Advanced Tactical Ordnance Systems, LLC v. Real Action Paintball, Inc. ( 2014 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 13-3005
ADVANCED TACTICAL ORDNANCE SYSTEMS, LLC,
Plaintiff-Appellee,
v.
REAL ACTION PAINTBALL, INC., and K.T. TRAN,
Defendants-Appellants.
____________________
Appeal from the United States District Court for the
Northern District of Indiana, Fort Wayne Division.
No. 1:12-CV-296-JVB — Joseph S. Van Bokkelen, Judge.
____________________
ARGUED JANUARY 7, 2014 — DECIDED MAY 9, 2014
____________________
Before WOOD, Chief Judge, and POSNER and KANNE, Cir-
cuit Judges.
WOOD, Chief Judge. Some readers of our opinions may be
familiar with paintball, a type of war game in which the
players shoot charges of paint at one another. Paintballs, it
turns out, are not the only kind of nonlethal projectile that
can be used in this way. Our case concerns a more serious
product, known to Advanced Tactical Ordnance Systems
2 No. 13-3005
(Advanced Tactical) by the name PepperBall (a ball filled
with a pepper-spray-like irritant). Police departments, pri-
vate security firms, and comparable organizations are the
primary consumers of these items. This is a trademark in-
fringement action, brought by Advanced Tactical against a
company that calls itself Real Action Paintball, Inc., and its
president, K.T. Tran. (We refer to both as Real Action, be-
cause there is no material difference between the company
and its president for purposes of this appeal.) Although the
parties have focused in their briefs on the preliminary in-
junction the district court granted, we have a more funda-
mental problem with the case. We conclude that the district
court lacked personal jurisdiction over defendant Real Ac-
tion, which preserved its objection on this point. We there-
fore reverse and remand with directions to dismiss on that
basis.
I
Advanced Tactical manufactures and sells PepperBall
branded items, including PepperBall projectile irritants. Its
headquarters is allegedly in Indiana, though that is less clear
than it might be—the company appears to have at least one
office in California. It became the manufacturer and seller of
PepperBall-branded items in 2012 after it acquired trade-
marks and other property in a foreclosure sale from a com-
pany called PepperBall Technologies Inc. PepperBall Tech-
nologies Inc. was located in California. Before the foreclo-
sure, PepperBall Technologies had purchased its irritant pro-
jectiles from at least two sources: Perfect Circle, half owner
of Advanced Tactical, and a Mexican company called APON.
After Advanced Tactical acquired PepperBall Technologies,
No. 13-3005 3
APON ceased its work as an assembler or manufacturer for
PepperBall projectiles.
Around the time of foreclosure, APON’s chief operating
officer, Conrad Sun, a citizen of California, contacted Real
Action Paintball Inc., a California company, to see if Real Ac-
tion was interested in acquiring irritant projectiles from
APON. The answer was yes. The parties concluded their
deal in August 2012, after which Real Action posted on its
website and sent through its email list an announcement that
it had acquired the “machinery, recipes, and materials once
used by PepperBall Technologies Inc.” That announcement is
central to the merits, because it arguably implied that after
PepperBall Technologies ceased to exist, Real Action was the
only maker of PepperBall irritant projectiles.
Advanced Tactical soon caught wind of Real Action’s an-
nouncement and fired off a cease-and-desist letter. In re-
sponse, Real Action added a disclaimer to the original mes-
sage, stating that it was neither associated nor affiliated with
PepperBall Technologies and its brands, and that Real Action
projectiles were not made by the current PepperBall Tech-
nologies (the name under which Advanced Tactical was do-
ing business). Unsatisfied, Advanced Tactical filed this suit
in the District Court for the Northern District of Indiana. It
offered a number of different theories of recovery, including
intentional violations of the Lanham Act, 15 U.S.C. § 1111 et
seq., common law trademark infringement and unfair com-
petition, trade dress infringement, and misappropriation of
trade secrets.
