Philips Medical Systems (Cleveland), Inc. v. Buan

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

PHILIPS MEDICAL SYSTEMS )

(CLEVELAND), INC., and PHILIPS MEDICAL )

SYSTEMS DMC, GmbH )

)

Plaintiffs, )

)

v. ) No. 1:19 CV 02648

) Hon. Marvin E. Aspen

JOSE BUAN, GL LEADING TECHNOLOGIES, )

INC., KUNSHAN YIYUAN MEDICAL )

TECHNOLOGY CO., LTD., KUNSHAN GUOLI )

ELECTRONIC TECHNOLOGY CO., LTD., )

AND SHERMAN JEN, )

)

Defendants. )

MEMORANDUM OPINION & ORDER

MARVIN E. ASPEN, District Judge:

This lawsuit concerns the alleged misappropriation of trade secrets. Before us are

Defendants Kunshan Yiyuan Medical Technology Co., LTD. (“Yiyuan”) and Kunshan Guoli

Electronic Technology Co., LTD’s (“Guoli”; collectively, “Defendants”)1 motions to dismiss

Plaintiffs Philips Medical Systems (Cleveland), Inc. and Philips Medical Systems DMC,

GmbH’s (collectively, “Philips” or “Plaintiffs”) Second Amended Complaint (Dkt. No. 92)

(“SAC”). (Dkt. Nos. 158, 161.)2 Defendants move to dismiss pursuant to Federal Rules of Civil

Procedure 12(b)(2) for lack of personal jurisdiction, 12(b)(4) for insufficient process, and

1 The briefing also refers to Guoli as “GuoLi.”

2 Also before us is Defendant Yiyuan’s motion to seal Exhibits 1, 2, and 3 of Feng Zhou’s

Declaration. We grant this motion to seal because they relate to the Confidentiality Order’s

designated materials of “business or strategic plans . . . price information . . . sales and financial

data . . . other information of a competitive, financial or commercial significance.”

(Confidentiality Order (Dkt. No. 31) ¶ 2.)

12(b)(5) for insufficient service of process. (Id.) For the reasons set forth below, we deny

Defendants’ motions to dismiss.

BACKGROUND

The following facts are taken from Plaintiffs’ Second Amended Complaint and are taken

as true for the purposes of this motion. See Bell v. City of Chi., 835 F.3d 736, 738 (7th Cir.

2016); see also Tamayo v. Blagojevich, 526 F.3d 1074, 1081 (7th Cir. 2008).

Plaintiff Philips Medical Systems (Cleveland), Inc. is a California corporation with its

principal place of business in Cleveland, Ohio. (SAC ¶ 1.) Plaintiff Philips Medical Systems

DMC, GmbH, is a German entity with its principal place of business in Hamburg, Germany. (Id.

¶ 2.) Plaintiffs engage in “research, development, and commercialization of medical imagining

technology,” among other lines of business. (Id. ¶ 3.)

Plaintiffs allege that Yiyuan is a Chinese entity with its principal place of business in

Kunshan, Jiangsu Province, China. (Id. ¶ 7.) They believe that Yiyuan is engaged in research

and development, manufacturing and selling products for medical imaging equipment, providing

technical development, technical services and technical consultation in the field of medical

imaging technology,” as well as the “import and export of goods and technologies.” (Id. ¶ 8.)

Plaintiffs allege that Guoli is a Chinese entity with its principal place of business at the

same location in China as Yiyuan. (Id. ¶ 9.) According to Plaintiffs, Guo Li is a stockholding

enterprise specializing in developing and manufacturing electrical vacuum products, including

X-ray tubes. (Id. ¶ 10.)

I. Former Employees Misappropriate Plaintiffs’ Information.

A. Jose Buan

Plaintiffs allege that two of their former employees, Defendants Jose Buan (“Buan”) and

Sherman Jen (“Jen”), misappropriated trade secret information from Philips’ computer system to

share with their new employer, Defendant GL Leading. (See, id. ¶¶ 72–83, 88–92, 96–97, 100–

101.) On December 26, 2017, Buan “copied over 740 [of] Philips’ files, including trade secret

and other confidential business information” onto a portable drive. (Id. ¶¶ 72, 74–77.) Plaintiffs

believe that these files included, among other documents, presentations related to Philips’

“2XXX X-ray Tubes and other X-ray tub products.” (Id. ¶ 73.)

