LP Solutions LLC v. Duchossois ( 2018 )

United States Court of Appeals
For the First Circuit
No. 18-1351
LP SOLUTIONS LLC,
Plaintiff, Appellant,
v.
CRAIG J. DUCHOSSOIS, individually and as Co-Executor of the
Estate of Richard Bruce Duchossois; RICHARD L. DUCHOSSOIS;
KIMBERLY T. DUCHOSSOIS; DAYLE P. DUCHOSSOIS-FORTINO; THOMAS A.
SMITH, as Co-Executor of the Estate of Richard Bruce Duchossois,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. D. Brock Hornby, U.S. District Judge]
Before
Lynch, Stahl, and Thompson,
Circuit Judges.
Daniel J. Murphy, with whom Bernstein Shur Sawyer & Nelson
was on brief, for appellant.
Nolan L. Reichl, with whom Kyle M. Noonan and Pierce Atwood
LLP were on brief, for appellees.
October 24, 2018
LYNCH, Circuit Judge. This contract case raises the
close question of whether the plaintiff has failed to carry its
burden of showing that there is personal jurisdiction over the
defendants in Maine, as the district court held in a thoughtful
opinion dismissing the action. LP Sols., LLC v. Duchossois, No.
2:18-CV-25-DBH, 2018 WL 1768037, at *1 (D. Me. Apr. 11, 2018).
The underlying dispute involves agreements about the
defendants' interests in an Illinois limited partnership, Elm
Street Plaza Venture, LLLP. LP Solutions LLC (LPS), a Maine
company, offered to buy limited partnership interests owned by
members of the Duchossois family, who are defendants here, and who
mostly reside in Illinois. LPS said that the transaction would
provide the family members with payments and tax benefits. The
family members accepted a second offer made to them in Illinois.
Under an agreement with LPS, the family made distribution payments
to LPS in Maine only three times, once per year for three years.
In March 2015, the Elm Street partnership's General
Partners sued LPS in Illinois. The thrust of the lawsuit was that
LPS could not legally obtain the limited partnership interests
from partnership interest holders like the Duchossois family
members. When the family members later refused to deliver
partnership distributions made in 2016 that LPS said were assigned
to it, LPS sued them in Maine, in a case removed to federal court.
- 2 -
The federal district court, on the undisputed evidence,
found there was no personal jurisdiction because the Duchossois
family's contacts with Maine did not make the exercise of personal
jurisdiction foreseeable. LP Sols., 2018 WL 1768037, at *1.
Although it is a close call, the context of the family's Maine
contacts, including their nature, number, origin, and duration,
leads us to agree with the district court. We affirm.
I.
We take the facts from LPS's properly documented
evidentiary proffers and from the Duchossois family's undisputed
proffers. See Copia Commc'ns, LLC v. AMResorts, L.P., 812 F.3d 1,
3 (1st Cir. 2016).
A. The Parties
The defendant Duchossois family had partnership
interests in Elm Street Plaza Venture, LLLP (a limited liability
limited partnership). The Elm Street LLLP built and owns a
residential apartment building in Chicago, Illinois. That
partnership is registered in Illinois, its partnership agreement
is governed by Illinois law, its assets are in Illinois, and it is
managed by a General Partner who resides in Illinois. The
Duchossois family members, Richard L. Duchossois and his children
Craig J. Duchossois, Kimberly T. Duchossois, and Dayle P.
Duchossois-Fortino, all live in Illinois, except for Richard Bruce
Duchossois who resided in Florida and spent time in South Carolina
- 3 -
before his death in 2014.1 Before interacting with LPS, the
Duchossois family members collectively owned a 4.54 percent
interest in the Elm Street partnership.
LPS is a Portland, Maine-based investor in the
affordable housing industry. It owns "thousands of limited
partnership interests and related interests in various limited
partnerships across the United States." Before its dealings with
the Duchossois family, LPS already owned a 13.66 percent stake in
the Elm Street partnership.
B. The Contracts
In September 2013, LPS sent letters to the Duchossois
family members offering to buy their interests in the Elm Street
partnership. William Gendron, an LPS agent, also called Jennifer
Hager, a Duchossois agent in Illinois, to follow up on those
letters. Hager rejected the offer without negotiation.