The complaint alleged that personal jurisdiction was
proper under Indiana’s long-arm statute, which is found in
Trial Rule 4.4(A). Each defendant, it asserted, engaged in
4 No. 13-3005
conduct satisfying one or more of the following: doing any
business in Indiana, via an interactive website capable of ac-
cepting orders from citizens of Indiana (Rule 4.4(A)(1)); en-
gaging in tortious acts outside Indiana while knowing they
would harm citizens of Indiana (Rule 4.4(A)(3)); causing
damage in Indiana while deriving substantial revenue from
goods sold in Indiana (same); and conspiring to engage in
tortious conduct calculated to harm a citizen of Indiana
(same). Real Action contested personal jurisdiction. In re-
sponse to the district court’s query why Indiana was proper
and why California was not preferable, Advanced Tactical
pointed to the “blast email” that Real Action sent to all of its
customers, “many of whom are located here in the state of
Illinois. I mean, state of Indiana.” Advanced Tactical also
noted that Real Action regularly emailed customers or po-
tential customers from all over the United States, including
Indiana, and that it had made at least one sale to an Indiana
resident.
The district court decided that the parties needed more
time to look into the question. It held an evidentiary hearing
on the matter on December 7, 2012, after which it concluded
that personal jurisdiction was proper and that Advanced
Tactical was entitled to a preliminary injunction. Real Action
has appealed, as it is entitled to do under 28 U.S.C.
§ 1292(a)(1), contesting both the personal jurisdiction ruling
and the injunctive relief.
II
The plaintiff bears the burden of establishing personal ju-
risdiction. N. Grain Mktg., LLC v. Greving, 743 F.3d 487, 491
(7th Cir. 2014) (citing Purdue Res. Found. v. Sanofi–Synthelabo,
S.A., 338 F.3d 773, 782 (7th Cir. 2003)). When the district
No. 13-3005 5
court holds an evidentiary hearing to determine personal
jurisdiction, as it did here, “the plaintiff must establish juris-
diction by a preponderance of the evidence.” Purdue, 338
F.3d at 782 (citing Hyatt Int'l Corp. v. Coco, 302 F.3d 707, 713
(7th Cir. 2002)). Advanced Tactical, however, urges first that
the question of personal jurisdiction is not properly before
us on this interlocutory appeal; Real Action responds that we
can reach it through pendant appellate jurisdiction. Both
parties are wrong; this court is entitled to entertain a thresh-
old non-merits question, such as personal jurisdiction, at the
outset of a case. See Ruhrgas AG v. Marathon Oil Co., 526 U.S.
574, 584 (1999) (“Personal jurisdiction … is an essential ele-
ment of district court jurisdiction, without which the court is
powerless to proceed to an adjudication.”). Although per-
sonal jurisdiction is the kind of limitation that is waivable,
that is of no moment in a case like this one, in which the ob-
jection has been fully aired.
In order for the district court’s preliminary injunction to
be valid, that court had to have personal jurisdiction over the
defendant. Accord e360 Insight v. The Spamhaus Project, 500
F.3d 594, 598 (7th Cir. 2007) (“Default judgments rendered
without personal jurisdiction are void and, therefore, we
shall ‘set aside a default judgment as a per se abuse of discre-
tion if the district court that entered the judgment lacked ju-
risdiction.’”) (citing Swaim v. Moltan Co., 73 F.3d 711, 716 (7th
Cir. 1996)). Indeed, as both parties seem to acknowledge, our
decision in Indianapolis Colts, Inc. v. Metro. Balt. Football Club
Ltd. P'ship, 34 F.3d 410 (7th Cir. 1994), is precisely on point.
There we reviewed a preliminary injunction, and the main
argument concerned personal jurisdiction. We therefore pro-
ceed to that issue.
6 No. 13-3005
III
This case involves claims under both federal law (the
Lanham Act) and state law, and so the district court’s juris-
diction rested on a federal question, 28 U.S.C. § 1331, and
supplemental jurisdiction, 28 U.S.C. § 1367. Because the
Lanham Act does not have a special federal rule for personal
jurisdiction, however, we look to the law of the forum for the
governing rule. See FED. R. CIV. P. 4(k)(1)(A); Daimler AG v.
