BouMatic LLC v. Idento Operations BV, No. 13-2300 (7th Cir. 2014)

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Justia Opinion Summary

Idento makes robotic milking machines in the Netherlands. BouMatic, LLC, based in Wisconsin, entered into an agreement for purchasing and reselling those machines in Belgium. BouMatic claims that Idento breached the agreement by selling direct to at least one of BouMatic’s Belgian customers and by failing to provide parts and warranty service. The district court dismissed, ruling that commercial transactions in the European Union do not expose Idento to litigation in Wisconsin even though BouMatic has its headquarters there, the parties exchanged drafts between Wisconsin and the Netherlands, and Idento shipped one machine to Wisconsin. After exploring the nature of the business entities, the Seventh Circuit vacated for consideration of personal jurisdiction in light of the contract language. Litigants cannot confer subject matter jurisdiction by agreement or omission, but personal jurisdiction is a personal right that a litigant may waive or forfeit.

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In the United States Court of Appeals For the Seventh Circuit ____________________   No.  13-­ 2300   BOUMATIC,  LLC,   Plaintiff-­ Appellant,   v.   IDENTO  OPERATIONS,  BV,   Defendant-­ Appellee.   ____________________   Appeal  from  the  United  States  District  Court   for  the  Western  District  of  Wisconsin.   No.  11-­ cv-­ 822-­ wmc    William  M.  Conley,  Chief  Judge.   ____________________   ARGUED  FEBRUARY  20,  2014    DECIDED  JULY  22,  2014   ____________________   Before  EASTERBROOK,  MANION,  and  SYKES,  Circuit  Judges.   EASTERBROOK,   Circuit   Judge.   Idento   Operations,   BV,   makes   robotic   milking   machines   in   the   Netherlands.   Bou-­ Matic,   LLC,   which   is   based   in   Wisconsin,   entered   into   an   agreement   for   purchasing   and   reselling   those   machines   in   Belgium.  BouMatic  filed  this  suit  under  the  international  di-­ versity   jurisdiction,   28   U.S.C.   §1332(a)(2),   contending   that   Idento   had   broken   its   promises   by   selling   direct   to   at   least   one   of   BouMatic s   Belgian   customers   and   by   failing   to   pro-­ 2   No.  13-­ 2300   vide  parts  and  warranty  service.  The  district  court  dismissed   the  suit,  however,  ruling  that  commercial  transactions  in  the   European   Union   do   not   expose   Idento   to   litigation   in   Wis-­ consin  even  though  BouMatic  has  its  headquarters  there,  the   parties  exchanged  drafts  between  Wisconsin  and  the  Nether-­ lands,  and  Idento  shipped  one  machine  to  Wisconsin.   Before   turning   to   personal   jurisdiction,   we   discuss   sub-­ ject-­ matter   jurisdiction.   BV   stands   for   besloten   vennootschap   met  beperkte  aansprakelijkheid,  a  label  that  the  Netherlands  ap-­ plies  to  closely  held  businesses  whose  shares  are  subject  to  a   restriction   of   some   kind,   such   as   a   buy-­ sell   agreement   that   prevents  investors  from  selling  to  strangers  without  offering   them  to  the  business  first.  Unless  this  is  treated  as  a  corpora-­ tion  for  the  purpose  of  American  law,  we  need  to  know  the   citizenship  of  every  equity  investor.  See  Carden  v.  Arkoma  As-­ sociates,  494  U.S.  185  (1990);  Fellowes,  Inc.  v.  Changzhou  Xinrui   Fellowes   Office   Equipment   Co.,   No.   12-­ 3124   (7th   Cir.   July   22,   2014).   This   can   require   tracing   through   several   layers.   See   Cosgrove  v.  Bartolotta,  150  F.3d  729  (7th  Cir.  1998)  (citizenship   of   an   LLC   depends   on   citizenship   of   its   members,   traced   through  as  many  levels  as  necessary  to  reach  corporations  or   natural   persons).   BouMatic,   which   is   organized   as   an   LLC,   has  members  in  several  states  but  not  in  the  Netherlands.  If   Idento   is   treated   as   a   corporation,   or   if   all   of   its   direct   and   indirect   investors   have   citizenships   outside   the   United   States,  subject-­ matter  jurisdiction  is  established.   Classification  of  a  foreign  business  entity  can  be  difficult,   see,   e.g.,   White   Pearl   Inversiones   S.A.   (Uruguay)   v.   Cemusa,   Inc.,  647  F.3d  684  (7th  Cir.  2011),  because  other  nations  may   use   subsets   of   the   characteristics   that   distinguish   corpora-­ tions   from   other   business   entities   in   the   United   States.   