Philos Technologies, Inc. v. Philos & D, Inc. , 802 F.3d 905 ( 2015 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
Nos. 12-3446, 14-2007, 14-3153
PHILOS TECHNOLOGIES, INC.,
Plaintiff-Appellant,
v.
PHILOS & D, INC., et al.,
Defendants-Appellees.
____________________
Appeals from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 08 C 7240 — Milton I. Shadur, Judge.
____________________
ARGUED JUNE 1, 2015 — DECIDED SEPTEMBER 22, 2015
____________________
Before WOOD, Chief Judge, and POSNER and WILLIAMS,
Circuit Judges.
WOOD, Chief Judge. This lawsuit involves a complicated
transaction—or set of transactions—among several related
companies, most of which are based in the Republic of Ko-
rea. At its core, the lawsuit alleges that the defendants, Kore-
an 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
2 Nos. 12-3446, 14-2007, 14-3153
to P&D as part of a business deal. Although we part compa-
ny 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 compa-
ny cannot stand in light of the many legal and factual uncer-
tainties involved in this case. We therefore vacate the court’s
sanctions order.
I
A
An ordinary commercial transaction underlies this dis-
pute. 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 per-
sonal jurisdiction, we will recount not only the actions relat-
ed 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 juris-
diction 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
Nos. 12-3446, 14-2007, 14-3153 3
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 arti-
cles 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 Illi-
nois, he began engaging in conversations with Philos Tech
about the formation of a joint venture. (In its original com-
plaint, 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 Defend-
ants), on the other hand, urge that Don-Hee did not negoti-
ate 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 ven-
ture between PLST and P&D. In the second, to which we re-
fer 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
4 Nos. 12-3446, 14-2007, 14-3153
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 Equip-
ment Agreement. (Once again, the earlier complaint paints a
different picture: in it, Philos Tech did not mention the writ-
ten 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 agree-
ments; 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 Kore-
an 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 in-
vestment law. See Foreign Investment Promotion Act (Re-
public 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 in-
vestment 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
Nos. 12-3446, 14-2007, 14-3153 5
illusion that the Illinois-based company Philos Tech was con-
tributing 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 contri-
butions; the equipment instead made a round trip from Ko-
rea to Illinois and back again with no value-added at the Illi-
nois end. Philos Tech denies that this was the case. It main-
tains that the February 2008 articles of incorporation are le-
gitimate 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 negoti-
ations 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 com-
pany 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 be-
tween itself and P&D. Defendants argue that the letter can-
celed both the Joint Venture Agreement and the Equipment
Agreement between P&D and PLST, because (they say) there
6 Nos. 12-3446, 14-2007, 14-3153
was no oral agreement with Philos Tech and the joint ven-
ture 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 trans-
ferred approximately 200 million won to PLST (approxi-
mately 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 di-
rect 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. Kore-
an 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 deter-
Nos. 12-3446, 14-2007, 14-3153 7
mined that Don-Hee Park lied when he said that he had nev-
er seen P&D’s Articles of Incorporation before; that convic-
tion was affirmed on appeal.
B
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 Tech’s shares of
P&D after Philos Tech sent additional equipment to P&D in
Korea, but that Defendants reneged on this agreement. This
prompted Philos Tech to demand the return of its equip-
ment. Defendants refused to comply and, according to
Philos Tech, wrongfully retained the equipment.
Defendants did not appear in the Illinois court to answer
the complaint. The district court thus granted Philos Tech’s
motion for default judgment and awarded damages. After
Philos Tech attempted to enforce this judgment in Korea, De-
fendants filed a motion to vacate the judgment under Feder-
al Rule of Civil Procedure 60(b)(4), asserting that the Illinois
court’s judgment was void for lack of personal jurisdiction.
The district court concluded that the request was untimely,
but we reversed that judgment in Philos Technologies, Inc. v.
Philos & D, Inc., 645 F.3d 851 (7th Cir. 2011). Defendants then
renewed their motion to vacate.
The district court held an evidentiary hearing to deter-
mine whether it had personal jurisdiction over Defendants.
