InStep Software, LLC v. InStep (Beijing) Software Comp, No. 13-3713 (7th Cir. 2014)

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NONPRECEDENTIAL  DISPOSITION   To  be  cited  only  in  accordance  with  Fed.  R.  App.  P.  32.1 United States Court of Appeals For  the  Seventh  Circuit Chicago,  Illinois  60604   Argued  September  16,  2014   Decided  September  18,  2014       Before                               No.  13-­ 3713     WILLIAM  J.  BAUER,  Circuit  Judge     RICHARD  A.  POSNER,  Circuit  Judge     FRANK  H.  EASTERBROOK,  Circuit  Judge   INSTEP  SOFTWARE  LLC,     Plaintiff-­ Appellee,       v.   INSTEP  (BEIJING)  SOFTWARE  CO.,  LTD.,     Defendant-­ Appellant.     Appeal   from   the   United   States   District   Court   for   the   Northern   District   of   Illinois,   Eastern  Division.     No.  11  C  3947   John  W.  Darrah,  Judge.   Order     InStep  Software  asked  the  district  court  to  declare  that  Instep  (Beijing)  Software  is  no   longer  authorized  to  sell  or  license  InStep s  products.  The  district  court  entered  judg-­ ment  in  InStep s  favor,  and  Instep  (Beijing)  has  appealed.     As  the  names  suggest,  the  two  parties  are  related:  InStep  is  among  the  equity  inves-­ tors  in  Instep  (Beijing).  This  means  that  the  requirements  of  subject-­ matter  jurisdiction   under  28  U.S.C.  §1332(a)(2)  are  satisfied  only  if  Instep  (Beijing)  is  treated  as  having  its   own  citizenship,  independent  of  the  citizenships  of  its  investors.  If  the  citizenships  of   InStep s  members  (for  InStep  is  itself  not  a  corporation)  are  imputed  to  Instep  (Beijing),   complete  diversity  is  missing.     No.  13-­ 3713   Page  2   In  the  district  court,  InStep  argued,  and  the  judge  found,  that  Instep  (Beijing)  is  a  cit-­ izen  of  China  (and  only  China)  because  Chinese  law  treats  it  as  a   juridical  person.   Our  decision  in  Fellowes,  Inc.  v.  Changzhou  Xinrui  Fellowes  Office  Equipment  Co.,  No.  12-­ 3124  (7th  Cir.  July  22,  2014),  shows  that  this  approach  is  untenable.     That  leaves  the  question  whether  Instep  (Beijing)  has  attributes  sufficiently  similar  to   those  of  a  corporation  organized  in  the  United  States.  See,  e.g.,  BouMatic,  LLC  v.  Idento   Operations,  BV,  No.  13-­ 2300  (7th  Cir.  July  22,  2014).  At  oral  argument  counsel  disagreed   about  just  what  attributes  Instep  (Beijing)  possesses could  not  agree,  indeed,  on  what   kind  of  entity  it  is  as  a  matter  of  Chinese  law.  Instep  (Beijing)  calls  itself  a   common  law   joint  venture.  InStep  calls  it  both  a   limited  liability  company  and  a   Chinese    for-­ eign  equity  joint  venture.     Instead  of  attempting  to  resolve  factual  disputes  in  this  court,  we  think  it  prudent  to   remand  so  that  the  district  court  may  determine,  in  the  first  instance,  (a)  what  kind  of   business  form  Instep  (Beijing)  has;  (b)  what  attributes  such  a  form  possesses  under  Chi-­ nese  law  (for  example,  does  it  have  alienable  shares,  and  what  role  does  the  govern-­ ment  of  China  play  in  determining  the  venture s  duration  and  ownership?);  and  (c)   whether  a  business  organization  of  this  kind  should  be  treated  as  a  corporation  for  the   purpose  of  §1332,  given  the  analysis  in  Fellowes  and  BouMatic.     If  the  district  court  finds  that  Instep  (Beijing)  is  not  a  corporation,  the  case  must  be   dismissed  for  lack  of  subject-­ matter  jurisdiction.  If  Instep  (Beijing)  is  a  corporation,  the   judgment  on  the  merits  should  be  reentered.  Any  appeal  from  the  new  decision  will  re-­ turn  to  this  panel.     VACATED  AND  REMANDED  

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