Court Opinion

ID: 4547923
Source: CourtListenerOpinion
Date Created: 2020-07-13 21:00:20.127213+00
Date Added: 2024-06-11T12:55:29.530259
License: Public Domain

In the

    United States Court of Appeals
                 For the Seventh Circuit
                     ____________________
No. 19-2465
J.S.T. CORPORATION,
                                                  Plaintiff-Appellant,
                                 v.

FOXCONN INTERCONNECT
TECHNOLOGY LTD., et al.,
                                               Defendants-Appellees.
                     ____________________

         Appeal from the United States District Court for the
           Northern District of Illinois, Eastern Division.
           No. 1:19-cv-300 — Virginia M. Kendall, Judge.
                     ____________________

      ARGUED FEBRUARY 12, 2020 — DECIDED JULY 13, 2
                 ____________________

   Before BAUER, KANNE, and BARRETT, Circuit Judges.
    BARRETT, Circuit Judge. J.S.T. Corporation, which is based
in Illinois, produces a type of electronic equipment called a
connector. Bosch, an engineering company, asked J.S.T. to de-
sign and manufacture a connector that Bosch could incorpo-
rate into a part that it builds for General Motors. For a time,
Bosch retained J.S.T. as its sole supplier of those connectors.
Then, according to J.S.T., Bosch wrongfully acquired J.S.T.’s
2                                                     No. 19-2465

proprietary designs and provided them to J.S.T.’s competi-
tors. The competitors used the stolen designs—allegedly with
full knowledge of their provenance—to build their own
knockoff connectors and eventually to displace J.S.T. from its
role as Bosch’s supplier.
    After filing various lawsuits against Bosch, J.S.T. filed this
suit in Illinois against the competitors, alleging misappropri-
ation of trade secrets and unjust enrichment. The district court
dismissed the case for lack of personal jurisdiction. The com-
petitors’ only link to Illinois is that they sell their connectors
to Bosch, knowing that the connectors will end up in General
Motors cars and parts that are sold in Illinois. For personal
jurisdiction to exist, though, there must be a causal relation-
ship between the competitors’ dealings in Illinois and the
claims that J.S.T. has asserted against them. Because no such
causal relationship exists, we affirm the judgment of the dis-
trict court.
                                I.
    We draw the facts in this case from the well-pleaded alle-
gations in J.S.T.’s complaint. be2 LLC v. Ivanov, 642 F.3d 555,
556 (7th Cir. 2011). And as we must for a case in this posture,
we assume the truth of the facts that J.S.T. alleges. uBid, Inc. v.
GoDaddy Grp., Inc., 623 F.3d 421, 423–24 (7th Cir. 2010). What
follows, then, is the story as J.S.T. tells it.
   In 2005, General Motors retained engineering company
Bosch to build a “body control module” for some of its cars.
A body control module is essentially a computer system that
controls certain electronic functions inside a car, like its locks
and its power windows. To build the body control module,
Bosch required a “183-pin connector”—an electrical adapter
No. 19-2465                                                     3

that can connect 183 electrical circuits. Bosch turned to Illinois
company J.S.T. Corporation for the task. J.S.T. accepted the
contract and designed and built for Bosch a 183-pin con-
nector. J.S.T.’s connectors performed well in Bosch’s body
control modules, and for years, Bosch retained J.S.T. as its sole
supplier of the product.
     Then Bosch took advantage of its relationship with J.S.T.
Bosch tricked J.S.T. into handing over its proprietary design
specifications and drawings for its 183-pin connectors, falsely
representing that General Motors needed them and that
Bosch would keep them confidential. Instead, Bosch gave
those designs to some of J.S.T.’s competitors based in the
United States and abroad, presumably hoping that the com-
petitors could make an identical product more cheaply. The
competitors accepted the wrongfully acquired designs with
full knowledge of their source and then used those designs to
produce their own knockoff 183-pin connectors. Upon learn-
ing what Bosch had done, J.S.T. stopped building 183-pin con-
nectors for Bosch, and the competitors displaced J.S.T. from
its role as Bosch’s supplier.
    J.S.T. filed several lawsuits against Bosch and the compet-
itors. It first sued Bosch for misappropriation of trade secrets
in Michigan, where Bosch is headquartered. That lawsuit re-
mains pending. Next, J.S.T. sued Bosch and the competitors
for patent infringement, both in Illinois and at the Interna-
tional Trade Commission. Those lawsuits are also ongoing.
Finally, J.S.T. filed the present suit in Illinois against several
of the competitors—TE Connectivity Corporation, known as
TEC, and a group of related companies under the umbrella of
Foxconn. The suit alleges misappropriation of trade secrets
4                                                     No. 19-2465