At the hearing, Defendants called Sam Ko and Sung-Hyun
Nam, a former PLST vice-president. Philos Tech presented
no witnesses. Relying on the live testimony, affidavits from
the Parks, and other documentary evidence, the district
8 Nos. 12-3446, 14-2007, 14-3153
court vacated the default judgment and dismissed the com-
plaint for lack of personal jurisdiction. It largely credited De-
fendants’ version of the facts. It found, for example, that
Philos Ko had contacted the Parks in October 2007 to pro-
pose a joint venture. It determined that Don-Hee Park had
not engaged in any negotiations during his May 2007 trip to
Illinois and that he had not come to Illinois in May 2008 at
all. It rejected Philos Tech’s contention that the written
agreements of December 20, 2007, were rescinded and re-
placed with an oral agreement between Philos Tech and the
Parks; instead, the court concluded, the joint venture had
always been between the two Korean companies, P&D and
PLST. The court criticized what it viewed as the “sham
transaction” in which P&D was designated as a foreign di-
rect investment company; it took the position, however, that
it did not need to wade into the details of this potential prob-
lem under Korean law in order to determine whether it had
personal jurisdiction over Defendants. Finally, the court
opined that Philos Tech’s claim was really one for breach of
contract rather than conversion, and it concluded that even if
it were to believe that Philos Tech manufactured the equip-
ment in Illinois as part of some sort of agreement with P&D,
these facts still were insufficient to confer personal jurisdic-
tion over Defendants. They simply bought a product from
an Illinois company, the court reasoned, and this action does
not constitute purposeful availment of the benefits of Illinois
law.
After the court’s ruling, Defendants filed a motion for
sanctions against Philos Tech and its counsel under Federal
Rule of Civil Procedure 11 and 28 U.S.C. § 1927. The district
court imposed sanctions pursuant to Rule 11 in the amount
of $778,489.72 against Philos Tech, finding that Philos Tech
Nos. 12-3446, 14-2007, 14-3153 9
had lied in order to demonstrate that the court had personal
jurisdiction over the defendants. The district court also
thought that Philos Tech had falsely claimed that it had a
meeting with the defendants on December 20, 2007, and the
court pointed to Philos Tech’s failure to discuss the written
agreements with PLST in its complaint and to the other
changes in its story.
Philos Tech later filed a motion for relief from the judg-
ment under Federal Rule of Civil Procedure 60(b)(3) (fraud
by opposing party), (b)(6) (catch-all), and (d)(3) (fraud on the
court). It argued that the recent Korean convictions of the
Parks for perjury in connection with statements regarding
the joint venture were grounds for vacating the judgment,
because those convictions showed that the Parks had lied to
the court about the nature of the joint venture. The district
court denied the motion, noting that the Korean judgment
postdated its own judgment and reasoning that its prior de-
termination of the facts was “not dependent on the truthful-
ness or falsity of the Parks’ testimony.”
Philos Tech appealed the district court’s orders vacating
the court’s previous default judgment, imposing sanctions,
and denying its Rule 60 motion. The defendants cross-
appealed the district court’s denial of sanctions against
Philos Tech’s counsel, but we later dismissed the cross-
appeal upon the joint motion of the parties. See FED. R. APP.
P. 42(b). The district court had subject-matter jurisdiction
under 28 U.S.C. § 1332(a)(2). (The parties are diverse: Philos
Tech is an Illinois corporation with its principal place of
business in Illinois; P&D is a Korean corporation with its
principal place of business in that country; and Don-Hee and
10 Nos. 12-3446, 14-2007, 14-3153
Jae-Hee Park are citizens of Korea.) We have appellate juris-
diction pursuant to 28 U.S.C. § 1291.
II
Philos Tech first focuses on the district court’s grant of the
Defendants’ motion under Rule 60(b)(4), which provides re-
lief from final judgment if a judgment is void for lack of per-
sonal jurisdiction. Although we usually review a grant of a
Rule 60(b) motion for abuse of discretion, the court’s resolu-
tion of the legal question about the existence of personal ju-
risdiction is subject to de novo review. See In re Chinese-
Manufactured Drywall Prods. Liab. Litig., 742 F.3d 576, 584 (5th
Cir. 2014); be2, LLC v. Ivanov, 642 F.3d 555, 557–58 (7th Cir.
