AARP v. AMERICAN FAMILY PREPAID LEGAL CORPORATION, INC.,et al

Filing 76

MEMORANDUM OPINION AND ORDER signed by JUDGE THOMAS D. SCHROEDER on 02/25/09, that Defendants' motion to dismiss AARP's RICO claims (Doc. 19 ) is GRANTED as to the federal RICO claims AND DENIED as to the North Carolina RICO claims, and th at Plaintiff's federal RICO claims are DISMISSED WITHOUT PREJUDICE; The motions to dismiss by Defendants Tina Hennessy, Tom Hennessy, Jeffrey Norman, and Stanley Norman for lack of personal jurisdiction (Docs. 19 & 27 ) are DENIED; and Defendants' motions to dismiss claims relating to conduct other than activity directed to North Carolina (Docs. 19 , 20 & 27 ) are GRANTED. (Law, Trina)

IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF NORTH CAROLINA AARP, v. Plaintiff, ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

AMERICAN FAMILY PREPAID LEGAL CORPORATION, INC., d/b/a AMERICAN FAMILY LEGAL PLAN, HERITAGE MARKETING AND INSURANCE SERVICES, INC., STANLEY NORMAN, JEFFREY NORMAN, MIKE FEDYNSIZYN, ROBERT MALARCHICK, AMERICA'S RECOMMENDED MAILERS, INC., TINA HENNESSY, and TOM HENNESSY, Defendants.

Case No.: 1:07cv202

MEMORANDUM OPINION AND ORDER THOMAS D. SCHROEDER, District Judge This is an action by AARP against providers of certain financial services and their marketing firms and principals for allegedly engaging in a scheme to unlawfully pass off their services as AARP-endorsed. The Amended Complaint alleges

violations of the Racketeer Influenced and Corrupt Organizations Act (federal "RICO"), 18 U.S.C. § 1962 (2000), and its North Carolina analog, N.C. Gen. Stat. § 75D-1-14 (2007) (state

"RICO"), the Lanham Act, 15 U.S.C. §§ 1114, 1125, the North Carolina unfair and deceptive trade practice statute, N.C. Gen Stat. § 75-1.1, and North Carolina common law involving

trademark infringement, unfair competition, false designation of origin, passing off and dilution. (Doc. 3.)

Before the court are motions to dismiss the federal RICO claims by all Defendants (Docs. 19, 20 & 27), and to dismiss the state RICO claims by certain Defendants (Doc. 27), for failure to state a claim, pursuant to Rule 12(b)(6), Fed. R. Civ. P. Certain Defendants have also moved to dismiss the Amended

Complaint for lack of personal jurisdiction, pursuant to Rule 12(b)(2), Fed. R. Civ. P., and, in the alternative, to dismiss any claims arising out of conduct other than activity directed toward North Carolina. For motions the to reasons (Docs. 19, 20 & 27.) set the forth federal below, RICO the court grants will the be

dismiss

claims,

which

dismissed without prejudice, and it denies the motions as to the North Carolina RICO claims. The court denies the jurisdictional

motions and concludes that specific jurisdiction exists over the individual Defendants as to the remaining claims. the extent the Amended Complaint asserts claims Finally, to relating to

mailings directed outside of North Carolina, those claims are dismissed. I. BACKGROUND The key facts are set forth below, while additional facts relevant to the various legal issues are addressed in the

analysis to follow.

On motion to dismiss, all facts are viewed

in the light most favorable to AARP as the non-moving party. Bell Atl. Corp. v. Twombly, 127 S. Ct. 1955, 1965 (2007).
2

AARP is a District of Columbia corporation that describes itself as the largest membership organization in the nation and is devoted to promoting the interests of persons age 50 or

older.

(Doc. 3 ¶¶ 12, 13.)

