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Baumann Farms, LLP v. Yin Wall City, Inc.

United States District Court, E.D. Wisconsin

November 29, 2016

BAUMANN FARMS, LLP a Wisconsin limited liability partnership; GLENN HEIER; and AARON KAISER, Plaintiffs,
v.
YIN WALL CITY, INC., an Illinois corporation; SUT I. FONG; CHOENG SAT O; YIN WALL CITY, INC., a Texas corporation; and YIN WALL CITY, DALLAS, INC., a Texas corporation, Defendants.

          ORDER ON DEFENDANTS' MOTION TO DISMISS

          WILLIAM E. DUFFIN U.S. Magistrate Judge

         Defendants Yin Wall City, Inc. (an Illinois Corporation), Sut I. Fong, Choeng Sat O, Yin Wall City, Inc. (a Texas corporation), and Yin Wall City, Dallas, Inc. (a Texas corporation) (all collectively referred to herein as “YWC”) move to dismiss the class action complaint of plaintiffs Baumann Farms, LLP (a Wisconsin limited liability partnership), Glenn Heier, and Aaron Kaiser (collectively “Baumann”). (ECF No. 11.) Having the consent of the parties (ECF Nos. 2, 10), the matter is briefed and ready for resolution.

         I. Background

         This case involves ginseng root, a root cultivated in Asia and North America that is associated with certain medicinal effects that sooth the recipient.[1] According to Baumann's complaint, Wisconsin-grown ginseng root sells at a premium of two and one-half to three and one-half times the price of ginseng root grown elsewhere. (ECF No. 1, at 2.) This demand is driven by Wisconsin-grown ginseng's purity and high levels of the medicinally active ingredient, ginsenocide.[2] (ECF No. 1 at 2.) Given the demand, there have been reports of U.S. wholesalers and retailers importing bulk ginseng from outside the United States and packaging it as “grown in Wisconsin” so as to obtain a higher price.[3]

         Baumann filed this class action lawsuit alleging that the YWC defendants engaged in precisely such behavior: YWC imported and repackaged in-bulk (as opposed to pre-packaged) ginseng root from China and sold it as ginseng grown in Wisconsin. (ECF No. 1, ¶ 6.) The complaint alleges that the YWC defendants violated section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), by falsely advertising their products and engaging in unfair competition.

         YWC's motion to dismiss challenges this court's jurisdiction. It sets forth two grounds for dismissal: (1) this court cannot establish either general or specific personal jurisdiction over YWC, and (2) Baumann has not plausibly pled the requisite amount in controversy for this court to exercise subject matter jurisdiction over this class action. YWC further moves for dismissal of the non-corporate defendants (Fong and Sat O). Lastly, YWC argues that, as a non-class action, none of the plaintiffs have demonstrated entitlement to any damages as stand-alone plaintiffs.

         YWC previously was sued by the Ginseng Board of Wisconsin in the Northern District of Illinois for the same underlying conduct. (ECF No. 11 at 3.)[4] That lawsuit was dismissed with prejudice on July 27, 2016. (ECF No. 13-1, Exh. B.) Nevertheless, plaintiffs possess certain information as a result of that suit which they reference in arguing for personal jurisdiction and meeting the amount in controversy requirement.

         II. Personal Jurisdiction

         a. Jurisdictional Facts

         Through a declaration by defendant Sat O, all defendants avow that they do not: (a) reside in Wisconsin; (b) maintain any office in Wisconsin; (c) own or lease any real estate in Wisconsin; (d) maintain any bank accounts in Wisconsin; (e) have any personal property in Wisconsin; (f) have any telephone listings in Wisconsin; (g) are licensed to do business in Wisconsin; (h) maintain any active website enabling purchase of products by any persons in Wisconsin or elsewhere; (i) sell any product in Wisconsin, by order over the telephone or otherwise; (j) ship any products into the State of Wisconsin; or (k) target Wisconsin as a market for ginseng products they package for resale, by advertising, marketing, or otherwise. (ECF No. 12, at 1-2, ¶ 3.) Sat O's declaration further states:

The only transaction that the YWC Defendants have had with a Wisconsin entity is the purchase of prepackaged ginseng from Hsu's Ginseng Enterprises Inc. of Wasusau, WI, which product was resold in the YWC Defendants' retail stores without any modification. This product is not the subject of any allegations by Plaintiffs in this lawsuit.

(ECF No. 12, at 2, ¶ 5.)

         Contradicting Sat O's declaration that the only transaction the YWC Defendants have had with a Wisconsin entity was the purchase of prepackaged ginseng from Hsu's Ginseng (“Hsu's”), Baumann presents an invoice showing that YWC purchased $45, 000.00 worth of bulk ginseng from “Grandco Inc.”- a company operating in Wausau, Wisconsin-in June 2015. (ECF No. 16-4.) Baumann also provides invoices between YWC and Hsu's that show that YWC purchased ginseng from Hsu's several times per year between 2008 and 2015, for a total of approximately 31 interactions.[5](ECF No. 16-3.)

         In reply, YWC admits that its contacts with Wisconsin do indeed include the purchase of bulk ginseng from Grandco, Inc. YWC does not say whether the June 2015 purchase evidenced by the invoice submitted by Baumann was the only transaction between YWC and Grandco, Inc. or only one of many. Regardless, that admission in the reply brief is in conflict with Sat O's declaration.

         b. Legal Background

         When challenged by a defendant, the plaintiff bears the burden of establishing personal jurisdiction. N. Grain Mktg., LLC. v. Greving, 743 F.3d 487, 491 (7th Cir. 2014). Where no evidentiary hearing is held, “the plaintiff need only make out a prima facie case of personal jurisdiction.” Purdue Research Found. v. Sanofi-Synthelabo, S.A., 338 F.3d 773, 782 (7th Cir. 2003) (emphasis in original). “In evaluating whether the prima facie showing has been satisfied, the plaintiff ‘is entitled to the resolution in its favor of all disputes concerning relevant facts presented in the record.'” Id. (quoting Nelson v. Park Indus., Inc., 717 F.2d 1120, 1123 (7th Cir. 1983)).

         With that in mind, the question of personal jurisdiction begins with the laws of the state in which the federal district court sits. Daimler AG v. Bauman, 134 S.Ct. 746, 753 (2014) (“Federal courts ordinarily follow state law in determining the bounds of their jurisdiction over persons.”); see also Fed. R. Civ. P. 4(k)(1)(A). “Under Wisconsin law, the jurisdictional question has two components. First, the plaintiff must establish that the defendants come within the grasp of the Wisconsin long arm statute.” Steel Warehouse of Wisconsin, Inc. v. Leach, 154 F.3d 712, ...


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