under the Illinois Trade Secrets Act, 765 ILCS 1065/1, and un-
just enrichment.
     TEC and the Foxconn companies moved to dismiss for
lack of personal jurisdiction. They emphasized that none of
the defendants is headquartered in Illinois or has its primary
place of business there. In fact, only two of the Foxconn com-
panies even have an office in Illinois, and neither office is in-
volved in producing the connector at issue. Further, none of
the defendants manufactured the 183-pin connectors in Illi-
nois, nor did they sell them in Illinois. Instead, they sold the
connectors to Bosch in Texas and in China, where Bosch put
them into body control modules that it sold to General Mo-
tors. The only relevant connection to Illinois is that General
Motors incorporates some of those body control modules into
cars and sets some aside to be sold as spare auto parts. Gen-
eral Motors then sells those cars and parts to authorized deal-
ers for distribution nationwide, including in Illinois. The de-
fendants argued that this connection is too attenuated to sup-
port personal jurisdiction over them. The district court agreed
and dismissed the suit under Federal Rule of Civil Procedure
12(b)(2), holding that J.S.T. had failed to make a prima facie
showing of facts that would support personal jurisdiction in
Illinois. See Felland v. Clifton, 682 F.3d 665, 672 (7th Cir. 2012).
J.S.T. now appeals.
                                II.
   The federal district court’s jurisdiction over J.S.T.’s state-
law claims is circumscribed by both Illinois law and the U.S.
Constitution. Matlin v. Spin Master Corp., 921 F.3d 701, 705 (7th
Cir. 2019); see FED. R. CIV. P. 4(k)(1)(A). The parties agree that
the Illinois long-arm statute, 735 ILCS 5/2-209(c), is coexten-
sive with the Federal Constitution’s Due Process Clause. See
No. 19-2465                                                     5

Matlin, 921 F.3d at 705. We therefore ask only whether the ex-
ercise of jurisdiction comports with federal due process.
    There are two types of personal jurisdiction: general and
specific. General jurisdiction permits a defendant to be sued
in a particular forum for any claim, regardless of whether the
claim has any connection to the forum state. Lexington Ins. Co.
v. Hotai Ins. Co., 938 F.3d 874, 878 (7th Cir. 2019). For a court
to exercise general jurisdiction over an out-of-state defendant,
the defendant’s connection to the forum state must be “so
‘continuous and systematic’ as to render [it] essentially at
home” there. Goodyear Dunlop Tires Operations, S.A. v. Brown,
564 U.S. 915, 919 (2011) (citation omitted). By contrast, specific
jurisdiction “is confined to adjudication of ‘issues deriving
from, or connected with, the very controversy that establishes
jurisdiction.’” Id. (citation omitted). J.S.T. concedes that the
defendants lack a sufficient relationship with Illinois to per-
mit general jurisdiction. The only question before us is
whether the district court had specific personal jurisdiction
over this particular controversy.
    J.S.T. contends that the defendants are subject to specific
jurisdiction in Illinois because cars and parts containing their
knockoff connectors are sold to consumers in Illinois. To
make this argument, J.S.T. relies on the “stream of commerce”
theory first articulated by the Supreme Court in World-Wide
Volkswagen Corp. v. Woodson, 444 U.S. 286, 297–98 (1980), a case
about personal jurisdiction over a products liability suit for
personal injury. That theory posits that personal jurisdiction
may be appropriate over “a corporation that delivers its prod-
ucts into the stream of commerce with the expectation that
they will be purchased by consumers in the forum State.” Id.
Since World-Wide Volkswagen, the viability of the stream of
6                                                    No. 19-2465

