Forret v. Davis

Filing 15

ORDER signed by Judge J.P. Stadtmueller on 12/19/2017: GRANTING 4 Defendant's Motion to Dismiss for Lack of Personal Jurisdiction and DISMISSING CASE without prejudice. (cc: all counsel) (jm)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
JAMES G. FORRET,
Plaintiff,

v.
JAMES L. DAVIS,

Defendant.
1.

Case No. 17-CV-1440-JPS

ORDER

INTRODUCTION
This action was originally filed in Waukesha County Circuit Court,

and was removed to this Court on October 20, 2017. (Docket #1). According
to his Complaint, Plaintiff loaned money to Defendant’s start-up business,
with Defendant personally guaranteeing the investment. When Plaintiff
called in the loan, Defendant refused to pay, leading to Plaintiff filing this
breach of contract action. Defendant maintains that this Court lacks
personal jurisdiction over him, as he is a Minnesota resident. Defendant
filed a motion to dismiss on that ground on October 27, 2017. (Docket #4).
That motion is now fully briefed. (Response, Docket #11; Reply, Docket
#14). For the reasons explained below, the motion must be granted.
2.

LEGAL STANDARD
Under Federal Rule of Civil Procedure 12(b)(2), a party may move to

dismiss on the ground that the court lacks jurisdiction over him. Fed. R. Civ.
P. 12(b)(2). The plaintiff bears the burden of establishing personal
jurisdiction when the defendant contests it. N. Grain Mktg., LLC v. Greving,
743 F.3d 487, 491 (7th Cir. 2014). However, in cases such as this one, where
the matter is decided on a motion to dismiss and without an evidentiary

hearing, the plaintiff “‘need only make out a prima facie case of personal
jurisdiction.’” Id. (quoting Hyatt Int’l Corp. v. Coco, 302 F.3d 707, 713 (7th Cir.
2002)).
Unlike some other challenges to a plaintiff’s complaint, when
questions of personal jurisdiction arise, the Court may consider affidavits
and other evidence outside the pleadings. Purdue Research Found. v. Sanofi–
Synthelabo, S.A., 338 F.3d 773, 782 (7th Cir. 2003). Indeed, it can “accept as
true any facts contained in the defendant’s affidavits that remain unrefuted
by the plaintiff.” GCIU–Employer Ret. Fund v. Goldfarb Corp., 565 F.3d 1018,
1020 n.1 (7th Cir. 2009). Nevertheless, the court will “accept as true all wellpleaded facts alleged in the complaint and resolve any factual disputes in
the affidavits in favor of the plaintiff.” Purdue, 338 F.3d at 782; Felland v.
Clifton, 682 F.3d 665, 672 (7th Cir. 2012).
3.

RELEVANT FACTS
The operative facts, drawn from Plaintiff’s Complaint, the exhibits

thereto, and the parties’ affidavits, are as follows.1 Plaintiff is a citizen of
Wisconsin, while Defendant is a citizen of Minnesota. Both parties are
successful businessmen, each with substantial personal net worth, who
attained their wealth in the manufacture and distribution of lighting
fixtures. The parties have known each other for forty years through their
work in this field. As part of this relationship, Defendant knew that Plaintiff
lived and worked in Wisconsin. Defendant does not live, work, or own

Defendant criticizes Plaintiff’s affidavit testimony as self-serving and
unsupported by other evidence. The Seventh Circuit has dispensed with the
notion that such testimony must be discounted. Sanders v. Melvin, 873 F.3d 957, 960
(7th Cir. 2017). In any event, Defendant’s argument is misplaced in a motion to
dismiss for lack of personal jurisdiction, wherein the Court must accept all of
Plaintiff’s allegations as true and construe them in Plaintiff’s favor.
1

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property in Wisconsin. He does not have a business office or advertise any
services here.
At some point, Defendant created a company called Cachet Financial
Solutions, Inc. (“Cachet”). Defendant is on the board of Cachet and, owning
22% of its common stock, is its single largest shareholder. Cachet is a
Minnesota company with its principal place of business in Chanhassen,
Minnesota (a suburb of Minneapolis). While he is a board member for
Cachet, he does not actually perform any services for the company.
In 2012, Cachet was in need of $3 million in debt financing. At that
time, during conversations relating to the lighting business, Defendant
casually mentioned to Plaintiff the possibility of investing in Cachet.
Defendant solicited a $100,000 investment from Plaintiff during those
conversations. Plaintiff was reluctant to invest because it seemed like a
risky venture and he was nearing retirement. Defendant ultimately
convinced Plaintiff by offering him a personal, written guarantee that he
would repay the loan if Cachet could not (the “Guarantee”). The Guarantee
provided that if Cachet could not repay the loan by January 15, 2015,
Defendant would do so. Defendant executed the Guarantee in Minnesota.
Upon receipt of the written Guarantee, Plaintiff made the $100,000 payment
to Cachet from his home in Wisconsin.2