The following day, Buan copied more than 70 additional Philips files onto a portable

drive. (Id. ¶¶ 78, 80–83.) These files included additional information pertaining to Philips’ x-

ray tubs. (Id. ¶ 79.) A subsequent investigation revealed that Buan took “a trove” of additional

files containing “confidential and trade secret technical and business information pertaining to

the 2XXX series X-ray tubes, and other important Philips X-ray technologies, including Philips

iMRC X-ray tubes.” (Id. ¶ 89.)

At least one of the drives used to download the data referenced above was connected to

Buan’s work computer at GL Leading. (Id. ¶ 91.) Plaintiffs believe that “additional USB

devices that had been connected to Buan’s Philips Company Workstation . . . have also been

connected to Buan’s work computer at GL Leading.” (Id. ¶ 92.)

B. Sherman Jen

By August 2017, Jen was communicating with Guoli regarding the formation of GL

Leading. (Id. ¶ 51.) Plaintiffs believe that between August 2017 and December 2017, Jen was

also involved in recruiting Philips employees to join Guoli/GL Leading and sending Philips

confidential information and trade secrets to Guoli/GL Leading. (Id.)

Plaintiffs suspect that Jen kept “more than three thousand” of Philips’ electronic

materials after he was terminated from Philips. (Id. ¶ 96 (emphasis in original).) A number of

these documents’ legends indicate that they contain Philips’ confidential and proprietary

information and contain schematics for various components, among other technical information.

(See, e.g., id. ¶ 97.)

II. Buan and Jen Begin Working for GL Leading / Guoli.

Soon after Buan left Philips’ Dunlee facility, he began working at GL Leading as a

Director of Engineering, and later, as a Senior Manager for Product Engineering. (Id. ¶ 100.)

Plaintiffs believe that Buan is using information obtained from Philips in his new role. (Id.)

Jen began working with Guoli before GL Leading’s formation and before he left Philips,

“at least as of August 2017.” (Id. ¶ 101.) This “‘under the table’” work included R&D planning,

visiting a Guoli manufacturing site in China, instructing the copying of certain of Plaintiffs’

proprietary materials, and asking Plaintiffs’ employees to join GL Leading, among other things.

(Id.) At some point, Jen assumed the role of Principal Engineer at GL Leading. (Id. ¶ 102.)

Plaintiffs believe that Jen and Guoli were “directly involved” in forming GL Leading and

recruiting various Philips employees who had “designed manufactured and commercialized”

Plaintiffs’ x-ray tubs, including Buan, to join GL Leading. (Id. ¶¶ 103, 105.)

The SAC provides additional information concerning how each of the Defendants

purportedly used the misappropriated information. (See id. ¶¶ 114–161.) By way of example,

while working at GL Leading, Buan and Jen purportedly used Philips’ proprietary information to

design an x-ray tube “for manufacture and commercialization by Guoli and/or Yiyuan.” (Id.

¶¶ 114–16.)

III. Relationship Between GL Leading, Guoli, and Yiyuan

Plaintiffs allege that GL Leading, Guoli, and Yiyuan are all competitors and that two of

their x-ray tube products are meant to “replace, operate similarly to, or be interchangeable with”

certain of Philips’ x-ray tubes. (Id. ¶ 104.) Plaintiffs further allege that Guoli was “directly

involved in the formation of GL Leading” and the hiring of Buan and other personnel from

Philips. (Id. ¶ 105.)

Plaintiffs believe that Yiyuan is a subsidiary of Guoli, and that one or both of those

entities controls GL Leading and “have been acting in concert with GL Leading” with respect to

the misuse of Plaintiffs’ trade secrets. (Id. ¶¶ 108–09.) Apart from that, Plaintiffs allege that

Guoli, Yiyuan, and GL Leading share “common directors and/or management” and “certain

information technology, electronic data storage and/or communication infrastructure;” one or

both of the Defendants “exercise significant financial control over GL Leading;” and GL

Leading uses a logo that is identical to the logo used by Guoli, among other things. (Id. ¶¶ 110–

13.) In short, Plaintiffs allege that there is a high degree of inter-relatedness between GL

Leading, Guoli, and Yiyuan, and all played a role in the misappropriate and misuse of Plaintiffs’

proprietary information.