After that initial rejection, Gendron sent a new offer
to Janet Czosek, another Duchossois agent also in Illinois.
Gendron represented that the offer -- LPS's "Option
Program" -- would have tax benefits for the Duchossois family
members. It would let them "lock [in]" the value of their
partnership interests "at today's market value, receive a
1 Richard Bruce Duchossois's estate has participated in
this suit through its co-executors: Craig J. Duchossois and Thomas
A. Smith.
- 4 -
significant portion of the purchase price on a tax-deferred basis
and avoid tax recapture." LPS marketed its program to individuals
whose limited partnership interests had "significant tax
recapture." As we understand it, individuals in that circumstance
had the choice to either sell their interests in their lifetime,
with attendant negative tax consequences, or to "wait until their
estate receives the interest" at death. LPS's program gave limited
partnership holders a third option: LPS would make an "Option Fee
payment[]," which is not taxable "until the final transfer of the
limited partnership interest," in return for "partnership cash
flow." Simply put, LPS gave the limited partnership holder money
up front on a tax-deferred basis in return for a portion of the
partnership's distributions.
In September 2013, LPS sent agreements embodying the
advertised proposal to each member of the Duchossois family. Those
agreements had two main parts: an Option agreement and an
Assignment. Both parts were fully drafted and signed by LPS and
had the sales price filled in. They both defined LPS as "a Maine
limited liability company with a principal place of business" in
Portland, Maine.
The Option agreement gave LPS a twenty-year option to
purchase the Duchossois family member's partnership interest for
a specified amount (the purchase price). There was, apart from
the twenty years over which LPS could exercise the option, no term
- 5 -
of years to the agreement. LPS said it would spread payment of
the purchase price over a series of payments: First, LPS would pay
half the purchase price to the family in Illinois on execution of
the agreement. Next, LPS would make payments in two installments,
each of about ten percent of the purchase price, in November 2014
and November 2015, respectively. LPS would not, however, pay the
balance of the purchase price unless it exercised the option, a
choice left to its discretion. If LPS exercised the option before
the death of a family member, it would pay to that family member,
"as additional sales proceeds, the cost of the tax recapture of
the limited partner's negative capital account."
In return, under the Option agreement, if the
partnership made a "cash flow distribution," the Duchossois family
members would then give LPS part of that distribution, equal to
the proportion LPS had paid to that date of the agreement's
purchase price. Put more simply, if LPS had paid fifty percent of
the purchase price to a particular family member, LPS would be
entitled to fifty percent of the partnership's cash flow
distributions to that family member. The record contains no
evidence that any Duchossois family member had authority to cause
the Elm Street LLLP or its General Partners to make or not to make
distributions on behalf of the partnership.
The Duchossois family members also agreed not to
alienate or encumber their Elm Street partnership interests and to
- 6 -
vote their interests as directed by LPS. They would send "[a]ll
notices, demands, and other communications" to LPS in Maine. The
agreements do not say where distribution payments to LPS were to
be made.
The Assignment required the Duchossois family members to
"irrevocably and unconditionally sell[], assign[] and transfer[]"
their partnership interests to LPS if LPS exercised its option, as
LPS later sought to do. LPS, importantly, "assume[d] all risk"
for "any transfer restrictions contained in the Partnership's
partnership agreement." The family members assumed no such
obligations. (Later, in the lead-up to litigation Elm Street
brought against LPS in Illinois, the Elm Street General Partners
did object to any such transfer to LPS by any limited partners,
including the Duchossois family members.)
The Option agreement states that it is "governed
exclusively by the laws of the State of Maine" under a choice-of-
law provision. The Assignment, however, is governed by "the laws
of the state where the Partnership is domiciled," that is,
Illinois. Neither agreement contains a forum-selection clause.
We return to the chronology of events. In September
2013, having received and reviewed LPS's proposal, Hager and Czosek
emailed LPS to say that the proposed agreements were acceptable to
the family. They did not negotiate price or any other terms with
LPS. The two agents collected signatures from the Duchossois
- 7 -
family members in Illinois and South Carolina. In early October
2013, Hager and Czosek sent the executed agreements to LPS in
Maine. An LPS employee responded that the agreements lacked
witness signatures, so Hager and Czosek sent new, witnessed
signature pages to LPS in Maine.
