Court Discussions on North Carolina assuming jurisdiction
1999 N.C. App. LEXIS 908,*;135 N.C. App. 24;
519 S.E.2d 317
Plaintiffs assert that personal jurisdiction over defendants is
proper under N.C. Gen. Stat. § 1-75.4(5)(d), which provides that
such jurisdiction is proper, as to local services, goods, or
contracts, in any action which "relates to goods, documents of
title, or other things of value shipped from this State by the
plaintiff to the defendant on his order or direction." A money
payment is a "thing of value" within the meaning of the long-arm
statute. Pope v. Pope, 38 N.C. App. 328, 248 S.E.2d 260 (1978).
In Cherry Baekert & Holland v. Brown, 99 N.C.
App. 626, 394 S.E.2d 651 (1990), this Court held that "because
defendant directed plaintiff to send his monies to him in Alabama
and plaintiff distributed the money from North Carolina," defendant
was [*7] subject to personal jurisdiction pursuant to N.C. Gen.
Stat. § 1-75.4(5)(d). Id. at 631, 394 S.E.2d at 655. It was
irrelevant that defendant did not specify that payment be sent from
this state. Id.
Likewise, in the present case, defendants
directed plaintiffs to send payment due them to Florida, and
plaintiffs distributed the payment from North Carolina. Payment was
sent from this state in the form of a check drawn on a bank in this
state. Based on Pope and Cherry, we agree that personal jurisdiction
is proper under N.C. Gen. Stat. § 1.74.4(5)(d); therefore, we need
not address plaintiff's arguments regarding additional long-arm
statutes. Our inquiry now turns to whether the exercise of personal
jurisdiction satisfies the requirements of the Due Process Clause of
the Fourteenth Amendment of the United States Constitution.
The Due Process Clause of the Fourteenth Amendment operates to limit
the power of a state to assert in personam jurisdiction over a
non-resident defendant. Helicopteros, Nacionales v. Hall, 466 U.S.
408, 413, 80 L. Ed. 2d 404, 410, 104 S. Ct. 1868 (1984) (citing
Pennoyer v. Neff, 95 U.S. 714, 24 L. Ed. 565 (1878)). [*8] In order
for personal jurisdiction to exist, a sufficient connection between
defendant and the forum state must be present so as to make it fair
to require defense of the action in the forum state. Kulko v.
California Superior Court, 436 U.S. 84, 91, 56 L. Ed. 2d 132, 141,
98 S. Ct. 1690, reh. denied, 438 U.S. 908, 98 S. Ct. 3127, 57 L. Ed.
2d 1150 (1978).
The pivotal inquiry is whether the defendant
has established "certain minimum contacts with [the forum state]
such that the maintenance of the suit does not offend 'traditional
notions of fair play and substantial justice.'" International Shoe
Co. v. Washington, 326 U.S. 310, 316, 90 L. Ed. 95, 102, 66 S. Ct.
154 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463, 85 L. Ed.
278, 283, 61 S. Ct. 339 (1940)). The factors used in determining the
existence of minimum contacts include "'(1) quantity of the
contacts, (2) nature and quality of the contacts, (3) the source and
connection of the cause of action to the contacts, (4) the interest
of the forum state, and (5) convenience to the parties.'" Cherry, 99
N.C. App. at 632, 394 S.E.2d at 655-56 (quoting New Bern Pool &
Supply Co. v. Graubart, 94 N.C. App. 619, 624, 381 S.E.2d 156, 159,
[*9] affirmed per curiam, 326 N.C. 480, 390 S.E.2d 137 (1990)).
To effectuate minimum contacts, a defendant
must have acted to purposefully avail itself of the privileges of
conducting activities within this state, thus invoking the benefits
and protection of our laws. International Shoe, 326 U.S. at 319, 90
L. Ed. at 103. Additionally, the relationship between defendant and
North Carolina must be such that defendant "should reasonably
anticipate being haled into court" in this state. Cherry, 99 N.C.
App. at 632, 394 S.E.2d at 656 (quoting Tom Togs, Inc. v. Ben Elias
Industries Corp., 318 N.C. 361, 365, 348 S.E.2d 782, 786 (1986)). In
considering the foreseeability of litigation, "the interests of, and
fairness to, both the plaintiff and the defendant must be considered
and weighed." Dillon v. Funding Co., 291 N.C. 674, 678, 231 S.E.2d
629, 632 (1977).
As the United States Supreme Court has
explained, the "purposeful availment" requirement ensures that a
defendant will not be haled into a jurisdiction solely as a result
of "random," "fortuitous," or "attenuated" contacts, or of the
"unilateral activity [*10] of another party or a third person . . .