2011); Bally Export Corp. v. Balicar, Ltd., 804 F.2d 398, 400 (7th
Cir. 1986) (if district court lacked jurisdiction it was a per se
abuse of discretion to deny the Rule 60(b)(4) motion). Factual
findings related to the personal-jurisdiction issue are re-
viewed for clear error. See In re Chinese-Manufactured Dry-
wall, 742 F.3d at 584. On a Rule 60(b)(4) motion, the defend-
ant bears the burden of proving the court’s lack of personal
jurisdiction. See Bally, 804 F.2d at 401.
A
Philos Tech begins with a procedural complaint about the
scope of the hearing that the district court held to determine
its jurisdiction over Defendants. It contends that because the
jurisdictional and merits determinations were intertwined,
the court should have held a “full-blown” hearing, before
which Philos Tech could have conducted discovery and at
which it could have called and cross-examined more wit-
nesses. Because, as Philos Tech claims, the hearing was more
Nos. 12-3446, 14-2007, 14-3153 11
limited and the court relied on the affidavits of the Parks
(who did not testify at the hearing), Philos Tech asserts that
it was required only to make out a prima facie case of jurisdic-
tion. Furthermore, it asserts, the court was required to con-
strue all factual disputes in its favor.
If material facts about personal jurisdiction are in dis-
pute, the court “must hold an evidentiary hearing to resolve
them.” Hyatt Int'l Corp. v. Coco, 302 F.3d 707, 713 (7th Cir.
2002). Until that hearing is held, “the party asserting person-
al jurisdiction need only make out a prima facie case.” Id. In
some circumstances, particularly when the court is required
to assess credibility in order to resolve factual disputes, the
court may be required to allow either cross-examination of
witnesses or pre-hearing discovery if a party so requests. See
Boit v. Gar-Tec Prods., Inc., 967 F.2d 671, 676 (1st Cir. 1992).
The problem with Philos Tech’s position is simple: the
district court never prohibited pre-hearing discovery or live
testimony, and Philos Tech never asked for either opportuni-
ty. Philos Tech did not call the Parks (or anyone else) as wit-
nesses, in spite of the fact that Defendants presented live tes-
timony. The court was not obliged to divine from Philos
Tech’s silence exactly what discovery it wanted to undertake
and which live witnesses it wanted. A district court may
conduct an evidentiary hearing to determine personal juris-
diction as long as “both sides have the opportunity to present
their cases fully.” Walk Haydel & Assocs., Inc. v. Coastal Power
Prod. Co., 517 F.3d 235, 241–42 (5th Cir. 2008) (emphasis add-
ed). Both Philos Tech and the defendants had such an oppor-
tunity. Philos Tech’s failure to take advantage of it was not
the court’s fault and casts no cloud on the court’s handling of
the hearing.
12 Nos. 12-3446, 14-2007, 14-3153
B
Philos Tech’s primary argument is that the court erred
when it found that it lacked personal jurisdiction over De-
fendants. Though we affirm the district court’s conclusion,
we approach this issue from a different perspective, focusing
on Defendants’ contacts with Illinois rather than on the
complicated relationships between the parties and non-party
PLST.
District courts exercising diversity jurisdiction apply the
personal jurisdiction rules of the state in which they are lo-
cated. See Hyatt, 302 F.3d at 713. The district court here
properly looked to Illinois’s long-arm statute, which pro-
vides that the Due Process Clause of the Fourteenth
Amendment sets the outer boundary of the personal juris-
diction of its courts. See 735 ILCS 5/2-209(c) (“A court may
also exercise jurisdiction on any other basis now or hereafter
permitted by the Illinois Constitution and the Constitution
of the United States.”). We have concluded that normally
there is “no operative difference” between Illinois constitu-
tional and federal constitutional limits on personal jurisdic-
tion. Hyatt, 302 F.3d at 715 (determining that even though
these standards “hypothetically might diverge,” the two are
for most purposes one and the same); see also Rollins v.
