Memorandum Opinion — Sha-Poppin v. JPMorgan (Dkt. 83, N.D. Ill.)

Summary

A memorandum opinion and order by United States District Judge Joan B. Gottschall, dated March 5, 2021 and filed as Document 83 in Sha-Poppin Gourmet Popcorn LLC v. JPMorgan Chase Bank, N.A., and Phunware, Inc., Case No. 20-cv-2523, in the U.S. District Court for the Northern District of Illinois. It summarizes the amended complaint's allegation that Chase gave preferential treatment to certain customers under the PPP's first-come, first-served rule, and that Sha-Poppin obtained a $6,000 PPP loan from another bank. The court resolves Phunware's motion to dismiss on personal jurisdiction grounds, stating that, as far as appears from the amended complaint, Phunware did not apply for a loan in Illinois or direct a loan application there. It grants dismissal of count VI, the unjust enrichment claim against Phunware, for lack of personal jurisdiction.

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“Memorandum Opinion — Sha-Poppin v. JPMorgan (Dkt. 83, N.D. Ill.).” Original at archive.org. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/court-filing-plaintiff-v-jpmorgan-chase-bank-n-a-dkt-83-n-d-ill-a4517d50af/, SHA-256 8e244cd3879160f5289a0b7920d59b95a815f0c2d5649aafdec63a1475308587.

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Case: 1:20-cv-02523 Document #: 83 Filed: 03/05/21 Page 1 of 8 PageID #:826

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

Sha-Poppin Gourmet Popcorn LLC, )
)
Plaintiff, )
) Case No.: 20-cv-2523
v. )
) Honorable Joan B. Gottschall
JPMorgan Chase Bank, N.A., and )
Phunware, Inc., )
)
Defendants. )

MEMORANDUM OPINION AND ORDER

This proposed class action is one of at least seven cases filed in federal courts across the

nation in which the plaintiff alleges that defendant JPMorgan Chase Bank, N.A. (“Chase”)

improperly processed applications for small business loans under the Paycheck Protection

Program (“PPP”) established by the Coronavirus Aid, Relief, and Economic Security Act

(“CARES Act”), Pub. L. No. 116-136, 134 Stat. 281 (2020). See In re JPMorgan Chase

Paycheck Prot. Program Litig., 481 F. Supp. 3d 1342, 1344–45 (J.P.M.L. 2020) (denying motion

to transfer similar suits under 28 U.S.C. § 1407). Through the PPP program, Congress made

$349 billion in small business loans available in an effort to mitigate the economic impacts of

COVID-19-related shutdowns. See CARES Act §§ 1102, 1106, 134 Stat. at 286, 297. The U.S.

Small Business Administration (“SBA”) oversaw the PPP program, but approved private lenders,

including Chase, processed all loan applications and made the loans. See id. At issue here is an

SBA regulation requiring lenders to process PPP loan applications on a “first-come, first-served”

basis. Business Loan Program Temporary Changes; Paycheck Protection Program, 85 Fed.

Reg. 20811, 20813 (Apr. 15, 2020). In its amended complaint, plaintiff Sha-Poppin Gourmet

Popcorn LLC (“Sha-Poppin”), a five-employee gourmet popcorn company based in
Case: 1:20-cv-02523 Document #: 83 Filed: 03/05/21 Page 2 of 8 PageID #:827

Westchester, Illinois, alleges that Chase gave preferential treatment to certain large or politically

connected customers, including co-defendant Phunware, Inc. (“Phunware”). See Am.

Compl.1 ¶¶ 47-54, ECF No. 69.

The court has before it Phunware’s motion to dismiss Sha-Poppin’s complaint against it

for lack of standing under Article III of the Constitution, for lack of personal jurisdiction, and for

failure to state a claim for which relief may be granted. See Fed. R. Civ. P. 12(b)(1), (2), and (6).

The court resolves the motion on personal jurisdiction grounds. “Customarily, a federal court

first resolves doubts about its jurisdiction over the subject matter.” Ruhrgas AG v. Marathon Oil

Co., 526 U.S. 574, 578 (1999). But “[w]here, as here, . . . a district court has before it a

straightforward personal jurisdiction issue presenting no complex question of state law, and the

alleged defect in subject-matter jurisdiction raises a [more] difficult and novel question, the court

does not abuse its discretion by turning directly to personal jurisdiction.” Id. at 588; see Cent.