." Jurisdiction is proper, however, where the contacts proximately
result from actions by the defendant himself that create a
"substantial connection" with the forum State.Burger King Corp. v.
Rudzewicz, 471 U.S. 462, 475, 85 L. Ed. 2d 528, 542, 105 S. Ct. 2174
(1985) (citations omitted) (emphasis in original).
This Court has held that a continual contractual business
relationship, rather than one or two isolated transactions, is
sufficient to establish in personam jurisdiction. Harrelson Rubber
Co. v. Layne, 69 N.C. App. 577, 317 S.E.2d 737 (1984). However, a
single contract may be a sufficient basis for the exercise of in
personam jurisdiction if it has a substantial connection to this
state. Tom Togs, Inc. v. Ben Elias Industries Corp., 318 N.C. 361,
348 S.E.2d 782. Our Supreme Court held that a single contract had a
substantial connection to North Carolina when (1) defendant
contacted plaintiff, whom defendant knew to be located in North
Carolina, thus the contract for the manufacture of shirts was made
in North Carolina; (2) defendant was told the shirts would be [*11]
cut in North Carolina, and defendant agreed to send its personal
labels to plaintiff in North Carolina to be attached, thus defendant
was aware that the contract would be performed in this state; and
(3) shirts were manufactured and shipped from this state; and (4)
after defendant became dissatisfied with the shirts, it returned
them to this state. Id.
Unlike the circumstances in Tom Togs, the plaintiffs in the present
case made the initial contact with defendants in Florida. The
contract was performed in Florida, and none of the alleged acts of
negligence occurred in this forum. Defendants did forward the Form
and mailed a billing statement here, and subsequently received one
thing shipped from this state -- a check as payment for their
services. Defendants never shipped anything to this state beyond the
one billing statement.
In Stallings v. Hahn, 99 N.C. App. 213, 392 S.E.2d 632 (1990), this
Court held that in personam jurisdiction could not be
constitutionally exercised when defendant placed an advertisement
for the sale of her car in a national monthly magazine distributed
in this state, returned the call of plaintiff to North Carolina,
plaintiff [*12] mailed a $ 200.00 cashier's check to defendant in
Pennsylvania, and defendant subsequently returned the deposit check
to plaintiff by mail to North Carolina. The present case is very
similar to Stallings; however, unlike Stallings, competent evidence
does not support the findings of the trial court that advertisements
were circulated and solicitation activities by or on behalf of the
defendants were carried on within this state.
The evidence indicates that Cunningham testified that she never
recommended TFVA to plaintiffs or solicited plaintiffs on TFVA's
behalf. Drs. Templeton and Franklin testified that they had never
solicited business or advertised their services in North Carolina.
Under the name The Equine Connection, the advertisements at issue
merely provide a telephone number for an individual to call if he or
she wishes to obtain information about equine veterinarians in their
area of the United States. Therefore, the advertisement does not
advertise the defendants' services in this forum. As shown by the
affidavit of Marv Jahde, the individual responsible for the
advertisements, in order for the defendants to receive a referral,
an individual must first initiate contact [*13] with The Equine
Connection and then must request information about veterinarians in
the Miami, Florida area. While plaintiff Gordon Calhoun testified
that he was referred to TFVA upon calling The Equine Connection, he
admitted that upon calling, he stated that he was moving to the
Miami area. The referral letter at issue originated in Shawnee
Mission, Kansas and was sent to Mr. Calhoun in North Carolina only
because he specifically requested information about veterinarian
services in the Miami, Florida area. Therefore, the letter did not
amount to solicitation by or on behalf of defendants in this state.
1999 N.C. App. LEXIS 363,*;133 N.C. App. 139;
515 S.E.2d 46
Our long-arm statute provides for personal jurisdiction in any
action claiming injury to person or property within this state
arising out of an act or omission in this state, N.C. Gen. Stat. §
1-75.4(3) (1996); an act or omission outside this state by the
defendant, provided in addition that at or about the time of the
injury either: a. Solicitation [*6] or services activities were
carried on within this State by or on behalf of the defendant; or b.
Products, materials, or thing processed, serviced or manufactured by
the defendant were used or consumed, within this State in the
ordinary course of trade.