Ellwood, 565 N.E.2d 1302, 1316 (Ill. 1990) (Illinois Constitu-
tion requires “[j]urisdiction … to be asserted only when it is
fair, just, and reasonable to require a nonresident defendant
to defend an action in Illinois, considering the quality and
nature of the defendant’s acts which occur in Illinois or
which affect interests located in Illinois”). None of the par-
ties before us has suggested that there is any material diver-
gence between the state and federal standard for our case;
Nos. 12-3446, 14-2007, 14-3153 13
we therefore turn to the familiar federal due-process princi-
ples to resolve the issue.
Under the Fourteenth Amendment’s Due Process Clause,
a court may exercise personal jurisdiction over an out-of-
state defendant when that defendant has “minimum con-
tacts with [the forum state] such that the maintenance of the
suit does not offend ‘traditional notions of fair play and sub-
stantial justice.’” Int'l Shoe Co. v. State of Wash., Office of Un-
employment Comp. & Placement, 326 U.S. 310, 316 (1945) (quot-
ing Milliken v. Meyer, 311 U.S. 457, 463 (1940)). The defendant
must have deliberately established these contacts, or, in oth-
er words, he must have purposefully availed himself of the
forum state, “’such that he should reasonably anticipate be-
ing haled into court there.’” Burger King Corp. v. Rudzewicz,
471 U.S. 462, 474–75 (1985) (quoting World-Wide Volkswagen
Corp. v. Woodson, 444 U.S. 286, 297 (1980)). It is the defend-
ant—not the plaintiff or third parties—that must create the
contacts in the forum state, and those contacts must be “with
the forum State itself, not … with persons who reside there.”
Walden v. Fiore, 134 S. Ct. 1115, 1122 (2014) (“[T]he plaintiff
cannot be the only link between the defendant and the fo-
rum.”).
Standing alone, the fact that a foreign party has formed a
contract with an in-state party is often insufficient to supply
the minimum contacts required by the Constitution. Burger
King, 471 U.S. at 478. Other links, such as “prior negotiations
and contemplated future consequences, along with the terms
of the contract and the parties’ actual course of dealing” may
demonstrate that the defendant has purposefully availed it-
self of the forum. Id. at 479; see also RAR, Inc. v. Turner Diesel,
Ltd., 107 F.3d 1272, 1277–78 (7th Cir. 1997). Illinois courts use
14 Nos. 12-3446, 14-2007, 14-3153
a multi-factor test for determining whether personal jurisdic-
tion exists in these types of situations. They consider “(1)
who initiated the transaction; (2) where the contract was ne-
gotiated; (3) where the contract was formed; and (4) where
performance of the contract was to take place.” Estate of
Isringhausen ex rel. Isringhausen v. Prime Contractors & Assocs.,
Inc., 883 N.E.2d 594, 600–01 (Ill. App. Ct. 2008).
While there are two branches of personal jurisdiction
theory—general and specific—only the latter is relevant
here. For a court to exercise specific jurisdiction, the lawsuit
must “result[] from alleged injuries that ‘arise out of or relate
to’” the defendant’s contacts with the forum. Burger King, 471
U.S. at 472–73 (quoting Helicopteros Nacionales de Colombia,
S.A. v. Hall, 466 U.S. 408, 414 (1984)); see also Hyatt, 302 F.3d
at 716 (noting that a “suit must ‘arise out of’ or ‘be related to’
[a defendant’s] minimum contacts with the forum state”).
With these principles in mind, we turn to the contacts
with Illinois that P&D and the Parks had. In so doing, we
find it more helpful to keep in mind the fluidity of the rela-
tionships among P&D, Philos Tech, and PLST (as well as the
various people who controlled these companies), rather than
to focus narrowly on the precise legal structures they chose.
We see nothing to be gained by investigating whether PLST
or Philos Tech is technically the joint venture partner of
P&D—an examination that we fear would be fruitless given
our lack of expertise in Korean law, the lack of any expert
evidence on that law, and the parties’ conflicting accounts.
Instead, we move straight to the central question: whether
P&D, Don-Hee Park, and Jae-Hee Park had the type, quality,
and level of contacts with Illinois to support personal juris-
diction.
