Vesuvius Techs., LLC v. ServerCentral, Inc., Case No. 12-CV-1161

• Decision Date: 03 May 2013
• Docket Number: Case No. 12-CV-1161
• Parties: VESUVIUS TECHNOLOGIES, LLC, Plaintiff, v. SERVERCENTRAL, INC., Defendant.
• Court: U.S. District Court — Eastern District of Wisconsin

VESUVIUS TECHNOLOGIES, LLC, Plaintiff,

v.SERVERCENTRAL, INC., Defendant.

Case No. 12-CV-1161

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WISCONSIN

Dated: May 3, 2013

ORDER DENYING MOTION TO DISMISS OR TO TRANSFER

I. FACTS AND PROCEDURAL HISTORY

Vesuvius Technologies, LLC ("Vesuvius") is organized in Florida but its principal place of business is in Milwaukee, Wisconsin. (Docket No. 1, ¶1.) Its members are two trusts organized under Wisconsin law. The trustee of these member trusts is a citizen of Wisconsin. (Docket No. 1, ¶2.) ServerCentral, Inc. ("ServerCentral") is an Illinois corporation with its principal place of business in Chicago, Illinois. (Docket No. 1, ¶3.) The parties entered into a contract whereby ServerCentral agreed to provide Vesuvius with "colocation services, bandwidth/internet connection, and power." (Docket No. 1, ¶13.) To enable this service, Vesuvius installed its own equipment at ServerCentral's facility in Elk Grove, Illinois. (Docket No. 1, ¶13.) Vesuvius subsequently sought to remove its equipment but was prevented from doing so by ServerCentral, (Docket No. 1, ¶¶17-21), leading to Vesuvius filing this action on November 14, 2012, (Docket No. 1). The court has subject matter jurisdiction based upon the diversity of the parties and because the amount in controversy exceeds $75,000.00. 28 U.S.C. § 1332(a). However, ServerCentral contends that the court lacks personal jurisdiction over it.

In response to the complaint, ServerCentral filed a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(3) for lack of personal jurisdiction or in the alternative to transfer this action to the Northern District of Illinois. (Docket No. 13.) The court permitted Vesuvius to undertake limited discovery related to the motion to dismiss, (Docket No. 25), and following that discovery, the parties filed supplemental briefs with the court, (Docket Nos. 32 (sealed pursuant to protective order); 34). The pleadings on ServerCentral's motion are now closed and the matter is ready for resolution. All parties previously consented to the full jurisdiction of a magistrate judge. (Docket Nos. 10, 12.)

II. PERSONAL JURISDICTION

Venue is proper in "a judicial district in which any defendant resides...." 28 U.S.C. § 1391. For purposes of venue, a corporate defendant, such as ServerCentral, shall be deemed to reside in any judicial district where it "is subject to the court's personal jurisdiction with respect to the civil action in question." 28 U.S.C. § 1391(c)(2). Thus, the court looks to Wisconsin's long-arm statute, Wis. Stat. § 801.05, to determine whether a corporate defendant is subject to personal jurisdiction. A corporation is subject to general personal jurisdiction under Wisconsin's law, Wis. Stat. § 801.05, if it "[i]s engaged in substantial and not isolated activities within this state, whether such activities are wholly interstate, intrastate, or otherwise." Wis. Stat. § 801.05(1)(d). Alternatively, a defendant is subject to specific personal jurisdiction in Wisconsin if, as is relevant here: "In any action claiming injury to person or property within this state arising out of an act or omission outside this state by the defendant, provided in addition that at the time of the injury...[s]olicitation or service activities were carried on within this state by or on behalf of the defendant." Wis. Stat. § 801.05(4)(a). Wisconsin's long-arm statute is liberally construed in favor of jurisdiction." Kopke v. A. Hartrodt S.R.L., 2001 WI 99, ¶10, 245 Wis. 2d 396, 629 N.W.2d 662.

Generally, a court's analysis of personal jurisdiction is two-fold. Rasmussen v. Gen. Motors Corp., 2011 WI 52, ¶16, 335 Wis. 2d 1, 803 N.W.2d 623. First, the court must determine whether the defendant comes within the state's long-arm statute. Id. Second, the court must determine whether exercising jurisdiction over the defendant would comport with due process. Id. Wisconsin continues to follow this two-step analysis despite the fact that, at least with respect to claims of jurisdiction under Wis. Stat. § 801.05(1)(d), the analyses overlap. Id. at ¶¶19-21. Parenthetically, Chief Justice Abrahamson noted the apparent redundancy of the analyses and stated in concurrence that, with respect to claims of jurisdiction under Wis. Stat. § 801.05(1)(d), "the only analysis that need be done is a due process analysis." Id. at ¶57 (Abrahamson, C.J., concurring).

However, a majority of the Wisconsin Supreme Court has not adopted this single-pronged approach, merging due process with statutory factors. Thus, this court's analysis must remain distinctly two-pronged because federal courts defer to state courts only on matters of state law and not federal due process protections. RAR, Inc. v. Turner Diesel, Ltd., 107 F.3d 1272, 1275-76 (7th Cir. 1997). Thus, this court shall first look to Wisconsin case law (or federal cases applying Wisconsin law) to determine whether the defendant falls within either Wis. Stat. § 801.05(1)(d) or § 801.05(4)(a). Id. If the court answers this first question affirmatively, it shall then look to federal case law for guidance as to whether the statutory exercise of jurisdiction comports with due process. Id.