N.C. Gen. Stat. § 1-75.4(4)a, b (1996). Personal jurisdiction is
also property in any action which:
a. Arises out of a promise . . . by the
defendant to perform services . . . or to pay for services . . .
in this State . . .; or
b. Arises out of services . . . performed for the plaintiff by
the defendant within this State . . .; or
c. Arises out of a promise, made anywhere . . . by the defendant
to deliver or receive within this State . . . things of value;
d. Relates to goods . . . shipped from this State by the
plaintiff to the defendant on his order or direction; or
e. Relates to goods, documents of title, or other things of
value actually received by plaintiff in this State from the
defendant . . . .
N.C. Gen. Stat. § 1-75.4(5)a-e (1996).
When personal jurisdiction is alleged to exist pursuant to the
long-arm statute, the question of statutory authority collapses into
one inquiry [*7] -- whether the defendant has the minimum contacts
with North Carolina necessary to meet the requirements of due
Murphy v. Glafenhein, 110 N.C. App. 830, 431
S.E.2d 241, disc. review denied, 335 N.C. 176, 436 S.E.2d 382
(1993). In order to satisfy the requirements of the Due Process
Clause, the pivotal inquiry is whether the defendant has established
"certain minimum contacts with [the forum state] such that
maintenance of the suit does not offend 'traditional notions of fair
play and substantial justice.'" Id. at 835, 431 S.E.2d at 244
(quoting International Shoe Co. v. Washington, 326 U.S. 310, 316, 90
L. Ed. 95, 102, 66 S. Ct. 154 (1945)). The factors used in
determining the existence of minimum contacts include "'(1) quantity
of the contacts, (2) nature and quality of the contacts, (3) the
source and connection of the cause of action to the contacts, (4)
the interest of the forum state, and (5) convenience to the
parties.'" Murphy, 110 N.C. App. at 835, 431 S.E.2d at 244 (quoting
Cherry Bekaert & Holland v. Brown, 99 N.C. App. 626, 632, 394 S.E.2d
651, 655-56 (1990)).
The United States Supreme Court has noted two types of long-arm
jurisdiction: "specific [*8] jurisdiction," where the controversy
arises out of the defendant's contacts with the forum state, and
"general jurisdiction," where the controversy is unrelated to the
defendant's activities within the forum, but there are "sufficient
contacts" between the forum and the defendant. Helicopteros
Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414, 80 L. Ed.
2d 404, 411, 104 S. Ct. 1868 (1984). The controversy in this case
arises out of the alleged misappropriation of trade secrets of the
plaintiff by the defendant. The misappropriation occurred when the
defendant obtained the list and used it to send advertisement
literature to North Carolina residents. Because the controversy
arises out of defendant's contacts with this state, specific
jurisdiction is sought. See Tom Togs, Inc. v. Ben Elias Industries
Corp., 318 N.C. 361, 348 S.E.2d 782 (1986).
With specific jurisdiction, the court must analyze the relationship
among the defendant, the forum state, and the cause of action. Buck
v. Heavner, 93 N.C. App. 142, 145, 377 S.E.2d 75, 77 (1989). In a
case similar to the present one, our Supreme Court held that by
making an offer to a North Carolina plaintiff to enter into [*9] a
contract made in this state and having substantial connection with
it, a defendant purposefully availed itself of the protection and
benefits of our law and sufficient minimum contacts justified the
exercise of specific jurisdiction. Tom Togs, Inc., 318 N.C. at
367-68, 348 S.E.2d at 787.
In that case, the Court found that a single
contract had substantial connection to North Carolina when (1)
defendant contacted plaintiff, whom plaintiff knew to be located in
North Carolina, thus the contract for the manufacture of shirts was
made in North Carolina; (2) defendant was told the shirts would be
cut in North Carolina, and defendant agreed to send its personal
labels to plaintiff in North Carolina to be attached, thus defendant
was aware that the contract would be performed in this state; (3)
shirts were manufactured and shipped from this state; and (4) after
defendant became dissatisfied with the shirts, it returned them to
this state. Id. at 367, 348 S.E.2d at 786-87.
In the present case, the controversy concerns MidweSterling's
alleged misappropriation of trade secrets under the North Carolina
Trade Secrets Protection Act (Act). "Misappropriation" is defined in
the act as [*10] "acquisition, disclosure, or use of a trade secret
of another without express or implied authority or consent, unless
such trade secret was arrived at by independent development, reverse
engineering, or was obtained from another person with a right to
disclose the trade secret." N.C. Gen. Stat. § 66-152(1) (1992). The
alleged misappropriation in the present case includes use of the
trade secret information to address mail to at least fifty North
Carolina suppliers soliciting their business. By its own admission,
MidweSterling sent the mail in question, which was received in this
state in August 1997. Therefore, the misappropriation, or use,
concluded in North Carolina. If a defendant has "purposefully
directed" activities towards the state's residents, it has "fair
warning" that it may be sued in this forum, and the assertion of
specific jurisdiction is proper.
