Gerald North v. Ubiquity, Incorporated

72 F.4th 221

• Court: Court of Appeals for the Seventh Circuit
• Decided: June 26, 2023
• Docket: 17-2620
• Status: Published

Opinion

In the

United States Court of Appeals For the Seventh Circuit ____________________ No. 17-2620 GERALD D. W. NORTH, Plaintiff-Appellant, v.

UBIQUITY, INC., a Nevada Corporation, f/k/a, UBIQUITY BROADCAST CORPORATION, a Delaware Corporation, f/k/a UBIQUITY HOLDING INC., a Delaware Corporation, Defendant-Appellee. ____________________

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 1:16-cv-5698 — Elaine E. Bucklo, Judge. ____________________

ARGUED MAY 31, 2023 — DECIDED JUNE 26, 2023 ____________________

Before ROVNER, HAMILTON, and SCUDDER, Circuit Judges. SCUDDER, Circuit Judge. For the better part of a decade Ger- ald North and Ubiquity, Inc. have been at loggerheads over the alleged breach of a 2006 contract. After litigating for sev- eral years in Arizona state court, North filed a second lawsuit alleging the exact same breach of contract—this time in a fed- eral district court in Illinois. But the parties’ only connection 2 No. 17-2620

to Illinois was the 2006 contract, which Ubiquity signed with North’s former Chicago-based firm, North & Associates, ra- ther than with North himself. The district court concluded that the contract alone was insufficient to establish personal jurisdiction over Ubiquity, so it dismissed the case. We agree. In North’s view, though, that should not be the end of the story. Invoking 28 U.S.C. § 1631, he contends the district court ought to have considered transferring the case to the Central District of California (which would have had general personal jurisdiction over Ubiquity, a California firm) instead of dis- missing it outright. North is correct that the district court should have at least considered transfer before dismissing the action for lack of personal jurisdiction. But North’s own rep- resentations before the district court would have fatally un- dermined his request that the court transfer the case. We therefore see no reason to remand for further analysis, so we affirm the district court’s judgment for Ubiquity. I A In 2006 Ubiquity, an upstart telecommunications com- pany based in southern California, sought to expand its busi- ness nationwide. It approached Gerald North, a retired anti- trust and patent lawyer, in its effort to connect with strategic partners in the telecommunications industry. Ubiquity ulti- mately entered into a contract with North’s Illinois firm, North & Associates, in which North agreed to connect Ubiq- uity to some of his own industry contacts. North executed the contract in Arizona, where he lived, on behalf of his firm. Part of the contract involved Ubiquity promising to trans- fer 1.5% of its outstanding shares to North & Associates as a No. 17-2620 3

“commencement fee”—an equity award that would be paid regardless of how long the partnership between them lasted. As it turned out, their affiliation proved short-lived. Ubiquity terminated the agreement in February 2007, only two months after signing the contract. At that time Ubiquity had not yet transferred its shares to North & Associates. It never did. At first North did nothing to attempt to enforce the con- tract. For several years he thought he could not recover any damages because Ubiquity stock was not yet worth anything. That all changed in 2013 when Ubiquity went public. Recog- nizing the newfound value of the equity Ubiquity had prom- ised, North sent a letter demanding specific performance on the contract in February 2014. Ubiquity refused to issue North any shares. So in June 2014 North sued Ubiquity for breach of contract in Arizona state court. The prolonged (and still ongoing) Arizona litigation pro- duced a litany of motions, affidavits, and declarations from both sides of the dispute. Ubiquity sought to dismiss the Ari- zona lawsuit, asserting that because North & Associates—the signatory to the contract—was based in Illinois, Arizona courts lacked personal jurisdiction over claims arising from the contract. North responded by emphasizing the lawsuit’s ties to Arizona, including the fact that North negotiated and executed the contract there. B The Arizona court ultimately denied Ubiquity’s motion to dismiss for lack of personal jurisdiction. Yet North, worried about potential reversal on appeal, wanted to safeguard his interests. So he filed an identical breach-of-contract claim in the Northern District of Illinois in May 2016. 4 No. 17-2620