States, Se. & Sw. Areas Pension Fund v. Reimer Express World Corp., 230 F.3d 934, 939 n.2

(7th Cir. 2000).

I. Motion Standard

A complaint does not need to include allegations establishing personal jurisdiction, “but

‘once the defendant moves to dismiss the complaint under Federal Rule of Civil

Procedure 12(b)(2) for lack of personal jurisdiction, the plaintiff bears the burden of

demonstrating the existence of jurisdiction.’” Curry v. Revolution Labs., LLC, 949 F.3d 385,

392 (7th Cir. 2020) (citing Purdue Rsch. Found. v. Sanofi-Synthelabo, S.A., 338 F.3d 773, 782

(7th Cir. 2003)). Phunware challenges the sufficiency of the amended complaint here, and no

1
Phunware moved to dismiss plaintiff’s original complaint. ECF No. 25 at 1. Sha-Poppin subsequently amended
its complaint to drop its claims against two other defendants but did not otherwise alter the complaint. Compare
Am. Compl., ECF No. 69 with Compl., ECF No. 1. The court cites the operative amended complaint in this order.

2
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evidentiary hearing has been requested or held. See Mem. Supp. Phunware Mot. to Dismiss 6,

ECF No. 26. As a result, Sha-Poppin has “only the burden of making a prima facie case for

personal jurisdiction.” Curry, 949 F.3d at 393 (citing uBID, Inc. v. GoDaddy Grp., Inc.,

623 F.3d 421, 423 (7th Cir. 2010)). To decide whether plaintiff has made a prima facie case of

personal jurisdiction, the court accepts the well-pleaded facts alleged in the complaint as true and

resolves any factual disputes in the plaintiff’s favor. J.S.T. Corp. v. Foxconn Interconnect Tech.

Ltd., 965 F.3d 571, 574 (7th Cir. 2020); Curry, 949 F.3d at 392.

II. Summary of Claim Against Phunware

Sha-Poppin held a small business banking account with Chase. Am. Compl. ¶ 59. When

Chase began accepting PPP loan applications on April 3, 2020, Sha-Poppin founder and manager

Stacey Hawkins-Armstrong (“Hawkins-Armstrong”) began attempting to apply via Chase’s

website, but each time she applied that day and over the next several days she received error

messages telling her not to contact Chase customer service about the error. See id. ¶¶ 60–61.

Although the PPP loan application period had not yet closed, a Chase employee later called

Hawkins-Armstrong to suggest subtly that she take her application elsewhere. See id. ¶ 63. She

eventually did so, but the $6,000 PPP loan Sha-Poppin obtained from another bank was four

times smaller than it would have been if Chase had processed Sha-Poppin’s loan application on a

first-come, first-served basis. See id. ¶¶ 65–69.

Citing reports in the press, Sha-Poppin alleges that its experience was typical of many

other Chase commercial banking customers who found Chase’s loan application website to be

sporadically available on April 3, 2020. Id. ¶ 38. This was all of part of “a carefully executed

plan by Chase” intended to steer PPP loans to preferred customers. See id. ¶¶ 50–54. Chase

aided its preferred customers, resulting in nearly all those customers receiving PPP loans, while

3
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only one in fifteen of Chase’s lower-priority customers obtained a PPP loan from Chase. See

id. ¶¶ 37–39, 47–54 (citing press reports for statistics).

Sha-Poppin pleads five claims under Illinois law against Chase, and a single count

(count VI) of unjust enrichment against Phunware. See id. at 23–31. Phunware is alleged to be a

Delaware corporation with a principal place of business in Austin, Texas. Id. ¶ 16.

In addition to proposing to represent a plaintiff class of Chase PPP loan applicants, see

id. ¶ 70, Sha-Poppin sues Phunware as a representative of a potential defendant class comprised,

with some exceptions, of “[a]ll Chase Commercial Banking account holders that applied for a

PPP loan through Chase, and whose application was approved not on a first-come, first-served

basis.” Id. ¶ 76.

