Philos Techs., Inc. v. Philos & D, Inc.
| Decision Date | 22 September 2015 |
| Docket Number | 14–2007,Nos. 12–3446,14–3153.,s. 12–3446 |
| Citation | 802 F.3d 905 |
| Parties | PHILOS TECHNOLOGIES, INC., Plaintiff–Appellant, v. PHILOS & D, INC., et al., Defendants–Appellees. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Drew G.A. Peel, Rachlis, Duff, Adler & Peel LLC, Chicago, IL, for Plaintiff–Appellant.
John W. Moss, Winston & Strawn LLP, Washington, DC, for Defendants–Appellees.
Before WOOD, Chief Judge, and POSNER and WILLIAMS, Circuit Judges.
This lawsuit involves a complicated transaction—or set of transactions—among several related companies, most of which are based in the Republic of Korea. At its core, the lawsuit alleges that the defendants, Korean company Philos & D, Inc. (P & D), and Korean citizens Don–Hee and Jae–Hee Park, unlawfully retained equipment that plaintiff Philos Technologies, Inc. (Philos Tech), had sent to P & D as part of a business deal. Although we part company with the district court's reasoning, we agree with that court's conclusion that it lacked personal jurisdiction over the defendants. We also affirm the district court's denial of Philos Tech's motion asking the court to vacate its judgment on account of the Parks' alleged fraud. Finally, although we understand the district court's frustration with Philos Tech, we conclude that its imposition of sanctions on that company cannot stand in light of the many legal and factual uncertainties involved in this case. We therefore vacate the court's sanctions order.
An ordinary commercial transaction underlies this dispute. Philos Tech sent some equipment to Korea for delivery to P & D in connection with an alleged joint venture between the two companies. Philos Tech alleges that P & D, along with Don–Hee and Jae–Hee Park, unlawfully converted that equipment. Because the chief issue before us concerns personal jurisdiction, we will recount not only the actions related to the alleged conversion, but also the events leading up to the alleged agreements between Philos Tech and P & D, as those events all bear on the question whether personal jurisdiction can be sustained in an Illinois court.
Philos Tech is an Illinois corporation; Philos Ko (who is also known as Jongho Ko) is its chairman. Philos Ko is also the chairman of PLS Tech Korea Co., Ltd. (PLST), a Korean company that, while not a party to this litigation, plays an important role in our story. Philos Tech and PLST are closely intertwined: Philos Ko's wife, Angela Ko (also known as Haewon Park), is the president and CEO of PLST. Philos Ko's son, Sam Ko, is the president and CEO of Philos Tech. P & D, one of the defendants here, is a Korean corporation. (Its articles of incorporation appear in the record; they establish that P & D is the equivalent of a U.S. corporation.) The formation of P & D is a disputed topic, which we explore below. For now it suffices to say that the two Parks (Don–Hee and Jae–Hee), both Korean citizens and both defendants in this suit, were involved in P & D's incorporation.
Don–Hee Park visited Illinois in May 2007. While in Illinois, he began engaging in conversations with Philos Tech about the formation of a joint venture. (In its original complaint, Philos Tech alleged that these conversations did not begin until September 2007; this is the first of several such contradictions.) P & D and the Parks (collectively Defendants), on the other hand, urge that Don–Hee did not negotiate any details of a potential joint venture while in Illinois. They contend instead that Don–Hee's interactions with Philos Tech during his trip were purely for him to learn more about Philos Tech's work and technologies.
On December 20, 2007, PLST (the Korean company also chaired by Philos Ko) and P & D executed two written agreements. The first agreement, which we call the “Joint Venture Agreement,” provisionally established a joint venture between PLST and P & D. In the second, to which we refer as the “Equipment Agreement,” PLST agreed to provide P & D with certain equipment. The Equipment Agreement (between two Korean companies) contains a forum selection clause designating Korea as the forum to resolve disputes.
Philos Tech asserts that on the same day the written agreements were executed—December 20, 2007—it had a phone meeting with the Parks. In that meeting, the parties decided to rescind and replace the Joint Venture Agreement between PLST and P & D on which the ink was barely dry with an oral agreement essentially substituting Philos Tech for PLST. Under the revised agreement, Philos Tech would take PLST's place in the joint venture and provide the equipment PLST had promised to supply under the Equipment Agreement. (Once again, the earlier complaint paints a different picture: in it, Philos Tech did not mention the written agreements with PLST; instead, it merely asserted that during a “meeting” on December 20, 2007, it and the Parks had agreed to form a joint venture between Philos Tech and P & D, and that Philos Tech's role would be that of equipment supplier to P & D.) Defendants deny the existence of any oral agreement superseding the December 20 written agreements; they maintain that P & D's joint venture partner has always been PLST, not Philos Tech.