It claims membership of nearly half (Id.) for AARP AARP

of all so-called "senior citizens" in America. allegedly owns federal trademark registrations

financial services and receives substantial licensing fees for the use of its mark, which has a national reputation. 14-17.) Defendants Heritage Marketing and Insurance Services, Inc. ("Heritage"), Prepaid Plan Legal a California corporation, Inc., a d/b/a and American Family Family Legal acting both (Id. ¶¶

Corporation, Family"),

American

("American their

California and the

corporation,

through

principals,

Jeffrey in

Stanley business

Norman, 1 of

California financial

residents, services to

engaged senior to in

offering these the

citizens. 2 the Amended

Collectively Complaint as

Defendants,

referred

"Financial Services Defendants," marketed their services through
1 Stanley Norman, at all times relevant, was president of American Family and president (or chief executive officer of Heritage, he could not remember which); his son, Jeffrey Norman, was secretary and chief executive officer of American Family. (Doc. 41, Ex. B at 9, 11 & 56.) Defendants Mike Fedynsizyn and Robert Malarchick were allegedly North Carolina-based sales associates who contracted with American Family and Heritage to personally call on potential customers in North Carolina. The case against Malarchick is stayed pursuant to 11 U.S.C. § 362, pending the resolution of his bankruptcy proceedings. (Doc. 70.) 3
2

contracts

with

Defendant

America's

Recommended

Mailers,

Inc. ARM's

("ARM"), a Texas corporation.

(Doc. 42, Ex. A at 13-14.)

principals are Tom and Tina Hennessy, 3 citizens and residents of Lewisville, Texas. Hennessys are (Doc. 21 ¶ 2; Doc. 22 ¶ 2.) to collectively as the ARM and the "Mail House

referred

Defendants." AARP Financial conspired alleges Services to that starting in and and about Mail mail July House millions 2004, the

Defendants create,

Defendants of "lead

design,

generation cards" (or "lead cards") bearing the "AARP" mark to senior citizens to pique interest in living trusts, annuities and other financial products and services offered by the

Financial Services Defendants. (Doc. 3 ¶¶ 103, 108, 114 & 120.) An illustrative lead card states as follows:

3 Tina Hennessy founded ARM and is its sole officer, shareholder and director; her husband, Tom Hennessy, has been its general manager since 2000. (Doc. 42, Ex. A at 11-12, 16-17.) 4

(Doc. 3, Ex. A.)

Defendant Stanley Norman takes credit for

originating the idea to market financial services by referring to the AARP study. sent original (Doc. 41, Ex. B at 10-13.) of some lead cards American Family to ARM and the

designs

Hennessys.

(Doc. 42, Ex. A at 125.)

Tom Hennessy testified,

however, that the text of one of the lead cards, ARM-0002 (Id., Ex. A, Ex. 2), was modified and "part the "part under design under ours." as a their [American Ex. A

Family's] at 132.)

direction" He

(Id.,

characterized

"collaborative

effort" between ARM and American Family.

(Id., Ex. A at 130.)

Tina Hennessy also had some input on the card, indicating that she "may have reworded a few things on it" but cannot recall

5

what she did.

(Id., Ex. B at 73-75.)

There is no affirmative

testimony that the Hennessys modified any of the text referring to AARP. However, at least one other version of the lead card

containing reference to the AARP study was a "stock" mailer ARM had sent out on behalf of other customers. (Id., Ex. A at 127.)

Tom Hennessy testified that the "stock" lead cards predated his employment with ARM in 2000. (Id., Ex. A. at 127-128.)

The Financial Services Defendants contracted with ARM to mail the lead cards and to process responses from potential customers. (Doc. 3 ¶¶ 19-20, 40-90.) ARM mailed the lead cards

to a list of people matching criteria identified by American Family, collected and the responses from those to who sought more

information, (Id. ¶ 27.)

redirected

respondents

American

Family.

Respondents seeking more information were contacted

by sales representatives (including Defendants Fedynsizyn and Malarchick) employed by the Financial Services Defendants, and a home-visit was set up during which high-pressure sales tactics were allegedly used to "browbeat seniors into buying financial services." (Id. ¶¶ 40-90.) AARP alleges that the lead cards

misled seniors into believing that the mailings and subsequent services originated from, were endorsed by, and/or were

affiliated with, AARP, when in fact they were not. 30, 40-90.) As a consequence, AARP charges,

(Id. ¶¶ 26many senior

citizens were defrauded into purchasing services they thought
6

were associated with AARP.