commerce theory has been uncertain; circuit courts have split
on the issue and the Supreme Court has twice failed to resolve
it conclusively. J. McIntyre Mach., Ltd. v. Nicastro, 564 U.S. 873
(2011); Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102
(1987).
     J.S.T. is correct that our circuit is among those that apply
the stream of commerce theory in products liability cases. In
the absence of intervening guidance from the Supreme Court,
we have reasoned that the Court adopted the stream of com-
merce theory in World-Wide Volkswagen and has not overruled
it since. Dehmlow v. Austin Fireworks, 963 F.2d 941, 946–47 (7th
Cir. 1992); see also Jennings v. AC Hydraulic A/S, 383 F.3d 546,
550 & n.2 (7th Cir. 2004) (affirming Dehmlow while acknowl-
edging that Asahi left the issue unresolved by the Supreme
Court). On that basis, we have found personal jurisdiction in
a products liability suit because a defendant sold fireworks to
a middleman “with the knowledge that its fireworks would
reach Illinois consumers in the stream of commerce.” Dehm-
low, 963 F.2d at 947.
     But J.S.T. fails to acknowledge that there is a reason why
the stream of commerce theory is typically associated only
with products liability suits. In the context of products liabil-
ity, downstream sales to consumers can support personal ju-
risdiction because they bear on “the relationship among the
defendant, the forum, and the litigation.” Walden v. Fiore, 134
S. Ct. 1115, 1121 (2014) (emphasis added) (citation omitted).
Specific jurisdiction requires not only that a defendant estab-
lish minimum contacts with the forum state, but also that the
litigation arise out of those contacts. Lexington Ins. Co., 938
F.3d at 878. In a products liability suit, the underlying litiga-
No. 19-2465                                                      7

tion alleges the development of a product that harms consum-
ers. Thus, when a defendant takes steps to reach consumers
in a forum state, it has created a relationship with the forum
state that has special relevance to the litigation at issue. The
stream of commerce theory contemplates that a defendant’s
product may go through middlemen before reaching con-
sumers, but the point of consumer sale remains relevant to the
relationship between the defendant, the forum, and the con-
sumer-injury litigation.
    But the point of consumer sale will not have the same rel-
evance to specific jurisdiction in every suit. Bristol-Myers
Squibb Co. v. Superior Court, 137 S. Ct. 1773, 1781 (2017)
(“[E]ven regularly occurring sales of a product in a State do
not justify the exercise of jurisdiction over a claim unrelated
to those sales.” (citation omitted)). For the point of consumer
sale to be as relevant to this litigation as it is to products lia-
bility suits, there must also be a connection here between
downstream consumer sales and J.S.T.’s underlying claims.
See Curry v. Revolution Labs., LLC, 949 F.3d 385, 400–02 (7th
Cir. 2020); Illinois v. Hemi Grp. LLC, 622 F.3d 754, 759 (7th Cir.
2010). If there is only an attenuated connection between
J.S.T.’s claims and the downstream sales in Illinois, then these
claims cannot be adjudicated in this forum. See, e.g., Matlin,
921 F.3d at 706; Advanced Tactical Ordnance Sys., LLC v. Real
Action Paintball, Inc., 751 F.3d 796, 801–02 (7th Cir. 2014).
    The parties focus on J.S.T.’s claim that the defendants mis-
appropriated J.S.T.’s trade secrets, so we’ll begin there too.
Unlike products liability, the tort of trade secret misappropri-
ation is not intrinsically linked to interactions with a con-
sumer. Trade secret law is not like trademark law, in which
consumer confusion can be at the heart of the underlying
8                                                                No. 19-2465

