Bestway (USA) Inc et al v. Shanghai Jilong Plastic Products Co Ltd et al

Filing 22

ORDER signed by Judge Rudolph T. Randa on 12/17/2014. 10 Defendant Zhu's MOTION to Dismiss for Lack of Jurisdiction GRANTED; Zhu DISMISSED from this action. Telephonic Scheduling Conference set for 1/21/2015 at 11:00 AM (Central Time) before Judge Rudolph T. Randa, the Court will initiate the call. (Attachments: # 1 Attachment A, # 2 Attachment B, # 3 Attachment C) (cc: all counsel)(cb)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
BESTWAY (USA), INC. and
BESTWAY INFLATABLES & MATERIAL CORP.,
Plaintiffs,
-vs-

Case No. 13-C-1033

SHANGHAI JILONG PLASTICS PRODUCTS
CO., LTD., FUN-ZONE INFLATABLES
EXPERTS NORTH AMERICA, INC., and
ZHENGREN ZHU,
Defendants.

DECISION AND ORDER
In this action, Plaintiffs Bestway USA and Bestway Inflatables &
Materials Corp. (collectively “Bestway”) claim that Defendants Shanghai
Jilong Plastics Products Co., Ltd. (“Jilong”), Fun-Zone Inflatables Experts
North America (“FunZone”), and Zhengren Zhu (“Zhu”), have engaged in
unfair competition in violation of the Lanham Act, 15 U.S.C. § 1051 et seq.
and Wisconsin common law, and have misappropriated Bestway’s style of
doing business in violation of Wisconsin common law. (Compl. 1.) (ECF
No. 1.) This Decision and Order addresses Zhu’s motion to dismiss the
claims against him for lack of personal jurisdiction. (Mot. Dismiss.) (ECF
No. 10.)

Zhu is alleged to be an executive officer of Jilong and to be

responsible for directing the actions of Jilong and FunZone. (Compl. ¶ 7.)
Zhu avers that “[he] do[es] not directly participate in, authorize, or direct
the design, manufacture, sale, marketing, or distribution of Jilong’s
products or the preparation or distribution of Jilong’s marketing and
informational materials and [has] never had any contact with Jilong’s
customers in the United States.” (Zhu Decl. ¶ 3.) (ECF No. 12.)
Lack of Personal Jurisdiction
Because Zhu has moved to dismiss for lack of personal jurisdiction,
Bestway has the burden of demonstrating a prima facie case of personal
jurisdiction. See Purdue Research Found. v. Sanofi-Synthelabo, S.A., 338
F.3d 773, 782-83 (7th Cir. 2003). This Court has jurisdiction over the claim
if the Wisconsin state courts would have jurisdiction over the claim. See
Jennings v. AC Hydraulic A/S, 383 F.3d 546, 548 (7th Cir. 2004). Thus, a
determination of personal jurisdiction begins with Wisconsin’s long-arm
statute, Wis. Stat. § 801.05, which is to be liberally construed in favor of
jurisdiction. Seebach v. Beetling Design Corp., No. 13-C-1201, 2014 WL
4365090, at *2 (E.D. Wis. Aug. 29, 2014). The Court must then ensure that
personal jurisdiction comports with due process under the Fourteenth
Amendment. Jennings, 383 F.3d at 549. Bestway contends that personal
jurisdiction is proper under Wis. Stat. §§ 801.05(1)(d) and 801.05(4)(b) and
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that due process is satisfied because Zhu has minimum contacts with
Wisconsin. (Pl.’s Opp’n Mot. Dismiss 2.) (ECF No. 15.)
Under Wis. Stat. § 801.05(1)(d), personal jurisdiction is proper when
the defendant “engaged in substantial and not isolated activities within
this state, whether such activities are wholly interstate, intrastate, or
otherwise.” There is no indication that Zhu came to the United States or
Wisconsin for business purposes.