(Id.)

AARP alleges that it lost

income and royalties, as well as goodwill, because potential customers were lured away from actual AARP-endorsed financial services. (Id. ¶ 91.)

AARP filed its lawsuit on September 14, 2006, in Guilford County, North Carolina, Superior Court, and amended the

complaint effective February 28, 2007, to add claims under the Lanham Act and federal RICO. action to this court and (Doc. 1.) filed the Defendants removed the collection of instant

motions. 4 II. RICO CLAIMS A. The Section Federal RICO Amended 1962" Complaint seeks recovery under "18 U.S.C. AARP

without

further

specification,

though

clarified at oral argument that it is proceeding under section 1962(c). 5 1962(c), a (Doc. 3 ¶¶ 93-100.) RICO plaintiff To state a claim under section prove that the defendant

must

"conducted or participated in the conduct of the affairs of an enterprise engaged in interstate commerce through a pattern of
4 Remand was not sought although it appears to have been available because the original complaint was removable under 28 U.S.C. § 1332. See Ellenburg v. Spartan Motors Chassis, Inc., 519 F.3d 192, 198-99 (4th Cir. 2008).
5

At one point the Amended Complaint alleges that the Financial Services Defendants and the Mail House Defendants constitute an enterprise that has "conspired to engage" in the predicate acts. (Doc. 3 ¶ 39.) A conspiracy would be subject to a claim under 18 U.S.C. § 1962(d).

7

racketeering activity."

United States v. Norton, 17 F. App'x

98, 101 (4th Cir. 2001) (citing Salinas v. United States, 522 U.S. 52, 61 (1997)). Thus, section 1962(c) requires proof of

(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering. Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496

(1985); accord R.J. Reynolds Tobacco Co. v. S K Everhart, Inc., No. 1:00CV00260, 2003 U.S. Dist. LEXIS 13440, at *10 (M.D.N.C. July 31, 2003). In dispute here is whether AARP has AARP

sufficiently alleged the existence of a RICO "enterprise."

alleges that "[t]he Mail House Defendants [] and the Financial Services Defendants [] have formed an enterprise that is engaged in a pattern of racketeering activity." (Doc. 3 ¶ 94.) AARP

contends that these Defendants constitute an association-in-fact enterprise based on a pattern of conduct predicated on mail fraud and trademark counterfeiting. 31 at 4.) 6 A motion under Rule 12(b)(6) should be granted only where, assuming the truth of all allegations in the Amended Complaint, a plaintiff fails to allege sufficient facts entitling it to relief. Fed. R. Civ. P. 12(b)(6); Twombly, 127 S. Ct. at 1965. (Id. ¶¶ 19-33, 39-89; Doc.

All factual allegations must be construed in the light most
6 Defendants' argument that for a RICO claim because of at 9-10; Doc. 36 at 7-9) has Indem. Co., 128 S.Ct. 2131, was submitted. mail fraud cannot be a predicate offense a lack of first-party reliance (Doc. 20 been rejected by Bridge v. Phoenix Bond & 2145 (2008), which issued after briefing

8

favorable to the Plaintiff.

Martin Marietta Corp. v. Int'l And,

Telecomm. Satellite Org., 991 F.2d 94, 97 (4th Cir. 1992).

the complaint must have enough facts to state a claim that is above the speculative level and plausible on its face.

Adcock v. Freightliner LLC, 550 F.3d 369, 374 (4th Cir. 2008). The court should not dismiss a claim by insisting that a

plaintiff allege specific facts "beyond those necessary to state a claim and the grounds showing entitlement to relief."

Twombly, 127 S. Ct. at 1973-74. 1. RICO "person" and "enterprise" distinctness

Section 1962(c) makes it unlawful for "any person employed by or associated with any enterprise engaged in . . . interstate or foreign commerce to conduct or participate, directly or

indirectly in the conduct of such enterprise's affairs through a pattern of racketeering activity." 18 U.S.C. § 1962(c). Unlike

section 1962(a), section 1962(c) "envisions the enterprise as being different from, not the same as or part of, the person" against whom recovery is sought. New Beckley Mining Corp. v.