Nos. 12-3446, 14-2007, 14-3153 15
Defendants’ first alleged contact occurred in May 2007,
when Don-Hee Park traveled to Illinois. The district court
concluded that Don-Hee did not conduct negotiations or so-
licit Philos Tech to enter a joint venture on this trip. In com-
ing to this conclusion, it credited Defendants’ version of the
trip, i.e., that Don-Hee had come to the United States for un-
related reasons and that, while he happened to be in the
country, he decided to learn more about Philos Tech’s work.
The court also noted that May 2007 seemed quite early for
the solicitation of a deal that did not result in final agree-
ments until December of that year. The court credited Don-
Hee’s avowal that Philos Ko did not propose the joint ven-
ture until October 2007. It did not clearly err in making these
findings. Philos Tech (perhaps relying too heavily on the fact
that it did not bear the burden of proof) presented no evi-
dence that anything beyond a preliminary informational vis-
it occurred during Don-Hee’s trip. The court’s conclusion
that neither negotiations nor solicitation of a deal took place
at that time is consistent with the evidence before it. Thus,
because the May 2007 trip was largely unrelated to the mat-
ters at issue in this lawsuit, this contact is irrelevant to our
personal-jurisdiction inquiry.
The next potential contact is the December 20, 2007
agreements. The written agreements, which were executed
in Korea between two Korean companies, are immaterial to
our analysis. They reflect a purely Korean transaction lack-
ing any connection to Illinois. If we credit Philos Tech’s ver-
sion of the events, the Joint Venture Agreement was orally
modified immediately to make Philos Tech the joint venture
partner. We consider later whether this adds enough to De-
fendants’ Illinois contacts to make a difference.
16 Nos. 12-3446, 14-2007, 14-3153
Regardless of the identity of P&D’s joint venture partner,
Philos Tech did send equipment from its Illinois facility to
P&D in Korea. Although the court noted that the evidence is
conflicting whether Philos Tech actually manufactured that
equipment or simply passed it through from PLST to P&D, it
never resolved that question. Instead, it concluded that
“Philos Tech appears to have the better of it in characterizing
itself as the manufacturer.” We will assume that this means
the court thought that P&D acquired a product from an Illi-
nois company.
Don-Hee’s May 2008 visit to Illinois is the final potential-
ly relevant contact with the state. The district court conclud-
ed that Don-Hee did not make this trip, despite the uncon-
tradicted evidence that he did (including a transcript of a
Chicago radio broadcast with Don-Hee on May 2, 2008) and
the parties’ agreement on the matter. The court’s finding that
this trip never occurred was clearly erroneous, though not in
the end harmful. Don-Hee contends that he merely toured
Philos Tech’s facilities and received an invoice while in the
state; he maintains that he did not engage in any negotia-
tions or business discussions. Moreover, he says that his
chief purpose in coming to the United States was not to visit
Philos Tech but rather to attend an academic conference.
Philos Tech, to the contrary, asserts that it and Don-Hee “fi-
nalized” their joint venture agreement during this trip; nev-
ertheless, Philos Tech failed to provide details about what
this “finalization” entailed.
The suit that Philos Tech filed in Illinois does not arise
out of or relate to these mostly incidental interactions that
Defendants had with the state. Even if we assume that P&D
had some sort of agreement with Philos Tech, we already
Nos. 12-3446, 14-2007, 14-3153 17
have observed that a foreign party’s contract with an in-state
party alone is insufficient to support personal jurisdiction.
Burger King, 471 U.S. at 478. Burger King did note that the cir-
cumstances surrounding a contract might demonstrate a for-
eign party’s purposeful availment of a forum. Philos Tech
has not, however, directed our attention to any such circum-
stances. To the contrary, the facts compel the conclusion that
this was a Korean business deal from start to finish, with a
couple of incidental interactions with Illinois. Most of the
parties involved, including the Parks, P&D, and PLST, are
Korean. The original written agreements were executed in
Korea, and even the purported oral agreement was conclud-
ed over a phone call with one party in Korea. Philos Tech al-
so acknowledges that it outsourced component parts from
Korea-based PLST for the equipment that it sent to P&D in
Korea.