According to Defendant, a stock broker named Bernie Weber (“Weber”)
formally solicited Plaintiff’s investment in Cachet. Defendant supports this
assertion by noting that Cachet’s own stock broker, Terry Nerhus (“Nerhus”),
received a finder’s fee for facilitating Plaintiff’s investment via Weber. If
Defendant himself had obtained Plaintiff’s investment, Cachet would have had no
reason to pay that fee to Nerhus.
2

Plaintiff admits that he knows Weber and that he may have spoken to
Weber about Cachet. He does not recall any specific communications with Weber
about Cachet, and he does not possess any correspondence confirming those

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In late 2013, Cachet asked Plaintiff to convert his loan into Cachet
stock. Plaintiff was reluctant to convert his loan into stock, but Defendant
persuaded him by offering to amend the Guarantee (the “Amendment”).
According to the Amendment, Plaintiff agreed to convert his loan into
Cachet stock. The conversion contemplated by the Amendment occurred
while Plaintiff was located in Wisconsin. If Plaintiff’s stock was worth less
than $100,000 as of March 15, 2015, Defendant would nevertheless be
obligated to pay that amount to Plaintiff to buy his shares. Like the
Guarantee, the Amendment was signed in Minnesota. When the time came,
Plaintiff’s stock was only worth about $21,000. Plaintiff demanded the full
$100,000 price from Cachet, but it would not redeem his shares. Plaintiff
then turned to Defendant and his Guarantee, but he too refused to pay.3
Plaintiff and Defendant exchanged an unspecified number of e-mails
relating to the Cachet investment. From 2013 to the filing of this lawsuit,
Plaintiff has had communications with Defendant about Cachet and
recoupment of Plaintiff’s investment. In 2017, Defendant attempted to
arrange repayment through Cachet but Plaintiff never received the money.

communications. Plaintiff is adamant, however, that it was Defendant and not
Weber who solicited the investment. In accordance with the standard of review,
the Court must credit Plaintiff’s account.
Defendant maintains that the Amendment did not allow Plaintiff to
redeem his shares for $100,000 at any point in the future. Rather, the transaction
needed to occur on March 15, 2015. However, when that date arrived, Plaintiff
decided to keep his stock. Approximately two years later, in March 2017, Plaintiff
contacted Defendant in an attempt to enforce the Guarantee and Amendment.
Defendant refused because the Guarantee had expired. Defendant nevertheless
suggested that Cachet could pay Plaintiff what he wanted if Plaintiff would tender
his shares to the company. Plaintiff would not agree to do so until months later.
These facts are inconsistent with the Complaint and Plaintiff’s affidavit, and thus
cannot be credited in the context of the instant motion.
3

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Plaintiff asserts one claim against Defendant—breach of contract.
Plaintiff alleges that he performed his obligations under both the Guarantee
and the Amendment, by making the initial loan, and by converting his loan
into Cachet stock. Defendant, however, failed to abide by those agreements
when he would not repay the loan to Plaintiff after March 15, 2015.
4.

ANALYSIS
Personal jurisdiction refers to a court’s power over parties, in

contrast to its subject-matter jurisdiction, which is its power over certain
types of claims. When, as here, the Court exercises diversity jurisdiction
over a case, the Court will exercise personal jurisdiction over a nonresident
defendant only if a court of the state in which it sits would do so. Purdue,
338 F.3d at 779. This normally entails a two-part analysis, where the court
first asks whether the state’s long-arm statute encompasses the defendant’s
conduct, then considers whether exercising personal jurisdiction in the case
at hand would comport with principles of due process. Id. Defendant makes
no mention of Wisconsin’s long-arm statute in his opening brief. Plaintiff
asserts that his claim falls within the contracts provision of the statute. Wis.
Stat. § 801.05(5)(a). Without opposition from Defendant, the Court must
agree.4
Notwithstanding compliance with the state long-arm statute, the
Due Process Clause of the Fourteenth Amendment protects a defendant
from being haled into court in a state where it has no meaningful
connections. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 464 (1985). Due