Int'l Union, United Mine Workers, 18 F.3d 1161, 1163 (4th Cir. 1994) (internal citations and quotations omitted); Busby v.

Crown Supply, Inc., 896 F.2d 833, 841 (4th Cir. 1990) (en banc) (affirming the necessity of distinction between the "person" and the "enterprise" in actions alleging a violation of § 1962(c)).

9

AARP's Amended Complaint does not define the "person(s)" but alleges that the Mail House Defendants and the Financial Services Defendants constitute the enterprise and are all

engaged in the racketeering activity.

(Doc. 3 ¶ 39.)

AARP thus

casts the same group of actors as being both "persons" and the "enterprise." Defendants argue that by doing so AARP's Amended

Complaint lacks the requisite distinctness between the "person" undertaking the racketeering conduct and the "enterprise" with which such person is associated. Defendants misread the standard of distinctness. The

"enterprise" and a "person" cannot be one and the same because under the statute a "person" cannot be "employed" by itself. For that reason New Beckley Mining, upon which Defendants rely, is distinguishable because the union defendant was both the

person and enterprise.

18 F.3d at 1163.

United States v.

Computer Sci. Corp., 689 F.2d 1181, 1190-91 (4th Cir. 1982), is also distinguishable because the corporation both the and person its and

unincorporated enterprise.

divisions

constituted

Accord Busby, 896 F.2d at 841 n.8.

A corporation

may associate with others, however, "to form an enterprise that is sufficiently distinct from itself." Riverwoods Chappaqua

Corp. v. Marine Midland Bank, N.A., 30 F.3d 339, 344 (2d Cir. 1994) (dismissing claim where employer and employees were both defendants and alleged enterprise); Eason v. Merrigan, No. DKC
10

2003-0933, 2004 WL 903756, at *2 (D. Md. Apr. 28, 2004) (same). An enterprise may even consist of an association of individuals and corporations. Nunes v. Merrill Lynch, Pierce, Fenner & RICO claims

Smith, Inc., 609 F. Supp. 1055, 1065 (D. Md. 1985).

have been sustained under section 1962(c) where there is only partial overlap between the person and the enterprise, Jacobson v. Cooper, 882 F.2d 717, 720 (2d Cir. 1989), and where the defendant may be a RICO person yet one of a number of members of the alleged enterprise, Cullen v. Margiotta, 811 F.2d 698 (2d Cir. 1987); Superior Bank, F.S.B. v. Tandem Nat'l Mortgage,

Inc., 197 F. Supp. 2d 298, 325 (D. Md. 2000). 7 Blakey, The RICO Civil Fraud Action in Context:

See G. Robert Reflections on

Bennett v. Berg, 58 Notre Dame L. Rev. 237, 286 (1982). Here, each Defendant, although part of the alleged

enterprise, is distinct from it. distinctness requirement, and

Thus, Defendants meet the motion to dismiss the

their

federal RICO claim on this basis is denied.
7 It is difficult to conclude that the court's statement in Entre Computer Ctrs., Inc. v. FMG of Kansas City, Inc., 819 F.2d 1279 (4th Cir. 1987), requires a different result. There the court stated: "[A]ssuming a corporation can be part of an `association in fact,' the central question is whether it can combine with other entities to form an enterprise, when it is already the `person' whose behavior the Act is designed to punish. Computer Sciences answers that question in the negative." Id. at 1287. While the facts of the case are not set out in detail in the opinion, it appears that the court's statement was in regard to the fact that the alleged enterprise was the corporate defendant and its franchises, thus demonstrating application of the rule set out above that corporations and their closely aligned entities cannot constitute both the RICO enterprise and the person. 11

2.

