Steel Warehouse of Wisconsin, Inc. v. Leach

Decision Date13 October 1998
Docket NumberNo. 97-3854,97-3854
Citation154 F.3d 712
PartiesSTEEL WAREHOUSE OF WISCONSIN, INC. and Steel Warehouse Co., Inc., Plaintiffs-Appellants, v. Howard H. LEACH and Henry C. McMicking, Defendants-Appellees.
CourtU.S. Court of Appeals — Seventh Circuit

Charles R. Watkins (argued), Susman, Buehler & Watkins, Chicago, IL, Timothy J. Storm, Storm & Associates, Chicago, IL, for Plaintiffs-Appellants.

Jeffrey O. Davis (argued), Quarles & Brady, Milwaukee, WI, for Defendants-Appellees.

Before RIPPLE, KANNE, and EVANS, Circuit Judges.

KANNE, Circuit Judge.

Steel Warehouse of Wisconsin, Inc. and Steel Warehouse Co., Inc. (collectively "Steel Warehouse"), filed an action in the District Court for the Eastern District of Wisconsin alleging that defendants Howard Leach and Henry McMicking, former members of the Board of Directors for Cortec Industries, Inc., a now insolvent corporation, caused or permitted false, incomplete, or misleading financial statements to be given to Steel Warehouse to induce it to continue to supply steel products and extend credit to the corporation. The claims against Leach and McMicking are based on breach of fiduciary duty, common law fraud, negligent misrepresentation, and statutory fraudulent misrepresentation. According to the complaint, Leach and McMicking knew of Cortec's insolvency, knew that its financial statements were false, and knew, or in the exercise of due care should have known or were reckless in not knowing, that Cortec was supplying those statements to Steel Warehouse to induce it to extend credit to Cortec.

Cortec was a Delaware corporation headquartered in Brookfield, Wisconsin. Leach and McMicking's only contact with Wisconsin, the forum state, was their attendance at Board meetings. Although the record is somewhat unclear as to how many meetings Leach and McMicking attended in Wisconsin, the record does support their presence in Wisconsin on a number of occasions for Cortec Board meetings. Leach and McMicking are both California citizens.

Leach and McMicking moved to dismiss the case for lack of personal jurisdiction under Fed.R.Civ.P. 12(b)(2). The district court granted this motion on October 7, 1997. This appeal followed.

The determination of personal jurisdiction is a question we review de novo. See Klump v. Duffus, 71 F.3d 1368, 1371 (7th Cir.1995), cert. denied, 518 U.S. 1004, 116 S.Ct. 2523, 135 L.Ed.2d 1047 (1996). The plaintiff has the burden of demonstrating the existence of personal jurisdiction over the defendants. See McIlwee v. ADM Indus., Inc., 17 F.3d 222, 223 (7th Cir.1994). A federal district court exercising diversity jurisdiction has personal jurisdiction over a nonresident only if a court of the state in which it sits would have such jurisdiction. See Wilson v. Humphreys Ltd., 916 F.2d 1239, 1243 (7th Cir.1990).

Wisconsin may exercise either general or specific personal jurisdiction over nonresident defendants. Specific jurisdiction refers to "jurisdiction over a defendant in a suit arising out of or related to the defendant's contacts with the forum." Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 n. 8, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984). General jurisdiction is proper when a defendant has "continuous and systematic general business contacts" with the forum. Id. at 416, 104 S.Ct. 1868. This type of jurisdiction allows a defendant to be amenable to suit within that forum regardless of the subject matter of the suit. Steel Warehouse has never alleged that Leach and McMicking have such continuous and systematic contacts with Wisconsin and in oral argument affirmatively waived any argument for general jurisdiction. We therefore focus on the exercise of specific jurisdiction.