By that point Ubiquity was facing unrelated legal troubles and failed to appear in Illinois district court to defend itself. In October 2016 the district court entered a default judgment against Ubiquity totaling over $7 million—the August 2014 resale value of the shares that North & Associates would have been entitled to receive under the contract. The judgment led to a lien on Ubiquity’s assets in March 2017, and two weeks after the lien went into effect, Ubiquity filed a Rule 60(b)(4) motion to vacate the default judgment and dismiss the case for lack of personal jurisdiction. The district court agreed with Ubiquity and granted its Rule 60(b)(4) motion. The district court clearly and concisely explained that Ubiquity’s only connection to Illinois was that it had contracted with North & Associates, an Illinois entity. The district court further underscored that North, by his own admissions, had negotiated, executed, and promised to per- form on the contract in Arizona, not Illinois. In the end, the district court concluded that there were not sufficient contacts between Ubiquity and Illinois, vacated the default judgment, and dismissed the case for lack of personal jurisdiction. Nei- ther North nor Ubiquity ever requested that the district court transfer the case to any other forum, and the court did not on its own consider whether transfer would be appropriate. The district court entered its order on July 10, 2017, and North filed a timely notice of appeal on August 9. Then, on October 31, he sought a stay of the proceedings in our court while his original litigation in Arizona state court went for- ward. That stay remained in effect for over five years—until January 2023—by which point North’s contract claim would have been time-barred in every relevant jurisdiction. No. 17-2620 5

II We begin with the district court’s determination that it lacked personal jurisdiction over Ubiquity. Because the dis- trict court made its determination “on the submission of writ- ten materials, without the benefit of an evidentiary hearing,” North needed only to “make out a prima facie case of personal jurisdiction.” Purdue Rsch. Found. v. Sanofi-Synthelabo, S.A., 338 F.3d 773, 782 (7th Cir. 2003) (quoting Hyatt Int’l Corp. v. Coco, 302 F.3d 707, 713 (7th Cir. 2002)). He has not done so. A The Supreme Court has long made clear that the question of personal jurisdiction hinges on the defendant’s—not the plaintiff’s—contacts with the forum state. See Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (“Historically the jurisdic- tion of courts to render judgment in personam is grounded on their de facto power over the defendant’s person.”). If an in- dividual resides in a state, or if a corporation is incorporated or has its primary place of business in a state, then the courts of that state have general personal jurisdiction over any law- suit against that individual or corporation. See id. at 316–17. Otherwise the question becomes whether the facts of the case at hand establish specific personal jurisdiction—or, to use the Supreme Court’s terminology, whether there were “‘mini- mum contacts’ between the defendant and the forum State.” World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 291 (1980) (quoting International Shoe, 326 U.S. at 316). There is no question that Ubiquity is not incorporated in Illinois, nor does it have its primary place of business there. That means our focus is not on general but instead on specific personal jurisdiction. 6 No. 17-2620

Minimum contacts exist—and specific personal jurisdic- tion is established—when “the defendant has ‘purposefully directed’ his activities at residents of the forum and the litiga- tion results from alleged injuries that ‘arise out of or relate to’ those activities.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472–73 (1985) (first quoting Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 774 (1984), and then quoting Helicopteros Nacion- ales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 (1984)). Corpo- rations that “reach out beyond one state and create continuing relationships and obligations with citizens of another state” are subject to personal jurisdiction in the latter state. Id. at 473 (quoting Travelers Health Ass’n v. Virginia, 339 U.S. 643, 647 (1950)). In those circumstances, the defendant has “manifestly [ ] availed himself of the privilege of conducting business” in the forum state, so “it is presumptively not unreasonable to require him to submit to the burdens of litigation in that fo- rum as well.” Id. at 476. But a defendant’s “‘random,’ ‘fortuitous,’ or ‘attenuated’ contacts” with a state are not enough to establish personal ju- risdiction. Id. at 475 (quoting Keeton, 465 U.S. at 774, and World-Wide Volkswagen, 444 U.S. at 299). “[A]n individual’s contract with an out-of-state party alone,” the Supreme Court has stressed, cannot “automatically establish sufficient mini- mum contacts in the other party’s home forum.” Id. at 478 (emphasis in original). In those instances courts should in- stead take “a ‘highly realistic’ approach that recognizes that a ‘contract’ is ‘ordinarily but an intermediate step serving to tie up prior business negotiations with future consequences which themselves are the real object of the business transac- tion.’” Id. at 479 (quoting Hoopeston Canning Co. v. Cullen, 318 U.S. 313, 316–17 (1943)). So a proper personal jurisdiction in- quiry considers “prior negotiations and contemplated future No. 17-2620 7