claim. Cf. Curry, 949 F.3d at 400–02. Nor is it like patent law,
in which the sale of a patented invention to a consumer can
be an act of infringement, even if the seller is unaware of the
patent. 35 U.S.C. § 271(a); Glob.-Tech Appliances, Inc. v. SEB
S.A., 563 U.S. 754, 761 n.2 (2011); cf. Honeywell, Inc. v. Metz Ap-
paratewerke, 509 F.2d 1137 (7th Cir. 1975) (finding personal ju-
risdiction over a patent infringement claim on the basis of
downstream sales). Instead, under Illinois law, trade secret
misappropriation is the unauthorized acquisition, disclosure,
or use of a trade secret by a person who knows or has reason
to know that the secret was improperly acquired. 765 ILCS
1065/2(b).1 The knowing acquisition, disclosure, and use of a
secret are all actions that can be completed long before an of-
fending product ever comes into contact with a consumer.
And here, if the defendants knowingly acquired, disclosed, or
used J.S.T.’s trade secrets anywhere, it was not in Illinois.
They did not receive the stolen designs and drawings from
Bosch in Illinois. They neither designed nor manufactured

    1 Both parties seem to agree that Illinois law governs J.S.T.’s claims. In

our circuit, when neither party raises a conflict of law issue in a diversity
case, a federal court should apply the law of the state in which it sits. Mass.
Bay Ins. Co. v. Vic Koenig Leasing, Inc., 136 F.3d 1116, 1120 (7th Cir. 1998).
Thus, we too analyze J.S.T.’s claims under Illinois law—although we
might have proceeded differently if the parties had disagreed about which
state’s law applied. Cf. Salton, Inc. v. Philips Domestic Appliances & Pers. Care
B.V., 391 F.3d 871, 879 (7th Cir. 2004) (“[T]he Illinois choice of law rule
applicable to misappropriation cases (and it is Illinois’s choice of law rules
that apply to the misappropriation claim in this case because Illinois is the
forum state) selects the place where the misappropriation took place or
the defendant obtained the benefit of the misappropriation, the latter be-
ing the state or other jurisdiction in which the defendant has its principal
place of business.” (emphasis removed)).
No. 19-2465                                                            9

their knockoffs in Illinois. And assuming that the defendants’
sale of their connectors counted as a “use” of a trade secret,
the defendants only sold their products to Bosch at its facili-
ties in Texas and China. Bosch then sold the products to Gen-
eral Motors, which sold to consumers in Illinois and else-
where.2 Because the defendants themselves did not acquire,
disclose, or use J.S.T.’s trade secrets in Illinois, the link be-
tween the Illinois sales and their misappropriation of J.S.T.’s
trade secrets is attenuated.
    J.S.T.’s attempt to tighten that link fails to persuade us.
J.S.T. contends that consumer sales in Illinois bear on trade
secret misappropriation just as they bear on products liability
suits for personal injury. Its argument proceeds in two steps.
First, J.S.T. posits that a contact—here, downstream sales—is
relevant to the underlying claim if it tracks one of the
“elements” of the claim that “establish liability.” See Young v.
Colgate-Palmolive Co., 790 F.2d 567, 570 (7th Cir. 1986). Second,
it notes that Illinois courts have said, “[T]he three elements of
trade secret misappropriation … are: (1) a trade secret existed;
(2) the secret was misappropriated …; and (3) the owner of
the trade secret was damaged by the misappropriation.”
Liebert Corp. v. Mazur, 827 N.E.2d 909, 925 (Ill. App. Ct. 2005)
(citation omitted). J.S.T. contends that the downstream
consumer sales in Illinois damaged its bottom line, thereby
satisfying the third element of the tort. And, J.S.T. says, a state
in which an element of a tort is satisfied necessarily has a close
relationship to litigation concerning that tort.

