A Utah consulting firm that helped an Illinois nonprofit get a pandemic tax credit couldn't…
ERC Specialists v. Schoolmates
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A Utah consulting firm that helped an Illinois nonprofit get a pandemic tax credit couldn't collect its fee in Utah court because the nonprofit lacked sufficient ties to Utah. Tenth Circuit affirmed dismissal.
Why it matters
The Tenth Circuit upheld a federal district court's dismissal of a breach of contract lawsuit because the defendant, an Illinois nonprofit called Schoolmates, did not have enough connections to Utah to be sued there. ERC Specialists, a Utah company, had helped Schoolmates obtain a pandemic-era Employee Retention Credit and claimed it was owed nearly $125,000 in fees. The court found that Schoolmates lacked the minimum contacts with Utah required by due process for a court in that state to exercise personal jurisdiction over it.
Who it affects
This ruling most directly affects businesses and individuals who provide services from one state to clients located in another state, particularly when trying to sue a non-paying client in their own home state. Companies like ERC Specialists that contract with out-of-state clients may find they cannot sue those clients in their home state's courts if the client lacks sufficient connections to that state.
What happens next
Current
Decision issued Jul 13, 2026
Unpublished opinion
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- Decision issued Jul 13, 2026Unpublished opinion
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Jul 13, 2026 · Unpublished opinion
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DEEPER READ
ERC Specialists, a Utah company, provided consulting services to help Schoolmates, an Illinois nonprofit that ran a Chicago charter school, apply for the Employee Retention Credit, a tax benefit created during the coronavirus pandemic. The parties agreed that ERC Specialists would receive fifteen percent of any credit obtained, and that IRS checks would be sent to a third-party escrow agent rather than directly to Schoolmates. ERC Specialists alleged that Schoolmates never paid the roughly $125,000 owed after the credit was secured. ERC Specialists originally filed suit in Utah state court, but Schoolmates removed the case to federal court based on the parties being citizens of different states. Schoolmates then moved to dismiss the case, arguing that a Utah court could not properly exercise personal jurisdiction over it. The district court agreed, finding that ERC Specialists had not shown Schoolmates had sufficient minimum contacts with Utah, which is the constitutional standard under the Due Process Clause for a state's courts to hear a case against an out-of-state party. The Tenth Circuit reviewed the case with only one participating party, since Schoolmates had become defunct and its former attorney withdrew after stating the entity no longer had any employees or active decision makers and did not intend to participate in the appeal. The court confirmed it could still decide the case because ERC Specialists, as the party aggrieved by the lower court's ruling, satisfies the constitutional requirement of a live case or controversy. After carefully reviewing the record, the district court order, and relevant legal precedent, the Tenth Circuit concluded that Schoolmates did not have the minimum contacts with Utah necessary to allow a Utah federal court to assert personal jurisdiction over it. The court affirmed the dismissal. No dissent is noted in the available text. This decision does not establish binding precedent in the Tenth Circuit but may be cited for its persuasive value in future cases.
CITATION AND RECORD
Record source: CourtListener
Appellate Case: 25-4116 Document: 44-1 Date Filed: 07/13/2026 Page: 1 FILED United States Court of Appeals Tenth Circuit UNITED STATES COURT OF APPEALS July 13, 2026 FOR THE TENTH CIRCUIT _________________________________ Christopher M. Wolpert Clerk of Court ERC SPECIALISTS, LLC, a Utah limited liability company, Plaintiff - Appellant, v. No. 25-4116 (D.C. No. 2:24-CV-00727-DAO) SCHOOLMATES, NFP, (D. Utah) Defendant - Appellee. _________________________________ ORDER AND JUDGMENT * _________________________________ Before TYMKOVICH, BACHARACH, and FEDERICO, Circuit Judges. _________________________________ This appeal arises from an archetypical fact pattern. ERC Specialists, LLC, contracted to provide consulting services to Schoolmates, NFP. ERC Specialists provided the contracted-for services. When the bill came due for ERC Specialists’ services, Schoolmates failed to pay. So, ERC Specialists *After examining the brief and appellate record, this panel has determined unanimously that oral argument would not materially assist in the determination of this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore ordered submitted without oral argument. This order and judgment is not binding precedent, except under the doctrines of law of the case, res judicata, and collateral estoppel. It may be cited, however, for its persuasive value consistent with Federal Rule of Appellate Procedure 32.1 and Tenth Circuit Rule 32.1. Appellate Case: 25-4116 Document: 44-1 Date Filed: 07/13/2026 Page: 2 sued. But it could find no recompense. The