Complicating matters further is the fact that P & D's Korean articles of incorporation, which took effect on February 25, 2008, state that P & D's founders are Don–Hee Park and Philos Tech. Defendants' explanation for the references to Philos Tech in the articles and other documents is that they were a smokescreen designed to subvert Korea's foreign investment law. See Foreign Investment Promotion Act (Republic of Korea), enacted Sept. 16, 1998, available at http://legal.un.org/avl/ pdf/ls/Shin_RelDocs.pdf (visited on Aug. 20, 2015, as were all websites cited in this opinion). The references falsely represented P & D as a foreign direct investment company so that P & D could obtain government benefits under that Act. The real agreement, Defendants say, was between the two Korean companies (P & D and PLST), but the parties falsified certain documents and created the illusion that the Illinois-based company Philos Tech was contributing to the Korean economy. They assert that P & D was not actually receiving any genuine foreign direct investment from the Illinois company in the form of equipment contributions; the equipment instead made a round trip from Korea to Illinois and back again with no value-added at the Illinois end. Philos Tech denies that this was the case. It maintains that the February 2008 articles of incorporation are legitimate and that Philos Tech was making genuine transfers of funds and equipment to its Korean joint venture.
Don–Hee Park visited Illinois again in May 2008. (The district court found that he came only once, in 2007, but the parties agree that he also made a trip in 2008.) Philos Tech asserts that it and Don–Hee finalized the details of their joint venture at this time. Defendants again deny that any negotiations took place during this visit. They concede that Don–Hee received an invoice from Philos Tech while he was in Illinois, but they say that they did not respond to it because they had entered into the agreements with the Korean company PLST, rather than Philos Tech.
On August 18, 2008, PLST sent P & D a letter in which it stated that it was canceling agreements made on December 20, 2007. Once again, it is unclear what was happening. Philos Tech takes the position that this letter purported to cancel solely the Equipment Agreement—and not the Joint Venture Agreement—because the Joint Venture Agreement already had been superseded by Philos Tech's December 20 oral agreement with the Parks to form the joint venture between itself and P & D. Defendants argue that the letter canceled both the Joint Venture Agreement and the Equipment Agreement between P & D and PLST, because (they say) there was no oral agreement with Philos Tech and the joint venture between P & D and PLST had remained in force throughout 2008. The parties presented the district court with competing translations of these documents, all of which are in Korean.
There were transfers of funds and equipment between Korea and Illinois in connection with these machinations, but the purpose and details are unclear. The Parks transferred approximately 200 million won to PLST (approximately US $160,000 at the time, see http://www.exchange–rates.org/Rate/KRW/USD/12–31–2008); that money was later transferred to Philos Tech, which eventually sent either funds or some other kind of investment back to P & D. PLST sent equipment from Korea to Philos Tech, and Philos Tech later sent equipment back to Korea. Defendants maintain that the equipment was largely unchanged during its time in Illinois, and that these transfers were part of the foreign direct investment scam. Philos Tech insists that the equipment PLST sent consisted of component parts, which it assembled into completed equipment and returned to Korea.
While this lawsuit has been underway, related litigation has been wending its way through the Korean courts. Korean courts have ruled that Philos Tech, not PLST, was the joint venture partner of P & D. More recently, both Don–Hee and Jae–Hee Park were convicted in Korea for perjury in relation to statements made during prior court proceedings; Jae–Hee Park's conviction was then overturned on appeal, and it is on appeal to the Korean Supreme Court. (The Korean court of first instance found that Jae–Hee committed perjury when she stated that P & D's joint venture partner never changed from PLST to Philos Tech.) The Korean courts also determined that Don–Hee Park lied when he said that he had never seen P & D's Articles of Incorporation before; that conviction was affirmed on appeal.
Philos Tech filed this lawsuit in the Northern District of Illinois in December 2008, alleging that the Defendants had unlawfully converted its property. The complaint asserts that Defendants had agreed to increase Philos...
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