As we already have noted, Don-Hee Park’s 2007 trip to
the United States is irrelevant for purposes of specific juris-
diction, because Philos Tech’s lawsuit to recover the equip-
ment it sold to P&D is not sufficiently related to this purely
informational visit. See Hyatt, 302 F.3d at 717 (“[I]t is only the
‘dealings between the parties in regard to the disputed con-
tract’ that are relevant to minimum contacts analysis.”)
(quoting Vetrotex Certainteed Corp. v. Consol. Fiber Glass Prods.
Co., 75 F.3d 147, 153 (3d Cir. 1996)). Even if Don-Hee en-
gaged in some negotiations during his later May 2008 trip to
Illinois, it was not he who initiated the transaction. (The dis-
trict court credited Don-Hee’s account, according to which
Philos Ko was the instigator of this deal.) Moreover, Don-
Hee did not undertake the trip for the purpose of communi-
cating or negotiating with Philos Tech. That Defendants
made a contract with an Illinois company and may have had
18 Nos. 12-3446, 14-2007, 14-3153
some conversations about it in Illinois does not outweigh the
fact that they neither solicited the Illinois company to enter
into an agreement nor travelled to the state for the purpose
of conducting business with that company. Cf. Daniel J.
Hartwig Assocs., Inc. v. Kanner, 913 F.2d 1213, 1218 (7th Cir.
1990) (noting that “[t]wo significant factors” in the conclu-
sion that defendant purposefully availed himself of the fo-
rum were that he solicited the plaintiff’s services and did so
on numerous occasions). Even more jarring, for purposes of
personal jurisdiction over Jae-Hee Park specifically, is the
fact that, to our knowledge, Jae-Hee Park has never visited
Illinois, at least on a trip that was in any way connected with
Philos Tech.
The deal before us is categorically different from the
franchise relationship held to confer personal jurisdiction on
an out-of-state franchisee in Burger King. The defendant
there had “entered into a carefully structured 20-year rela-
tionship that envisioned continuing and wide-reaching con-
tacts with Burger King in Florida.” Burger King, 471 U.S. at
480. Here, the agreement was neither highly structured nor
long-lasting; instead, it was in essence a contract for the pro-
vision of goods to a Korean company. The mere fact that
Philos Tech produced those goods in Illinois (possibly at the
behest of Korean-based PLST) is largely incidental to the ju-
risdictional analysis and does not automatically confer juris-
diction over foreign defendants who otherwise lack signifi-
cant connections to Illinois. Cf. Walden, 134 S. Ct. at 1125 (de-
fendant’s actions did not constitute sufficient contacts with
forum state “simply because he allegedly directed his con-
duct at plaintiffs whom he knew had [forum state] connec-
tions”).
Nos. 12-3446, 14-2007, 14-3153 19
Our conclusion would remain the same if we read Philos
Tech’s complaint to raise a claim of conversion, rather than
breach of contract. Illinois courts have stated that they may
exercise personal jurisdiction over defendants in tort suits “if
the defendant performs an act or omission that causes an in-
jury in Illinois and the plaintiff alleges the act was tortious in
nature.” Kalata v. Healy, 728 N.E.2d 648, 653 (Ill. App. Ct.
2000); see also 735 ILCS 5/2-209(a)(2). This analysis, however,
accounts for only the statutory authorization to exercise per-
sonal jurisdiction; any such exercise still must comport with
federal due-process principles. See Walden, 134 S. Ct. at 1125
(“[M]ere injury to a forum resident is not a sufficient connec-
tion to the forum.”); Kalata, 728 N.E.2d at 654. And, as we
have just discussed, the defendants did not have sufficient
contacts with Illinois such that the exercise of personal juris-
diction over them would conform to constitutional stand-
ards. Philos Tech cannot avoid that conclusion by a simple
shift in the state-law theory that supports its claim.
III
We now address Philos Tech’s appeal of the district
court’s grant of sanctions against it under Federal Rule of
Civil Procedure 11. We review a district court’s grant of Rule
11 sanctions for abuse of discretion; an order imposing sanc-
tions based on an error of law or a clearly erroneous finding
of fact is a per se abuse of discretion. See Hartmarx Corp. v.
Abboud, 326 F.3d 862, 866–67 (7th Cir. 2003).
