DocketNumber: No. 07 C 1763
Citation Numbers: 283 F.R.D. 392
Judges: Cole
Filed Date: 5/11/2012
Status: Precedential
Modified Date: 11/26/2022
MEMORANDUM OPINION AND ORDER
A.
Following five years of litigation, a two-week trial, and a jury decision against him, one of the defendants, Timothy Grimsley, has brought a motion challenging the court’s personal jurisdiction over him. He raised the personal jurisdiction issue in June of 2007—less than three months after the complaint was filed—before Judge Coar, to whom the ease was originally assigned. Judge Coar denied the motion to dismiss under Illinois’ fiduciary shield doctrine and the due process clause. The “fiduciary shield doctrine” as enunciated by the Illinois courts, precludes a court (federal or state) from exercising personal jurisdiction over a nonresident tortfeasor where the conduct which gave rise to the tort was “solely on behalf of [their] employer.” Minemyer v. R-Boc Representatives, Inc., 2007 WL 2461666, *3 (N.D.Ill.2007); [Dkt. # 66, at 12].
A number of courts have concluded, Judge Coar found, that the doctrine should not apply where the employee has the power to decide what is to be done and chooses to commit the acts that subject him to long-arm jurisdiction. But the level of discretion is not, itself, determinative and must instead be viewed within the context of all the circumstances. Judge Coar found significant, inter alia, the claim that Grimsley was motivated in part by his friendship with R-BOC’s Robert Lundeen, Minemyer, 2007 WL 2461666, *5.
The fiduciary shield doctrine is usually said to be discretionary or “equitable,” rather than an absolute entitlement. Minemyer, 2007 WL 2461666, *5. In terms of the fairness of the case as a whole, Judge Coar held that, taking the allegations of Plaintiffs complaint as true, it did not make sense to preclude jurisdiction over Grimsley since he conspired with Mr. Lundeen of R-Boc to replace plaintiffs couplers with R-Boc’s and lied and facilitated lies about the switch to plaintiff. The plaintiff was thus wronged not only by the actions of R-BOC and Dura-Line in materially infringing on his patent, but also by the assurances of Grimsley, himself, that induced Plaintiffs continued reliance on his mistaken belief that his patented product was being submitted to Verizon in response to its request for bids.
Although he said that it was a close question whether Illinois’s fiduciary shield doctrine applied, Judge Coar ended with this invitation: “[i]f after further discovery it should prove appropriate, [Mr. Grimsley] will have the opportunity to move for dismissal once again and this Court retains the right to consider the motion on a more complete record.” Minemyer, 2007 WL 2461666, *7. However, Judge Coar had no reservations about the issue of specific jurisdiction under the Due Process clause, and he denied that portion of Mr. Grimsley’s motion without any suggestion that the issue might be reintroduced at a later date. Id. at 7-8. [Dkt. # 66, at 13-16].
This case was reassigned to me in December of 2008 by consent of the parties. [Dkt. # 124]. Discovery closed on May 30, 2009. [Dkt. # 167, 168]. There was, to use Judge Coar’s qualifier, no “further discovery” after that. Between the date of the reassignment in 2008 and the date the trial began in February 2012, the parties were in court on an almost constant basis.
It was not until February 14, 2012, when the trial was half over, that Mr. Grimsley’s lawyer, on his cross-examination, began to question him about his contacts with Illinois and matters that might be implicated by the fiduciary shield doctrine. [Dkt. #492, at 1397].
B.
Even a valid defense of lack of personal jurisdiction can be deemed waived if it is not raised in a timely fashion. Blockowicz v. Williams, 630 F.3d 563, 566 (7th Cir.2010). It is Mr. Grimsley’s contention that having raised the issue at the start of the case in mid-2007, he could wait until the trial was underway four-and-a-half years later to pursue the issue. The theory advanced is that since the plaintiff has the burden at trial to prove jurisdiction, the issue was of necessity in the case. While it is true, as Mr. Grimsley submits, that there are cases that say it is up to the plaintiff to prove by the end of trail that the court has personal jurisdiction over the defendant, there are dangers, as the Seventh Circuit repeatedly reminds both bench and bar, in reading statements in judicial opinions too literally. See, e.g., Miller v. Dobier, 2011 WL 477046, *2 (7th Cir.2011); McCready v. Jesse White, 417 F.3d 700, 703-04 (7th Cir.2005); Acevedo v. Canterbury, 457 F.3d 721, 724 (7th Cir.2006); All-Tech Telecom v. Amway Corp., 174 F.3d 862, 866 (7th Cir.1999); Rapier v. Harris, 172 F.3d 999, 1005-06 (7th Cir.1999).