Bauman, 134 S. Ct. 746, 753 (2014). Under Indiana’s long-arm
statute, Indiana state courts may exercise personal jurisdic-
tion on a number of prescribed bases, as well as “on any ba-
sis not inconsistent with the Constitution of this state or the
United States.” IND. R. TRIAL P. 4.4(A). The Supreme Court of
Indiana has held that Indiana’s long-arm provision “re-
duce[s] analysis of personal jurisdiction to the issue of
whether the exercise of personal jurisdiction is consistent
with the Federal Due Process Clause.” LinkAmerica Corp. v.
Cox, 857 N.E.2d 961, 967 (Ind. 2006). Thus, to determine
whether the district court had personal jurisdiction over Real
Action, we ask whether “the exercise of jurisdiction com-
ports with the limits imposed by federal due process.” Wal-
den v. Fiore, 134 S. Ct. 1115, 1121 (2014) (internal quotation
marks omitted).
In Daimler, the Court confirmed its adherence to the dis-
tinction between “general jurisdiction” and “specific juris-
diction.” The former is proper only in the limited number of
fora in which the defendant can be said to be “at home.” For
a corporation, such places include the state of incorporation
and the state of the principal place of business. Specific ju-
risdiction is available for a suit that arises out of the forum-
related activity. Advanced Tactical concedes that it cannot
No. 13-3005 7
rely on general jurisdiction; it must prove specific jurisdic-
tion or face dismissal. We thus confine the discussion that
follows to the law governing specific jurisdiction.
Nearly 70 years ago, the Supreme Court held that due
process is satisfied for this purpose so long as the defendant
had “certain minimum contacts” with the forum 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. Mey-
er, 311 U.S. 457, 463 (1940)). Walden serves as a reminder that
the inquiry has not changed over the years, and that it ap-
plies to intentional tort cases as well as others. See Walden,
134 S. Ct. at 1119.
The relevant contacts are those that center on the rela-
tions among the defendant, the forum, and the litigation. Id.(citing Keeton v. Hustler Mag., Inc., 465 U.S. 770, 775 (1984)).
Crucially, not just any contacts will do: “For a State to exer-
cise jurisdiction consistent with due process, the defendant’s
suit-related conduct must create a substantial connection with
the forum State.” Id. at 1121 (emphasis added). The “mere
fact that [defendant’s] conduct affected plaintiffs with con-
nections to the forum State does not suffice to authorize ju-
risdiction.” Id. at 1126. Furthermore, the relation between the
defendant and the forum “must arise out of contacts that the
‘defendant himself’ creates with the forum … .” Id. at 1122
(quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475
(1985)). Contacts between the plaintiff or other third parties
and the forum do not satisfy this requirement. Id.; see Wal-
den, 134 S. Ct. at 1122.
Here, the district court found the necessary minimum
contacts based on several facts: first, Real Action fulfilled
8 No. 13-3005
several orders of the allegedly infringing projectiles for pur-
chasers in Indiana; second, it knew that Advanced Tactical
was an Indiana company and could foresee that the mislead-
ing emails and sales would harm Advanced Tactical in Indi-
ana; third, it sent at least two misleading email blasts to a list
that included Indiana residents; fourth, it had an interactive
website available to residents of Indiana; and finally, it put
customers on its email list when they made a purchase,
thereby giving the company some economic advantage. In
our view, none of these meets the standards that the Su-
preme Court has set.
While it is true that Real Action fulfilled a few orders af-
ter putting the allegedly infringing message on its website
and in emails, Advanced Tactical provides no evidence that
those sales had any connection with this litigation. We do
not know, for example, whether the Indiana residents saw
Real Action’s post before making their purchases. There is
also nothing to suggest that any Indiana purchaser thought
that Advanced Tactical had started selling PepperBalls.