LEGAL STANDARD

I. Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(2)

“A motion to dismiss under Federal Rule of Civil Procedure 12(b)(2) ‘tests whether a

federal court has personal jurisdiction over a defendant.’” MOLD-A-RAMA Inc. v. Collector-

Concierge-International, 451 F. Supp. 3d 881, 884 (N.D. Ill. 2020) (quoting United Airlines, Inc.

v. Zaman, 152 F. Supp. 3d 1041, 1045 (N.D. Ill. 2015). If a defendant challenges the existence

of personal jurisdiction, the plaintiff bears the burden of establishing that it exists. Northern

Grain Marketing, LLC v. Greving, 743 F.3d 487, 491 (7th Cir. 2014).

When the court rules on a 12(b)(2) motion based on its review of written materials

submitted by the parties, as opposed to an evidentiary hearing, the plaintiff “need only make out

a prima facie case of personal jurisdiction.” Purdue Research Foundation v. Sanofi-Synthelabo,

S.A., et al., 338 F.3d 773, 782 (7th Cir. 2003) (quoting Hyatt Int’l Corp. v. Coco, 302 F.3d 707,

713 (7th Cir. 2002). “[A]ny well-pleaded facts alleged in the complaint are taken as true and any

factual disputes in the affidavits are resolved in the plaintiff’s favor.” MOLD-A-RAMA, 451 F.

Supp. at 884. However, if a defendant “submits affidavits or other evidence in opposition, ‘the

plaintiff must go beyond the pleadings and submit affirmative evidence supporting the exercise

of jurisdiction.’” ABN AMRO, Inc. v. Capital Int’l Limited, 595 F. Supp. 2d 805, 818 (N.D. Ill.

2008) (quoting Purdue, 338 F.3d at 783). “While in this context affidavits trump the pleadings,

in the end all facts disputed in the affidavits will be resolved in the plaintiff’s favor.” Leong v.

SAP Am., Inc., 901 F. Supp. 2d 1058, 1061 (N.D. Ill. 2008).

A court may exercise either general or specific personal jurisdiction over a dispute.3

Felland v. Clifton, 682 F.3d 665, 673 (7th Cir. 2012). “Specific jurisdiction exists ‘for

controversies that arise out of or are related to the defendant’s forum contacts.’” Abbott Labs.,

Inc. v. Biovalve Techs., Inc., 543 F. Supp. 2d 913, 920 (N.D. Ill. 2008) (quoting Hyatt Int’t Corp.

v. Coco, 302 F.3d 707, 713 (7th Cir. 2002)). In the Seventh Circuit, there are “three essential

requirements” for specific jurisdiction:

3 No party argues that we have general jurisdiction over Defendants. (See generally Dkt. Nos.

159, 162; Combined Resp.)

(1) the defendant must have purposefully availed himself of the

privilege of conducting business in the forum state or purposefully

directed his activities at the state; (2) the alleged injury must have

arisen from the defendant’s forum related activities; and (3) the

exercise of jurisdiction must comport with traditional notions of fair

play and substantial justice.

Felland, 682 F.3d at 673 (7th Cir. 2012) (internal citations omitted); see also Northern Grain

Mktg., LLC v. Greving, 743 F.3d 487, 492 (7th Cir. 2014) (“[I]f Illinois constitutionally may

exercise personal jurisdiction over a defendant, its long-arm statute will enable it to do so.”);

Hyatt Int’l Corp. v. Coco, 302 F.3d 707, 715-16 (7th Cir. 2002).

II. Motion to Dismiss Pursuant to Federal Rule of Civil Procedures 12(b)(4) and

12(b)(5).

Federal Rule of Civil Procedure 4 requires that every defendant be served with a copy of

the operative complaint and summons. Luxxotica Grp. S.P.A. v. Partnerships, 391 F. Supp. 3d

816, 821 (N.D. Ill. 2019) (citing Fed. R. Civ. P. 4(b), 4(c)(1)). “Only proper service vests a

district court with personal jurisdiction over a defendant. Id. (internal citation omitted).

“Rule 12(b)(4) motions challenge the form of the process; they test matters such as

whether the summons bore the seal of the court, was signed, or was addressed to the proper

party.” Luxxotica, 391 F. Supp. 3d at 821 (internal citation omitted). By contrast, Rule 12(b)(5)

motions challenge the way the process was served. Id. “Because motions under both rules

ultimately test the court’s personal jurisdiction over the defendant, the same standards govern

motions under both rules.” Id. (internal citation omitted).

“The plaintiff bears the burden to demonstrate that the district court has jurisdiction over

each defendant through effective service.” Cardenas v. City of Chicago, 646 F.3d 1001, 1005

(7th Cir. 2011) (internal citation omitted). If a court finds that a plaintiff has not met this burden

and lacks good cause for not perfecting service, the court must either dismiss the lawsuit or

specify a time within which the plaintiff should serve the defendant. Id.

