Court Opinion

ID: 9392465
Source: CourtListenerOpinion
Date Created: 2023-05-04 22:00:34.955866+00
Date Added: 2024-06-11T17:18:46.093242
License: Public Domain

In the

    United States Court of Appeals
                 For the Seventh Circuit
                     ____________________

No. 21-1579
SUNNY HANDICRAFT (H.K.) LTD. and BIN TEH HANDICRAFT
(SHENZHEN) COMPANY, LTD.,
                                    Plaintiffs-Appellees,

                                 v.

ENVISION THIS! LLC,
                                               Defendant-Appellant.
                     ____________________

         Appeal from the United States District Court for the
           Northern District of Illinois, Eastern Division.
                No. 14 C 1512 — John Z. Lee, Judge.
                     ____________________

       ARGUED APRIL 20, 2023 — DECIDED MAY 4, 2023
                ____________________

   Before EASTERBROOK, ROVNER, and ST. EVE, Circuit Judges.
   EASTERBROOK, Circuit Judge. Sunny Handicraft and Bin Teh
Handicraft (collectively Sunny) sold seasonal merchandise to
Walgreens, with Envision This! as an intermediary. From 2007
through 2012 Sunny shipped goods directly to Walgreens but
routed contracts and other documents through Envision.
Every year Sunny sent documents calling for it to be named
the beneﬁciary of leWers of credit to cover the price. Envision
2                                                    No. 21-1579

passed these to Walgreens, which arranged for the leWers of
credit. In 2013 business relations continued, and Sunny sent
the usual documents to Envision. But Envision played a dirty
trick: it substituted its own name for Sunny’s as the beneﬁ-
ciary of the leWers of credit. It did not tell Sunny about this
switch. Walgreens sent the leWers of credit to Envision, which
drew more than $3 million. Envision did not remit a dime to
Sunny. This suit followed, invoking the alien-citizen diversity
jurisdiction of 28 U.S.C. §1332(a)(2).
    A jury found that Envision breached its contract with
Sunny by not paying it the money drawn on the leWers of
credit. Damages were set at $3,069,631.37. The jury also found
that Envision had commiWed fraud and awarded a further
$400,000 in compensatory damages plus $903,890 in punitive
damages. The contract damages plus the compensatory dam-
ages for fraud add up to the total of the leWers of credit. (En-
vision did not draw the ﬁnal $400,000, and Sunny, which had
not been named as a beneﬁciary, could not do so.) The district
court denied Envision’s motions for a new trial and for judg-
ment as a maWer of law. As the case comes to us, only the
award of damages for fraud is contested. (Envision does not
dispute the contract verdict, but it has not paid that part of the
judgment or posted a bond to secure Sunny’s interest.)
    Envision is a limited liability company, both of whose
members are citizens of Florida. Both plaintiﬀs are business
entities based in China—one in Hong Kong and the other on
the mainland. The parties treat them as equivalent to corpo-
rations, telling us their places of incorporation and principal
places of business. But it is inappropriate simply to assume
that any given business entity based outside the United States
is a “corporation” for the purpose of §1332. Many domestic
No. 21-1579                                                    3

business entities (such as limited liability companies) are not
corporations, see Cosgrove v. Bartolo:a, 150 F.3d 729 (7th Cir.
1998), and the Supreme Court has instructed us that entities
other than traditional corporate forms should be treated as
partnerships rather than corporations. Carden v. Arkoma Asso-
ciates, 494 U.S. 185, 195–96 (1990).
    We held in Superl Sequoia Ltd. v. Carlson Co., 615 F.3d 831,
832 (7th Cir. 2010), that a Hong Kong business “limited by
shares” and bearing the identiﬁer “Ltd.” is treated as a corpo-
ration. This recognition stemmed from the fact that Hong
Kong inherited its legal system from the United Kingdom,
and we had previously concluded that other “Ltd.” entities in
that tradition should be treated as corporations when they are
perpetual, can issue traded shares, and are independent of in-
vestors for tax and liability. See Lear Corp. v. Johnson Electric
Holdings Ltd., 353 F.3d 580 (7th Cir. 2003) (Bermuda). If busi-
ness law in Hong Kong remains the same as in 2010, then Su-
perl Sequoia remains controlling—but the parties have not told
us what changes, if any, have been made recently in the law
of business organization in Hong Kong.
    As for business entities based in mainland China, we held
in Fellowes, Inc. v. Changzhou Xinrui Fellowes Oﬃce Equipment
Company Ltd., 759 F.3d 787 (7th Cir. 2014), that such a business
can be more like an American LLC than like a Hong Kong
Ltd., even when it bears the “Ltd.” label. It maWered in Fel-
lowes that investment interests in that Ltd. were inalienable.
The parties have not told us anything about the alienability of
investments in Bin Teh Handicraft or whether the law of the
People’s Republic has changed in material ways since 2014;
they have instead proceeded as if Fellowes did not exist.
4                                                    No. 21-1579

