Hedeen International, LLC v. Zing Toys, Inc.

In the
United States Court of Appeals
For the Seventh Circuit
No. 15-1749
HEDEEN INTERNATIONAL, LLC, d/b/a
Fun City, USA,
Plaintiff-Appellant,
v.
ZING TOYS, INC., et al.,
Defendants-Appellees.
Appeal from the United States District Court for the
Eastern District of Wisconsin
No. 1:14-cv-00304-WCG — William C. Griesbach, Chief Judge.
ARGUED NOVEMBER 4, 2015 — DECIDED JANUARY 27, 2016
Before KANNE, ROVNER, and SYKES, Circuit Judges.
ROVNER, Circuit Judge. On March 21, 2014, Hedeen Interna-
tional, LLC (“Hedeen”) filed suit in the United States District
Court for the Eastern District of Wisconsin alleging breach of
contract and unjust enrichment against two corporations,
OzWest, Inc. and Zing Toys, Inc., and against Peter Cummings
who was the leading shareholder in those companies.
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Cummings is an Australian citizen who resides in Hong Kong
and has never visited Wisconsin. The amended complaint
identifies him as a principal of OzWest, which is an Oregon
company, and he is OzWest’s signatory on the license
agreement which underlies this case. The district court granted
Cummings’ motion to dismiss for lack of personal jurisdiction,
and Hedeen now appeals that determination. Hedeen argues
that Cummings waived the right to challenge personal
jurisdiction because he did not file a motion within 21 days of
service of the complaint.
Hedeen served Cummings through office service under
Oregon law by leaving a copy of the summons and complaint
at OzWest’s office in Oregon on March 31, 2014, and by
mailing copies of those same documents to the Oregon office
address on June 4. On June 10, 2014, Hedeen filed an Amended
Complaint. That complaint alleged that OzWest had breached
a license agreement with it and that Cummings had employed
some of his other companies to sell the products which Hedeen
had licensed to OzWest without paying a royalty. OzWest
served a motion to dismiss on July 7, 2014, but Cummings did
not file any response in court. Hedeen attempted service again
on July 15, and three days later sought declaratory relief
establishing that Cummings had been properly served and for
an extension of time to serve him if service was deemed faulty.
The court entered an order on July 24 declaring that it
appeared that Cummings was properly served and was
avoiding service, but reserving the right for Cummings to
challenge service if he appeared.
On October 22, 2014, Cummings filed a motion to dismiss
asserting that service of process was insufficient and that the
No. 15-1749 3
court lacked personal jurisdiction over him. The court rejected
his argument as to service, again concluding that service was
proper. As to the motion for personal jurisdiction, Hedeen
asserted that Cummings had waived that argument by failing
to assert it within 21 days, which Hedeen asserted was the time
period mandated by Federal Rules of Civil Procedure 12(h) and
12(a)(1). The district court rejected that reading of Rule 12 and
determined that the motion was timely filed. The court then
held that it lacked personal jurisdiction over Cummings and
granted his motion to dismiss for lack of personal jurisdiction.
Hedeen now appeals to this court, challenging only the district
court’s determination that Cummings did not waive his
challenge to personal jurisdiction.
The sole issue before us, then, is whether under Rule 12, a
litigant is required to raise a defense of lack of personal
jurisdiction within 21 days of service. Rule 12(a) provides that
unless another time is specified, the time for serving a
responsive pleading is 21 days after being served with the
summons or complaint and that serving a motion under the
rule alters that time period. Fed.R.Civ.P. 12(a)(1)(A)(I) and
(a)(4). Rule 12(b) directly addresses defenses, providing that
every defense to a claim for relief in any pleading must be
asserted in a responsive pleading if one is required, but that a
party may assert certain defenses by motion, including the
defense of lack of personal jurisdiction. Fed.R.Civ.P. 12(b)(2).
It further provides that a motion asserting any of those
defenses must be made before pleading if a responsive
pleading is allowed. Fed.R.Civ.P. 12(b).
Those provisions do not on their face impose a 21-day rule
on a motion presenting a defense of personal jurisdiction. They
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provide that a responsive pleading such as an answer must be
filed within 21 days, but the defenses can be asserted either in
that responsive pleading or in a motion. Rule 12(b) provides
that the motion cannot occur after such a responsive pleading
is filed, but that is not at issue here because the motion was not
filed after a responsive pleading was filed. Therefore, the plain
language does not impose a 21-day restriction on the motion.
Rule 12(h) directly addresses waiver, providing that a party
waives a defense, including that based on personal jurisdiction,
by omitting it from its first motion or by failing to either make
it in a motion under Rule 12 or include it in the responsive
pleading or in an amendment allowed by Rule 15(a)(1) as a
matter of course. By its terms, then, the rule allows a defense
based on lack of personal jurisdiction to be raised either in a
responsive pleading, which would be subject to the 21-day
provision discussed earlier, or by a motion. The rule does not
by its terms impose a 21-day time period on that motion.
Courts addressing this issue have taken divergent paths,
but we agree with a leading commentator that applying the
21-day time limit to motions under Rule 12 would require “an
overly strict interpretation of the language of Rule 12(a) and
Rule 12(h)(1).” 5C Wright & Miller, Fed. Prac. & Proc. Civ.
§ 1391 (3d ed. 2004, supp. 2015)(also noting that “[t]here do not
appear to be any recent cases applying the Rule 12(a)
benchmark for waiver.”); see, e.g., Marcial Ucin, S.A. v. SS
Galicia, 723 F.2d 994, 997 (1st Cir. 1983)(“Rule 12(h)(1) of the
Federal Rules of Civil Procedure does not call for the assertion
of the lack of personal jurisdiction defense within the time
provided in Rule 12(a).”), Bechtel v. Liberty Nat. Bank, 534 F.2d
1335, 1341 (9th Cir. 1976)(agreeing with Wright & Miller that
No. 15-1749 5
applying the 21-day provision to motions is an overly strict
interpretation, and holding that such a motion may be made at
any time prior to a responsive pleading), Farmers Elevator Mut.
Ins. Co. v. Carl J. Austad & Sons, Inc., 343 F.2d 7, 12 (8th Cir.
1965)(in dicta cautioning that a Rule 12 motion must be filed
within 20 days of service of the complaint or the defense is
waived).
Litigators should be able to rely on the plain language of
the Rules in conducting litigation in federal court. Under a
straightforward reading of Rule 12, a challenge to personal
jurisdiction may be asserted either in a responsive pleading
filed within 21 days, or in a motion with no similar time limit
specified. That does not mean the time for filing such a motion
is unbounded or that the plaintiff was without recourse.
Failure to file a motion or responsive pleading in 21 days may
result in the issuance of a default judgment against the
defendant. Moreover, a personal jurisdiction defense may be
waived if a defendant gives a plaintiff a reasonable expectation
that he will defend the suit on the merits or where he causes
the court to go to some effort that would be wasted if personal
jurisdiction is subsequently found lacking. H-D Michigan, LLC
v. Hellenic Duty Free Shops S.A., 694 F.3d 827, 848 (7th Cir.
2012); Mobile Anesthesiologists Chicago, LLC v. Anesthesia
Associates of Houston Metroplex, P.A., 623 F.3d 440, 443 (7th Cir.
2010). But Hedeen has declined to argue that the delay in filing
the motion met those standards, relying solely on the
argument that it was untimely because filed more than 21 days
after service of the complaint. We agree with the district court
that the defense was not waived by the failure to file the
motion within 21 days.
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The decision of the district court is AFFIRMED.