C. Performance, Exercise of Options, and Breach
In October 2013, after the agreements were signed, LPS
paid the first installment to the Duchossois family members. LPS
sent each payment to Illinois.
The Elm Street partnership made a distribution to the
limited partners in June 2014. By then, LPS had paid half of the
purchase price to each Duchossois family member, so the family
members each sent half of their distribution proceeds to LPS in
Maine.
Richard Bruce Duchossois died in July 2014. A Duchossois
family agent notified LPS of his death. Hager wrote to "confirm"
that Richard Bruce Duchossois's death "[wa]s a triggering event
under the agreement" and to inquire about "the next steps." LPS
responded requesting information and paperwork necessary to
exercise the option. LPS exercised its option on Richard Bruce
Duchossois's partnership interest and, in late August, sent the
balance of the option price to his estate. The estate executed
the Assignment and sent it to LPS in Maine that same month. LPS
- 8 -
did not then exercise its options on the interests of the remaining
family members.
In October 2014, LPS made the second round of installment
payments to the remaining Duchossois family members.2 These
payments were the second check or wire transfer to each family
member that LPS had sent from Maine to Illinois.
The next month, Hager, for the family, emailed Gendron
of LPS to say that "[w]e are anxious to speak to you about the tax
consequences" of the Option agreements. After the two spoke by
phone, Hager followed up to ask whether Gendron "ha[d] an update
on the potential to exercise the option agreements for the
Duchossois family members before the end of 2014." Gendron
testified that he understood this to mean that the family members
wanted LPS to exercise its options on each of their interests.
There is no evidence as to what the family members understood.
LPS chose to exercise its options on the family members'
interests effective in December 2014. LPS's choice required the
Duchossois family members to sign the Assignments, so Hager and
Gendron spoke by phone in mid-November, and they along with other
2 The record does not show this second payment being made
to Richard L. Duchossois. There is no allegation, however, that
LPS did not make this second payment. Later, the record includes
uncontradicted testimony that Richard L. Duchossois received all
required payments under the Option agreements. Based on this
testimony, we assume that LPS made the second payment by wire to
Richard L. Duchossois in Illinois.
- 9 -
party agents corresponded back and forth into January 2015. LPS
received Richard L. Duchossois's signed Assignment in December and
scans of the remaining family members' signed Assignments in
January 2015. LPS paid the balance on Richard L. Duchossois's
interest by wire transfer in December 2014, and on the remaining
family members' interests by checks in February 2015. These were
the third round of payments made by LPS to the family members in
Illinois.
In January 2015, after the Assignments were executed,
LPS communicated by email with the Duchossois family members in
Illinois, asking them to each sign and send a letter to the Elm
Street partnership's General Partners requesting the General
Partners' consent to the Assignments. The family members agreed
and sent the letters to the General Partners in Illinois. Two
months later, the General Partners responded by letter to Richard
L. Duchossois stating that the partnership did not recognize the
transfer of his interests to LPS. Craig J. Duchossois received
the same letter in his capacity as co-executor of Richard Bruce
Duchossois's estate. The General Partners took the same position
as to all the remaining family members: the General Partners have
not recognized as valid any of the transfers to LPS involving the
Duchossois family's ownership interests in the Elm Street
partnership.
- 10 -
In March 2015, the Elm Street partnership's manager and
General Partners brought suit against LPS in Illinois state court
over LPS's efforts to acquire interests in the partnership and
other similar partnerships. The Duchossois family made no
appearance in and is not a party to that litigation. LPS sought
to join the family members as necessary parties, the Elm Street
partners opposed, and the Illinois court denied that motion. LPS
has made no effort to sue the family in Illinois on the subject
matter of this action.
As part of the agreements, LPS had agreed to take on
certain tax liability resulting from the sale of the Duchossois
family members' partnership interests. The agreements, however,
do not say how this was to be accomplished. LPS began this process;
it sent a letter to Richard L. Duchossois in Illinois on March 26,
2015, requesting a copy of his 2014 Schedule K-1.3 The Schedule
K-1 is a tax form used to report the filer's share of partnership
income. LPS needed copies of that form for each family member so
that it could fill out for each a Form 8082, another tax form used
to adjust and shift tax liability to the assignee of an economic
interest (that is, LPS). LPS included with the letter a FedEx
envelope already addressed to return the Schedule K-1 to LPS.
