Be2 Llc v. Ivanov

Citation98 U.S.P.Q.2d 1499,642 F.3d 555
Decision Date06 April 2011
Docket NumberNo. 10–2980.,10–2980.
PartiesBE2 LLC and be2 Holding, A.G., Plaintiffs–Appellees,v.Nikolay V. IVANOV, Defendant–Appellant.
CourtUnited States Courts of Appeals. United States Court of Appeals (7th Circuit)

OPINION TEXT STARTS HERE

Jeana R. Lervick (submitted), Attorney, Greer, Burns & Crain, Chicago, IL, for PlaintiffsAppellees.Nick Ivanov (submitted), Mahwah, NJ, pro se.Before FLAUM, WOOD, and HAMILTON, Circuit Judges.HAMILTON, Circuit Judge.

One online matchmaking service has sued another for trademark infringement. The issue on appeal is whether the defendant's Internet activity made him susceptible to personal jurisdiction in Illinois for claims arising from that activity. We conclude that it did not, so we reverse and remand with directions to dismiss for lack of personal jurisdiction.

We set out the facts as they appear in the complaint. Plaintiff be2 LLC is a Delaware limited liability company that is also headquartered in that state. Its parent company, be2 Holding, A.G., is organized and headquartered in Germany. These companies, which we collectively call be2 Holding, run an Internet dating website located at be2.com. Plaintiff be2 Holding originally offered its dating service only to singles in Europe. Over the past few years, be2 Holding has extended its reach to 14 million users in 36 countries, including the United States.

The complaint asserts claims arising under the Lanham Act, 15 U.S.C. §§ 1114(1), 1125(a), federal common law, and the Illinois Uniform Deceptive Trade Practices Act, 815 ILCS 510/1 to /7. The complaint names Nikolay Ivanov, a resident of New Jersey, as a defendant. Allegedly he is the co-founder and CEO of be2.net and also the person “responsible for the majority of business transactions” on the website. Until December 2006, the complaint continues, Ivanov offered a matchmaking service through the website sladurana.com. Until that time, the be2.net website had been just a collection of links to other Internet sites. But during December 2006, Ivanov allegedly moved his matchmaking service to the website be2.net, deliberately choosing to use an existing domain address and design that were “confusingly similar” to be2.com “with the intention of misleading consumers.”

Ivanov did not answer the complaint or attend a scheduled status hearing, so the district court granted plaintiff's oral motion for entry of default under Rule 55(a) of the Federal Rules of Civil Procedure. On plaintiff's motion, the court later entered a default judgment under Rule 55(b)(2). To prove its damages, be2 Holding submitted a declaration from Andreas Etten, its co-CEO and a member of its board of directors. Etten attached to his declaration a series of documents printed from the Internet. Some of those documents were more relevant to whether personal jurisdiction was proper in Illinois than they were to damages. One document is a printout from the “American personals” directory of the website be2.net. The document shows that when the website was accessed one year before the hearing, 10 men and 10 women with Chicago addresses had registered on be2.net for matchmaking services. Another document, printed from the website sladurana.com, is headlined “be2 Management Team” and highlights Nick Ivanov as the CEO and co-founder, as well as “the one responsible for censorship, profile approval, design, and advertising.” The page was printed from the website sladurana.com, but it is emblazoned with the “be2.net” logo. The document also includes a disclaimer emphasizing that “be2.NET is in NO WAY affiliated with be2.COM and their unfair practices.” A third document apparently is Ivanov's profile printed from the social-networking website LinkedIn. Under the category “Experience,” it includes another description of Ivanov as the co-founder and CEO of “be2.net” and boasts that the website offers free “dating services with hundreds of thousands of online users.”