Under Wisconsin law, the jurisdictional question has two components. First, the plaintiff must establish that the defendants come within the grasp of the Wisconsin long-arm statute. See Logan Productions, Inc. v. Optibase, Inc., 103 F.3d 49, 52 (7th Cir.1996); Lincoln v. Seawright, 104 Wis.2d 4, 310 N.W.2d 596, 599 (1981); Marsh v. Farm Bureau Mut. Ins. Co., 179 Wis.2d 42, 505 N.W.2d 162, 165 (1993). If the plaintiff is successful, the burden switches to the defendants to show that jurisdiction would violate due process. See Logan Productions, 103 F.3d at 52; Lincoln, 310 N.W.2d at 599. The parties in this case focus their attention on the due process question; we will therefore assume for the purpose of analysis that Leach and McMicking come within the grasp of the Wisconsin long-arm statute.

Due process requires that the defendants have "purposefully established minimum contacts within the forum State." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476-77, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985). "Crucial to the minimum contacts analysis is showing that the defendant should reasonably anticipate being haled into court [in the forum State] ... because the defendant has purposefully avail[ed] itself of the privilege of conducting activities there." RAR Inc. v. Turner Diesel, Ltd., 107 F.3d 1272, 1277 (7th Cir.1997) (quotations omitted). To satisfy due process, specific jurisdiction requires that the suit "arise out of" or "be related to" these minimum contacts with the forum state. See Helicopteros, 466 U.S. at 414 n. 8, 104 S.Ct. 1868; RAR Inc., 107 F.3d at 1277. In the instant case, this requirement means that Steel Warehouse's claims must connect to Leach and McMicking's contact with Wisconsin, i.e. Steel Warehouse's claims must arise from or relate to Leach and McMicking's activities at the Wisconsin Board meetings.

As Leach and McMicking demonstrate, Steel Warehouse has not sufficiently alleged the requisite connection between their claims and Leach and McMicking's attendance at Wisconsin Board meetings. Nothing in the complaint alleges that the defendants' acts or omissions occurred in Wisconsin, nor does the supplemental information included in Steel Warehouse's response to the defendants' motion to dismiss indicate that the actions or omissions which give rise to the allegations in the complaint occurred in Wisconsin.

Although the complaint alleges that the defendants "attended Board meetings at which the financial condition of Cortec was discussed and analyzed," the complaint does not allege that these meetings took place in Wisconsin. Additionally, while Steel Warehouse relies on the deposition excerpts attached to their response to the motion to dismiss, these excerpts are unhelpful because they fail to establish the connection with Wisconsin as well. Though both Leach and McMicking admit to having attended Cortec Board meetings in Wisconsin, they also attended Cortec Board meetings in Illinois. By alleging only that the defendants attended "Board meetings," without specifying where these meeting took place or the content of the meetings that might support their claims, Steel Warehouse has not established the requisite connection between the defendants' activities and the forum. While a complaint need not include facts alleging personal jurisdiction, see Turnock v. Cope, 816 F.2d 332, 333 (7th Cir.1987), a plaintiff bears the burden of establishing that the Court may exercise personal jurisdiction over the defendants once defendants move to dismiss for lack of personal jurisdiction. See McIlwee, 17 F.3d at 223. Steel Warehouse has failed to establish a prima facie case for personal jurisdiction, through either the allegations in its complaint or other evidence in the record, in response to the affidavits of Leach and McMicking supporting their motion to dismiss. Specific jurisdiction cannot lie without a connection between the defendants' Wisconsin activity and the claims alleged in the complaint.

For the foregoing reasons, we AFFIRM the district court's dismissal of this action for lack of personal jurisdiction.

RIPPLE, Circuit Judge, dissenting.

In my view, the fundamental misstep in the majority's analysis is its emphasis on the lack of presence of the defendants within the state of Wisconsin and on the precise activities that the defendants conducted while within the confines of the state. The appropriate focus of due process analysis 1 ought to be on the activity that the defendants caused the corporation to undertake within the state. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475-76, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985) ("Thus where the defendant 'deliberately' has engaged in significant activities within a State, ... or has created 'continuing obligations' between himself and residents of the...

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