ANALYSIS

I. Yiyuan and Guoli’s Motions to Dismiss for Lack of Personal Jurisdiction.

Defendants argue this this case should be dismissed for lack of personal jurisdiction

because they have not engaged in suit-related conduct in this jurisdiction. (Dkt. Nos. 159 at 6–

12, 162 at 5–12.) For example, Guoli argues that it was not “directly involved” in the formation

of GL Leading, but even if it was, that conduct was lawful and unrelated to Plaintiffs’ DTSA and

unjust enrichment claims. (Dkt. No. 159 at 6–7.) Both Defendants dispute that they control or

have been “acting in concert” with GL Leading. (Dkt. Nos. 159 at 7, 162 at 6–7.) According to

Defendants, they do not share common directors or management, nor certain information

technology, electronic data storage, or communication infrastructure with GL Leading. (Dkt.

Nos. 159 at 7, 162 at 6.) Defendants assert that they do not exert significant financial control

over GL Leading either. (Id.)

Guoli claims that it no incentive to “act in concert” with GL to misappropriate Plaintiffs’

trade secrets because it had no use for them. (Id. at 8.) Yiyuan denies that it used the Philips

intellectual property identified in the Second Amended Complaint and further adds that in its

contract with GL Leading, Yiyuan “obtained a promise from GL Leading that GL Leading

owned the intellectual property it was providing to Yiyuan and that GL Leading had not

misappropriated trade secrets.” (Dkt No. 162 at 9–10.) In support of these contentions,

Defendants submit declarations by Guoli’s General Manager Hao Huang (Dkt. No. 158-3),

Yiyuan’s General Manager Feng Zhou (Dkt. No. 161-3), and Yiyuan’s Vice General Manager

Xiaoqin Du (Dkt. No. 158-4) that generally refute the aforementioned allegations and others

made in Plaintiffs’ Second Amended Complaint. (See generally Dkt Nos. 158-3, 158-4; 159 at

6–11, 161-3, 162 at 7–8.)

In response, Philips argues that the declarations submitted by Guoli and Yiyuan should be

given limited weight, if any, because they are contradicted by documentary evidence produced

by Defendants in this case,4 GL Leading’s interrogatory responses, and admissions in Jen’s

Answer to the Second Amended Complaint. (Philips’ Consolidated Opposition to Kunshan

Guoli Electronic Technology Co., LTD.’s, and Kunshan Yiyuan Medical Technology Co.,

LTD.’s Motions to Dismiss (“Combined Response” or “Combined Resp.”) (Dkt. No. 193) at 7–

10.) According to Philips, these materials demonstrate “that numerous GuoLi and Yiyuan

personnel” have directed business activity to Illinois with the purpose of acquiring proprietary

and confidential Philips documents, and have maintained “absolute control” over GL Leading in

Illinois, including, for example, the recruitment and hiring of employees in Illinois and the

approval of capital improvements to GL Leading’s facility in Illinois. (Id. at 10.) In support of

this argument, Plaintiffs attached 74 exhibits to their Combined Response, including email

correspondence, schematics, and webpages, among other documents. (Combined Resp. at Exs.

1–74.)

Defendants moved to exclude 47 of those exhibits on various grounds. See generally

Philips Medical Systems (Cleveland), Inc. v. Buan, No. 19 CV 2648, 2021 WL 83736 (N.D. Ill.

Jan. 11, 2021). That motion was denied in January 2021. Id. at *1. Philips later filed

declarations authenticating the webpage exhibits, as directed by Magistrate Kim. (See Dkt. Nos.

256, 258.)5 Defendants then objected to Magistrate Judge Kim’s ruling (Dkt. No. 259),

necessitating another round of briefing. We denied Defendants’ motion to reconsider Magistrate

4 Discovery has been ongoing between Plaintiffs and other defendants in this case. (See, e.g.,

Dkt. Nos. 27, 30, 251.)

5 Dkt. No. 258 appears to be a corrected version of Dkt. No. 256-6.

Judge Kim’s Order for reasons explained in the separate Opinion issued contemporaneously with

this one.

