Appeals panel says Chicago investments firm can't sue FL rival in IL to protect its trademark 'Ariel'

By Scott Holland | Feb 1, 2018

While a Chicago federal judge had determined a Florida investment firm had trespassed the trademark of a more established Chicago company, a federal appeals court has said the Chicago firm can’t sue to protect its rights in Illinois, because the Sunshine State firm doesn’t do business in the Land of Lincoln.

On Jan. 31, the U.S. Seventh Circuit Court of Appeals overturned the decision of U.S. District Matthew Kennelly, who had granted a win to Chicago-based Ariel Investments LLC in their dispute with Florida firm, Ariel Capital Advisors LLC.

Seventh Circuit judges Frank Easterbrook, Joel Flaum and Amy Barrett heard arguments Jan. 17 in the case. Easterbrook wrote the opinion, with his colleagues concurring.

Both companies are investment management firms. Ariel Investment has been using the name since 1983, according to court documents, while Ariel Capital dates only to 2014. Kennelly determined Ariel Capital violated the federal Lanham Act and infringed on Ariel Investments’ trademark.

In its appeal, Ariel Capital didn’t dispute Kennelly’s findings or conclusions, but argued instead the Chicago federal court lacked the power to resolve the dispute. Illinois-based Ariel Investments does business nationwide, whereas “Ariel Capital, based in Florida, would like to have a national presence but so far does not,” Easterbrook wrote. “It does not have a client in Illinois, does not have any property or staff in Illinois, does not advertise in Illinois, and never has had an employee or agent even visit Illinois — until it had to defend this suit.”

Kennelly had determined Ariel Capital “knew or should have known that its choice of name would injure Ariel Investments in Illinois,” Easterbrook noted, as Kennelly had found the Florida firm “reached into the (trademark) holder’s home forum to take its property.” Yet according to the appeals panel, the Lanham Act — unlike antitrust and securities laws — requires a plaintiff to secure personal jurisdiction under state law.

“Knowing about a potential for harm in a particular state is not the same as acting in that state — and it takes the latter to permit personal jurisdiction under state law,” Easterbrook wrote.

He cited the 2014 U.S. Supreme Court opinion in Walden v. Fiore in which the court asserted a state’s right to base jurisdiction on a particular transaction only if the defendant has “a substantial connection with the forum state,” and a plaintiff is not allowed to create the connection.

The appellate panel said Kennelly determined Ariel Capital intentionally tried to harm Ariel Investments by giving its Florida-based firm a similar name. But Walden, they maintained, already determined such an allegation is inadequate because it lacks evidence of injurious conduct on the part of Ariel Capital.

Even if the panel were to accept Ariel Investments’ argument that Ariel Capital could be punished for aiming an action at Illinois, it still wouldn’t have been able to prove the company actually did, according to Easterbroook, because at the trial stage, “The founder of Ariel Capital testified, without contradiction, that he named the firm to honor his daughter, Ariel Marie Bray, rather than to injure Ariel Investments.”

If any trademark infringement occurred, the panel concluded, it happened in Florida, or some other state where both companies have clients. But as Ariel Capital lacks any clients in Illinois Kennelly was wrong in allowing the matter to be litigated in his district, and so the panel reversed the ruling.

“No matter how one might characterize the relation between Ariel Investments and Ariel Capital, it is easy to describe the relation between Illinois and Ariel Capital: none,” Easterbrook wrote. “That resolves this litigation.”

According to federal court records, Ariel Investments is represented in the action by in-house counsel and the firm of Michael Best & Friedrich LLP, of Chicago.

Ariel Capital is represented by the firm of Taft Stettinius & Hollister LLP, of Chicago, and Christopher P Bray Associates LLC, of Naples, Fla.

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Organizations in this Story

Ariel Investments LLC Michael Best and Friedrich LLP Taft, Stettinius & Hollister LLP U.S. Court of Appeals for the Seventh Circuit U.S. District Court for the Northern District of Illinois

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