But   No.  13-­ 2300   3   treatment  of  a  Netherlands  BV  is  straightforward.  A  BV  has   the  standard  elements  of   personhood  (perpetual  existence,   the   right   to   contract   and   do   business   in   its   own   name,   and   the   right   to   sue   and   be   sued)   and   issues   shares   to   investors   who  enjoy  limited  liability  (which  is  to  say,  are  not  liable  for   the  business s  debts).  Shares  can  be  bought  and  sold,  subject   to   restrictions   that   the   business   declares.   That   is   a   common   device   in   this   nation s   close   corporations   too.   We   held   in   Hoagland   v.   Sandberg,   Phoenix   &   von   Gontard,   P.C.,   385   F.3d   737  (7th  Cir.  2004),  that  a  professional  corporation,  in  which   only   a   few   lawyers   can   invest,   is   a   corporation   for   the   purpose   of   §1332.   It   follows   that   other   close   corporations,   including  the  Netherlands  BV,  satisfy  that  standard.   Now   for   personal   jurisdiction,   which   per   Fed.   R.   Civ.   P.   4(k)(1)(A)   depends   on   Wisconsin   law.   In   contract   cases   (of   which   this   is   one),   Wisconsin   provides   for   jurisdiction   over   persons   who   perform   services   or   sell   goods   in   Wisconsin.   Wis.   Stat.   §801.05(5)(a),   (c).   Neither   of   these   provisions   ap-­ plies   to   Idento,   for   the   dispute   does   not   concern   the   single   machine   it   delivered   to   Wisconsin.   The   dispute   concerns   Idento s   provision   of   goods   and   services   in   Belgium.   Wis-­ consin   does   not   authorize   personal   jurisdiction   just   because   one   of   the   contracting   parties   operates   in   Wisconsin.   This   leaves   only   one   possibility:   that   Idento   has   consented   to   be   sued   in   Wisconsin,   which   treats   consent   as   a   valid   extra-­ statutory   basis   of   personal   jurisdiction.   Kohler   Co.   v.   Wixen,   204  Wis.  2d  327,  336  (Ct.  App.  1996).   BouMatic   contends   that,   before   executing   a   written   con-­ tract,  the  parties  agreed  orally  that  any  dispute  could  be  re-­ solved  in  Wisconsin.  The  written  agreement  does  not  have  a   forum-­ selection  clause  or  a  choice-­ of-­ law  clause,  but  neither   4   No.  13-­ 2300   does  it  have  an  integration  clause  or  otherwise  demonstrate   that   the   writing   represents   the   parties   sole   agreement.   To   the   contrary,   ¶13   of   the   contract   contemplates   additional   terms   from   other   sources.   This   means   that   terms   orally   agreed   survive   the   signed   writing.   Idento   contends   that   it   did  not  orally  agree  to  litigate  in  Wisconsin.  This  appears  to   set  the  stage  for  a  hearing  under  Fed.  R.  Civ.  P.  12(b)(2),  (i)  to   determine  whose  version  of  events  is  correct.  But  the  district   court   thought   a   hearing   unnecessary   in   light   of   forms   the   parties  exchanged  after  signing  their  principal  contract.   Paragraph   13   of   the   main   contract   provides   that   addi-­ tional  terms  will  come  from  the  purchase  orders  and  invoic-­ es   that   the   parties   exchange   for   particular   machines.   When   ordering   machines,   BouMatic   sent   purchase   orders   that   in-­ corporated  a  clause  specifying  that  litigation  would  occur  in   Wisconsin   under   Wisconsin s   law   of   contracts.   For   its   part,   Idento   sent   invoices   containing   a   clause   specifying   that   liti-­ gation  would  occur  in  the  Netherlands  under  its  substantive   law.  Inconsistencies  in  commercial  forms  bring  the  situation   within   the   scope   of   the   Uniform   Commercial   Code s   battle-­ of-­ the-­ forms  provision,  §2 207,  which  Wisconsin  has  enacted   verbatim  as  Wis.  Stat.  402.207.  (We  use  Wisconsin  law  provi-­ sionally   here,   because   neither   side   contends   that   Nether-­ lands  law  governs  this  part  of  their  dispute.  Our  provisional   use   of   Wisconsin   law   does   not   imply   that   Wisconsin   pro-­ vides   the   rules   that   govern   the   substance   of   this   dispute,   should  personal  jurisdiction  be  established.)   Section   2 207(2)   treats   a   form   such   as   BouMatic s   (or   Idento s)   as   a   proposal   for   additions   to   the   contract   and   states   that   between   merchants   (which   BouMatic   and   Idento   are)  these  terms  become  part  of  the  contract  unless   the  offer   No.  13-­ 2300   5   expressly   limits   acceptance   to   the   terms   of   the   offer   (§2 207(2)(a)).   