Kothawala v. Whole Leaf, LLC

2023 IL App (1st) 210972

217 N.E.3d 1202

466 Ill.Dec. 926

Mohammedsahil KOTHAWALA, Plaintiff-Appellee,

v.WHOLE LEAF, LLC, d/b/a Whole Leaf Tobacco, and LG Chem, Ltd., and HS Wholesale, Ltd., Defendants,

(LG Chem, Ltd., Defendant-Appellant).

No. 1-21-0972

Appellate Court of Illinois, First District, SECOND DIVISION.

Filed March 28, 2023

Timothy J. Young, Jacob D. Sawyer, and Jordan W. LaClair, of Lewis Brisbois Bisgaard & Smith LLP, of Chicago, for appellant.

Michael Resis, of SmithAmundsen LLC, Harry N. Arger, and Anda Tatoiu, of Dykema Gossett PLLC, and Alexander Gerteis, of Kryder Law Group, LLC, all of Chicago, and Thomas P. Scherschel and Kaylea H. Weiler, of SmithAmundsen LLC, of St. Charles, for appellees.

JUSTICE ELLIS delivered the judgment of the court, with opinion.

¶ 1 Plaintiff, Mohammedsahil Kothawala, sued LG Chem, Ltd. (and others) after an e-cigarette—also known as a vape pen or vaping device—containing one of its batteries exploded in his pocket. LG Chem, a subsidiary of the well-known South Korean company, moved to dismiss the complaint, claiming that Illinois could not exercise personal jurisdiction over it.

¶ 2 Before ruling on the motion, the circuit court allowed plaintiff to take discovery for the purposes of establishing personal jurisdiction. That discovery showed that LG Chem had sold nearly 2 million "18650 battery cells"—the battery at issue—within Illinois during the relevant period. Still, LG Chem contended that Illinois could not exercise jurisdiction because it did not avail itself to Illinois's vape-pen industry. The circuit court disagreed and found that LG Chem availed itself to the battery market in Illinois, and that this forum thus had specific jurisdiction over plaintiff's claims arising out of the same.

¶ 3 This case is one of many around the country alleging injury from the same batteries under more or less the same circumstances. See LG Chem, Ltd. v. Superior Court of San Diego County , 80 Cal.App.5th 348, 295 Cal. Rptr. 3d 661, 679 n.10 (2022) (noting nearly 20 cases nationwide). We also recognize that courts have split on whether the individual forums can exercise personal jurisdiction over LG Chem.

¶ 4 We hold that Illinois may exercise personal jurisdiction over LG Chem. Between 2016 and 2018, the company sold nearly 2 million of these 18650 batteries into Illinois, including sales to a distributor who resold the battery packs. An 18650 battery ended up in plaintiff's vape-pen in Illinois, and that battery exploded and injured plaintiff in Illinois. From a jurisdictional viewpoint, LG Chem purposefully availed itself of the laws of Illinois by intentionally selling batteries within the state, and plaintiff's claims unquestionably relate to that business. While LG Chem claims it did not authorize the batteries’ use in vape pens per se , we find that argument relevant to liability and not personal jurisdiction.

¶ 5 BACKGROUND

¶ 6 LG Chem manufactured small, cylindrical lithium-ion battery cells, "18650 batteries." (We use the past tense because the company created a new subsidiary, LG Energy Solutions, in 2020 to "spin-off" its battery division.) In September 2018, plaintiff's vape pen, which allegedly contained one of LG Chem's batteries, "exploded and/or caught fire" while in plaintiff's pocket. To recover for the injury, plaintiff filed negligence and strict product liability claims against LG Chem and the companies involved in the manufacturing and sale of the vape pen.

¶ 7 LG Chem appeared and moved to dismiss for lack of personal jurisdiction, attacking both general and specific jurisdiction. LG Chem argued that plaintiff's claims did not arise out of its conduct in Illinois, nor did it purposefully avail itself of the vaping market within the forum. The motion was supported by the affidavit of Kyung Taek Oh. In his affidavit, Mr. Oh states that LG Chem is a South Korean corporation, headquartered in Seoul, and the company does not have a physical presence in Illinois and is not registered to conduct business within the state—effectively defeating general jurisdiction.

¶ 8 As to specific conduct, Oh swore: "LG Chem never designed, manufactured, distributed, advertised, or sold 18650 lithium-ion cells for sale to or use by individual consumers as standalone, removable batteries." Nor did it ever "distribute[,] advertise[,] or [sell] 18650 lithium-ion cells directly to consumers as standalone, removable batteries and never authorized any manufacturer, wholesaler, distributor, retailer, re-seller, or other individual entity to do so." He also stated that 18650 batteries were not designed or manufactured in Illinois, and that the company never conducted any business with the defendants involved with the vaping industry.

¶ 9 Mr. Oh testified in his deposition that he is a "Professional" involved in overseas sales at the newly formed LG Energy Solutions. Before the "spin-off" in 2020, he had the same job with LG Chem. At the relevant time, LG Chem manufactured and distributed 18650 lithium-ion cell batteries across the globe. LG Chem sold the batteries on a "business to business" model, meaning they were not meant for individual consumers but were sold to be incorporated into larger "battery packs," which were then used in "a wide variety of applications." He also stated that LG Chem did not advertise the batteries but, because of its prominence within the industry, customers came to them.