A. Wis. Stat. § 801.05(1)(d)

"Pursuant to Wis. Stat. § 801.05(1), Wisconsin courts may exercise general personal jurisdiction over a defendant when that defendant takes up 'local presence or status' within the state." Rasmussen, 2011 WI 52, ¶18 (quoting Druschel v. Cloeren, 2006 WI App 190, ¶¶7-8, 295 Wis.2d 858, 723 N.W.2d 430). In determining whether a defendant engaged in the statutorily required "substantial and not isolated activities" in Wisconsin, the court considers "[(1)] thequantity of the contacts, [(2)] the nature and quality of those contacts, [(3)] the source and connection of the contacts to the claim made, [(4)] the interest of Wisconsin in the action and [(5)] the convenience of the parties. Id. at ¶19 (citing Nagel v. Crain Cutter Co., 50 Wis.2d 638, 648, 184 N.W.2d 876 (1971)).

While "Wisconsin's long-arm statute is liberally construed in favor of jurisdiction," Kopke, 2001 WI 99, ¶10, the defendant's substantial activities in Wisconsin must nonetheless be "continuous and systematic," Travelers Ins. Co. v. George McArthur & Sons, 25 Wis. 2d 197, 203, 130 N.W.2d 852, 854 (1964). "A defendant generally has 'substantial and not isolated' contacts with the state if it "solicits, creates, nurtures, or maintains, whether through personal contacts or long-distance communications, a continuing business relationship with anyone in the state." Shepherd Investments Int'l, Ltd. v. Verizon Commc'ns Inc., 373 F. Supp. 2d 853, 861 (E.D. Wis. 2005) (quoting Stauffacher v. Bennett, 969 F.2d 455, 457 (7th Cir.1992)) (brackets omitted).

In assessing the defendant's contacts with the state, the court focuses upon the contacts that existed at the time the action was commenced, Wis. Stat. § 801.05(1); FL Hunts, LLC v. Wheeler, 2010 WI App 10, ¶11 322 Wis. 2d 738, 747, 780 N.W.2d 529, 533, although the defendant's recent activities in the state will carry some weight, Shepherd, 373 F. Supp. 2d at 865 (citing Miller Brewing Co. v. ACME Process Equip. Co., 441 F. Supp. 520, 524 (E.D.Wis.1977)).

"The plaintiff has a "minimal burden" of showing that the statutory and constitutional requirements are met." Rasmussen, 2011 WI 52, ¶17 (citing Kopke, 2001 WI 99, ¶8). The court "may consider documentary evidence and weigh affidavits in reaching a determination as to whether this burden has been met. Factual doubts are to be resolved in favor of the plaintiff." Id. (quoting Kopke, 2001 WI 99, ¶8). If the court concludes that the plaintiff has sustained its burden to show that Wisconsin's long-arm statute reaches the defendant, the burden then shifts to the defendant to rebut the presumption that the exercise of jurisdiction would comport with due process.Shepherd, 373 F. Supp. 2d at 861 (citing Kopke, 2001 WI 99, ¶22); see also Harley-Davidson Motor Co., Inc. v. Strada, 78 F.R.D. 521, 523 (E.D. Wis. 1978).

Vesuvius contends that ServerCentral is subject to the jurisdiction of Wisconsin courts because it was "engaged in substantial and not isolated activities" in Wisconsin by soliciting customers in Wisconsin through internet advertising that it knew would be viewed by persons in Wisconsin and by collecting significant revenue from a few different customers in Wisconsin over recent years. However, ServerCentral notes that it was never physically present in Wisconsin, nor did it ever ship any product to Wisconsin. Rather, it merely provided services from Illinois to its customers, some of whom happened to be in Wisconsin. While ServerCentral representatives communicated with Vesuvius' employees in Wisconsin via email or telephone, the only physical interaction between the parties, minimal that it was, occurred in Illinois. To the extent that any physical product was involved, e.g. the servers the plaintiff provided to the defendant, all relevant events occurred in Illinois.

The court begins its analysis with the first two Nagel factors—the quantity and quality of ServerCentral's contacts with the state of Wisconsin. ServerCentral had other customers to whom it mailed invoices at Wisconsin addresses from 2009 to 2012. No employee, agent, or representative of ServerCentral ever visited Wisconsin during this time for the purpose of sales or advertising. It provided these customers services from its facilities outside of Wisconsin.

However, a defendant need not physically set foot in Wisconsin to be subject to its jurisdiction. Stauffacher, 969 F.2d at 457-58; see also Dorf v. Ron March Co., 99 F. Supp. 2d 994, 997 (E.D. Wis. 2000); PKWare, Inc. v. Meade, 79 F.Supp.2d 1007 (E.D.Wis. 2000). It is possible for a defendant to establish high quality contacts with the state through only telephonic or email communications. PKWare, 79 F. Supp. 2d at 1013; but see Dietrich v. Wisconsin Patients Compensation Fund, 169 Wis. 2d...