3 Similar requests apparently went to other family
members, but the record contains only the letter LPS sent to
Richard L. Duchossois.
- 11 -
Two weeks later, Kimberly Spencer, an LPS agent, emailed
Hager that she had received 2014 Schedule K-1s from Kimberly and
Craig Duchossois and Dayle Duchossois-Fortino. Hager replied that
she had sent the forms because "[w]e received a letter from LP
Solutions requesting they be sent." Hager then asked when she
could expect the "Forms 8082" from LPS in return.
In June 2015 and May and June 2016, the Duchossois family
members each sent Elm Street partnership distributions by check to
LPS in Maine. The parties engaged in routine correspondence about
these payments. These payments when added to the earlier June
2014 payments totaled $86,363.65.
In October 2016, after the Elm Street partnership had
sued LPS in Illinois, the partnership experienced what the
complaint calls a "capital event." That event was a refinancing
of certain of the Elm Street partnership's financial obligations.
This resulted in distributions to the limited partners. Again,
there is no assertion that the family members controlled or caused
this event. LPS has alleged that the distributions collectively
totaled over $1,000,000 to the Duchossois family -- about $500,000
to Richard L. Duchossois and $130,000 each to the remaining family
members and Richard Bruce Duchossois's estate. LPS's complaint
alleges that the family has "refused to remit" these distributions
to LPS despite LPS's demands. LPS adds that the family has also
retained the nearly $600,000 that LPS paid as consideration for
- 12 -
its option on their interests. At oral argument in Illinois,
counsel for LPS suggested that the Duchossois family had "refus[ed]
to move forward" with LPS "because of the confusion that the [Elm
Street General Partners] have sewed [sic] as to the validity of
the agreement."
D. Procedural History
LPS sued the Duchossois family in Maine state court on
November 15, 2017. It brought claims for breach of contract, or,
in the alternative, for unjust enrichment. The Duchossois family
removed the case to federal court and moved to dismiss for lack of
personal jurisdiction.
The district court granted the motion to dismiss,
concluding on the prima facie record that exercising specific
personal jurisdiction over the Duchossois family would not comport
with due process. LP Sols., 2018 WL 1768037, at *1. The district
court found that the Duchossois family members "did not
purposefully avail themselves of the privilege of conducting
activities in Maine in a way that would make jurisdiction over
them here foreseeable." Id. at *11.4
LPS timely appealed.
4 The district court also denied LPS's request for
jurisdictional discovery. LPS has not appealed that denial.
- 13 -
II.
A. Standard of Review
Given the district court's use of prima facie review, we
take the plaintiff's evidentiary proffers as true and we consider
uncontradicted facts proffered by the defendant. C.W. Downer &
Co. v. Bioriginal Food & Sci. Corp., 771 F.3d 59, 65 (1st Cir.
2014). It is LPS's burden to proffer evidence "sufficient to
support findings of all facts essential to personal jurisdiction,"
and to do so without relying on unsupported allegations. A Corp.
v. All Am. Plumbing, Inc., 812 F.3d 54, 58 (1st Cir. 2016). Our
review is de novo. See Foster-Miller, Inc. v. Babcock & Wilcox
Can., 46 F.3d 138, 147 (1st Cir. 1995).
B. Personal Jurisdiction
In diversity jurisdiction cases like this one, the
exercise of personal jurisdiction must be both authorized by state
statute and permitted by the Constitution. Harlow v. Children's
Hosp., 432 F.3d 50, 57 (1st Cir. 2005). The state statute here,
Maine's long-arm statute, reaches "to the fullest extent permitted
by the due process clause of the United States Constitution." Me.
Rev. Stat. Ann. tit. 14, § 704-A(1) (2016). The parties agree
that our inquiry resolves into only whether the exercise of
jurisdiction complies with due process.
For the exercise of jurisdiction to be constitutional,
a defendant must have "certain minimum contacts with [the forum
- 14 -
state] such that the maintenance of the suit does not offend
'traditional notions of fair play and substantial justice.'" Int'l
Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (quoting Milliken
v. Meyer, 311 U.S. 457, 463 (1940)).5 LPS has asserted specific
personal jurisdiction over the Duchossois family, so the
constitutional analysis here has three components: relatedness,
purposeful availment, and reasonableness. Plixer Int'l, Inc. v.
