehdi, the
Chairman of the Board and Chief Thought Leader of HI. [Id. at ¶ 1]. Mr.
Herrmann developed numerous analytical models, practical tools, and
4
software
algorithms
for
psychometric
assessment
techniques
and
applications to define and describe the way humans process information,
communicate, and solve problems. [Id. at ¶ 6]. In or about 1979, Mr.
Herrmann created the first version of the Herrmann Brain Dominance
Instrument (“HBDI”). At the core of the HBDI is an algorithm developed by
Mr. Herrmann based on his research on the connections between brain
perception, processing structures, and patterns.
[Id. at ¶ 7].
Plaintiffs’
business revolves around the administration of the HBDI assessment to
individuals and consulting and training regarding the effective use of the
HBDI results. Plaintiffs also provide these services to companies and other
organizations to aid the companies in interpreting the HBDI assessment
results of their employees and executives. [Id. at ¶ 8]. Plaintiffs’ business
depends, in part, on an extensive database of the HBDI profiles of many
individuals having taken the HBDI assessment, either directly through
Plaintiffs or through Plaintiffs’ licensees and partners, which for many years
included the Defendants. [Id.].
Over the years, Plaintiffs have developed and used highly confidential,
proprietary information (“Trade Secrets”). [Id. at ¶ 9]. Such Trade Secrets
specifically include the algorithms underlying the implementation, scoring,
and interpretation of the HBDI assessment and its results; an extensive
5
collection of client data consisting of and derived from HBDI assessment
results; and software source code, including code for implementing, scoring,
and interpreting the HBDI assessment and its results. These Trade Secrets
also include client lists and consulting and training techniques, tools, and
materials, including those for the training, certification, and accreditation to
administer the HBDI and to interpret the results. [Id.].
After some time, Plaintiffs decided to expand their business to serve
key European markets. To this end, Plaintiffs and Defendants, including
Defendants’ predecessors in interest, entered into an oral license agreement
(“License Agreement”) covering the intellectual property and proprietary
information now owned by HG. [Id. at ¶ 10]. The License Agreement was
formed after a series of meetings between Plaintiffs and Defendants in Lake
Lure, North Carolina, and other locations in the United States. Vuillemin
traveled to HI’s Lake Lure, North Carolina, facility to attend and participate in
a training and HBDI certification workshop, which was held November 7-10,
1985. This workshop was conducted by and on behalf of HBDI. [Id. at ¶ 13].
Next, Vuillemin traveled to Faber, Virginia, to attend and participate in
Plaintiffs’ Applied Creative Thinking (“ACT”) workshop, which was held from
October 26-30, 1987.
During the ACT workshop, Vuillemin received
additional training on Plaintiffs’ assessment and consulting methods.
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Vuillemin also met with HI’s representatives to discuss a potential expanded
business relationship with Plaintiffs. [Id. at ¶ 14]. Finally, after the conclusion
of the ACT workshop, from October 31 to November 2, 1987, Vuillemin
visited with the principals of HI, including Mr. Herrmann, Ann HerrmannNehdi, and others, in Lake Lure, North Carolina. [Id. at ¶ 15]. On November
1, 1987, at a dinner attended by Vuillemin, Mr. Herrmann, Ann HerrmannNehdi, Vuillemin’s then-colleague Betrand de Leusse, and others, it was
decided that HI would work with Vuillemin and de Leusse to create what
became known as Defendant HIE. It was furthered agreed that HIE would
be a licensee of HI and its intellectual property and HIE would distribute the
HBDI assessment and provide related training and consulting services and
materials on behalf of HI. [Id.].
After the conclusion of these meetings, Vuillemin traveled to
Monterrey, California, to participate in HI’s Creative Problem Solving (“CPS”)
workshop, held from November 4-6, 1987. At the CPS workshop, Vuillemin
received further training regarding the Plaintiffs’ assessment and related
consulting methods in furtherance of HIE’s role as a licensee of HI’s
intellectual property. [Id. at ¶ 16]. In or around July 1990, Vuillemin attended
a master class in the Plaintiffs’ assessment, training, and consulting methods
in connection with and in furtherance of Defendants’ licensing and business
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relationship with Plaintiffs. After the master class, Vuillemin also participated
in a meeting of all international licensees of HI in furtherance of the licensing
relationship. The master class and the meeting were held in Lake Lure. On
or about August 1, 1991, Vuillemin traveled to Lake Lure for business
meetings with Plaintiffs. [Id. at ¶ 17].