    2 General Motors is not a defendant in this suit, and J.S.T. does not
allege that General Motors knew or had reason to know of the improper
acquisition of J.S.T.’s trade secrets. See 765 ILCS 1065/2(b).
10                                                   No. 19-2465

    While clever, this argument has problems. To begin with,
J.S.T.’s focus on the damages element is in tension with the
admonition in Walden that “it is the defendant’s conduct,” not
the plaintiff’s injury, “that must form the necessary connec-
tion with the forum State.” 134 S. Ct. at 1122 (emphasis
added). It is true that courts look to the elements of a tort in
determining whether a plaintiff’s claims arise out of a defend-
ant’s contacts. Id. at 1124; Young, 790 F.2d at 570. And here,
J.S.T. is right that damage to the plaintiff is an element of the
tort of trade secret misappropriation. (That’s hardly surpris-
ing, given that harm to the plaintiff is a classic element of
every tort.) But our interest in the elements of a tort is not a
mechanical scan for anything that courts label an “element.”
Instead, we consider the elements of the underlying tort for
the light that they cast on “the relationship between the de-
fendant, the forum, and the litigation.” Walden, 134 S. Ct. at
1121 (citation omitted). In that inquiry, our core focus is al-
ways on the defendants’ conduct, not the plaintiff’s damages.
J.S.T. therefore has framed the issue incorrectly. Contrary to
its argument, the fact that damages are an element of the al-
leged tort does not necessarily mean that personal jurisdiction
exists in any state where that element is satisfied.
    When we put the focus where it should be—on the de-
fendants’ conduct—it becomes clear why J.S.T.’s argument
fails. The defendants harmed J.S.T. both by illicitly using
J.S.T.’s designs to turn a profit and by displacing J.S.T. as
Bosch’s supplier. Both harms flowed from the defendants’
sales to Bosch, which were the source of the defendants’ ill-
gotten gains, as well as the reason for J.S.T.’s lost opportunity.
General Motors’ sales to Illinois consumers are relevant only
insofar as demand for General Motors’ cars helped drive de-
No. 19-2465                                                                11

mand for Bosch parts, and, in turn, for the defendants’ con-
nectors. But Illinois consumers have virtually nothing to do
with the defendants’ interactions with Bosch, which are the
foundation of J.S.T.’s trade secret claim. Because the down-
stream sales to Illinois consumers have only an attenuated re-
lationship to this litigation, those sales do not entitle Illinois
courts to adjudicate the defendants’ liability for misappropri-
ating J.S.T.’s drawings.
     J.S.T. raised another claim in its complaint: unjust enrich-
ment.3 But the sales to consumers in Illinois are not sufficient
to establish personal jurisdiction for this claim either. If the
defendants had made money in Illinois from J.S.T.’s draw-
ings, then we might be able to conclude that J.S.T.’s unjust en-
richment claim arose from those downstream sales. But the
defendants were not enriched by those sales. The enriching
sales were the defendants’ sales to Bosch, which took place at
Bosch’s locations in China and Texas. The connection between
J.S.T.’s unjust enrichment claim and the downstream sales in
Illinois of General Motors products is thus too attenuated to
support personal jurisdiction over the defendants. Neither of
J.S.T.’s claims arise out of the defendants’ contacts in Illinois,
so the district court’s dismissal for lack of personal jurisdic-
tion is AFFIRMED.

    3 The district court dismissed this case for lack of personal jurisdiction

without addressing the merits of J.S.T.’s claims. To avoid resolving an is-
sue not passed on by the district court, we do the same. We have doubts,
however, about whether J.S.T. has stated a discrete claim of unjust enrich-
ment, given that the Illinois Trade Secrets Act displaces common-law un-
just enrichment claims based on the misappropriation of trade secrets. 765
ILCS 1065/8; Pope v. Alberto-Culver Co., 694 N.E.2d 615, 619 (Ill. App. Ct.
1998).