Plaintiffs met their burden at this juncture. As Magistrate Judge Kim observed, “All that

is needed at this stage . . . is a prima facie showing that Defendants are subject to personal

jurisdiction in this district.” Philips Medical Systems, 2021 WL 83736, at *4 (citing Purdue, 338

F.3d at 782).) The numerous exhibits attached to the Combined Response satisfy this standard.

For example, the exhibits suggest that Yiyuan received certain of Philips’ proprietary

information from individuals who left Philips’ Illinois facility to work for GL Leading:

• On August 29, 2017, Jen sent Xiaoqin Du6 an eighteen-page schematic bearing the word

“Philips” and “© 2014 Philips Healthcare USA Aurora, IL” on every page. (Dkt. No.

193-1.)

• On September 3, 2017, Jen sent Xiaoqin Du an email attaching a Philips PowerPoint

stamped “Confidential,” which sets forth information about Philips’ “Organizational

Direction,” “Organizational Changes,” and “Organizational Development.” (Dkt. No.

193-2.)

The exhibits also suggest that Defendants’ personnel were involved in establishing GL Leading

in Illinois and played a role in its ongoing operations:

• On November 22, 2017, Jen sent an email to a number of individuals, including Xiaoqin

Du, whom he cc’d, in which he appears to describe steps being taken in connection with

the establishment of GL Leading in Illinois. Among other things, he writes that “Ms.

D”"—presumably Xiaoqin Du—“will finish all the paper work for the company

6 Xiaoqin Du is Yiyuan’s Vice General Manager. (Dkt. No. 158-4.)

registration and everyone’s contract. . . . Ms. Du will fly to Cleveland to get all the IT

support issue [sic] done.” (Dkt. No. 193-13.)

• On June 18, 2018, Xiaoqin Du advises Buan that the “budget was approved by president

Mr. Yin,” Guoli’s Chairman. (Dkt. No. 193-15.)

• On July 26, 2018, Buan sent Xiaoqin Du and others a PowerPoint presentation entitled,

“Monthly Management Review” in anticipation of an upcoming meeting. (Dkt. No. 193-

61.) The presentation relates to GL Leading Technologies, Inc. and describes the

company’s “Engineering Activities,” as well as its “Management/Site Activities.” (Id.)

• On April 25, 2019, Xiaoqin Du sent Buan a schedule, presumably for Du’s upcoming trip

to Illinois. Du describes logistics for meeting lawyers who Buan apparently “found,”

noting “according [to] the evaluation by our lawyer we will make decision on most

suitable one to be our attorney.” (Dkt. No. 193-20 (emphasis added).) Du comments on

other tasks and writes, “Of course, every day we will have a meeting with Harry and Mr.

Yin to discuss and analyze progress. Especially before we make any decision we have to

get approval by Mr. Yin.” (Id. (emphasis added).)

• On April 30, 2019, Xiaoqin Du sent what appears to be a draft employment agreement to

Buan. Buan remarks that he as updated the agreement “to make sure it is correct for

Illinois.” He adds that he “will send it out to everyone and ask them to sign it today.”

The employment agreement attached to his email relates to employment for GL Leading

Technologies, Inc., located in Aurora, Illinois. (Dkt. No. 193-14.)

There is some suggestion that GL Leading may be a subsidiary of one or both Defendants:

• On October 31, 2017, an individual at Cushman & Wakefield asked Jen to provide

information about GL Technologies in connection with a rental arrangement. Jen

responded, “Basically, we are the subsidiary from GL Electronic which is based at

KunShan, China. It is a well established company, and we will be the R&D division in

US. The Company registered in US will be GL-Leading Technologies Inc. You can

check this website www.glvac.com.” (Dkt. No. 193-49.) Exhibits to the declarations of

Nicholas W. Armington (Dkt. No. 256-1) and Jan Leheij (Dkt. No. 256-5) reflect that

Guoli and Yiyuan are located in Kunshan, China. (See Dkt. Nos. 256-2, 256-7, 258.)

The exhibits further suggest that Yiyuan took steps to facilitate information sharing between

Yiyuan and GL Leading:

• On May 17, 2018, Xiaoquin Du sent Buan and others an email concerning an “IT

Project.” (Dkt. No. 193-31.) Du wrote, “Mr. Yin decide [sic] to set up individual IT

sysetem [sic] for Kunshan Yiyuan and GL Leading so that we can share the same server

through VPN, each colleague can find and save documents in same place and easy to

share the information.” (Id.)