     Fortunately, it is not necessary to remand for further pro-
ceedings to investigate contemporary Chinese law and the at-
tributes of the two plaintiﬀs. In response to Envision’s dock-
eting statement in this court, Sunny told us that Bin Teh
Handicraft has only one investor, Sunny Handicraft, and that
Sunny has four shareholders: Daniel Huang, his father, his
mother, and his brother. The statement continues: “All live
and work in Shenzhen, China where the business is located.”
It is exceedingly unlikely that any of the Huangs is a citizen
of Florida, where both members of Envision are domiciled. So
even if the two plaintiﬀs are treated as partnerships or LLCs,
complete diversity of citizenship has been established.
    From a jurisdictional perspective, it is lucky that only six
investors are involved. Many business entities have hun-
dreds, thousands, or more investors. Accurate classiﬁcation of
the nature of these entities can be vital to ascertaining subject-
maWer jurisdiction. We have dodged a problem today, but it
will recur. Counsel must pay more aWention to the proper
classiﬁcation of foreign business entities than they have done
in this litigation.
    The parties have assumed that Illinois law controls this
suit. Walgreens has its headquarters in Illinois, but the acts
and omissions giving rise to liability for fraud occurred in
Florida. Still, we do not have any reason to think that the law
of fraud in Florida diﬀers in any important way from the law
in Illinois, so we accept the litigants’ implicit choice of law.
    Envision contends that it cannot be liable for fraud be-
cause it was not Sunny’s agent or ﬁduciary and therefore did
not have any duty to alert Sunny that it had changed the in-
structions about who would control the leWers of credit. But
the district court held that the cooperative business relations
No. 21-1579                                                     5

between Sunny and Envision from 2007 through 2012 created
a “special relationship” that required Envision to notify
Sunny about any deviation in their dealings. Connick v. Suzuki
Motor Co., 174 Ill. 2d 482, 500 (1996), holds that a business such
as Envision must disclose material facts when it is in “a posi-
tion of inﬂuence and superiority over” the other party, and
that this position “may arise by reason of friendship, agency,
or experience.” The district judge concluded that the “experi-
ence” of the business relation between 2007 and 2012 sup-
ported a duty to disclose under Illinois law.
    According to Envision, that conclusion is untenable be-
cause the jury was not asked to determine whether Sunny and
Envision had the sort of joint “experience” that requires dis-
closure. There’s a good reason for the absence of such a ﬁnd-
ing: no one put this question to the jury. Envision did not
move for summary judgment on this ground or list this issue
as a contested one in the pretrial order. Envision did not pro-
pose jury instructions directed to the subject or ask for a spe-
cial verdict. It is understandable that Sunny did not address
the subject directly at trial; it lacked any reason to think that
the maWer was in dispute. Not until after trial, in a motion un-
der Fed. R. Civ. P. 50(b) for judgment as a maWer of law, did
Envision seek a favorable decision on this ground.
    The district judge treated the maWer as forfeited, and un-
derstandably so. The issues for trial are set out in pretrial or-
ders and jury instructions. A litigant cannot wait until the trial
is over and cry “Gotcha!” The function of Rule 50(b) is to pro-
vide a means to reconsider issues raised earlier, such as in a
motion for summary judgment or a mid-trial motion under
Rule 50(a). We do not allow litigants to bypass arguments
6                                                     No. 21-1579

when making Rule 50(a) motions, only to raise them after the
trial has ended.
    We have held that legal issues raised at the summary-judg-
ment stage may be renewed in post-trial motions, see Lawson
v. Sun Microsystems, Inc., 791 F.3d 754, 761 (7th Cir. 2015); Six
Star Holdings, LLC v. Milwaukee, 821 F.3d 795, 804 (7th Cir.
2016); Lexington Insurance Co. v. Horace Mann Insurance Co.,
861 F.3d 661, 669 (7th Cir. 2017); but Envision did not raise
this contention in any fashion before the jury returned its ver-
dict. Its current argument is blocked by the norm that issues
cannot be raised for the ﬁrst time in post-trial motions. See,
e.g., Builders NAB LLC v. FDIC, 922 F.3d 775, 778 (7th Cir.
2019); Wheeler v. Hronopoulos, 891 F.3d 1072 (7th Cir. 2018).
    At oral argument Envision asserted that it is entitled to
raise pure questions of law after trial, even if these issues had
not been mentioned earlier. Asked for authority to support
that proposition, Envision conceded that it had none. And
there’s a further problem: the existence of a “special relation-
ship” is not a pure question of law. It is a mixed question of
law and fact, requiring assessment of the multi-year business
relations between Sunny and Envision. Even when a mixed
question is vitally important to the case, it remains one of fact.
See, e.g., Pullman-Standard v. Swint, 456 U.S. 273 (1982); Icicle
Seafoods, Inc. v. Worthington, 475 U.S. 709 (1986); U.S. Bank N.A.
v. Village at Lakeridge, LLC, 138 S. Ct. 960 (2018).
    Envision tells us that Illinois treats the existence of a “spe-
cial relationship” as one of law, to be decided by a judge ra-
ther than a jury. But federal procedure controls in federal
court. Mayer v. Gary Partners & Co., 29 F.3d 330 (7th Cir. 1994).
Which questions belong to a jury in federal court is a maWer
of federal procedure. As we observed in Mayer, 29 F.3d at 333,
No. 21-1579                                                      7

if Illinois were to abolish civil jury trials, that would not aﬀect
the need for, and scope of, jury trials in federal suits under the
diversity jurisdiction.
    At all events, the district judge told us his view: to the ex-
tent Envision has not conceded the existence of a “special re-
lationship” by failing to raise the subject before or during trial,
the record shows that such a relation existed. That resolution
of a mixed question is reviewed deferentially on appeal, un-
der the approach of U.S. Bank, 138 S. Ct. at 966–68, and we do
not see any clear error or abuse of discretion. So Envision loses
every which way it can: forfeiture and the merits too.
                                                        AFFIRMED