consequences, along with the terms of the contract and the parties’ actual course of dealing,” instead of starting and end- ing with the mere existence of a contract. Id. B The district court applied these exact principles, and its analysis was spot-on. Because personal jurisdiction is all about the defendant’s contacts with the forum state, North had to show that Ubiq- uity had purposely directed its activities at Illinois and at its residents. He failed to do so—indeed, his complaint failed to make even a threshold, or prima facie, showing of personal ju- risdiction. See Purdue Research, 338 F.3d at 782. This makes the procedural posture of Ubiquity’s Rule 60(b)(4) challenge to personal jurisdiction (and related questions about the parties’ burdens) irrelevant to our analysis. North’s main argument for why Illinois courts have per- sonal jurisdiction over Ubiquity is that Ubiquity signed a con- tract with North & Associates, an Illinois firm. But Burger King makes clear that such a contract, by itself, does not establish specific personal jurisdiction. See also id. (“[C]ontracting with an out-of-state party alone cannot establish automatically minimum contacts in the other party’s home forum.”). So North needs something more. His only fallback is an assertion in his appellate brief that Ubiquity intended to avail itself of North & Associates’ Illinois-based contacts—but this naked contention lacks support in the record. Indeed, as the district court observed, North’s own statements “thoroughly undercut[ ] his assertion of jurisdiction” in Illinois. In the Ar- izona litigation North himself emphasized that he and Ubiq- uity negotiated and executed the contract in Arizona, and he 8 No. 17-2620

even stated that he would perform on the contract “in or from Arizona.” Like the district court, we see nothing in the record supporting a conclusion that Ubiquity purposely availed it- self of Illinois law when it contracted with North’s firm. All this goes to show that North failed to establish that Il- linois courts have personal jurisdiction over Ubiquity. We therefore affirm the district court and commend its analysis as a model of clarity. III Perhaps sensing that the district court got the personal ju- risdiction question right, North focuses his efforts elsewhere on appeal. He insists that even if the district court correctly found that personal jurisdiction was lacking, it should not have dismissed his case so quickly and instead shouldered an affirmative obligation to transfer the case to another venue— in particular, the Central District of California. Although North’s arguments on this front merit our close attention, they ultimately do not warrant remand. A We start with 28 U.S.C. § 1631, which provides that when- ever a “court finds that there is a want of jurisdiction, the court shall, if it is in the interest of justice, transfer such action or appeal to any other [ ] court … in which the action or ap- peal could have been brought at the time it was filed or no- ticed.” North contends that § 1631, by its terms, required the district court, upon concluding that personal jurisdiction was lacking in Illinois, to transfer his case to the Central District of California. Everyone agrees, he explains, that California courts would have general personal jurisdiction over Ubiquity. No. 17-2620 9

Ubiquity challenges North’s transfer arguments on sev- eral fronts: First, Ubiquity questions whether the term “juris- diction” in § 1631 encompasses personal jurisdiction or means subject matter jurisdiction only. Second, Ubiquity highlights that North never moved for venue transfer before the district court, so it says North waived any request to transfer. Third, Ubiquity contends that—even if North did not waive transfer and § 1631 applies when personal jurisdiction is lacking—the interests of justice do not require transfer in this case. 1. The Meaning of “Jurisdiction” in 28 U.S.C. § 1631 We see every reason to conclude that § 1631’s reference to “jurisdiction” includes both subject matter and personal juris- diction. The statute’s plain language does not constrain itself to subject matter or personal jurisdiction; it speaks only of “a want of jurisdiction.” The term “jurisdiction,” when used without qualification, normally encompasses both subject matter and personal jurisdiction. See Jurisdiction, Black’s Law Dictionary (11th ed. 2019); see also Want of Jurisdiction, Black’s Law Dictionary (11th ed. 2019). Nothing in § 1631 suggests that Congress intended the term “jurisdiction” to carry a different, more limited meaning. This conclusion also aligns with common sense. It is easy to see how a lack of personal jurisdiction—based as it is on a specific state’s authority over the defendant—could be cured by transfer to another court. It is comparatively uncommon (though not entirely unheard of) that a lack of subject matter jurisdiction would be cured by transfer. See In re IMMC Corp., 909 F.3d 589, 596 (3d Cir. 2018) (explaining that, while statu- tory limits on subject matter jurisdiction can at times be 10 No. 17-2620

avoided by transfer to another federal forum, constitutional limits on subject matter jurisdiction cannot be so avoided). Furthermore, every circuit court to address this issue has agreed that § 1631’s reference to “jurisdiction” encompasses personal jurisdiction as well as subject matter jurisdiction. See, e.g., Franco v. Mabe Trucking Co., 3 F.4th 788, 792–95 (5th Cir. 2021) (reaching this conclusion and collecting cases in agreement from the First, Third, Sixth, Eighth, Ninth, Tenth, and Eleventh Circuits). We too have little difficulty concluding that § 1631 applies when either subject matter or personal jurisdiction is lacking, meaning it could apply to North’s lawsuit here. 2. Waiver of § 1631 Transfer When North responded to Ubiquity’s challenge to per- sonal jurisdiction in the district court, he did not at any point suggest that transfer to the Central District of California—or any other district, for that matter—would be appropriate or desirable. Neither did North respond to the district court’s dismissal with a motion for reconsideration seeking transfer. On this record, Ubiquity invites us to conclude that North’s inaction amounts to waiver, such that North cannot raise transfer-related arguments on appeal. North disagrees. He reads § 1631 to impose an independ- ent and affirmative obligation on district courts to consider whether transfer would be appropriate irrespective of whether a party requests transfer. On this view, North could not have waived his request for transfer under § 1631. While the issue presented is new for us, other circuits have addressed it, and their analyses provide important guidance. In particular, we are convinced by the analysis in Danziger & No. 17-2620 11