Plaintiff pointed out this failing in his response brief. (Docket #11 at 5 n.1).
In an attempt to salvage the position, Defendant offered an analysis of the longarm statute in his reply. Arguments available to the movant—as this was—and
raised for the first time in a reply brief are deemed waived. West v. MeadWestvaco
Corp., 81 F. App’x 74, 75 (7th Cir. 2003).
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process requires that for personal jurisdiction to exist over a nonconsenting,
out-of-state defendant, the defendant must have “certain minimum
contacts with it such that the maintenance of the suit does not offend
‘traditional notions of fair play and substantial justice.’” Int’l Shoe Co. v.
State of Wash., Office of Unemployment Comp. & Placement, 326 U.S. 310, 316
(1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)).
There are two types of personal jurisdiction—general and specific—
that can satisfy the strictures of due process. See Helicopteros Nacionales de
Colombia v. Hall, 466 U.S. 408, 414–16 (1984). General personal jurisdiction
requires that the defendant have “‘affiliations with the State [that] are so
‘continuous and systematic’ as to render [the defendant] essentially at home
in the forum State.’” Daimler AG v. Bauman, 134 S. Ct. 746, 754 (2014)
(quoting Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919
(2011)). If such contacts exist, “the court may exercise personal jurisdiction
over the defendant even in cases that do not arise out of and are not related
to the defendant’s forum contacts.” Hyatt Int’l Corp. v. Coco, 302 F.3d 707,
713 (7th Cir. 2002). Plaintiff does not assert the existence of general personal
jurisdiction over Defendant. (Docket #11 at 4-9).
Specific personal jurisdiction, by contrast, exists where the suit
before the Court arises from or relates to the defendant’s contacts with the
forum State. Helicopteros, 466 U.S. at 414; Int’l Shoe, 326 U.S. at 317–18. This
type of personal jurisdiction is more limited than general personal
jurisdiction, which, if established, means that the defendant can be sued on
any claim in the forum State. See Daimler, 134 S Ct. at 754. Specific personal
jurisdiction arises only where 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). In assessing the existence of
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specific personal jurisdiction, the Court must examine the “relationship
among the defendant, the forum, and the litigation.” Shaffer v. Heitner, 433
U.S. 186, 204 (1977).
Inexplicably, neither Plaintiff nor Defendant cite to Walden v. Fiore,
134 S. Ct. 1115 (2014), the latest decision of the U.S. Supreme Court on
specific personal jurisdiction, or its progeny. Those decisions provide the
most recent and controlling guidance on assessing the question of
“minimum contacts.” Walden holds that specific personal jurisdiction is
present only when “the defendant’s suit-related conduct [creates] a
substantial connection with the forum State.” Id. at 1121 (emphasis added).
Walden offers two important observations on how to evaluate
whether such a connection has been made. First, the defendant himself
must make the contacts with the forum State. Id. at 1122. It is improper to
“attempt[] to satisfy the defendant-focused ‘minimum contacts’ inquiry by
demonstrating contacts between the plaintiff (or third parties) and the
forum State.” Id. Second, courts must look to “the defendant’s contacts with
the forum State itself, not the defendant’s contacts with persons who reside
there.” Id. Critically, Walden holds that “the plaintiff cannot be the only link
between the defendant and the forum.” Id. While “a defendant’s contacts
with the forum State may be intertwined with his transactions or
interactions with the plaintiff[,] . . . a defendant’s relationship with a
plaintiff . . ., standing alone, is an insufficient basis for jurisdiction.” Id. at
1123. In other words, “[d]ue process requires that a defendant be haled into
court in a forum State based on his own affiliation with the State, not based
on the ‘random, fortuitous, or attenuated’ contacts he makes by interacting
with other persons affiliated with the State.” Id. (quoting Burger King, 471
U.S. at 475).
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As an example, Walden points to Burger King, where the defendant
“‘reach[ed] out beyond’ their State and into another by . . . entering a
contractual relationship that ‘envisioned continuing and wide-reaching
contacts’ in the forum State[.]” Id. at 1122 (quoting Burger King, 471 U.S. at
479-80). Post-Walden, the Seventh Circuit echoed the Supreme Court’s
sentiments. Just three months after Walden was decided, the Court of
Appeals held that “after Walden there can be no doubt that the plaintiff
cannot be the only link between the defendant and the forum.” Advanced
Tactical Ordnance Sys., LLC v. Real Action Paintball, Inc., 751 F.3d 796, 802 (7th
Cir. 2014) (quotation omitted). Similarly, Johnson, which came down earlier
this year, notes that “a contract with a forum-state party does not
automatically establish personal jurisdiction in the forum.” Johnson v.
Hartwell, 690 F. App’x 412, 413 (7th Cir. 2017). Johnson reminds courts to
“examine ‘prior negotiations, contemplated future consequences, the terms
of the contract, and the parties’ course of actual dealing with each other’ to
determine if the defendant has ‘purposefully availed’ itself of conducting
business in the forum.” Id. (quoting Purdue, 338 F.3d at 781); see also Burger
King, 471 U.S. at 479.5
Johnson supplies a helpful analogy to this case. Johnson, an Indiana
resident, sued P&J Apartments, LLC, the apartment manager Paul Boehms,