Vuillemin’s travels to Lake Lure resumed when, between December
27, 2003 to January 4, 2004, Vuillemin participated in business meetings
with Plaintiffs relating to the License Agreement and Defendants’ business
as licensees of Plaintiffs. [Id. at ¶ 18]. Vuillemin was again in Lake Lure from
June 15-21, 2004. This time Vuillemin participated in and presented at
Plaintiffs’ THINC conference. Before and after this conference, Vuillemin
attended meetings with Plaintiffs relating to Defendants’ business under the
License Agreement.
[Id. at ¶ 19].
Finally, from January 14-22, 2009,
Vuillemin attended a global business meeting for Plaintiffs’ licensees and
business partners held by Plaintiffs in Lake Lure. [Id. at ¶ 20].
Over the course of these visits, Vuillemin discussed the terms of the
License Agreement and Defendants’ business relationship with Plaintiffs,
engaged in and expanded that business relationship, and obtained training
in and access to Plaintiffs’ Trade Secrets. [Id. at ¶ 12]. The parties enjoyed
a successful licensing relationship for many years. [Id. at ¶ 21]. Until
8
recently, Defendants substantially complied with Plaintiffs’ business and
intellectual property policies, exchanged client data and HBDI assessment
results with Plaintiffs and Plaintiffs’ other licensees in a global database,
attended licensee meetings and training sessions in North Carolina and
elsewhere, and made royalty payments to HI in North Carolina consistent
with the License Agreement. [Id. at ¶ 21].
Between 1981 and 2002, Plaintiffs registered many original and
creative works of authorship related to the Herrmann brand, including a
number of articles and assessment tools, that were developed in the course
of research and business operations (“Herrmann Copyrights”). [Id. at ¶ 43].
Between 2007 and 2016, Plaintiffs also registered and used several
distinctive trademarks, including HERRMANN®, HBDI®, HERRMANN
BRAIN DOMINANCE INSTRUMENT®, WHOLE BRAIN®, and three
different iterations of a color graphic logo (“Herrmann Trademarks”). [Id. at
¶ 36]. Plaintiffs directly and through licensees have adopted and used the
Herrmann Trademarks on a substantially exclusive and continual basis in
connection with Plaintiffs’ business since their adoption. [Id.].
In 2011, the parties began negotiations for Plaintiffs to acquire
Defendants’ companies at the request of Vuillemin, who wanted to retire. [Id.
at ¶ 22]. In 2015, the negotiations faltered when the parties were unable to
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agree on a contract price for the companies.
Thereafter, Defendants
stopped making timely royalty payments, disavowed their obligations under
the License Agreement, and ultimately breached the License Agreement.
This breach included the failure to comply with Plaintiffs’ intellectual property
policies, the failure to pay intellectual property royalties, and the seizure of
control of one of Plaintiffs’ computer servers through which Plaintiffs’ HBDI
application operates. [Id. at ¶¶ 22-26]. As a result of this server take over,
Defendants have unauthorized access to Plaintiffs’ trade secrets database
of HBDI user profiles. [Id. at ¶ 26]. Since Defendants’ repudiation of the
License Agreement, Plaintiffs and Defendants now directly compete for the
same business. [Id. at ¶ 30].
After the Defendants’ alleged breach and repudiation of the License
Agreement, Defendants have continued to use in commerce trademarks
incorporating the Herrmann Trademarks. Defendants have also registered
several domain names incorporating the Herrmann Trademarks. Plaintiffs
contend these infringing trademarks and domain names are identical and/or
confusingly similar to the Herrmann Trademarks and are used both inside
and outside the United States. [Id. at ¶ 41]. Further, after the repudiation,
Defendants continued to use materials that incorporate identical copies of
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the Herrmann Copyrights, including in North Carolina and other parts of the
United States. Id. at ¶ 44.
On March 7, 2017, Plaintiffs filed the present suit against Defendants,
raising various claims regarding the use of Plaintiffs’ registered trademarks
and breach of the License Agreement; including claims under the Lanham
Act, 15 U.S.C. § 1051 et seq.; a claim for copyright infringement under 17
U.S.C. § 101; claims for trade secret misappropriation under federal and
state law, 18 U.S.C. § 1832 et seq. and N.C.G.S. § 66-152 et seq.,
respectively; and state law claims for breach of contract, tortious interference
with contract, common law trademark infringement, and “alter ego and joint
liability.” [Doc. 1]. On February 12, 2018, Defendants filed a motion to
dismiss for lack of personal jurisdiction with a supporting brief, including the
Affidavits of Serge Gisbert and Lionel Marc Vuillemin with exhibits thereto.
[Docs. 16, 17]. The Plaintiffs filed a responding brief with the Affidavit of Ann
Herrmann-Nehdi with exhibits thereto. [Doc. 18]. Defendants filed a reply
brief with a second, additional Affidavit of Vuillemin. [Doc. 20]. On April 20,
2018, Defendants filed a Notice of Supplemental Authority, submitting to the
Court a Ruling from the Commercial Court of Versailles and an English
translation of this Ruling.