III. Personal Jurisdiction Principles

The federal Due Process Clause authorizes courts to exercise personal jurisdiction over

out-of-state defendants who have “certain minimum contacts with [the state] such that the

maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.’”

Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (quoting Milliken v. Meyer, 311 U.S.

457, 463 (1940)). A defendant’s contacts with the forum state must be such that it could

“reasonably anticipate being haled into court there.” Burger King Corp. v. Rudzewicz, 471 U.S.

462, 474 (1985) (quoting World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 295

(1980)).

Illinois’s long-arm statute stretches as far as the Due Process Clauses of the Illinois and

federal constitutions permit. See 735 Ill. Comp. Stat. § 5/2–209(c) (“A court may also exercise

jurisdiction on any other basis now or hereafter permitted by the Illinois Constitution and the

Constitution of the United States.”); Mobile Anesthesiologists Chi., LLC v. Anesthesia Assocs. of

4
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Hous. Metroplex, P.A., 623 F.3d 440, 443 (7th Cir. 2010) (holding that “there is no operative

difference between those two constitutional limits”); Kipp v. Ski Enter. Corp. of Wis., Inc.,

783 F.3d 695, 697 (7th Cir. 2015) (assuming that Illinois and federal standards for the exercise of

personal jurisdiction are coextensive). Thus, Phunware’s personal jurisdiction challenge

collapses into a minimum contacts analysis. See, e.g., J.S.T., 965 F.3d at 575.

IV. Minimum Contacts Analysis

Sha-Poppin argues that this court can exercise specific personal jurisdiction over

Phunware.2 Resp. to Mot. to Dismiss 6-10, ECF No. 64. A court may exercise specific personal

jurisdiction over a defendant based on the defendant’s contacts with the forum state in matters

relating to the subject matter of the plaintiff’s claims. See Helicopteros Nacionales de Colombia,

S.A. v. Hall, 466 U.S. 408, 414 & n.8 (1984). The Seventh Circuit has identified “three essential

requirements” for specific jurisdiction: “(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 v. Clifton, 682 F.3d 665, 673 (7th Cir. 2012) (internal citations

omitted). The analysis is not “mechanical or quantitative.” Int’l Shoe, 326 U.S. at 319. The

ultimate question is “whether it is fundamentally fair to require the defendant to submit to the

jurisdiction of the court with respect to this litigation.” Purdue, 338 F.3d at 780 (emphasis in

original).

2
General jurisdiction, not at issue here, is available when a defendant’s contacts with the forum state are
“continuous and systematic,” even when a plaintiff’s claims do not arise out of those contacts.
Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 415 (1984).

5
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As far as appears from the amended complaint, Phunware did not apply for a loan in

Illinois. Nor did it direct a loan application (or anything else) to Illinois at any time. See Am.

Compl. ¶¶ 47–49. Sha-Poppin does not argue otherwise. See Resp. to Mot. to Dismiss 7-9.

Sha-Poppin instead relies on several cases decided under the stream of commerce theory. See,

e.g., uBid, 623 F.3d at 433; Payton v. Kale Realty, LLC, 2014 WL 4214917, at *4 (N.D. Ill.

Aug. 26, 2014). Under the stream of commerce doctrine, if a “defendant delivers products into a

stream of commerce, originating outside the forum state, with the awareness or expectation that

some of the products will be purchased in the forum state, that defendant may be subject to

specific jurisdiction in the forum state.” Jennings v. AC Hydraulic A/S, 383 F.3d 546, 550 (7th

Cir. 2004) (citing World-Wide, 444 U.S. at 298); see generally Goodyear Dunlop Tires

Operations, S.A. v. Brown, 564 U.S. 915, 926–27 (2011). Sha-Poppin reasons that because

Phunware allegedly knew it would be jumping the line of Chase PPP loan applications, it is

reasonable to infer that it was aware that loan applicants in other states, such as Illinois, would be

harmed. See Resp. to Mot. to Dismiss at 7-8; Am. Compl. ¶¶ 47, 120. Thus, Sha-Poppin argues,

Phunware’s submission of a PPP loan application formed the necessary minimum contacts with

Illinois and every other state. See Resp. to Mot. to Dismiss 7-8.