The district court found sanctions appropriate based on
its finding that Philos Tech “made its submissions to this
District Court with an improper purpose and with a faulty
factual basis.” It pointed to the discrepancy between the
complaint’s allegation that Philos Tech had a “meeting” with
20 Nos. 12-3446, 14-2007, 14-3153
the Parks and contracted with them to form a joint venture,
and Philos Tech’s later contention that its meeting was really
a telephone conversation it had (likely with only Jae-Hee
Park) after the Parks had executed written agreements with
PLST. The court also thought that Philos Tech was lying
about the existence of an oral agreement with P&D; it found
instead that PLST had always been P&D’s joint venture part-
ner. It branded the relationship between Philos Tech and
P&D, documented by the articles of incorporation and other
papers, as a sham that the parties had perpetrated in order
to obtain benefits from the Korean government.
These would be serious problems indeed if they were
supported by a proper record. But they are not. The record
that was developed in the hearing before the court focused
on personal jurisdiction, not the merits. Such issues as the
scope of the telephone meeting that occurred, why (in this
close-knit group of family companies) an oral agreement
might quickly have superseded a written agreement, what
Korean law provides in the way of benefits to foreign inves-
tors, and how the Korean authorities would have viewed the
parties’ arrangements, were not adequately explored. On the
record before us, it is impossible to evaluate either the legal
significance of P&D’s articles of incorporation and other offi-
cial documents or the legitimacy of the parties’ transfers of
funds and equipment between Korea and the United States.
And without more information about Korean law, we cannot
tell whether the parties’ attempts to obtain foreign direct in-
vestment benefits were part of a valid business strategy or a
sham meant to deceive Korean officials.
In the absence of a solid reason for condemning the joint
venture reflected in P&D’s articles of incorporation as a
Nos. 12-3446, 14-2007, 14-3153 21
“sham,” we cannot be confident that Philos Tech was un-
truthful in its filings about its dealings with P&D and the
Parks. On such a murky record, where the legal implications
of the parties’ actions are so uncertain, the court was wrong
to characterize Philos Tech’s bid for personal jurisdiction in
the Northern District of Illinois as unscrupulous or under-
handed. Philos Tech’s argument that personal jurisdiction
over Defendants existed was not baseless. If Philos Tech had
not taken such a passive position at the critical hearing, then
there would have been some chance that the district court
might have found personal jurisdiction. (Several Korean
courts have found that it was a joint venture partner of P&D,
after all.) A court should not impose sanctions on a party
that loses an argument, as long as the argument was not en-
tirely groundless. See Nat'l Wrecking Co. v. Int'l Bhd. of Team-
sters, Local 731, 990 F.2d 957, 963 (7th Cir. 1993). Philos Tech
had enough support for its contentions related to personal
jurisdiction to avoid Rule 11 sanctions.
Our uncertainty about relevant Korean law, the existence
of related Korean litigation, and principles of comity rein-
force our doubts about the propriety of sanctions. See Hilton
v. Guyot, 159 U.S. 113, 164 (1895) (“[Comity] is the recogni-
tion which one nation allows within its territory to the legis-
lative, executive or judicial acts of another nation.”). Before
the district court issued its sanctions order, several Korean
courts had made findings that contradicted the factual de-
terminations that undergirded the district court’s imposition
of sanctions. In particular, those courts determined that
Philos Tech was P&D’s joint venture partner. The district
court’s sanctions order unnecessarily put it in conflict with
the Korean judiciary. Especially since possible abuse of Ko-
22 Nos. 12-3446, 14-2007, 14-3153
rean law played a significant role in the court’s decision,
there is every reason to defer to the Korean courts’ assess-
ment of that issue. The existence of these Korean court
judgments, combined with the many legal and factual uncer-
tainties in this case, lead us to conclude that the district court
went too far when it imposed sanctions on Philos Tech.
IV
Finally, we address Philos Tech’s argument that the dis-
trict court should have granted its motion under Federal
Rule of Civil Procedure 60(b)(3), (b)(6), and (d)(3). We re-
view the denial of a Rule 60(b) motion for abuse of discre-
tion. Wickens v. Shell Oil Co., 620 F.3d 747, 758 (7th Cir. 2010).