[Doc. 21].
supplemental authority. [Doc. 22].
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Plaintiffs filed a response to this
The Defendants’ motion is now ripe for disposition.
III.
DISCUSSION
For the Court to have personal jurisdiction, the Plaintiffs must make a
prima facie showing that exercising jurisdiction will (1) comply with the forum
state’s long-arm statute and (2) comport with the due process requirements
of the Fourteenth Amendment. See Carefirst of Maryland, Inc. v. Carefirst
Pregnancy Centers, Inc., 334 F.3d 390, 396 (4th Cir. 2003) (citation omitted).
Because North Carolina’s long-arm statute has been construed to extend as
far as due process allows, Christian Sci. Bd. of Directors of First Church of
Christ, Scientist v. Nolan, 259 F.3d 209, 215 (4th Cir. 2001), this two-pronged
test is collapsed into the single inquiry of whether the exercise of personal
jurisdiction over the defendant comports with due process.
Universal
Leather, 773 F.3d at 559.
A court’s exercise of jurisdiction over a nonresident defendant
comports with due process if the defendant has sufficient “minimum
contacts” with the forum, such that to require the defendant to defend its
interest in that state “does not offend traditional notions of fair play and
substantial justice.” Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)
(internal quotation marks omitted). The sufficiency of the contacts depends
on the circumstances of the case. A court can have personal jurisdiction
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over a defendant for all claims if the defendant’s contacts with the forum state
are continuous and systematic. This is referred to as “general jurisdiction.”2
However, more limited contacts can be sufficient to establish personal
jurisdiction over a defendant where those contacts relate to the substance of
the particular claim being asserted.
This is referred to as “specific
jurisdiction.” See e.g., Helicopteros Nacionales de Colombia, S.A. v. Hall,
466 U.S. 408, 414-16 (1984). In determining whether specific jurisdiction
exists, the Court considers (1) the extent to which the defendant purposefully
availed itself of the privilege of conducting activities in the state; (2) whether
the plaintiff’s claims arise out of those activities; and (3) whether the exercise
of personal jurisdiction would be constitutionally “reasonable.” ALS Scan,
Inc. v. Digital Serv. Consultants, Inc., 293 F.3d 707, 711-12 (4th Cir. 2002),
cert. denied, 537 U.S. 1105 (2003).
The first prong of the specific jurisdiction inquiry is grounded on the
premise that “a corporation that enjoys the privilege of conducting business
within a state bears the reciprocal obligation of answering to legal
proceedings there.” Universal Leather, 773 F.3d at 559 (quoting Tire Eng’g
and Distribution, LLC v. Shandong Linglong Rubber Co., Ltd., 682 F.3d 292,
301 (4th Cir. 2012)).
2
In determining whether a foreign defendant has
The Plaintiffs do not contend that this Court has general jurisdiction over the Defendants.
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purposefully availed itself of the privilege of conducting business in a forum
state, the Court asks whether “the defendant’s conduct and connection with
the forum [s]tate are such that he should reasonably anticipate being haled
into court there.” Fed. Ins. Co. v. Lake Shore Inc., 886 F.2d 654, 658 (4th
Cir. 1989) (quoting World-Wide Volkswagen v. Woodsen, 444 U.S. 286, 297
(1980)). This analysis is flexible and “depends on a number of factors that
courts consider on a case-by-case basis.” Universal Leather, 773 F.3d at
560 (citing Tire Eng’g, 682 F.3d at 302). In the business context, those
factors include, but are not limited to: (1) whether the defendant maintains
offices or agents in the forum state; (2) whether the defendant owns property
in the forum state; (3) whether the defendant reached into the forum state to
solicit or initiate business; (4) whether the defendant deliberately engaged in
significant or long-term business activities in the forum state; (5) whether the
parties contractually agreed that the law of the forum state would govern
disputes; (6) whether the defendant made in-person contact with the resident
of the forum in the forum state regarding the business relationship; (7) the
nature, quality and extent of the parties’ communications about the business
being transacted; and (8) whether the performance of contractual duties was
to occur within the forum. Id. (quotation marks and citation omitted). The
Fourth Circuit “generally [has] concluded that a foreign defendant has
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purposefully availed itself of the privilege of conducting business in the forum
state when the defendant ‘substantially collaborated with a forum resident
and that joint enterprise constituted an integral element of the dispute.’” Id.
(citing Tire Eng’g, 682 F.3d at 302).
The first prong is easily satisfied under the alleged facts of this case.