• On February 15, 2019, an individual who appears to be associated with Yiyuan based on

his email address (xujiajia@glvac.cn) advised a group of individuals with

@glleading.com email addresses, including Jen and Buan: “We created a folder for

sharing the tube building status and record information (yiyuan/ks-au-common

folder/GLA2153 tube built).” (Dkt. No. 193-33.)

Additionally, the exhibits suggest that certain schematics used by Philips in Illinois may have

been repurposed by Guoli for its own use:

• Schematics produced by GL Leading include references to both Philips and Kunshan

Guoli Electronic. (See, e.g., Dkt. Nos. 193-6 (noting that a “certificate of compliance”

should be transmitted “BY E-MAIL TO INCOMING.INSP.AURORA@PHILIPS.COM”

and also bearing the phrase “KUNSHAN GUOLI ELECTRONIC” elsewhere on the

document); 193-8 (noting “PHILIP’S/DONE APPROVAL REQUIRED” and also

bearing the phrase “KUNSHAN GUOLI ELECTRONIC” elsewhere on the document).)

Together, these and many other materials attached to, or otherwise referenced in, Plaintiffs’

Response make a prima facie showing that Defendants intentionally engaged in the

misappropriation of trade secrets, expressly aimed at Illinois,7 with knowledge that Philips would

be injured in Illinois. See Felland, 682 F.3d at 674–75. Based on the information put forth by

the parties to date, Defendants could reasonably anticipate being hailed into court here and doing

so accords with traditional notions of fair play and justice. Accordingly, we have specific

jurisdiction over Defendants in this case.

At trial, Plaintiffs will still bear the burden of proving that jurisdiction is appropriate in

this case. See Rice v. Nova Biomed. Corp., 38 F.3d 909, 914–15 (7th Cir. 1994 (noting that “the

denial of a preliminary challenge to personal jurisdiction . . . is not an automatic bar to renew[a]

of the motion after evidence bearing on it has been obtained by pretrial discovery or presented at

trial”). And to the extent Plaintiffs intend to use any of the exhibits attached to their Response to

prove their case at trial, the exhibits must be in admissible form.

II. Yiyuan and Guoli’s Rule 12(b)(4) and (5) Motions to Dismiss.

Defendants argue that Plaintiffs should have served them pursuant to the Hague

Convention since they are Chinese corporations with their principal places of business in China.

(Dkt. Nos. 159 at 14–15, 162 at 13–15.) They further argue that since Plaintiffs did not serve

7 Defendants filed supplemental briefing analogizing this case to J.S.T. Corp. v. Foxconn

Interconnect Tech. Ltd., 965 F.3d 571 (7th Cir. Jul. 13, 2020). These cases are distinguishable.

In Foxconn, there were not enough facts to show that the defendants’ conduct was targeted to

Illinois. Here, however, Plaintiffs’ allegations and the evidence before us shows a variety of

Illinois based conduct, namely, that the defendants did business in Illinois and received stolen

designs and drawings in and from business operations in Illinois. (See, e.g., SAC ¶¶ 16, 18.)

them through this mechanism, and only attempted service through an individual and an entity

who were not authorized to accept service, service has not been accomplished.8 (Dkt. Nos. 159

at 15, 162 at 14–15.)

Plaintiffs dispute that they are required to comply with the service provisions of the

Hague Convention. (Dkt. No. 193 at 22 n.6.) According to Plaintiffs, the service provisions of

the Hague Convention do not apply where service of process is accomplished within the United

States and in accordance with state law and the Due Process Clause. (Dkt. No. 193 at 22–29.)

Plaintiffs claim that they properly served Defendants through Defendants’ subsidiary in Illinois

(GL Leading) and Guoli’s U.S. Director of Operations (Jose Frias) in California. (Combined

Resp. at 22–29.)

Plaintiffs need not effectuate service using Hague Convention procedures if they properly

effectuate service in the U.S. See Chung v. Tarom, S.A., 990 F. Supp. 581, 584 n.2 (N.D. Ill.

198) (citing Volkswagenwerk Aktiengesellschaft v. Schlunk, 486 U.S. 694 (1988)); see also

Wissmiller v. Lincoln Trail Motosports, Inc., 552 N.E.2d 295, 299-300 (4th Dist. 1990).

Accordingly, we will consider whether they properly served Defendants when they served GL

Leading and Jose Frias.

