Diversity Jurisdiction

Alliance for Water Efficiency v. Fryer, No. 14 C 115, Slip Op. (N.D. Ill. Jan. 15, 2014) (Shadur, Sen. J.).

Judge Shadur sua sponte ordered plaintiff Alliance for Water Efficiency (“AWE”) to correct two deficiencies in its diversity jurisdiction pleading:

  1. AWE pled that it was headquartered in Illinois, but did not plead its corporate

Free Green Can, LLC v. Green Recycling Enters., LLC, No. 10 C 5764, Slip Op. (N.D. Ill. Jan. 28, 2011 (Coleman, J.).
Judge Coleman granted the individual defendants’ and Aslan Financial Group’s Fed. R. Civ. P. 12(b) motion to dismiss plaintiff Free Green Can’s trademark infringement and related state law claims. As an initial matter, the Court lacked subject matter jurisdiction as to all state law claims because while Free Green Can pled diversity of citizenship, it did not plead that the amount in controversy exceeded $75,000. Because Aslan Financial Group was only accused of state law claims, it was dismissed.
The federal trademark claims against the individual defendants were dismissed pursuant to Fed. R. Civ. P. 12(b)(6) because the individual defendants were accused of infringement based upon corporate acts of defendant Green Recycling Enterprises, of which each was an officer. But in order to state a claim for infringement, or any tort, by corporate officers or employees Free Green Can was required to allege each individual defendant had actively participated in the tortious acts. Because there were no such allegations, the infringement claims were dismissed.

Continue Reading Infringement Claims Against Corporate Officers Require Active Participation

Idex Corp. v. Dripping Wet Water, Inc., No. 08 C 1114, 2008 WL 4372038 (N.D. Ill. Feb. 26, 2008) (Shadur, Sen. J.).
Judge Shadur sua sponte gave plaintiffs one week to amend their pleadings to resolve potential subject matter jurisdiction issues. The Court noted that the breach of a patent settlement did not create federal question jurisdiction because the agreement was about a patent. And the Court held that it was not sufficient for diversity jurisdiction just to plead the parties’ residences. Both residence and citizenship must be pled for the purposes of diversity jurisdiction. The Court, therefore, ordered plaintiffs to amend their complaint to plead both residence and citizenship, or otherwise prove jurisdiction. The Court also ordered plaintiffs to explain why the case was filed in the Northern District rather than in Texas where the parties had an ongoing suit or Connecticut where the litigation resulting in the settlement at issue took place.

Continue Reading Breach of Patent Settlement Does Not Create Federal Jurisdiction

24 Hour Fitness USA, Inc. v. Bally Total Fitness Holding Corp., No. 08 C 3853, 2008 WL 4671748 (N.D. Ill. Oct. 21, 2008).
Judge Lefkow granted defendants’ Fed. R. Civ. P. 12(b)(1) motion to dismiss plaintiff 24 Hour Fitness’s (“24”) trade secret misappropriation complaint for lack of subject matter jurisdiction. 24 alleged that defendant Bally Total Fitness (“Bally) and the individual defendant (“Defendant”) misappropriated 24’s trade secrets when Defendant resigned his position as 24’s COO and became Bally’s CEO. But defendants argued that the Court lacked subject matter jurisdiction over 24’s state law trade secret claims because there was no diversity of citizenship – both 24 and Defendant were California citizens. 24 argued that Defendant was, in fact, a citizen of Illinois because he worked at Bally’s Illinois headquarters and because Defendant’s contract with Bally required that he move to Illinois before the case was filed.
Looking at the totality of the circumstances, the Court held that Defendant remained a citizen of California, where he had lived while employed by 24. Defendant had put his California home for sale and did have a contract requiring that he become domiciled in Illinois, although the particulars of the contract were disputed. But the most significant factor in the analysis was that Defendant’s family remained in California. And Defendant had not purchased or rented a home in Illinois or gotten an Illinois driver’s license, bank account or voter registration card.
Finally, the Court denied 24’s request to file an amended complaint adding a federal Computer Fraud and Abuse Act claim. A complaint cannot be amended to create subject matter jurisdiction. The case, therefore, had to be dismissed.

Continue Reading Location of Family Major Factoring in Determining Citizenship

Strom v. Strom Closures, Inc., No. 06 C 7051, 2008 WL 489363 (N.D. Ill. Feb. 20, 2008) (Der-Yeghiayan, J.).
Judge Der-Yeghiayan granted plaintiff Victoria Strom’s (“Strom”) motion to dismiss defendants’ (collectively “SCI”) counterclaims. SCI filed an earlier suit charging Strom with patent infringement. The parties settled that suit pursuant to a Settlement Agreement (“Agreement”). SCI alleged that Strom breached the Agreement and was once again, therefore, infringing SCI’s patents. But the Court held that once a district court dismisses a case with prejudice, it cannot reopen the case for enforcement of a related agreement without independent jurisdiction. SCI’s appropriate claim was for breach of the Agreement, not patent infringement. Because breach of the Agreement was a state law claim and because there was no diversity (SCI pled that all parties were Illinois residents), the Court lacked jurisdiction. Finally, the Court held that there was not supplemental jurisdiction based upon Strom’s federal employment claims. Strom’s claims and the breach of the Agreement were not sufficiently related.

Continue Reading Breached Settlement Does Not Create Patent Jurisdiction

ExcelStor Tech., Inc. v. Papst Licensing GMBH & Co. KG, No. 07 C 2467, 2007 WL 3145013 (N.D. Ill. Oct. 24, 2007) (Der-Yeghiayan, J.).
Judge Der-Yeghiayan granted defendant Papst Licensing’s (“Papst”) Fed. R. Civ. P. 12(b)(1) motion to dismiss for lack of subject matter jurisdiction. Plaintiffs, various related ExcelStor Technology entities (collectively “ExcelStor”) licensed Papst’s patent portfolio (the “Agreement”) related to hard disk drives (“HDD”). ExcelStor alleged that when the Agreement was signed, Papst had already given third party Hitachi a license covering the same HDDs. Furthermore, ExcelStor alleged that Papst concealed the Hitachi license from ExcelStor.
Based upon the alleged double royalties, ExcelStor filed this action seeking declaratory judgments that both Papst and the Agreement violated the patent exhaustion doctrine* by extracting two licensing fees for the same product based upon the same patent portfolio. But the Court held that patent exhaustion is a defense to patent infringement, not a cause of action. Because patent exhaustion does not entitle ExcelStor to relief, it does not create federal question jurisdiction. Similarly, ExcelStor’s state law claims for fraud and breach of contract claim do not create federal question jurisdiction because they relate to patent exhaustion – they are questions of state law for which the Court lacked jurisdiction. The Court also noted that it did not consider whether diversity jurisdiction existed because neither party raised it.
* For more on patent exhaustion, specifically the Supreme Court’s patent exhaustion case this term, click here.

Continue Reading Patent Exhaustion Alone Does Not Make Federal Question Jurisdiction