Both parties rely on three specific personal jurisdiction requirements
announced by the Seventh Circuit prior to Walden. Felland, 682 F.3d at 673 (“(1) the
defendant must have purposefully availed himself of the privilege of conducting
business in the forum state or purposefully directed his activities at the state . . . ;
(2) the alleged injury must have arisen from the defendant’s forum-related
activities . . .; and (3) the exercise of jurisdiction must comport with traditional
notions of fair play and substantial justice[.]”) (citations omitted). This motion may
be disposed of on the general “minimum contacts” principles stated in Walden and
Johnson. It is thus unnecessary to engage in a detailed analysis of each requirement.
5

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and their lawyer, Brian Hartwell, all citizens of Michigan. Johnson, 690 F.
App’x at 412. Johnson had co-signed a lease with her son, who failed to pay
the rent. Id. The defendants used various means to collect the overdue
amounts from her, including sending collection notices to Johnson at her
home and to various e-mail addresses. Id. Johnson sued them in Indiana
federal court for various torts, including negligence, intentional infliction
of emotion distress, and “privacy violations.” Id. Analyzing her tort claims
in light of Walden, Johnson concluded that the defendants’ only connection
to Indiana was through the plaintiff, and thus personal jurisdiction was not
present. Id. at 413.
Johnson presented an alternative argument in an attempt to save her
bid for personal jurisdiction. She suggested that a better basis for
jurisdiction was in contract, not tort, given that the defendants had agreed
to her co-signature and corresponded with her knowing she was in Indiana.
Id. The court was unmoved:
Johnson’s contract with Boehms and P&J
contemplated the lease of a home in Michigan, and payment
was to be made to P&J, a company also based in Michigan. It
is true that Johnson received correspondence from the
defendants and paid rent to P&J while she happened to be in
Indiana. But her location there was incidental to the contract.
Nothing about Indiana bore on the transaction for purposes
of personal jurisdiction. . . . The contract here established only
a random or fortuitous connection with Indiana that was not
sufficient to establish personal jurisdiction there.
Id. at 413-14 (citations and quotations omitted).
Applying these considerations to the facts of this case, the Court
finds that Defendant lacks the requisite minimum contacts with Wisconsin
to support an exercise of personal jurisdiction over him. The relevant

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contacts are extremely limited, and those initiated by Defendant himself
were a few telephone calls and e-mails with Plaintiff regarding the
Guarantee and the Amendment.6 Even if Defendant knew that Plaintiff was
a Wisconsin resident, his contacts were with Plaintiff alone and had nothing
to do with the State itself. In other words, Defendant’s only link to the
forum State is through Plaintiff. Plaintiff’s presence in Wisconsin during the
contacts was nothing more than fortuitous. If Plaintiff had been a resident
of Florida, Hawaii, or any state in between, those jurisdictions would have
precisely the same connection to this action as does Wisconsin.
This analysis is buttressed by reference to the nature of this action—
breach of contract. Though Defendant agreed to the Guarantee and the
Amendment with a Wisconsin party, as in Johnson, nothing about
Wisconsin bore on the contracts; they make no mention of Wisconsin at all
and express no reliance on Wisconsin law. Rather, the contracts were
executed in Minnesota, and they reflect an agreement by a Minnesota
resident to guarantee an investment in a Minnesota company. Further, the
subsequent course of dealing was minimal, consisting of a few telephone
calls and e-mails, and the terms of the contracts were exceedingly simple,
with the only performance required being a single payment if certain
conditions were met. These are not the “continuing and wide-reaching
contacts” Wisconsin contacts that Walden and Burger King say are necessary
for the exercise of personal jurisdiction. Walden, 134 S.Ct. 1122 (quoting
Burger King, 471 U.S. at 479-80). The contracts did not, then, create a
substantial connection between Defendant and Wisconsin. On the facts of

While these contacts are themselves critical to the case, Walden is
concerned with whether there are substantial contacts with the forum State, not
the centrality of the contacts to the cause of action. Walden, 134 S.Ct. at 1122-23.
6

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this case, Defendant did not purposefully avail himself of the privilege of
conducting business in Wisconsin such that he should have foreseen being
haled into court here.
5.

CONCLUSION
In light of the foregoing, the Court finds that the exercise of personal

jurisdiction over Defendant in this matter would not comport with the Due
Process Clause. Defendant’s motion to dismiss must, therefore, be granted,
and this action dismissed without prejudice.
Accordingly,
IT IS ORDERED that Defendant’s motion to dismiss (Docket #4) be
and the same is hereby GRANTED; and
IT IS FURTHER ORDERED that this action be and the same is
hereby DISMISSED without prejudice.
The Clerk of the Court is directed to enter judgment accordingly.
Dated at Milwaukee, Wisconsin, this 19th day of December, 2017.
BY THE COURT:

__________________
J. P. Stadtmueller
U.S. District Judge

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