Since Zhu did not have substantial

activities within this state, personal jurisdiction is not proper under §
801.05(1)(d).
Under Wis. Stat. § 801.05(4)(b), personal jurisdiction is proper when
the defendant’s products “[are] used or consumed within this state in the
ordinary course of trade.” Jilong owns real estate, production facilities,
fixtures, and equipment in China, and has approximately 1,300 employees
there. (Zhu Decl. ¶ 4.) While Jilong may have made contact and sold
products in Wisconsin, “personal jurisdiction must be measured by the
officer or employee’s own actions, taken either personally or on behalf of
the corporation.” Heritage Christian Sch., Inc. v. ING N. Am. Ins. Corp.,
No. 11-C-1067, 2012 WL 1079440, at *3 (E.D. Wis. Mar. 30, 2012). Zhu
does not directly participate in, authorize, or direct the design,
manufacture, sale, marketing, or distribution of Jilong’s products. Absent
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facts indicating that Zhu’s personal actions created any products to be used
or consumed within Wisconsin, personal jurisdiction is not proper under
Wis. Stat. § 801.05(4)(b).
The Court could end its analysis here, but further notes that
personal jurisdiction over Zhu would not comport with due process as
required by the Fourteenth Amendment.

Personal jurisdiction can be

general or specific. However, because Bestway does not assert there is
general jurisdiction over Zhu, only specific jurisdiction remains at issue
For specific jurisdiction to exist, “the defendant must have minimum
contacts with the forum state such that the maintenance of the suit does
not offend traditional notions of fair play and substantial justice.” Kinslow
v. Pullara, 538 F.3d 687, 691 (7th Cir. 2008) (citations omitted). Another
important consideration of specific jurisdiction is whether “the defendant
purposefully avails itself of the privilege of conducting activities within the
forum State, thus invoking the benefits and protections of its laws.”
Hanson v. Denckla, 357 U.S. 235, 253 (1958).
Bestway asserts that because Jilong acknowledged this Court has
personal jurisdiction over it, personal jurisdiction over Zhu is also proper.
(Pl.’s Opp’n Mot. Dismiss 5.)

Zhu cites Stuart v. Spademan, 772 F.2d

1185, 1197 (5th Cir. 1985) which states, “the general rule is that
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jurisdiction over an individual cannot be predicated upon jurisdiction over
a corporation,” and that an exception to the general rule arises when the
corporation is the alter ego of the individual.
Stuart is referring to the fiduciary shield doctrine. Many courts,
including Wisconsin’s, have not adopted the doctrine.

See Heritage

Christian Sch., Inc., 2012 WL 1079440, at *3 (citing Druschel v. Cloeren,
295 Wis.2d 858, 868 (Wis. Ct. App. 2006); Hardin Roller Corp. v. Universal
Printing Mach., Inc., 236 F.3d 839, 842 (7th Cir. 2001)).

Still, “the

contacts of the corporation do not automatically count as contacts of the
officer or employee,” id., and no facts have been presented regarding
business contacts by Zhu.
To demonstrate that this Court has specific jurisdiction over Zhu,
Bestway analogizes to Leong v. SAP Am., 901 F. Supp. 2d 1058 (N.D. Ill.
2012). (Id. at 5, 6.) In Leong, a gender discrimination action, the Illinois
district court held there was personal jurisdiction over the defendant, the
former chief human resources officer of a defendant company who resided
in Germany, because the defendant had discretion over her actions and
knew they would affect an Illinois resident. 901 F. Supp. 2d at 1063-64.
Bestway analogizes to Leong by providing a declaration from Jack Zhang
(“Zhang”) speculating as to Zhu’s “likely” job responsibilities. (Zhang Decl.
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¶ 3.) (ECF No. 16.) Zhang also asserts that Zhu had discretion over his
actions and knew that his actions would affect Wisconsin residents. (Pl.’s
Opp’n Mot. Dismiss 5-7.)
Unlike the plaintiff in Leong, the plaintiffs here are not residents of
the forum state; and unlike the defendant in Leong, Zhu has never set foot
in the forum state and no facts have been proffered indicating that Zhu
took any actions that would affect Wisconsin residents. (Zhu Decl. ¶¶ 2, 7,
8.) Neither the Companies Law of the People’s Republic of China (ECF
No. 20-1) nor Zhang’s declaration refute Zhu’s averment that “[he] do[es]
not directly participate in, authorize, or direct the design, manufacture,
sale, marketing, or distribution of Jilong’s products or the preparation or
distribution of Jilong’s marketing and informational materials and [has]
never had any contact with Jilong’s customers in the United States.” (Zhu
Decl. ¶ 3.) Thus, Zhu lacks minimum contacts with Wisconsin and has not
availed himself so as to invoke the benefits and protections of Wisconsin’s
laws.
Bestway’s request for an evidentiary hearing and jurisdictional
discovery is denied because it fails to make a prima facie showing of
personal jurisdiction, and “[f]oreign nationals usually should not be
subjected to extensive discovery in order to determine whether personal
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jurisdiction over them exists.”