Rice acknowledged that some cases say, “perhaps too casually,” 38 F.3d at 914, that by the end of the trial the plaintiff must have proved that the court has personal jurisdicBut, said Judge tion over the defendant. Posner:
[T]hese statements ... should not be taken literally. To begin with, they are in tension with the rule that the defendant must challenge personal jurisdiction at the earliest opportunity, on pain of forfeiture if he fails to do so. Fed.R.Civ.P. 12(h)(1). Such challenges should be resolved before rather than after trial in order to head off situations in which a defendant, if he thinks the trial is going against him, will plead lack of jurisdiction in order to force the plaintiff to start over in another court, but if he thinks the trial is going well will waive his objection to personal jurisdiction and await the entry of a final judgment that he can use as res judicata to prevent the plaintiff from suing him again.
It would defeat the purpose of requiring prompt assertion of the defense of lack of personal jurisdiction if the defendant, having raised an objection to personal jurisdiction at the outset as required, could without any penalty fail or refuse to press it, creating the impression that he had abandoned it, and not seek to correct that impression until he appealed from an adverse final judgment on the merits. We do not understand the cases that we have cited to condone such a tactic; and we condemned it in Continental Bank, N.A. v. Meyer, 10 F.3d 1293, 1297 (7th Cir.1993), though we did so not under Rule 12(h)(1), which concerns only pleading, but under the doctrine of waiver, which is applicable to all defenses except lack of subject-matter jurisdiction.
38 F.3d at 914.
Here as in Rice, Mr. Grimsley, having raised an objection to personal jurisdiction at the outset as required, failed for the next four-and-a-half years to press it, as Judge Coar invited him to do, thereby creating the impression that he had abandoned it.
Although discovery was long over, and there were numerous continuances of the trial—one lasting for more than a year—Mr. Grimsley chose not to have an evidentiary hearing on the question of jurisdiction or in any way pursue that issue until the trial was in its sixth day. It was then that Mr. Grimsley’s attorney began questioning him about his residency and contacts with the state of Illinois. [Dkt. #492, at 1397]. There was no forewarning to the court or Mr. Minemyer’s lawyers that this testimony was coming.
Mr. Grimsley said he lived in Tennessee, had never lived in Illinois, and had no bank accounts or property here. Of course, these were facts he knew even before he filed his initial jurisdictional motion. He also said the only business he transacted in Illinois was on behalf of his company, defendant Dura-Line Corporation. [Dkt. # 492, at 1398].
In that document, he said he was a resident of Tennessee, never lived in Illinois, didn’t have a bank account or property in Illinois, and only transacted business in Illinois on behalf of Dura-Line. [Dkt. # 42-2], He also stated that he was Dura-Line’s vice president in charge of sales and marketing. [Dkt. # 42-2], So, basically, in his renewed motion, Mr. Grimsley is relying on the same information he relied on before Judge Coar in 2007. Consequently, it is clear’ that there was nothing infeasible or inconvenient about a definitive determination of personal jurisdiction being made in advance of trial. The reality is that Mr. Grimsley, without the court’s permission and without notice to anyone, chose to defer to the trial the jurisdictional question. And he did so, notwithstanding the clarity of Judge Coar’s invitation to renew the jurisdictional challenge “[i]f, after further discovery, it became appropriate.” [Dkt. # 66, at 12].
In sum, nothing to which Mr. Grimsley has pointed to support his current jurisdictional challenge was obtained in discovery. It was all within his personal knowledge before he was sued.
C.
Like everything else that occurred in this case, the preparation of the final pretrial
Whether intended or not, what was done by Mr. Grimsley was sandbagging, pure and simple. Sandbagging in all its forms has been condemned time and again, not least of all by the Supreme Court, see e.g., Stern v. Marshall, — U.S. -, 131 S.Ct. 2594, 2608, 180 L.Ed.2d 475 (2011), and sandbagging can result in the waiver or forfeiture even of constitutional rights, id.,—including personal jurisdiction. Rice, 38 F.3d at 915; Peterson v. Highland Music, Inc., 140 F.3d 1313, 1318 (9th Cir.1998) (“personal jurisdiction, may be waived as a result of the course of conduct pursued by a party during litigation,” including “sandbagging.”). In Peterson the court observed: “[I]f a defendant were to engage in ‘sandbagging’ by raising the issue of personal jurisdiction on a motion to dismiss, deliberately refraining from pursuing it any further when his motion is denied in the hopes of receiving a favorable disposition on the merits, and then raising the issue again on appeal only if he were unhappy with the district court’s ultimate decision, then we would not hesitate to find that the defendant had waived any right to pursue the defense.” 140 F.3d at 1319.