Looking at the over 600 sales that Real Action allegedly
made to Indiana residents in the two years before suit was
filed does not help matters. Specific jurisdiction must rest on
the litigation-specific conduct of the defendant in the pro-
posed forum state. The only sales that would be relevant are
those that were related to Real Action’s allegedly unlawful
activity. Advanced Tactical—which has the burden of proof
here—has not provided evidence of any such sales.
Not only did Advanced Tactical fail to link the few sales
to Real Action’s litigation-specific activity, but even if it did,
it is unlikely that those few sales alone, without some evi-
dence linking them to the allegedly tortious activity, would
No. 13-3005 9
make jurisdiction proper. See Calder v. Jones, 465 U.S. 783(1984). To hold otherwise would mean that a plaintiff could
bring suit in literally any state where the defendant shipped
at least one item. The creation of such de facto universal ju-
risdiction runs counter to the approach the Court has fol-
lowed since International Shoe, and that it reaffirmed as re-
cently as February 2014 in Walden. See also Goodyear Dunlop
Tires Operations, S.A. v. Brown, 131 S. Ct. 2846, 2851 (2011).
The district court also thought personal jurisdiction
proper because Real Action knew that Advanced Tactical
was an Indiana company and could foresee that its mislead-
ing emails and sales would harm Advanced Tactical in Indi-
ana. Walden, however, shows the error of this approach.
There the defendant knew that the plaintiffs were going to
Nevada, and it was foreseeable that they would want the use
of their money there, but the Court squarely rejected this as
a permissible basis for jurisdiction. The “mere fact that [de-
fendant’s] conduct affected plaintiffs with connections to the
forum State does not suffice to authorize jurisdiction.” Wal-
den, 134 S. Ct. at 1126. The relation between the defendant
and the forum “must arise out of contacts that the ‘defend-
ant himself’ creates with the forum State.” Id. at 1118 (quoting
Burger King, 471 U.S. at 475).
The question whether harming a plaintiff in the forum
state creates sufficient minimum contacts is more complex.
Compare Wallace v. Herron, 778 F.2d 391, 394 (7th Cir. 1985)
(“We do not believe that the Supreme Court, in Calder, was
saying that any plaintiff may hale any defendant into court
in the plaintiff’s home state, where the defendant has no con-
tacts, merely by asserting that the defendant has committed
an intentional tort against the plaintiff.”) with Janmark, Inc. v.
10 No. 13-3005
Reidy, 132 F.3d 1200, 1202 (7th Cir. 1997) (finding that “there
can be no serious doubt after Calder [] that the state in which
the victim of a tort suffers the injury may entertain a suit
against the accused tortfeasor”) (citing Indianapolis Colts, 34
F.3d at 411–12). Although those two cases may be in some
tension with one another, after Walden there can be no doubt
that “the plaintiff cannot be the only link between the de-
fendant and the forum.” Walden, 134 S. Ct. at 1122. Any deci-
sion that implies otherwise can no longer be considered au-
thoritative.
The district court also considered Real Action’s online ac-
tivities—the sending of two allegedly misleading emails to a
list of subscribers that included Indiana residents and the
maintenance of an interactive website. The Supreme Court
has not definitively answered how a defendant’s online ac-
tivity translates into “contacts” for purposes of the “mini-
mum contacts” analysis. To the contrary, it expressly “le[ft]
questions about virtual contacts for another day” in Walden.
Id. at 1125 n.9. We have faced that problem on several occa-
sions, however, and thus far it has appeared to us “that the
traditional due process inquiry [] is not so difficult to apply
to cases involving Internet contacts that courts need some
sort of easier-to-apply categorical test.” Illinois v. Hemi Grp.
