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Court Discussions on North Carolina assuming jurisdiction


Don Burleson

 



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; or

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 process.

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.


Note:  This is a literature review prepared by a non-lawyer and this research may not be construed as legal advice.  If you are seeking legal advice of qualified attorneys, consult your local Bar Association, not my web pages.


 

 

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