¶ 10 Before LG Chem agreed to provide batteries, Oh claimed that each potential customer undergoes an internal review. While we do not have all the details of this process, essentially, LG Chem only works with companies that agree to use the batteries in an "approved" way. According to Oh, LG Chem would never work with a vape company because it was "forbidden."

¶ 11 As to Illinois, Oh was familiar with three companies that LG Chem had sold to: AllCell, Inventus, and B2B. Of these, he was only personally involved with Inventus. Inventus was a battery packer who used the LG Chem batteries in vacuums, but "there were other applications as well." While not personally familiar with AllCell, he believed they purchased the batteries to use in forklifts. Finally, B2B was a "distributer," not a battery packer. A distributor purchases the batteries from LG Chem and then resells them. Oh did not know to whom B2B distributed the batteries, nor does LG Chem track batteries after they are sold. In total, between 2016 and 2018, LG Chem sold approximately 2 million of these 18650 battery cells to companies in Illinois.

¶ 12 The circuit court denied LG Chem's motion to dismiss. The court concluded that it had specific jurisdiction: "Having established a market in Illinois, LG Chem's sale of the batteries sufficiently establishes a relationship among defendant LG Chem, the forum state, Illinois, and the claim at bar." We granted LG Chem leave to appeal pursuant to Illinois Supreme Court Rule 306(a)(3) (eff. Oct. 1, 2020).

¶ 13 ANALYSIS

¶ 14 On appeal, LG Chem argues the trial court erred in concluding that it was subject to personal jurisdiction within Illinois. It is a plaintiff's burden to establish a prima facie basis for exercising jurisdiction over a defendant. Rios v. Bayer Corp. , 2020 IL 125020, ¶ 16, 449 Ill.Dec. 237, 178 N.E.3d 1088. In finding jurisdiction proper, the court did not hear evidence and relied exclusively on the parties’ documentary filings. Thus, we review its decision de novo. Id.

¶ 15 Illinois's long-arm statute ( 735 ILCS 5/2-209 (West 2020) ) allows an Illinois court to exercise jurisdiction over a nonresident. Russell v. SNFA , 2013 IL 113909, ¶ 29, 370 Ill.Dec. 12, 987 N.E.2d 778. When a party, such as plaintiff here, invokes subsection (c) ( 735 ILCS 5/2-209(c) (West 2020)), commonly referred to as the "catch-all provision," the sole question before us is whether the nonresident's contact with Illinois is sufficient to satisfy federal and Illinois due process. Russell , 2013 IL 113909, ¶ 30, 370 Ill.Dec. 12, 987 N.E.2d 778. LG Chem does not contend that Illinois's due process clause provides greater restraint against the exercise of jurisdiction; we thus consider only federal principles. See Rios , 2020 IL 125020, ¶ 17, 449 Ill.Dec. 237, 178 N.E.3d 1088 ; Aspen American Insurance Co. v. Interstate Warehousing, Inc. , 2017 IL 121281, ¶ 13, 418 Ill.Dec. 282, 90 N.E.3d 440 ; Russell , 2013 IL 113909, ¶ 33, 370 Ill.Dec. 12, 987 N.E.2d 778.

¶ 16 The fourteenth amendment's due process clause limits a state court's authority to exercise jurisdiction over out-of-state defendants. Ford Motor Co. v. Montana Eighth Judicial District Court , 592 U.S. ––––, ––––, 141 S. Ct. 1017, 1024, 209 L.Ed.2d 225 (2021). The rules on jurisdiction stem from two sets of values—"treating defendants fairly and protecting ‘interstate federalism.’ " Id. at ––––, 141 S. Ct. at 1025 (quoting World-Wide Volkswagen Corp. v. Woodson , 444 U.S. 286, 293, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980) ). Initially, the focus was on the reciprocity between states and business; when a company enjoys the privilege of conducting business within a state, the state naturally gains the authority to hold those companies accountable for misconduct. Id. at ––––, 141 S. Ct. at 1025. The court has added that the rules on specific jurisdiction also serve to "provide[ ] defendants with ‘fair warning’—knowledge that ‘a particular activity may subject [it] to the jurisdiction of a foreign sovereign.’ " Id. at ––––, 141 S. Ct. at 1025 (quoting Burger King Corp. v. Rudzewicz , 471 U.S. 462, 472, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985) ). At the same time, courts are cautious to expand jurisdiction too much, to avoid states competing over who has jurisdiction. Id. at ––––, 141 S. Ct. at 1025 (citing World-Wide Volkswagen , 444 U.S. at 293, 100 S.Ct. 559 ). Thus, we "seek[ ] to ensure that States with ‘little legitimate interest’ in a suit do not encroach on States more affected by the controversy." Id. at ––––, 141 S. Ct. at 1025 (quoting ...