A. Service Upon GL Leading

Under Federal Rule of Civil Procedure 4(h), a foreign corporation may be served in the

manner directed by Rule 4(e)(1). This rule provides that an individual may be served in a

judicial district of the United States by “following state law for serving a summons in an action

8 Plaintiffs attempted to serve Guoli through both GL Leading and Jose Frias, but Yiyuan

through GL Leading only. (Dkt. Nos. 159 at 15, 162 at 14–15.)

brought in courts of general jurisdiction in the state where the district court is located or where

services is made. . . .” Fed. R. Civ. P. 4(e)(1).

In Illinois, a private corporation may be served by leaving a copy of the process with any

officer or agent of the corporation found anywhere in the State. 735 ILCS 5/2-204. Plaintiffs

contend that GL Leading is such an agent by virtue of being a subsidiary of one or both

Defendants. (Combined Resp. at 22–23.)

Plaintiffs assume that GL Leading is Defendants’ subsidiary based on Defendants’

purported involvement in GL Leading’s operations and an email from Jen to an individual at

Cushman & Wakefield, in which Jen wrote of GL Leading: “Basically, we are the subsidiary

from GL Electronic. . . .” (Combined Resp. at 22–27; Dkt. No. 193-49.) Plaintiff’s assumption

is problematic for several reasons.

The chief issue is that Defendants have put forth declarations attesting to the fact that GL

Leading is not a subsidiary of either Defendant. (See, e.g., Dkt. No. 158-3 at ¶ 8 (“GuoLi does

not have, and has never had, any ownership interest in GL Leading Technologies, Inc. . . .”);

Dkt. No. 161-3 at ¶ 8 (“Yiyuan does not have any ownership interest in GL Leading.”).)

Evidence put forth to the contrary is not persuasive because it is consistent with the idea

that GL Leading is not Defendants’ subsidiary. Defendants’ purported involvement in the

formation of GL Leading suggests a parent-subsidiary relationship but not definitive proof of it.

Likewise, Jen’s email does not conclusively demonstrate that GL Leading is a subsidiary of

either one or both of the Defendants. For one thing, it is not clear that Jen understood the legal

significance of the term “subsidiary” when he used it in his email. Based on the information

available to us, Jen was trained as an engineer, not an attorney. Additionally, Jen’s use of the

term “basically” suggests that Jen regards GL Leading as akin to a subsidiary, though it might

not be one in fact. Further, Jen does not reference either Defendant by name in his email,

referring to only “GL Electronic.” Without more information, it would be difficult to discern

whether Jen’s use of the term “GL Electronic” was intended to encompass either, both, or neither

of the Defendants.

Had Plaintiffs put forth corporate formation documents demonstrating that GL Leading is

a subsidiary of one or both Defendants, we might have reached a different conclusion. But as it

stands, we cannot conclude that GL Leading is or was Defendants’ subsidiary, such that service

upon Defendants was properly effectuated through GL Leading.

Even if we were to assume that GL Leading is Defendants’ subsidiary, it is not clear that

GL Leading would qualify as an “agent” for service of process under Illinois law. Illinois courts

consider thirteen factors to determine whether a domestic subsidiary is an agent for the purpose

of service of process:

(1) the subsidiary was established and wholly owned by the parent;

(2) the parent paid the salaries of the subsidiary’s directors; (3) the

parent guaranteed the subsidiary’s lease; (4) the subsidiary’s sole

business was the sale of parts for the parent; (5) the parent listed the

subsidiary’s address in advertisements; (6) the subsidiary existed

primarily to promote the sale and distribution of the parent’s

products; (7) the subsidiary was obligated to repaid and sell parts for

the parent’s products; (8) the subsidiary was contractually required

to apprise the parent of all aspects of its business; (9) the subsidiary

was authorized to prosecute trademark infringement suits in the

parent’s name; (10) the parent controlled the subsidiary’s choice of

dealers, designation of products and services, stock levels, and

methods of ordering; (11) the parent dominated the subsidiary’s

board of directors; (12) the subsidiary conducted its board meetings

in the domicile of the parent; and (13) the subsidiary was listed on a

consolidated financial sheet along with the parent rather than

publishing its own annual report.

Chung v. Tarom, S.A., 990 F. Supp. 581, 584 (N.D. Ill. 1998).