Central States, S.E. and S.W. Areas

Pension Fund v. Reimer Express World Corp., 230 F.3d 934, 946 (7th Cir.
2000).

Based on the foregoing, Zhu’s motion is granted and Zhu is

dismissed from this action.
Furthermore, pursuant to Federal Rule of Civil Procedure 16(b),
telephonic scheduling conference is scheduled for January 21, 2015 at
11:00 a.m. (Central Time). Counsel are expected to be available at that
time. The Court will initiate the call.
The purpose of the conference call is to establish a scheduling order
which will limit the time:
1.

to join other parties and to amend the pleadings;

2.

to file motions; and

3.

to complete discovery;

The scheduling order may also:
4.

modify the timing for disclosure under Rules 26(a) and 26(e)(1)

and of the extent of discovery to be permitted;
5.

provide for the disclosure or discovery of electronically stored

information;
6.

include any agreements the parties reach for asserting claims

of privilege or protection as trial preparation material after information is
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produced;
7.

include the date or dates for conferences before trial, a final

pretrial conference, and trial; and
8.

address any other matters appropriate in the circumstances of

the case.
The time limitations set forth in the scheduling order may only be
modified for good cause and with the Court’s consent. Fed. R. Civ. P.
16(b)(4).
The parties should be prepared to discuss the matters listed in Civil
Local Rule 16(a)(1).

(See Attach. A.)

Special attention should also be

given to Rule 26(f)(1), which requires the parties to conduct a
settlement/discovery conference at least 21 days prior to the initial
scheduling conference described above. The Rule 26(f) conference may be
conducted by telephone. Rules 26(f)(2) and (3) mandate that the parties,
within 14 days of their conference: (1) file a written report outlining the
proposed discovery plan they have developed at their Rule 26(f)
conference; and (2) make the required initial disclosures under Rule 26(a)
regarding witnesses and documents. In addition to the matters specified
in Rules 26(f)(2) and (3), the Court requests that the proposed discovery
plan submitted by the parties include one or two sentences stating the
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nature of the case.
The written report must include the telephone numbers where the
parties can be reached for this call.
In addition, the Court is participating in the Seventh Circuit
Electronic Discovery Pilot Program and has adopted the Principles
Relating to the Discovery of Electronically Stored Information. Counsel
should be fully prepared to discuss methods and techniques to accomplish
cooperative fact-finding in their case at the initial status conference.
Before the initial status conference, counsel must also meet and discuss
the Principles Relating to the Discovery of Electronically Stored
Information. At the initial status conference, counsel must be prepared to
discuss what agreements they have reached regarding discovery of
Electronically Stored Information (“ESI”) and what area of disagreement
they have with regard to discovery of ESI. After discussing the matter
with counsel, the Court will determine whether to enter the Standing
Order Relating to the Discovery of Electronically Stored Information in
their particular case. (See Attach. B & C.)
NOW, THEREFORE, BASED ON THE FOREGOING, IT IS
HEREBY ORDERED THAT:
Zhu’s motion to dismiss the claims against him for lack of personal
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jurisdiction (ECF No. 10) is GRANTED. Zhu is DISMISSED from this
action.
The parties must participate in a Rule 16(b) telephonic scheduling
conference on January 21, 2015 at 11:00 a.m. (Central Time). The
Court will initiate the call.
Dated at Milwaukee, Wisconsin, this 17th day of December, 2014.
BY THE COURT:

__________________________
HON. RUDOLPH T. RANDA
U.S. District Judge

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