Scrutinizer GmbH, No. 18-1195, 2018 WL 4357137, at *3 (1st Cir.
Sept. 13, 2018). That is, LPS must show that (1) its claim
directly arises out of or relates to the defendant's forum
activities; (2) the defendant's forum contacts represent a
purposeful availment of the privilege of conducting activities in
that forum, thus invoking the benefits and protections of the
forum's laws and rendering the defendant's involuntary presence in
the forum's courts foreseeable; and (3) the exercise of
jurisdiction is reasonable. Id.LPS must make all three showings to establish specific
personal jurisdiction. See C.W. Downer, 771 F.3d at 65. We hold
that LPS has not made the second showing because, on the evidence
5 The Duchossois family's Maine contacts mostly came from
their agents, but "[f]or purposes of personal jurisdiction, the
actions of an agent may be attributed to the principal." Daynard
v. Ness, Motley, Loadholt, Richardson & Poole, P.A., 290 F.3d 42,
55 (1st Cir. 2002). In our analysis, we treat each of the
Duchossois family members "as identically situated for ease of
exposition." Copia Commc'ns, 812 F.3d at 5 n.3.
- 15 -
LPS has presented, we find, in agreement with the district court,
that the Duchossois family has not purposefully availed itself of
the privilege of conducting activities in Maine, thus invoking the
Maine forum's laws and rendering the family's presence in the
forum's courts foreseeable.
1. Relatedness
The district court found that LPS had made a sufficient
showing under the relatedness prong, save that the contacts
involving LPS's preparation of tax forms for the Duchossois family
were not related. LP Sols., 2018 WL 1768037, at *7. To show
relatedness, LPS must produce evidence that shows its "cause of
action either arises directly out of, or is related to, the
defendant's forum-based contacts." Harlow, 432 F.3d at 61 (citing
United Elec., Radio & Mach. Workers of Am. v. 163 Pleasant St.
Corp., 960 F.2d 1080, 1088-89 (1st Cir. 1992).6 Even if LPS has
6 Both of LPS's claims -- for breach of contract and unjust
enrichment -- would be reviewed under the same contract-based
relatedness test. See C.W. Downer, 771 F.3d at 64, 66 (applying
the same jurisdictional analysis to related breach of contract and
unjust enrichment claims). The parties dispute the content of
that contract-based test. The Duchossois family says that the
only contacts that count are those that are "instrumental either
in the formation of the contract or its breach." Adelson v.
Hananel, 510 F.3d 43, 49 (1st Cir. 2007) (quoting Phillips Exeter
Acad. v. Howard Phillips Fund, Inc., 196 F.3d 284, 289 (1st Cir.
1999)). LPS responds that relatedness is a "flexible, relaxed
standard" that requires us to "focus on the parties' prior
negotiations and contemplated future consequences, along with the
terms of the contract and the parties' actual course of dealing."
C.W. Downer, 771 F.3d at 66 (quotation marks omitted). The dispute
is beside the point here as we agree with the district court that
- 16 -
satisfied the relatedness prong to the extent found by the district
court, it has not satisfied the purposeful availment prong, so we
turn to the purposeful availment analysis. See, e.g., Adams v.
Adams, 601 F.3d 1, 6 (1st Cir. 2010) (assuming, arguendo, that the
plaintiff had satisfied the relatedness prong before concluding
that the plaintiff had not made a showing of purposeful availment).
2. Purposeful Availment
LPS must show that the Duchossois family has
purposefully availed "itself of the privilege of conducting
activities within the forum State, thus invoking the benefits and
protections of its laws." Hanson v. Denckla, 357 U.S. 235, 253
(1958) (citation omitted). The test for purposeful availment "is
only satisfied when the defendant purposefully and voluntarily
directs his activities toward the forum so that he should expect,
by virtue of the benefit he receives, to be subject to the court's
jurisdiction based on these contacts." United States v. Swiss Am.
Bank, 274 F.3d 610, 624 (1st Cir. 2001). This standard ensures
that the exercise of jurisdiction is essentially voluntary and
foreseeable, C.W. Downer, 771 F.3d at 66, not based on a
defendant's "random, fortuitous, or attenuated [forum] contacts,"
Carreras v. PMG Collins, LLC, 660 F.3d 549, 555 (1st Cir. 2011)
(quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985)).
