Court Opinion

ID: 2734200
Source: CourtListenerOpinion
Date Created: 2014-09-18 17:00:33.470928+00
Date Added: 2024-06-11T07:48:56.939141
License: Public Domain

NONPRECEDENTIAL  DISPOSITION  
                                To  be  cited  only  in  accordance  with  Fed.  R.  App.  P.  32.1

                          United States Court of Appeals
                                            For  the  Seventh  Circuit
                                            Chicago,  Illinois  60604  
                                           Argued  September  16,  2014  
                                           Decided  September  18,  2014  
  
  
                                                          Before  
  
                                       WILLIAM  J.  BAUER,  Circuit  Judge  
  
                                       RICHARD  A.  POSNER,  Circuit  Judge  
  
                                       FRANK  H.  EASTERBROOK,  Circuit  Judge  
  
  
No.  13-­‐‑3713                                                                Appeal   from   the   United  
                                                                               States   District   Court   for   the  
INSTEP  SOFTWARE  LLC,                                                         Northern   District   of   Illinois,  
      Plaintiff-­‐‑Appellee,  
                                                                               Eastern  Division.  
                   v.                                                            
                                                                               No.  11  C  3947  
INSTEP  (BEIJING)  SOFTWARE  CO.,  LTD.,                                       John  W.  Darrah,  Judge.  
       Defendant-­‐‑Appellant.  
  
                                                  Order  
                                                         
    InStep  Software  asked  the  district  court  to  declare  that  Instep  (Beijing)  Software  is  no  
longer  authorized  to  sell  or  license  InStep’s  products.  The  district  court  entered  judg-­‐‑
ment  in  InStep’s  favor,  and  Instep  (Beijing)  has  appealed.  
      
    As  the  names  suggest,  the  two  parties  are  related:  InStep  is  among  the  equity  inves-­‐‑
tors  in  Instep  (Beijing).  This  means  that  the  requirements  of  subject-­‐‑matter  jurisdiction  
under  28  U.S.C.  §1332(a)(2)  are  satisfied  only  if  Instep  (Beijing)  is  treated  as  having  its  
own  citizenship,  independent  of  the  citizenships  of  its  investors.  If  the  citizenships  of  
InStep’s  members  (for  InStep  is  itself  not  a  corporation)  are  imputed  to  Instep  (Beijing),  
complete  diversity  is  missing.  

                                                                                                                           
No.  13-­‐‑3713                                                                                        Page  2  

    In  the  district  court,  InStep  argued,  and  the  judge  found,  that  Instep  (Beijing)  is  a  cit-­‐‑
izen  of  China  (and  only  China)  because  Chinese  law  treats  it  as  a  “juridical  person.”  
Our  decision  in  Fellowes,  Inc.  v.  Changzhou  Xinrui  Fellowes  Office  Equipment  Co.,  No.  12-­‐‑
3124  (7th  Cir.  July  22,  2014),  shows  that  this  approach  is  untenable.  
      
    That  leaves  the  question  whether  Instep  (Beijing)  has  attributes  sufficiently  similar  to  
those  of  a  corporation  organized  in  the  United  States.  See,  e.g.,  BouMatic,  LLC  v.  Idento  
Operations,  BV,  No.  13-­‐‑2300  (7th  Cir.  July  22,  2014).  At  oral  argument  counsel  disagreed  
about  just  what  attributes  Instep  (Beijing)  possesses—could  not  agree,  indeed,  on  what  
kind  of  entity  it  is  as  a  matter  of  Chinese  law.  Instep  (Beijing)  calls  itself  a  “common  law  
joint  venture.”  InStep  calls  it  both  a  “limited  liability  company”  and  a  “Chinese  –  for-­‐‑
eign  equity  joint  venture.”  
      
    Instead  of  attempting  to  resolve  factual  disputes  in  this  court,  we  think  it  prudent  to  
remand  so  that  the  district  court  may  determine,  in  the  first  instance,  (a)  what  kind  of  
business  form  Instep  (Beijing)  has;  (b)  what  attributes  such  a  form  possesses  under  Chi-­‐‑
nese  law  (for  example,  does  it  have  alienable  shares,  and  what  role  does  the  govern-­‐‑
ment  of  China  play  in  determining  the  venture’s  duration  and  ownership?);  and  (c)  
whether  a  business  organization  of  this  kind  should  be  treated  as  a  corporation  for  the  
purpose  of  §1332,  given  the  analysis  in  Fellowes  and  BouMatic.  
      
    If  the  district  court  finds  that  Instep  (Beijing)  is  not  a  corporation,  the  case  must  be  
dismissed  for  lack  of  subject-­‐‑matter  jurisdiction.  If  Instep  (Beijing)  is  a  corporation,  the  
judgment  on  the  merits  should  be  reentered.  Any  appeal  from  the  new  decision  will  re-­‐‑
turn  to  this  panel.  
      
                                                                                VACATED  AND  REMANDED