Rule 60(b)(3) provides relief from a final judgment when a
party has committed fraud in the context of the legal pro-
ceeding. The party complaining of fraud must establish the
fraud by clear and convincing evidence and must demon-
strate that the fraud prevented it from fully and fairly pre-
senting a meritorious claim. See id. at 758–59; see generally
11 CHARLES ALAN WRIGHT, ARTHUR R. MILLER & MARY KAY
KANE, FEDERAL PRACTICE AND PROCEDURE § 2860 at 412–13
(3d ed. 2012). Rule 60(b)(6) is a catch-all provision that al-
lows a judgment to be set aside for “any other reason that
justifies relief,” and Rule 60(d)(3) affirms that a court can
“set aside a judgment for fraud on the court.”
Philos Tech filed its motion on the basis of the Parks’ Ko-
rean perjury convictions for statements regarding the joint
venture with P&D. As we noted earlier, Jae-Hee was found
guilty of perjury for falsely averring that P&D’s joint venture
partner had never changed from PLST to Philos Tech. Her
conviction was vacated by the appellate court, but the prose-
cutors have taken a further appeal to the Korean Supreme
Nos. 12-3446, 14-2007, 14-3153 23
Court. Don-Hee was convicted on the basis of his avowal
that he had never seen P&D’s Articles of Incorporation be-
fore and that he had not made an agreement for Philos Tech
to supply equipment to P&D as an investment in P&D. Their
convictions occurred after the district court’s orders granting
Defendants’ Rule 60(b) motion and imposing sanctions.
Philos Tech argues that the court should have concluded
from these convictions that the Parks had committed fraud
when they swore in this litigation that Philos Tech was never
P&D’s joint venture partner.
These judgments do not, however, supply the requisite
evidence of fraud. The Parks have never admitted that they
lied, and in fact Jae-Hee Park’s conviction was vacated on
appeal, and both cases continue to be appealed in the Kore-
an courts. Korean criminal trials may involve different bur-
dens of proof and evidentiary standards than those in the
United States, and the line between fraud and perjury might
differ. The cases on which Philos Tech relies deal with incon-
trovertible (or nearly incontrovertible) evidence of perjury or
forgery, such as witnesses’ admissions of lying under oath or
the discovery of physical facts that would lead any reasona-
ble person to conclude that earlier statements were false. See,
e.g., Murdoch's Estate v. City of Philadelphia, 432 F.2d 867, 869–
70 (3d Cir. 1970) (involving uncontroverted documentary
evidence showing that litigant had misrepresented his in-
volvement in the event in dispute); Peacock Records, Inc. v.
Checker Records, Inc., 365 F.2d 145, 148 (7th Cir. 1966) (relief
required where witnesses were willing to testify that they
had perjured themselves in the course of the litigation). The
later-in-time, appealable decisions of foreign courts that we
have here are qualitatively different from (and significantly
less conclusive than) the evidence of fraud presented in
24 Nos. 12-3446, 14-2007, 14-3153
these cases. Moreover, neither comity nor any U.S.-Korea
treaty requires a U.S. court to give preclusive effect to a for-
eign-court judgment that postdates the U.S. court’s contrary
ruling. Cf. Gabbanelli Accordions & Imports, LLC v. Gabbanelli,
575 F.3d 693, 697 (7th Cir. 2009) (“Because the Italian judg-
ment postdates the American one, it cannot be pleaded as
res judicata.”). If the Parks committed perjury in Korea, then
presumably they will suffer the consequences there. As for
the U.S. proceeding, Philos Tech has not mustered clear and
convincing evidence of the Parks’ fraud, and so the district
court acted within permissible boundaries when it refused to
set aside the judgment on this basis.
V
Because Defendants lack sufficient contacts with Illinois,
the district court lacked personal jurisdiction over them. We
thus AFFIRM the district court’s grant of Defendants’ motion
under Federal Rule of Civil Procedure 60(b)(4). We also
AFFIRM the district court’s denial of Philos Tech’s motion
under Rules 60(b)(3), (b)(6), and (d)(3). We conclude, finally,
that the district court erred in imposing sanctions on Philos
Tech, and so we VACATE its sanctions order. Each side must
bear its own costs on appeal.