LPS has not carried its burden of proving that the Duchossois
family purposefully availed itself of Maine.
- 17 -
The parties agree that there is no issue as to
voluntariness here. The question is thus whether the Duchossois
family's Maine contacts are "of a nature that the [family] could
'reasonably anticipate being haled into court [in Maine].'"
Phillips v. Prairie Eye Ctr., 530 F.3d 22, 28 (1st Cir. 2008)
(quoting Adelson v. Hananel, 510 F.3d 43, 50 (1st Cir. 2007)). We
agree with the district court that, on the evidence LPS has
presented, the Duchossois family's Maine contacts did not make the
exercise of jurisdiction reasonably foreseeable. LP Sols., 2018
WL 1768037, at *8.
In contract cases, we have found that the exercise of
jurisdiction is reasonably foreseeable when "the defendant
deliberately direct[ed] its efforts toward the forum state," C.W.
Downer, 771 F.3d at 68 (citing Burger King, 471 U.S. at 476), or
when the defendant "enter[ed] a contractual relationship that
envisioned continuing and wide-reaching contacts in the forum
State," id. (quoting Walden v. Fiore, 571 U.S. 277, 285 (2014)).
The Duchossois family has neither directed its efforts toward Maine
nor entered into such an extensive contractual relationship.
First, the origin of the parties' contractual
relationship factors against a finding of purposeful availment.
The Duchossois family did not reach out to Maine looking to sell
its interests in the Elm Street partnership; instead, LPS reached
out to the family in Illinois to solicit the sale. Of course, a
- 18 -
lack of solicitation alone is not necessarily determinative, see
Baskin-Robbins Franchising LLC v. Alpenrose Dairy, Inc., 825 F.3d
28, 38 (1st Cir. 2016), but the lack of an effort by the Duchossois
family to reach out to Maine distinguishes this case from several
in which we have found the test for purposeful availment met.
Compare Cossart v. United Excel Corp., 804 F.3d 13, 21 (1st Cir.
2015) (noting, in support of purposeful availment, that the
defendant "recruited" for employment the plaintiff at his home in
the forum), and Adelson v. Hananel, 652 F.3d 75, 82–83 (1st Cir.
2011) (concluding that the defendant had purposefully availed
himself of the forum in part because he "sought" the employment
contract at issue "with a company whose key officers were all
located in [the forum]"), with Prairie Eye Ctr., 530 F.3d at 29(emphasizing the lack of solicitation when finding no purposeful
availment).
And second, the parties' contractual relationship does
not render the exercise of jurisdiction foreseeable. The
Duchossois family did knowingly enter into a contractual
relationship with a Maine entity, but, as the district court
properly noted, see LP Sols., 2018 WL 1768037, at *8, "the
defendant's awareness of the location of the plaintiff is not, on
its own, enough to create personal jurisdiction over a defendant."
Prairie Eye Ctr., 530 F.3d at 28. Something more is needed: the
contractual relationship must either envision or include
- 19 -
sufficient continuous and wide-ranging contacts with Maine to meet
the foreseeability test.
LPS argues that its agreements with the Duchossois
family envisioned continuous and wide-ranging contacts with Maine.
That argument is misleading. The family had no independent
obligations under the agreements with LPS; each of the family's
obligations depended first on the action of someone outside the
family. If the General Partners brought up some matter needing a
vote of the limited partnership interest, the family had to consult
with LPS before voting. If the General Partners made a
distribution, the family had to forward part of it to LPS. And if
LPS elected to exercise its option, the family members had to
execute their respective Assignments. But the agreements nowhere
required the General Partners to make a distribution or to bring
a matter to a vote. Nor did the agreements require LPS to exercise
its options. And, again, there is no allegation in the record
that the Duchossois family exercised control over either the
General Partners or the distributions made by the partnership.