BouMatic s   purchase   orders   incorporate   such   a   restriction;   each   says   that   the   transactions   must   be   on   its   terms   and   no   others.   When   Idento   replied   with   different   terms,  the  purchase  orders  and  invoices  canceled  each  other   out.  This  means  that  neither  the  purchase  orders  nor  the  in-­ voices  vary  the  terms  of  the  preexisting  contract.   The  district  court  inferred  from  this  that  the  only  terms  in   force  between  the  parties  are  those  in  the  master  contract.  As   that   contract   does   not   specify   where   litigation   will   occur,   Idento  has  not  consented  to  suit  in  Wisconsin.  The  problem   with  that  approach  is  that  the  inconsistent  purchase-­ and-­ sale   forms   countermand   each   other;   they   leave   the   parties   prior   agreements   unaffected.   It   takes   a   new   agreement   to   knock   out   an   old   one,   and   the   inconsistent   forms   mean   that   there   has   not   been   a   new   agreement.   If   the   parties   prior   agree-­ ments  include  consent  to  litigate  in  Wisconsin,  then  this  suit   can  proceed.   BouMatic  contends  that  a  hearing  is  unnecessary  because   its  form  is  the  only  one  in  the  record.  If  Idento  neglected  to   introduce   its   forms,   then   the   record   is   one-­ sided   and   Bou-­ Matic s   proposals   (including   consent   to   suit   in   Wisconsin)   became   part   of   the   contract.   But   BouMatic   is   mistaken;   the   record  has  several  copies  of  Idento s  terms,  which  its  invoic-­ es   (also   in   the   record)   incorporate.   And   the   district   court   added   (footnote   1   of   its   opinion)   that   BouMatic   has   waived   any  contention  that  Idento  did  not  send  sets  of  terms  incom-­ patible  with  BouMatic s  own.   According   to   Idento,   if   it   agreed   orally   to   anything   (which   it   denies)   it   specified   Wisconsin   as   a   forum   but   did   not   agree   to   personal   jurisdiction.   That   makes   no   sense.   A   6   No.  13-­ 2300   forum-­ selection   clause   can   work   only   if   both   parties   are   amenable   to   suit   in   the   chosen   forum;   to   agree   to   a   forum   thus  is  to  agree  to  personal  jurisdiction  in  that  forum.  Heller   Financial,  Inc.  v.  Midwhey  Powder  Co.,  883  F.2d  1286,  1292  n.4   (7th  Cir.  1989).   Finally,  Idento  asserts  that  it  would  violate  the  Due  Pro-­ cess   Clause   of   the   Fifth   Amendment   to   base   personal   juris-­ diction  on  consent.  That  is  nonsense.  The  Supreme  Court  has   stated  that  personal  jurisdiction  can  rest  on  consent.  See,  e.g.,   Burger  King  Corp.  v.  Rudzewicz,  471  U.S.  462,  472  n.14  (1985);   see  also  Heller  Financial,  883  F.2d  at  1290.  Cf.  Atlantic  Marine   Construction  Co.  v.  United  States  District  Court,  134  S.  Ct.  568   (2013).   Indeed,   an   argument   that   personal   jurisdiction   is   missing  can  be  forfeited  by  delay  in  moving  to  dismiss.  Fed.   R.  Civ.  P.  12(h)(1).   Litigants   cannot   confer   subject-­ matter   jurisdiction   by   agreement  or  omission,  but  personal  jurisdiction  is  a  person-­ al  right  that  a  litigant  may  waive  or  forfeit.  Idento  maintains   that  only   freely  negotiated  forum  selection  clauses  can  be   enforced.  Put  to  one  side  the  fact  that  the  Supreme  Court  has   enforced   a   clause   preprinted   in   tiny   type   on   the   back   of   a   cruise  ticket  and  not   negotiated  at  all.  Carnival  Cruise  Lines,   Inc.  v.  Shute,  499  U.S.  585  (1991).  Nor  is  personal  jurisdiction   achieved   when   the   defendant   forfeits   its   objection   freely   negotiated.  At  all  events,  Idento  does  not  contend  that  any-­ one   twisted   its   (corporate)   arm.   If   it   agreed   with   BouMatic   on  a  Wisconsin  forum,  in  a  manner  compatible  with  contract   (i.e.,  without  fraud),  no  more  is  necessary.   A  few  additional  arguments  have  been  considered  but  do   not  require  discussion.   No.  13-­ 2300   7   There  is  no  shortcut;  a  hearing  is  essential.  The  judgment   is   vacated,   and   the   case   is   remanded   for   proceedings   con-­ sistent  with  this  opinion.