D.
The pretrial conference and order are a vital part of the procedural scheme created by the Federal Rules of Civil Procedure. “Because the parties rely on the pretrial conference to inform them precisely what is in controversy, the pretrial order “establishes the issues to be considered at trial.” Gorlikowski v. Tolbert, 52 F.3d 1439, 1443-1444 (7th Cir.1995). “Each side plans for trial on the assumption that it needs to meet only the contentions its adversary identifies in that order.” Nagy v. Riblet Products Corp., 79 F.3d 572, 575 (7th Cir.1996). “For this reason, ‘[attorneys at a pre-trial conference must make a full and fair disclosure of their views as to what the real issues of the trial will be.’ ” Gorlikowski 52 F.3d at 1444. “Since the whole purpose of Rule 16 is to clarify the real nature of the dispute at issue, a claim or theory not raised in the pretrial order should not be considered by the fact-finder.” Id. Accord American Nat. Bank & Trust Co. of Chicago v. Regional Transp. Authority, 125 F.3d 420, 430 (7th Cir.1997).
Given the critical nature of the pretrial order, which supercedes all prior pleadings and controls the subsequent course of the action, Rockwell Intern. Corp. v. United States, 549 U.S. 457, 474, 127 S.Ct. 1397, 167 L.Ed.2d 190 (2007), the Seventh Circuit has consistently enforced a strict rule of forfeiture. Harper v. Albert, 400 F.3d 1052, 1063 (7th Cir.2005). The court has concluded that
But why not? There is nothing in the encompassing language in the opinions adverted to above or in Rule 16 that restricts the Rule to matters to be decided by the jury. And, given the purpose of the final pretrial order, an adverse party’s entitlement to notice that “a claim or theory” is to be tried cannot be a function of the identity of the fact-finder. Concealment of the issues to be tried adversely affects the integrity of the adversary system and the accuracy of fact-finding in equal measure, regardless of the identity of the fact-finder. Reduced to its essentials, Mr. Grimsley’s argument is that is it is okay to ambush a judge but not a jury. Mr. Grimsley’s brief neither points to a ease that supports the distinction it seeks to draw, nor does it contain a principled argument that would sustain its conclusion.
Mr. Grimsley relies on a snippet of language from Gorlikowski in which the court said that “a claim or theory not raised in the pretrial order should not be considered by the fact-finder.” (Defendant Grimsley’s Reply, at 3, quoting Gorlikowski, 52 F.3d at 1444). But the court could not have meant that it was permissible to exclude critical matters from the pretrial order merely because the judge would be the fact-finder on that particular issue. That would make no sense and would lead to an absurd result, which, in all contexts, is to be avoided. Compare Florida Power & Light Co. v. Lorion, 470 U.S. 729, 741, 105 S.Ct. 1598, 84 L.Ed.2d 643 (1985) (“An examination of the consequences that would follow upon adoption of the contrary rule proposed by the Court of Appeals in these cases confirms the soundness of this conclusion”); Parents Involved in Community Schools v. Seattle School Dist. No. 1, 551 U.S. 701, 127 S.Ct. 2738, 168 L.Ed.2d 508 (2007) (Breyer, J., dissenting) (“Hence it is important to consider the potential consequences of the plurality’s approach, as measured against the Constitution’s objectives. To do so provides further reason to believe the plurality’s approach is legally unsound.”); Beanstalk Group Inc. v. AM General Corp., 283 F.3d 856 (7th Cir.2002) (Posner, J.).
If the Seventh Circuit had meant Gorlikowski to stand for the rule Mr. Grimsley espouses, American Nat. Bank & Trust Co. of Chicago would not have cited it in support of its application of the forfeiture rule to a defense of collateral estoppel that had not been included in the pretrial order. 125 F.3d at 430. Of course, the applicability of that defense is a question for a judge to decide. See In re Davis, 638 F.3d 549, 553 (7th Cir.2011); Adair v. Sherman, 230 F.3d 890, 893 (7th Cir.2000).