Sha-Poppin cites Walden v. Fiore, 571 U.S. 277 (2014), but Walden actually undermines

Sha-Poppin’s position. Resp. to Mot. to Dismiss 8. As in Walden, Sha-Poppin’s approach to

specific jurisdiction “impermissibly allows a plaintiff's contacts with the defendant and forum to

drive the jurisdictional analysis.” Walden, 571 U.S. at 289. Ample contacts between Sha-

Poppin and Chase in Illinois have been alleged, and Sha-Poppin claims to have been harmed in

Illinois. See Am. Compl. ¶¶ 55-63. But Sha-Poppin’s interactions with Chase in Illinois do not

create the required connection between Illinois and Phunware because “the defendant [here,

6
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Phunware], not the plaintiff or third parties, . . . must create contacts with the forum State.”

Walden, 571 U.S. at 291. Nor does the fact that Sha-Poppin experienced harm in Illinois create

specific jurisdiction, for “mere injury to a forum resident is not a sufficient connection to the

forum.” Id. at 290.

The Seventh Circuit’s analysis of an unjust enrichment claim in J.S.T. Corp. v. Foxconn

Interconnect Tech. Ltd., 965 F.3d 571 (7th Cir. 2020), is instructive.3 The dispute in J.S.T.

concerned the plaintiff’s proprietary drawings. Plaintiff J.S.T. had an exclusive contract with

non-party Bosch to design and manufacture connectors. J.S.T, 965 F.3d at 573. Bosch, in turn,

used those connectors in engine components it sold to General Motors. Id. J.S.T. alleged that

Bosch gave J.S.T.’s proprietary drawings to J.S.T.’s competitors who copied them and

eventually displaced J.S.T. as Bosch’s sole supplier of the connectors. Id. J.S.T. sued the

competitors, but not Bosch, in federal court in Illinois. Id.

The Seventh Circuit held that there was no personal jurisdiction in Illinois because “[t]he

competitors’ only link to Illinois is that they sell their connectors to Bosch, knowing that the

connectors will end up in General Motors cars and parts that are sold in Illinois.” Id. at 573–74,

575–78. The Seventh Circuit expressly declined to perform a stream of commerce analysis. See

id. The minimum contacts analysis instead focused on the connections between Illinois and the

place where the defendants were alleged to have been unjustly enriched. See id. at 578. “If the

defendants had made money in Illinois from J.S.T.’s drawings, then we might be able to

conclude that J.S.T.’s unjust enrichment claim arose from those downstream sales. But . . . [t]he

enriching sales were the defendants’ sales to Bosch, which took place at Bosch's locations in

China and Texas.” Id. Courts in this district have employed similar reasoning to reject personal

3
The Seventh Circuit decided J.S.T. on July 13, 2020, while briefing on Phunware’s motion to dismiss was ongoing.
See Reply, ECF No. 70 (November 2, 2020).

7
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jurisdiction over unjust enrichment claims. See, e.g., Weston v. Big Sky Conf., 466 F. Supp. 3d

896, 906 (N.D. Ill. 2020); Richardson v. Se. Conf., 2020 WL 1515730, at *7 (N.D. Ill. Mar. 30,

2020).

As J.S.T. teaches, the court must identify where the unjust enrichment occurred when

performing the minimum contacts analysis rather than focus on where downstream effects were

felt. Sha-Poppin alleges that Phunware was unjustly enriched when Chase approved its PPP loan

application. See Am. Compl. ¶ 121. There is no allegation that the approval had any connection

to Illinois. See id. The connection between Phunware’s conduct and the harm felt by Sha-

Poppin in Illinois “is thus too attenuated” to support specific jurisdiction. J.S.T., 965 F.3d

at 578.

V. Conclusion

For these reasons, Phunware’s motion to dismiss is granted insofar as it seeks dismissal

of count VI of the amended complaint for lack of personal jurisdiction.

Dated: March 5, 2021 /s/
Joan B. Gottschall
United States District Judge

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