By Plaintiffs’ own admission, there is insufficient evidence in the record to conclude that

GL Leading satisfies many of these factors, purportedly because such information has not been

produced by other defendants. (See, e.g. Combined Resp. at 24 (writing of factor two: “While it

appears that GL Leading’s president, Harry Jiang, is also a director of Yiyuan. . .GL Leading has

not provided any discovery concerning the make-up and/or compensation of its board of

directors. . . .”), 26 (writing of factor 11: “GL Leading has yet to produce information concerning

its board of directors. . . . But its president is a Yiyuan director, and on information and belief,

GuoLi’s chairman effectively controls GL Leading’s board’s actions.”) (emphasis added); 26

(writing of factor 12: “GL Leading has yet to produce any board documents. . . .”); 27 (writing of

factor 13: “No defendant has yet to produce any GuoLi or Yiyuan financial statements.”).)

Other factors are in dispute and not fully satisfied by evidence put forth by Plaintiffs. For

example, in support of factor one (“Parent Established and Owned Subsidiary”), Plaintiffs state

only that GL Leading was “established under the direction and control” of two of Defendants’

employees, that one of Defendants’ employees “was kept closely apprized and authorized and

approved actions taken by his operatives both before and after GL leading was established,” and

that GL Leading has represented itself to be a Guoli subsidiary, citing the Jen email referenced

above. (Combined Resp. at 24.) Although some of these allegations might be consistent with the

contention that one or both Defendants “established and owned” GL Leading, they far from

demonstrate that fact. Arguments relating to factors three, five, and eight suffer from similar

deficiencies.

Another issue is that Plaintiffs address some of the factors in relation to one, but not both

defendants. For example, Plaintiffs claim that factor 9 (“Subsidiary Authorized to Prosecute

Trademark Suit for Parent”) is satisfied because “The Technical Service Corporation Agreement

provides that all GL Leading’s inventions belong to Yiyuan” but makes no mention of Guoli. (See

Combined Resp. at 26.)

In sum, Plaintiffs have not put forth enough evidence to suggest that GL Leading satisfies

the bulk of these factors in relation to the Defendants. Accordingly, this is a separate reason to

conclude that service was not properly effectuated upon Defendants through GL Leading.

B. Service Upon Jose Frias

Plaintiffs argue that service was also accomplished by serving Jose Frias in California;

they contend Frias is a “general manager” of both Defendants. (Combined Resp. at 27–29.)

California law decides when an individual is properly served in California. There, a foreign

corporation can be served against the foreign corporation’s general manager. Cal. Corp. Code §

2110. California defines “general manager” to include “any agent of the corporation of

sufficient character and rank to make it reasonably certain that the defendant will be apprised of

the service made.” Flaco v. Nissan North America, Inc., 987 F. Supp. 2d 1071, 1074 (C.D. Cal.

2013); see also Yamaha Motor Co., Ltd. V. Superior Court, 174 Cal. App. 4th 264, 273 (2009).

In support of their argument that Frias is Guoli and Yiyuan’s general manager, Plaintiffs

attach an exhibit of Frias’ LinkedIn page from around the time that he was served. Frias’

LinkedIn page indicates that he was holding himself out as a “MANUFACTURING

EXECUTIVE/OPERATIONS LEADERSHIP” and employed by Guoli as “Director- US

Operations” since April 2019. (Dkt. No. 193-73.) Plaintiffs contend that since they served

GuoLi’s general manager, Frias, that they thereby served Yiyuan through Guoli since they

alleged that “Yiyuan is a subsidiary of GuoLi” such that a Guoli general manager is also a

Yiyuan general manager for purposes of service. (See SAC ¶ 108.) Yiyuan did not reply to this

argument. (Consolidated Reply (Dkt. No. 210) at 36.) The allegation that Guoli and Yiyuan are

related business entities is bolstered by the facts that they are represented by the same counsel

and share similar naming conventions (Dkt. No. 193-23 (Compare “Kunshan Yiyuan Medical

Technology Co., Ltd.” with “Kunshan Guoli Electronic Technology Co., Ltd.”’).) More, the fact

that Yinyuan ultimately learned of this lawsuit confirms that service on Frias was “reasonably

certain” to make them “apprised of the service made,” as it did Just that. F/aco, 987 F. Supp. 2d

at 1074 (Dkt. No. 193-23 (Guoli and Yiyuan’s lawyer stating that they are apprised of the

amended complaint).) Accordingly, we hold that service has properly been effectuated by

having served Frias.

CONCLUSION

For the above reasons, we deny the motions to dismiss and grant Defendant Yryuan’s

motion to seal Exhibits 1, 2, and 3 of Feng Zhou’s Declaration. (Dkt. Nos. 158, 160, 161.)

UL €

United States District Judge

Dated: April 19, 2021

Chicago, Illinois

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