Although the Seventh Circuit has not had the occasion to discuss the application of the forfeiture rule to a failure to raise the jurisdictional issue in the pretrial order, American Nat. Bank & Trust Co. of Chicago supports the result reached here, and other Circuits have found that failure significant in the context of a question of personal jurisdiction. See Beagles & Elliott Enters., LLC v. Fla. Aircraft Exch., Inc., 70 Fed. Appx. 185, 187 (5th Cir.2003) (unpublished summary disposition) (viewing the omission of the personal jurisdiction issue from the joint pretrial order, coupled with the parties’ stipulation that “[tjhere are presently no pending jurisdictional issues,” as a concession of personal jurisdiction by the defendant).
In Mullins v. TestAmerica, Inc., 564 F.3d 386, 399 (5th Cir.2009), the defendants jointly moved to dismiss for lack of jurisdiction pursuant to Fed.R.Civ.P. 12(b)(2). The district court denied that motion without conducting an evidentiary hearing, impliedly concluding that the allegations in the complaint, together with the affidavits and other documentation, demonstrated a prima facie case of personal jurisdiction. The Court of Appeals held that this adverse jurisdictional ruling at
Under the circumstances presented by the instant ease, Mr. Grimsley’s failure not to have even adverted to the jurisdictional issue in the pretrial order, triggers the rule of strict forfeiture. But even if it did not, Mr. Grimsley’s silence on the jurisdictional question during the protracted period of the preparation of the final pretrial order was the capstone of his overall course of conduct from mid-2007 through February 2012, and that overall course of conduct does result in a waiver or forfeiture of the question of jurisdiction.
E.
Finally, even if there were no forfeiture or waiver in this ease, Mr. Grimsley still loses on the merits. The factors that Judge Coar discussed in his 2007 opinion and that are implicated in a challenge to jurisdiction under the fiduciary shield doctrine and due process favor the plaintiff, not Mr. Grimsley. As to those factors, and in terms of the fairness of the case as a whole, the plaintiff adduced more than a preponderance of the evidence to prove the truthfulness of his early allegations against Mr. Grimsley. The evidence showed that Mr. Grimsley was not simply acting at the behest of his employer, Dura-Line, and that he had discretion and control over his actions as they pertained to gulling Verizon and Mr. Minemyer. To the extent that Mr. Grimsley’s testimony was to the contrary, including his claim that he informed Verizon that the R-Boc coupler was being bid, not the Lozon coupler, I find it not credible. This was not simply a matter of my assessment of his demeanor, but more importantly, like other aspects of his testimony, the documentary and testimonial evidence adduced at trial confirms that rejection.
A conspicuous example of Mr. Grimsley’s lack of credibility involved his testimony at his deposition regarding his insistence that Verizon knew that Dura-Line was bidding the R-Boc, not the Lozon coupler. At the
Judge Coar was more prescient than he could have imagined. The plaintiff proved by a preponderance of the evidence that he not only was harmed by R-BOC, but by Grimsley who, among other things, lulled him and aided Mr. Lundeen and Dura-Line in lulling the plaintiff into believing that his coupler was being bid to Verizon. It was Grimsley and Lundeeris intent to engage in this deception so that they could substitute the R-Boc coupler for Mr. Minemyer’s and cut Mr. Minemyer out of the equation.
The evidence presented at trial proved by a preponderance of the evidence the accuracy of Judge Coar’s initial conclusion: “To excuse Grimsley ... from a case in which ... he was intimately involved as an individual [would] not equate with principles of fairness.” Minemyer, 2007 WL 2461666, *1. The defendant’s motion to dismiss for lack of personal jurisdiction [Dkt. #479] is DENIED.
. Mr. Lundeen denied being formally an employee of R-Boc, claiming his wife was the owner. Perhaps that was nominally true, but the evidence demonstrated the critical and pervasive role he played in the company’s affairs.
. This alleged deception of Mr. Minemyer was central to the success of the whole plan, for without it, he would have bid his own product, which Verizon had been using and with which it was pleased. Judge Coar concluded that to the extent that Mr. Grimsley, himself, was aware of
Judge Coar recognized that to the extent Mr. Grimsley was merely continuing to act in a manner consistent with the instructions of DuraLine, he may still be protected under the fiduciary shield doctrine. At trial there was no claim or proof that Mr. Grimsley’s superior at Dura-Line had instructed him to engage in the conduct Judge Coar assumed for purposes of the motion was true. Quite the contrary. Grimsley denied any misconduct.
. A review of the docket reveals the incessant activity following the close of discovery in May 2009 through 2011. See, e.g., Dkt. Nos. 168-429. The majority of the docket entries relate to activity by the defendants.