Defendants, by and through Vuillemin, travelled to North Carolina several
times to initiate and in furtherance of the formation of a business relationship
with Plaintiffs, both companies based in North Carolina. The parties entered
into the alleged oral License Agreement in North Carolina when Vuillemin
was physically present in the State. Defendants directed payments under
the alleged License Agreement to Plaintiffs in North Carolina. Defendants
visited North Carolina several times after the License Agreement was
reached in furtherance of and performance under that agreement. These
visits included discussion of the terms of the License Agreement and
Defendants’ business relationship with the Plaintiffs, expansion of that
business relationship, and Defendants obtaining training in and access to
Plaintiffs’ Trade Secrets. In short, Vuillemin engaged in a course of conduct
over a period of 25 years through which he purposefully availed the
Defendants of the privilege of conducting business in the forum state.
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Defendants “should reasonably anticipate being haled into court” in North
Carolina. See World-Wide Volkswagen, 444 U.S. at 297.
With respect to the second prong of specific jurisdiction, once
purposeful availment is satisfied, a court looks to whether “the plaintiff’s
claims arise out of activities directed at the forum state.” Tire Eng’g, 682
F.3d at 303. Where the activity in the forum state is the genesis of the
dispute, this prong is easily satisfied. Id. (internal quotation marks and
citation omitted).
Similarly, this prong is satisfied if “substantial
correspondence and collaboration between the parties, one of which is
based in the forum state, forms an important part of the claim.” Id. Here, the
Plaintiffs’ claims arise from the Defendants’ purposefully directed activities in
the forum state, as described supra. Namely, the substantial collaboration
between the parties, with the Plaintiffs being North Carolina corporations,
forms an integral part of the Plaintiffs’ claims. Accordingly, the second prong
is satisfied.
The Court turns to the final prong of the analysis: whether the exercise
of personal jurisdiction would be constitutionally “reasonable.” This prong
“ensures that litigation is not ‘so gravely difficult and inconvenient’ as to place
the defendant at a severe disadvantage in comparison to his opponent.”
CFA Institute v. Institute of Chartered Financial Analysis of India, 551 F.3d
16
285, 296 (4th Cir. 2009) (quoting Nolan, 259 F.3d at 217). “The burden on
the defendant, interests of the forum state, and the plaintiff’s interest in
obtaining relief guide [the Court’s] inquiry.” Tire Eng’g, 682 F.3d at 303
(citation omitted).
The corporate Defendants are French companies organized and
existing pursuant to the laws of France. Defendant Vuillemin is a resident of
France, the president of Defendant HIE and HT, and “controls” Defendant
Brain Ressources.
However, a corporate defendant’s domicile abroad,
standing alone, does not render domestic exercise of jurisdiction unduly
burdensome. Id. The Fourth Circuit recognizes that a foreign defendant’s
“ability to secure counsel in the forum state and its choice to do business
with a forum resident – which also made the prospect of litigation in the state
foreseeable – counseled that defending the suit would not be particularly
burdensome.”
Id.
Here, all the Defendants have secured counsel to
represent them in this matter and, at least according to the Plaintiffs’
allegations, chose to do business with forum residents. Further, in this case,
North Carolina maintains a “substantial interest” in resolving the grievances
of its businesses, Plaintiffs HI and HG, particularly when North Carolina law
governs or informs some of the claims. [Doc. 1 at ¶¶ 1, 2, 37-42, 81-88, 90105]. Finally, the Plaintiffs have a substantial interest in protecting their
17
trademark and business interests “after having ‘carved out a market niche
by cultivating’ their distinctive mark and products.” Tire Eng’g, 682 F.3d at
303 (quoting Nolan, 259 F.3d at 297). As such, the third prong of the test for
specific personal jurisdiction is met.3
As the Plaintiffs have shown a prima facie case of personal jurisdiction
over the Defendants, the Defendants’ motion to dismiss is denied.
ORDER
IT IS, THEREFORE, ORDERED that the Defendants’ Motion to
Dismiss [Doc. 16] is DENIED.
IT IS SO ORDERED.
Signed: September 28, 2018
Plaintiffs also argue that the Court could exercise jurisdiction over Defendants under
Federal Rule of Civil Procedure 4(k)(2), which allows a court to exercise personal
jurisdiction over a foreign defendant where the defendant is not subject to jurisdiction in
any particular state but has sufficient contacts with the United States as a whole to satisfy
due process requirements. Fed. R. Civ. P. 4(k)(2); ISI Intern., Inc. v. Borden Ladner
Gervais LLP, 256 F.3d 548, 551 (7th Cir. 2001). The Court need not address this
argument given its finding of specific personal jurisdiction in the forum state.
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