After the district court entered its final default judgment against Ivanov, he appeared for the first time through counsel and filed a motion to vacate the judgment as void for want of personal jurisdiction. Along with his motion, Ivanov submitted an affidavit in which he claimed that he was not the co-founder and CEO of any company called be2.net but merely a volunteer for Sladur, the Bulgarian company that had registered and owned the domain name be2.net. Ivanov, a Bulgarian–American, claimed that he had written a testimonial on Sladur's Bulgarian matchmaking site, which prompted the company to ask for his help in breaking into the United States market. He agreed, he said, because he was proud to be of service to a company from his native land, but claimed that his tasks consisted mostly of translating website content from Bulgarian to English, responding to some customer inquiries, and approving users' profiles. He already had a full-time job, he claimed, and said he thought of his work for Sladur as a “hobby.” He tried to explain his “CEO” status by claiming that Sladur had held him out as the CEO of be2.net and by insisting that the acronym stood only for “Centralized Expert Operator.” Sladur never compensated him for his services, he claimed, nor did he receive any other financial benefit from his association with the website be2.net. And, he concluded, he had never set foot in the state of Illinois.

With ample reason, the district court found that Ivanov was not credible. The court denied the motion to vacate the judgment. The court relied on what it described as “the whole list of Chicago contacts, the result of Mr. Ivanov's activity,” and concluded that “the idea of the absence of effective Illinois contacts sufficient to support in personam jurisdiction is undercut dramatically.” As for the argument that Ivanov was merely a volunteer, the district court pointed to his Internet boasting that he was co-founder and CEO of be2.net. And the district court resoundingly rejected Ivanov's “Centralized Expert Operator” explanation for describing himself as “CEO.”

Appearing pro se again on appeal, Ivanov renews his argument that he is not subject to personal jurisdiction in Illinois. Because he knew about the suit and chose to default rather than defend, he must bear the burden of proof on his post-judgment motion challenging personal jurisdiction. See Burda Media, Inc. v. Viertel, 417 F.3d 292, 299 (2d Cir.2005); Bally Export Corp. v. Balicar, Ltd., 804 F.2d 398, 401 (7th Cir.1986).

The district court's denial of Ivanov's motion to vacate cannot be sustained, as be2 Holding argues, as an exercise in “discretion piled on discretion.” When a district court enters a default judgment without personal jurisdiction over the defendant, “the judgment is void, and it is a per se abuse of discretion to deny a motion to vacate that judgment.” Relational, LLC v. Hodges, 627 F.3d 668, 671 (7th Cir.2010); see also Jenkens & Gilchrist v. Groia & Co., 542 F.3d 114, 118 (5th Cir.2008) (applying de novo review on issue of personal jurisdiction); Blaney v. West, 209 F.3d 1027, 1031 (7th Cir.2000) (noting that appellate review under Rule 60(b)(4) is more stringent than under other portions of Rule 60(b)), citing United States v. Indoor Cultivation Equipment from High Tech Indoor Garden Supply, 55 F.3d 1311, 1316–17 (7th Cir.1995).

The personal jurisdiction issue boils down to one of federal constitutional law. Plaintiff be2 Holding asserts claims arising under the Lanham Act, federal common law, and Illinois law. The Lanham Act does not authorize nationwide service of process, Sunward Elecs., Inc. v. McDonald, 362 F.3d 17, 22 (2d Cir.2004), so a federal court sitting in Illinois may exercise jurisdiction over Ivanov in this case only if authorized both by Illinois law and by the United States Constitution. See Fed.R.Civ.P. 4(k)(1)(A); Tamburo v. Dworkin, 601 F.3d 693, 700 (7th Cir.2010). The Illinois long-arm statute, in turn, permits its courts to exercise personal jurisdiction on any basis permitted by the constitutions of both Illinois and the United States. 735 ILCS 5/2–209(c).

As noted above, the district court had ample grounds for discounting Ivanov's credibility. It was preposterous for him to suggest that, by holding himself out as the “CEO” of be2.net, he actually meant to communicate that he was the website's “Centralized Expert Operator.” But even if we discount all such details in Ivanov's affidavit, he has still shown an absence of ties to or activities in Illinois. The question becomes whether the evidence originally submitted by be2 Holding was sufficient to show that Ivanov could be required to defend himself on these claims in Illinois.

We conclude on this record that the United States Constitution forbids an Illinois court to exercise personal jurisdiction over Ivanov in this case. The Due Process Clause is satisfied only if Ivanov has minimum contacts with Illinois such that requiring him to defend against this lawsuit in the state “does not offend traditional notions of fair play and substantial justice.” See International Shoe Co. v. Washington, 326 U.S. 310,...

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