The Duchossois family's contractual obligations are
different from those that courts have found justify the exercise
of jurisdiction. The contingent nature of the family's contractual
obligations separate this from a franchise contract case like
Burger King, in which the defendant voluntarily accepted "the long-
term and exacting regulation of his business from" the plaintiff
- 20 -
in the forum. 471 U.S. at 480. And these contingent obligations
separate this case from a services contract case like C.W. Downer,
which involved an agreement under which the plaintiff "acted as
[the defendant's] exclusive financial adviser in connection with"
the defendant's potential sale, and which thus required
"interactive communications between the two [parties] for an
extended period of time." 771 F.3d at 63, 68. The family's
contingent contractual obligations here mean that their Maine
contacts were also contingent, which undercuts the case for
foreseeability. Cf. Scottsdale Capital Advisors Corp. v. The Deal,
LLC, 887 F.3d 17, 21 (1st Cir. 2018) (noting, in a defamation case,
that the plaintiffs' argument was based on assumptions untethered
to evidence, which left "a hole in [their] prima facie case for
maintaining jurisdiction").
Next, LPS emphasizes its own obligations under the
agreement and the twenty-year term over which it could exercise
its option, provided that the Option agreement was not terminated
earlier. This was not, however, a contract requiring performance
of continuing obligations over a twenty-year period. Far from it.
Even if LPS kept the option for the full twenty years, the
agreement only required LPS to make three payments: one at signing,
one a year later, and one a year after that. And LPS had to
prepare tax forms only once: on exercise of the option. These tax
forms were meant to assign the "income (loss) attributable to the
- 21 -
economic interest from [the family] to [LPS]." The tax forms were
necessary for LPS to get the full benefit of its deal with the
family, so their preparation does little to show that the
Duchossois family purposefully availed itself of Maine. Cf. Copia
Commc'ns, 812 F.3d at 5-6 (noting that forum contacts that
"represent[] a convenience for [the plaintiff]" do not show "the
type of availment by [the defendant]" that would justify the
exercise of jurisdiction).
Given the few contractual commitments tying the
Duchossois family members to Maine, the family members' actual
contact with Maine strikes us as more relevant to the purposeful
availment inquiry. And that actual contact was limited. The
Duchossois family merely sent the amount of three partnership
distributions into Maine, sent the executed Assignments into
Maine, collaborated with LPS on tax issues, and corresponded about
these.
The Duchossois family's payments to Maine do not support
the exercise of jurisdiction. In Baskin-Robbins we concluded that
the exercise of jurisdiction was foreseeable in part because the
defendant had sent "a constant stream of payments" into the forum.
825 F.3d at 38-39. That stream comprised 180 payments made monthly
over about fourteen years. See id. at 39. In contrast, the
Duchossois family sent only three partnership distributions, one
per year over three years, to LPS in Maine. As the district court
- 22 -
correctly noted, see LP Sols., 2018 WL 1768037, at *9, the sending
of such "occasional payments into the forum state" here lacks
"'decretory significance'" in the jurisdictional calculus.
Baskin-Robbins, 825 F.3d at 38 (quoting Phillips Exeter Acad. v.
Howard Phillips Fund, Inc., 196 F.3d 284, 291 (1st Cir. 1999)).
Nor do the Maine activities and communications by the
family members support the exercise of jurisdiction. We upheld
the exercise of jurisdiction in Baskin-Robbins in part because the
defendant caused the plaintiff to undertake "a plethora of
activities on its behalf" in the forum. Id. at 39. Those
activities, like product testing and the processing of customer
complaints, better enabled the defendant to exploit the forum
market. See id. at 38. In contrast, LPS took on few activities
in Maine, like the preparation of tax forms and payments, for the
Duchossois family. These few activities are better evidence of
LPS's intent to exploit the Illinois market than the Duchossois
family's intent to exploit the Maine one. In the district court's
words, "[a]bsent are the substantial, ongoing, interdependent
controls and commitments that are typical of franchise and services
contract cases and often justify jurisdiction."7 LP Sols., 2018
WL 1768037, at *10.
7 That the Option agreements required the Duchossois
family members to vote their partnership interests at LPS's
direction does not change this analysis. We have typically
considered whether a contract subjects a defendant to "substantial
- 23 -
Relatedly, communication between representatives of LPS
and the Duchossois family was sporadic. Months went by without a
single email or phone call. And when the parties did correspond,
most of the communications from the Duchossois family to LPS were
responsive, having been instigated by LPS. In contrast, the
Baskin-Robbins parties coordinated "on a wide variety of
operational issues," with "communications occurr[ing] regularly
(at a minimum, monthly)." 825 F.3d at 39.