District of Utah, sitting in diversity, held that exercise of personal jurisdiction over Schoolmates would violate due process and dismissed the case. Stymied but persistent, ERC Specialists now appeals to this court. Schoolmates has indicated no intent to participate in the appeal, and its lawyer from the trial court proceedings represented that the entity is now defunct. Nonetheless, because ERC Specialists is aggrieved by the judgment below, we have jurisdiction to hear its appeal. A careful examination of the record, the district court order, and caselaw reveals that Schoolmates did not have sufficient minimum contacts with the state of Utah to allow for the exercise of personal jurisdiction by a federal court sitting in that state. We affirm. I ERC Specialists is a Utah company that helped client companies apply for a tax credit created during the coronavirus pandemic. Schoolmates was, at that time, an Illinois not for profit corporation that managed a charter school in Chicago. The tax credit in question, known as the Employee Retention Credit, was available in connection with certain employee wages paid from March 2020 through the end of December 2021. Employee Retention Credit, IRS (updated June 12, 2026), https://perma.cc/B8WQ-4ZV4. Although how the parties came into contact 2 Appellate Case: 25-4116 Document: 44-1 Date Filed: 07/13/2026 Page: 3 is not clearly resolved by the record, they ultimately contracted for ERC Specialists to help Schoolmates obtain the tax credit. Rather than providing its services in exchange for a lump sum, Schoolmates agreed to pay fifteen percent of the tax credit to ERC Specialists if it was ultimately secured. This arrangement for payment on a percentage basis was apparently ERC Specialists’ regular practice. See Tri-Cities Restoration LLC v. ERC Specialists, LLC, No. 2:24-CV-00816- RJS-DBP, 2025 WL 2050096, at *2 (D. Utah July 22, 2025) (describing same fee arrangement); ERC Specialists, LLC v. Boring Co., No. 2:25-CV-00387- DBB-CMR, 2025 WL 2480719, at *1 (D. Utah Aug. 28, 2025) (same). The parties’ agreement also provided that if the IRS declined to issue a tax credit, ERC Specialists would receive no fee. However, if the IRS were to pay the tax credit and then claw back any portion, ERC Specialists would nonetheless retain the entirety of its fee already collected. Additionally, the parties agreed that they would request the IRS send checks containing any credit funds to a third-party escrow agent, rather than to Schoolmates’ business address. Despite these contractual agreements, no checks were mailed to the escrow agent, and ERC Specialists was not paid in the anticipated course of business. Instead, ERC Specialists alleges, Schoolmates withheld all the nearly $125,000 due for its fee. 3 Appellate Case: 25-4116 Document: 44-1 Date Filed: 07/13/2026 Page: 4 As a result, ERC Specialists filed a complaint in Utah state court alleging breach of contract and, in the alternative, unjust enrichment. The state-court complaint sought damages in the amount of the withheld fees as well as interest, costs, and attorneys’ fees. Schoolmates thereafter filed a notice of removal in the District of Utah on the basis of the parties’ diversity of citizenship. See 28 U.S.C. §§ 1332, 1441, and 1446. ERC Specialists did not seek a remand to state court. Now in federal court, Schoolmates filed a motion to dismiss for lack of personal jurisdiction. See Fed. R. Civ. P. 12(b)(2). ERC Specialists opposed this motion and filed in response an affidavit by its general counsel as well as the parties’ written agreement. Schoolmates filed a reply brief supported by its own affidavit and a set of emails pertaining to the parties’ agreement. The district court heard argument on the motion but did not conduct an evidentiary hearing. It looked to the complaint and the parties’ affidavits and determined that ERC Specialists had not carried its burden to establish the existence of personal jurisdiction. ERC Specialists timely appealed to this court. After ERC Specialists had filed its notice of appeal – but before filing its Opening Brief – Schoolmates’ attorney moved to withdraw from the case. This court denied the motion without prejudice. In a renewed motion, counsel elaborated that her client was “no longer conducting any business, does not have any 4 Appellate Case: 25-4116 Document: 44-1 Date Filed: 07/13/2026 Page: 5 employees, and [] all of the decisionmakers for the entity have retired and/or resigned.” Doc. 37 at 1–2. She stated that “to the best of her knowledge, Schoolmates does not intend to participate in the appeal.” Id. at 2. This court granted the renewed motion and permitted the attorney to withdraw. This appeal, then, has only one participating party – ERC Specialists. But because that party is the appellant, “aggrieved by the order from which appeal is taken,” this court may adjudicate the matter consistent with Article III’s case-or-controversy requirement. See Raley v. Hyundai Motor Co., 642 F.3d 1271, 1274 (10th Cir. 2011) (quoting Thomas v. Metro. Life Ins. Co., 631 F.3d 1153, 1159 (10th Cir. 2011)). Our review, though, finds no error in the district court’s judgment. Exercising jurisdiction pursuant to 28 U.S.C. § 1291, we affirm.
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