. One need not wait nearly as long as Mr. Grimsley did for there to be a waiver. In New.Net, Inc. v. Lavasoft, 356 F.Supp.2d 1071, 1074 (C.D.Cal. 2003), the defendants were given an opportunity to litigate the personal jurisdiction issues before the court addressed the merits of the pending motion for injunctive relief. They chose not to do so. Furthermore, since they first raised the issue, they participated actively in the proceedings to date, including the appearance at, and participation in, oral argument regarding the preliminary injunction while remaining silent as to the issue of personal jurisdiction. Under all of these circumstances, the court concluded that the defendants waived their right to assert the lack of personal jurisdiction as a defense and
. See also Baribeau v. City of Minneapolis, 596 F.3d 465, 483 (8th Cir.2010) (per curiam); Fuentes v. Wagner, 206 F.3d 335, 342 (3rd Cir. 2000).
. All of this is ignored by Mr. Grimsley's brief.
. Unlike the defendant in Rice, who did not renew his challenge to personal jurisdiction until the appeal, Mr. Grimsley renewed the jurisdic
. Mr. Grimsley refers to this testimony in a footnote and in the body of his opening brief, but he does not cite to either the transcript pages (pp. 1397 et seq,) or the pages from the docketed volume (pp. 31 et seq.). In the docketed volume, the pages he cites—41, 42, 44—refer to a discussion among counsel. As Mr. Grimsley did not attach the pages he refers to in his brief, or indicate where the document he is working from might be found, there is no telling what document he is working from. " 'Judges are not like pigs, hunting for truffles buried [in the record].’ ” Gross v. Town of Cicero, 619 F.3d 697, 702 (7th Cir.2010) (quoting United States v. Dunkel, 927 F.2d 955, 956 (7th Cir.1991)). At least truffle hogs are taken to a specific forest to search.
. This includes Mr. Grimsley’s claim that he had to have approval from Dura-Line's CEO before signing contracts with Verizon or AT & T and was only acting on instructions from the CEO to proceed after notice of the '726 patent. (Grimsley Memorandum, at 5-6). Again, this testimony cannot be located in the voluminous trial transcript because Mr. Grimsley employs page citations know only to his attorney.
. By requiring comprehensive and timely disclosure of relevant information, the Federal Rules of Civil Procedure seek to avoid the surprise and secrecy that are antithetical to the informed determination of cases of their merits. Cf. Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512-13, 122 S.Ct. 992, 152 L.Ed.2d 1 (2002). See also Miller v. Lenz, 2010 WL 252287, *6-7 (N.D.Ill.2010).
. Unlike this case, however, neither defendant raised the issue following the trial. Indeed, neither objected to the district court’s statement in its final judgment that "it had jurisdiction over the subject matter and the parties” until the appeal.
. First and foremost was the plaintiff’s failure to argue that either defendant’s litigation of its jurisdictional defense affected the applicable evidentiary burden or the ability to review the district court’s denial of the joint motion to dismiss. Second, the plaintiff's brief relied almost entirely on the evidence presented at trial and the jury's finding of liability to substantiate personal jurisdiction. The Court of Appeals construed these references as an implied concession that the entire record is relevant to resolving the jurisdictional question. Under these circumstances, it deemed there to be a waiver of the objection to the defendants’ failure to preserve their jurisdictional challenge. Mullins, 564 F.3d at 398-400.
. Demeanor and inflection are critical components of the decision whether to believe a witness. Anderson v. Bessemer City, 470 U.S. 564, 575, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985); United States v. Stewart, 536 F.3d 714, 720 (7th Cir.2008). “The demeanor of a witness '... may satisfy the tribunal not only that the witness’ testimony is not true but that the truth is the opposite of his story; for the denial of one, who has a motive to deny, may be uttered with such hesitation, discomfort, arrogance or defiance, as to give assurance that he is fabricating, and that, if he is, there is no alternative but to assume the truth of what he denies.’ ” NLRB v. Walton Mfg. Co., 369 U.S. 404, 408, 82 S.Ct. 853, 7 L.Ed.2d 829 (1962).
. The suggestion that all Grimsley's actions lacked any self-interested component and were solely at the behest of his employer, Motion to Dismiss at 8, is inaccurate. There was no testimony that Dura-Line instructed him to engage in any form of deceit or misrepresentation, and, in fact, Mr. Grimsley denied having done anything inappropriate or dishonest.