Addressing the issue of personal jurisdiction under the Illinois long arm statute, the US Court of Appeals for the Seventh Circuit reversed the district court’s holding that Ariel Capital Investors had infringed Ariel Investments’ trademarks under the Lanham Act. Ariel Investments, LLC v. Ariel Capital Advisors LLC, Case Nos. 17-1516; -2645 (7th Cir., Jan. 31, 2018) (Easterbrook, J).
Ariel Investments, an Illinois-based investment company, brought suit in Illinois against Florida-based Ariel Capital, alleging that its name choice was infringing on Ariel Investments’ trademarks. As the Lanham Act does not authorize nationwide service of process, Ariel Investments was required to establish personal jurisdiction under Illinois law. After a district judge for the Northern District of Illinois found in favor of Ariel Investments on its claims, Ariel Capital appealed, arguing that the court lacked personal jurisdiction under the Illinois long arm statute.
The Illinois long arm statute permits service to the constitutional limits of its power. Ariel Capital does not have any clients or property in Illinois, does not advertise in Illinois, and has never had an agent visit Illinois. Regardless, the district court found the exercise of personal jurisdiction proper, reasoning that Ariel Capital knew or should have known that its choice of name would injure Ariel Investments in Illinois. In the district court’s view, Ariel Capital’s decision “to trade on the reputation and goodwill of an Illinois entity” was sufficient to establish a relationship between Ariel Capital and the forum state of Illinois. Ariel Capital appealed.
The Seventh Circuit reversed, finding the Supreme Court of the United States’ decision in Walden v. Fiore controlling. In Walden, the Supreme Court held that knowledge that an injury would occur in the forum state, even when conduct was “expressly aimed” at a resident of that state, was not sufficient to confer personal jurisdiction. Rather, a state may assert specific jurisdiction—jurisdiction based on a particular transaction—only when the defendant has created “a substantial connection with the forum state.” This requirement of a “substantial connection” is not satisfied by the defendant’s contacts with a resident of the forum state.
The district court based its decision on Ariel Capital’s conduct towards an Illinois entity, in particular that “Ariel Capital had set out to injure Ariel Investments, knowing that it is located in Illinois.” The Seventh Circuit rejected this rationale, stating that, “[n]o matter how one might characterize the relationship between Ariel Investments and Ariel Capital, it is easy to describe the relationship between Illinois and Ariel Capital: none. That resolves this litigation.” Subjecting a defendant to personal jurisdiction anywhere it aims its actions “is incompatible with Walden.”
Practice Note: When determining if personal jurisdiction is satisfied under the Lanham Act, exercise caution even where the relevant state’s long arm statute authorizes jurisdiction to the constitutional limits of its power. The defendant must have some specific contact with the forum state itself; knowledge of injury or intent to cause injury in the state is not sufficient.