LLC, 622 F.3d 754, 759 (7th Cir. 2010) (citing Jennings v. AC
Hydraulics A/S, 383 F.3d 546, 550 (7th Cir. 2004) (“[A]lthough
technological advances may alter the analysis of personal
jurisdiction, those advances may not eviscerate the constitu-
tional limits on a state's power to exercise jurisdiction over
nonresident defendants.”)); see also Tamburo v. Dworkin, 601
F.3d 693, 703 n.7 (7th Cir. 2010) (declining to endorse a spe-
cial jurisdictional test for internet cases). Thus, “[o]ur inquiry
boils down to this: has [defendant] purposefully exploited
No. 13-3005 11
the [Indiana] market” beyond simply operating an interac-
tive website accessible in the forum state and sending emails
to people who may happen to live there? be2 LLC v. Ivanov,
642 F.3d 555, 558–59 (7th Cir. 2011). Has the defendant, in
brief, targeted Indiana somehow? Id.The fact that Real Action maintains an email list to allow
it to shower past customers and other subscribers with com-
pany-related emails does not show a relation between the
company and Indiana. Such a relation would be entirely for-
tuitous, depending wholly on activities out of the defend-
ant’s control. See World-Wide Volkswagen Corp. v. Woodson, 444
U.S. 286, 291–92 (1980). As a practical matter, email does not
exist in any location at all; it bounces from one server to an-
other, it starts wherever the account-holder is sitting when
she clicks the “send” button, and it winds up wherever the
recipient happens to be at that instant. The connection be-
tween the place where an email is opened and a lawsuit is
entirely fortuitous. We note as well that it is exceedingly
common in today’s world for a company to allow consumers
to sign up for an email list. We are not prepared to hold that
this alone demonstrates that a defendant made a substantial
connection to each state (or country) associated with those
persons’ “snail mail” addresses. Cf. Burger King, 471 U.S. at
478 (contracting with an out-of-state party alone cannot es-
tablish automatically sufficient minimum contacts in the
other party’s home forum.). It may be different if there were
evidence that a defendant in some way targeted residents of
a specific state, perhaps through geographically-restricted
online ads. But in such a case the focus would not be on the
users who signed up, but instead on the deliberate actions
by the defendant to target or direct itself toward the forum
12 No. 13-3005
state. Advanced Tactical introduced no such evidence in the
district court and makes no such argument on appeal.
The interactivity of a website is also a poor proxy for
adequate in-state contacts. We have warned that “[c]ourts
should be careful in resolving questions about personal
jurisdiction involving online contacts to ensure that a
defendant is not haled into court simply because the
defendant owns or operates a website that is accessible in the
forum state, even if that site is ‘interactive.’” be2 LLC, 642
F.3d at 558 (citing Illinois v. Hemi Grp., LLC, 622 F.3d 754, 760
(7th Cir. 2010)). This makes sense; the operation of an
interactive website does not show that the defendant has
formed a contact with the forum state. And, without the
defendant’s creating a sufficient connection (or “minimum
contacts”) with the forum state itself, personal jurisdiction is
not proper.
Even if we assume that interactivity matters at least in an
evidentiary way, it is unclear how any interactivity of the
website here affected the alleged trademark infringement.
Real Action posted a notice (by itself not interactive) on its
website; that notice allegedly infringed Advanced Tactical’s
trademark. But whether the notice amounted to infringe-
ment has nothing to do with interactivity. We need not bela-
bor the point: if having an interactive website were enough
in situations like this one, there is no limiting principle—a
plaintiff could sue everywhere. Such a result would violate
the principles on which Walden and Daimler rest. Having an
“interactive website” (which hardly rules out anything in
2014) should not open a defendant up to personal jurisdic-
tion in every spot on the planet where that interactive web-
site is accessible. To hold otherwise would offend “tradition-
No. 13-3005 13
al notions of fair play and substantial justice.” Int’l Shoe, 326
U.S. at 316.
**********************
In sum, we see no evidence that the defendant, Real Ac-
tion, has the necessary minimum contacts with Indiana to
support specific jurisdiction. We REMAND the case with in-
structions to vacate the judgment and dismiss the complaint
for lack of personal jurisdiction.