De Llano, LLP v. Morgan Verkamp LLC, 948 F.3d 124 (3d Cir. 2020). The court focused in the first instance on the text of § 1631: “The relevant statute provides that the district court ‘shall’ transfer the case rather than dismiss it ‘if [doing so] is in the interest of justice.’” Id. at 132 (alteration in original) (quoting 28 U.S.C. § 1631). The statute’s plain text yields a plain conclusion: “a district court that lacks personal jurisdic- tion must at least consider a transfer” and “make some find- ings under § 1631.” Id. This approach makes sound sense, as many litigants who would likely benefit from § 1631 are pro se or otherwise unfa- miliar with the several venue-transfer statutes in the U.S. Code. See Phillips v. Seiter, 173 F.3d 609, 610 (7th Cir. 1999) (observing that statutes of limitations, which are avoidable by § 1631 transfer from a timely lawsuit, are “likely to be partic- ularly acute in prisoner cases, since prisoners do not have lawyers”); see also Paul v. INS, 348 F.3d 43, 47 (2d Cir. 2003) (Sotomayor, J.) (explaining that “Congress intended [§ 1631] to aid litigants who were confused as to the proper forum for review”). Such litigants may not know to file a § 1631 motion, or they might confuse it with a motion to transfer under a dif- ferent statute, such as § 1404(a) or § 1406(a). Other circuits have taken the same approach. See Cruz- Aguilera v. INS, 245 F.3d 1070, 1074 (9th Cir. 2001) (“Because the statute’s language is mandatory, federal courts should consider transfer without motion by the parties.”); see also USPPS, Ltd. v. Avery Dennison Corp., 647 F.3d 274, 277 (5th Cir. 2011) (transferring an appeal to the Federal Circuit under § 1631 even though neither party requested transfer). And alt- hough we have not yet definitively ruled on whether district courts bear an affirmative obligation to consider transfer, we 12 No. 17-2620

too have made clear that district courts can transfer a case “even if not asked to do so by either party.” Phillips, 173 F.3d at 610. We therefore conclude that when federal courts find that they lack jurisdiction, they bear an independent obligation under § 1631 to consider whether to transfer the case—even if neither party requests transfer. As we explain next, however, that obligation is quite limited, and it is rare that a court’s oversight will amount to reversible error. 3. The Interest of Justice We finally come to the heart of North’s argument—that transfer of this case to the Central District of California would have been in the interest of justice, as required by § 1631. But this is where North’s failure to seek transfer in the district court comes back to bite him. He did nothing to develop a record that would support his claim that transfer would be in the interest of justice, so any error the district court may have made by not considering transfer is not grounds for remand. See Phillips, 173 F.3d at 611. The record that North did develop undermines his argu- ment that transfer would be in the interest of justice. Indeed, it points in the opposite direction. We explained in Phillips that a “compelling reason for transfer is that the plaintiff, whose case if transferred is for statute of limitations purposes deemed by section 1631 to have been filed in the transferor court, will be time-barred if his case is dismissed and thus has to be filed anew in the right court.” Id. at 610 (citations omit- ted). But North expressly represented to the district court that he could refile his case in California up until February 2018— seven months after the district court dismissed his Illinois No. 17-2620 13

lawsuit. And the inverse of what we said in Phillips is also true: “If a plaintiff may, on its own, refile its case in a proper forum, ‘the interests of justice’ do not demand transfer.” Dan- ziger & De Llano, 948 F.3d at 133. By North’s own representations he had seven months within which to refile his case in the Central District of Cali- fornia—a proper forum. Yet he stood still. He did not refile or even move ahead with his appeal in our court, instead re- questing a stay that remained in place for over five years. North’s failure to refile his case in a proper forum does not change the interests of justice. We therefore see no reason to remand this case to the district court to determine whether transfer would have been required in the interest of justice. It would not have. B In addition to his contention that the district court should have transferred his case under § 1631, North also points to another venue-transfer statute, 28 U.S.C. § 1404(a), that he says should have provided grounds to transfer his case. But § 1404(a), like § 1631, gives district courts authority to transfer if doing so is “in the interest of justice.” Because the interests of justice do not require transfer under § 1631, they do not un- der § 1404(a) either. For these reasons we AFFIRM.