We reject LPS's three remaining arguments. LPS first
argues that several times the Duchossois family reached out to
LPS, and that this shows that the family has purposefully availed
itself of Maine. The first instance was when Richard Bruce
Duchossois died. Hager, an agent for the family, sought only to
"confirm" that his death was a "triggering event under the
agreement." After LPS exercised its option on Richard Bruce
Duchossois's partnership interest, Hager inquired "about the tax
consequences for the Duchossois family members" and followed up to
ask for "an update on the potential to exercise the option
agreements" for the remaining family members. These
communications do not show that the family purposefully availed
itself of Maine. Instead, as the district court noted, these
control" under the rubric of relatedness. See, e.g., Prairie Eye
Ctr., 530 F.3d at 27. For present purposes, we merely note that
there is no record evidence of LPS exercising any control over the
Duchossois family under this contractual provision.
- 24 -
communications were "merely an extension of the parties'
preexisting relationship that had been initiated by [LPS]." LP
Sols., 2018 WL 1768037, at *9. The Duchossois family "did not
intentionally avail themselves of the benefits of doing business
in [Maine] merely by calling residents of [Maine] to request"
payments that LPS had already agreed to make. Carreras, 660 F.3d
at 556.
Second, LPS argues that there were negotiations between
the parties that support the exercise of jurisdiction. But the
record contains no evidence of any such negotiations. It shows
only that the Duchossois family rejected LPS's first offer, and
merely signed the draft agreements for the second offer that LPS
provided to them outside Maine. There was no give-and-take over
language, price, or any other contractual terms, much less
extensive back-and-forth discussions. While on prima facie review
we must "construe [the plaintiff's evidentiary proffers] in the
light most favorable to the plaintiff's claim," C.W. Downer, 771
F.3d at 65, LPS cannot rely on unsupported allegations to establish
jurisdiction, see A Corp., 812 F.3d at 58.
And third, LPS suggests that the fact that the Option
agreements are governed by Maine law is a relevant Maine contact.
The Option agreements have a Maine choice-of-law provision, but
the Assignments are governed by Illinois law. The district court
considered these competing provisions at best "a wash." LP Sols.,
- 25 -
2018 WL 1768037, at *9. We think the Assignments' provision is
more pertinent. That provision's selection of Illinois law
highlights the fact that the underlying interests here are in
Illinois, a factor that counts against jurisdiction. Cf. Pritzker
v. Yari, 42 F.3d 53, 62 (1st Cir. 1994) (upholding the exercise of
jurisdiction when the defendant "knowingly acquir[ed] an
economically beneficial interest in the outcome of a [forum-based]
lawsuit that involved control over property located in [the
forum]").
Finally, the Duchossois family emphasizes that neither
its members nor agents set foot in Maine on business with LPS.
That is hardly dispositive, C.W. Downer, 771 F.3d at 68, but is
relevant to the jurisdictional analysis, see Baskin-Robbins, 825
F.3d at 38. The lack of such contact here tends to confirm that
the family could not foresee the exercise of jurisdiction.
* * *
The Duchossois family's Maine contacts, on this record,
do not constitute the "continuing and wide-reaching contacts,"
Burger King, 471 U.S. at 480, that form the "substantial
connection," C.W. Downer, 771 F.3d at 68 (quotation marks omitted),
with the forum necessary to make the exercise of jurisdiction
foreseeable. As the district court noted, this case's "center of
gravity is in Illinois: it concerns in part the alienability of
Illinois limited partnership interests in Illinois real estate
- 26 -
governed by Illinois law, issues which have been raised in a
pending Illinois lawsuit." LP Sols., 2018 WL 1768037, at *12.
This Illinois focus makes Maine litigation less foreseeable to the
family, which dooms LPS's case for purposeful availment.
There is no argument that the district court used the
wrong legal framework, and, on this record, we find no error in
its conclusion that the exercise of jurisdiction over the
Duchossois family would not comport with due process.8
III.
The district court's judgment is affirmed.
8 Because LPS has not presented sufficient evidence of
minimum contacts, we need not address the Duchossois family's claim
that it should prevail under the reasonableness prong. See
Pleasant St., 960 F.2d at 1091 n.11.
- 27 -