See Tom Togs, Inc., 318 N.C. at 366, 348 S.E.2d
at 786 (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474, 85
L. Ed. 2d 528, 540-41, 105 S. Ct. 2174 (1985)). Beyond the contact
from which the controversy in this case arises, MidweSterling has,
throughout the past several years, entered into numerous sales
contracts [*11] with Replacements, a North Carolina corporation
doing business in this state. The contracts were substantially
performed and the goods were shipped from this state. MidweSterling
also contracted to participate in an ongoing Star Supplier program
with Replacements, has maintained a supplier list with Replacements,
and has contacted Replacements by telephone calls to North Carolina
on several occasions. At the same time, MidweSterling has regularly
advertised in magazines and journals which are distributed in North
Carolina. While all of these acts may have originated in Missouri,
most were directed to, and all concluded in, the state of North
Carolina. Most required or solicited performance in North Carolina.
Therefore, MidweSterling has availed itself of the privilege of
conducting business in this state on numerous occasions, and
personal jurisdiction is proper.
Here, the trial court determined that the alleged conduct occurred
outside the state of North Carolina, in the state of Missouri, and
therefore applied the "heightened analysis required by the 'general
jurisdiction' cases." Based on the meaning of misappropriation in
the Act and evidence presented to the trial court, we disagree [*12]
with this finding and the court's ultimate conclusion. However,
assuming arguendo that the controversy in this case did not arise
from the contacts with this forum because the misappropriation of
trade secrets occurred outside of North Carolina, we find that the
exercise of general jurisdiction would be proper.
"General jurisdiction" may be asserted over the defendant even if
the cause of action is unrelated to defendant's activities in the
forum as long as there are sufficient "continuous and systematic"
contacts between defendant and the forum state. Fraser v.
Littlejohn, 96 N.C. App. 377, 383, 386 S.E.2d 230, 234 (1989)
(citing Helicopteros Nacionales de Colombia v. Hall, 466 U.S. 408,
414, 80 L. Ed. 2d 404, 411, 104 S. Ct. 1868. The United States
Supreme Court recognized that the threshold for satisfying minimum
contacts for general jurisdiction is higher than in specific
jurisdiction cases. In order to assert general jurisdiction there
must be "substantial" forum-related minimum contacts on the part of
the defendant. Id.
In the present case, there are substantial forum-related minimum
contacts on the part of the defendant. As discussed previously,
MidweSterling [*13] has maintained systematic and continuous
contacts with North Carolina since 1994 through its business
relationship with Replacements, including purchases of approximately
$ 65,000.00, participation in Replacements' Star Supplier program,
and maintenance of a supplier list with Replacements of patterns of
silverware MidweSterling is interested in purchasing. MidweSterling
has placed several phone calls to Replacements' North Carolina
headquarters regarding business transactions.
It has purposely availed itself of the
privilege of doing business here through direct mail to at least
fifty residents and advertisements in journals which are circulated
in North Carolina. It advertises on an internet website which is
available to North Carolina citizens. If a defendant has
"purposefully availed itself of the privilege of conducting
activities within the forum State," it has "thus invoked the
benefits and protections of its laws." Hanson v. Denckla, 357 U.S.
235, 253, 2 L. Ed. 2d 1283, 1298, 78 S. Ct. 1228 (1958); see Dillon
v. Funding Corp., 291 N.C. 674, 231 S.E.2d 629 (1977) (exercise of
personal jurisdiction proper over non-resident defendant corporation
where it had purposely [*14] availed itself of the privilege of
doing business here by actively soliciting orders by mailing
twenty-seven advertisements to North Carolinians). Therefore, a
finding of general jurisdiction in this case would also be proper.
Based on the foregoing, we find controversy at issue arises from the
contacts by MidweSterling in the state of North Carolina, which are
sufficient to satisfy the requirements of our long-arm statute and
the Due Process Clause. Therefore, the exercise of personal
jurisdiction is proper. Competent evidence does not support the
trial court's findings of fact. Where a trial court's finding of
fact is not supported by competent evidence, "the corresponding
conclusions of law are likewise erroneous." Ronald G. Hinson
Electric, Inc. v. Union County Bd. of Educ., 125 N.C. App. 373, 379,
481 S.E.2d 326, 330 (1997). Accordingly, we find that the trial
court erred in the order of 25 March 1998.
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