Philos Technologies, Inc. v. Philos & D, Inc.
802 F.3d 905
7th Cir.2015Background
- Philos Technologies, an Illinois corporation, alleges Korean company Philos & D (P&D) and Korean citizens Don‑Hee and Jae‑Hee Park converted equipment Philos Tech shipped to Korea as part of an alleged joint venture.
- Complex web of related entities: Philos Tech (Illinois), PLST (Korea, chaired by Philos Ko’s wife), and P&D (Korea). Dispute whether PLST or Philos Tech was the true joint‑venture partner of P&D.
- December 20, 2007: PLST and P&D executed written agreements in Korea (including a forum‑selection clause favoring Korea). Philos Tech claims an oral agreement that same day substituted Philos Tech for PLST; defendants deny any oral substitution.
- Transfers of funds and equipment occurred between Korea and Illinois; parties dispute whether equipment was manufactured/assembled in Illinois or merely transshipped as part of a foreign investment scheme.
- Defendants failed to appear in Illinois; district court entered default judgment for Philos Tech, later vacated for lack of personal jurisdiction after an evidentiary hearing. District court also imposed large Rule 11 sanctions on Philos Tech and denied Philos Tech’s post‑judgment fraud motions based on later Korean perjury convictions.
- Seventh Circuit affirmed vacatur for lack of personal jurisdiction, affirmed denial of Rule 60 motions, and vacated the district court’s sanctions order against Philos Tech.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Illinois court had specific personal jurisdiction over P&D and the Parks | Contacts (meetings, phone calls, equipment shipments, visits to Illinois) show purposeful availment and suit arises from those contacts | Contacts were incidental; core negotiations, contracts, and performance occurred in Korea between Korean entities | No personal jurisdiction: contacts with Illinois were insufficient to satisfy due process |
| Whether district court abused discretion in conducting limited jurisdictional hearing without Plaintiff’s discovery/cross‑examination | Hearing was intertwined with merits; Plaintiff needed fuller discovery and live testimony to make prima facie case | Plaintiff had opportunity but failed to request discovery or call witnesses; district court afforded full opportunity | No abuse: Plaintiff failed to request or utilize opportunities; evidentiary findings not clearly erroneous |
| Whether Rule 11 sanctions were warranted against Philos Tech | Plaintiff’s jurisdictional arguments were not frivolous; factual and legal uncertainty (including Korean litigation) meant sanctions were inappropriate | District court found Plaintiff made false factual submissions and pursued jurisdiction in bad faith | Vacated: Rule 11 sanctions were improper given murky facts, unresolved Korean law issues, and some support for Plaintiff’s position |
| Whether Korean perjury convictions warranted vacatur under Rule 60(b)(3)/(b)(6)/(d)(3) | Convictions show defendants committed fraud in the U.S. proceeding and justify setting aside rulings | Convictions are foreign, appealable, and not conclusive proof of fraud in U.S. litigation; Plaintiff offered no clear and convincing evidence | Affirmed denial: Korean convictions did not amount to clear, convincing evidence of fraud on the U.S. record |
Key Cases Cited
- Int'l Shoe Co. v. State of Wash., 326 U.S. 310 (minimum contacts standard for personal jurisdiction)
- Burger King Corp. v. Rudzewicz, 471 U.S. 462 (purposeful availment and relevance of contract negotiations/terms to jurisdiction)
- Walden v. Fiore, 134 S. Ct. 1115 (contacts must be with the forum state, not merely with forum residents)
- Hyatt Int'l Corp. v. Coco, 302 F.3d 707 (7th Cir.) (standards for prima facie showing and evidentiary hearings on jurisdiction)
- Bally Export Corp. v. Balicar, Ltd., 804 F.2d 398 (7th Cir.) (Rule 60(b)(4)—burden on defendant to show lack of jurisdiction)
- Nat'l Wrecking Co. v. Int'l Bhd. of Teamsters, 990 F.2d 957 (7th Cir.) (sanctions inappropriate where losing argument is not groundless)
- Peacock Records, Inc. v. Checker Records, Inc., 365 F.2d 145 (7th Cir.) (examples where perjury/fraud justified relief)