Association-in-fact enterprise

Under RICO, two categories of associations can fulfill the "enterprise" requirement: and partnerships); in and legal entities (such as corporations "any union or not group a of legal individuals entity."

associated

fact

although

18 U.S.C. § 1961(4). fact" RICO enterprise.

The latter is known as an "association-inThe Supreme Court has described it as "a

group of persons associated together for a common purpose of engaging in a course of conduct." 452 U.S. 576, 583 (1981). United States v. Turkette,

A RICO enterprise is characterized by

"continuity, unity, shared purpose and identifiable structure." United States v. Fiel, 35 F.3d 997, 1003 (4th Cir. 1994)

(internal citations and quotation marks omitted). a. Common purpose

AARP argues that the enterprise shared a common purpose to make money by defrauding seniors into believing that certain living trusts, annuities, financial and insurance products sold by American Family and Heritage were AARP-endorsed. The

Defendants argued at the hearing on these motions, though not in their briefing, that making money alone cannot suffice as a common purpose. An association-in-fact enterprise requires demonstration of a common purpose which animated its members. U.S. at 583. Turkette, 452

This can be established "by evidence of an ongoing
12

organization, formal or informal, of those associates in which they function as a continuing unit." 763 F.2d 628, 660 marks 631 F.2d (4th 996, Cir. 1000 Such 1985) (4th United States v. Tillett, (quoting Cir. United States

v. Griffin, quotation

1981)) be

(internal direct or

omitted).

proof

may

circumstantial.

Griffin, 660 F.2d at 1000.

The members of an

enterprise do not have to share all objectives as long as they have one in common. (1st Cir. 1995). In many RICO cases, the common purpose is to share in the ultimate illegal goal of the enterprise. See, e.g., United United States v. London, 66 F.3d 1227, 1244

States v. Batts, 171 F. App'x 977, 981 (4th Cir. 2006) (finding that a common purpose of dealing cocaine existed where gang members looked out for police, protected each other, referred drug buyers to other gang members for purchases, took turns selling, had a hierarchy of command, and committed violent

crimes to preserve their turf); United States v. Najjar, 300 F.3d 466, 485 (4th Cir. 2002) (finding common purpose between defendant-employee and the corporation based on evidence that defendant-employee acted on behalf of and with intent to benefit the corporation). A goal of making money establishes a common

purpose where the enterprise members sought to profit from the alleged illegal activity. common purpose of Tillett, 763 F.2d at 630-31 (finding was
13

enterprise

to

make

money

through

the

illegal trafficking of marijuana); Reynolds Tobacco, 2003 U.S. Dist. LEXIS 13440, at *11-12 (finding complaint stating entities had common purpose "to promote R.J. Reynolds cigarettes to

consumers in order to increase R. J. Reynolds' market share among adult smokers, while simultaneously increasing adult

smoker traffic in retailers' stores," sufficiently alleged an association-in-fact); see also Williams v. Mohawk Indus., Inc., 465 F.3d 1277, 1284 (11th Cir. 2006) (holding complaint alleging members of an enterprise stood to gain substantial financial benefits from the employment and harboring of illegal workers satisfied common purpose requirement under RICO). However,

while for obvious reasons making money is frequently the common purpose in RICO enterprises, RICO does not require that either the enterprise or the predicate acts be motivated by an economic purpose. The Fiel, 35 F.3d at 1003. Amended Complaint alleges that American Family and

Heritage are in the business of selling financial services and products and that the Mail House Defendants "sell unauthorized lead cards ¶¶ featuring 19, AARP Plaintiff's AARP and famous also trademark that the AARP." 8 "[t]he

(Doc. 3

28-29.) cards used

alleges by

counterfeit

designed

Financial

8 AARP alleges that ARM and the Hennessys provide infringing lead cards not just to the Financial Services Defendants but to other insurance agencies and financial service companies throughout the United States. (Doc. 3 ¶¶ 19-20.) 14

Services Defendants and the Mail House Defendants cause seniors to believe that they are dealing with AARP and that the

financial and insurance products and services of the Financial Services Defendants'[sic] are AARP-endorsed." (Id. ¶ 40.)

Thus, the Amended Complaint implicates the Mail House Defendants in the design of the lead cards and charges that all Defendants intended to mislead recipients. purpose of the scheme was to (Id. ¶ 40.) actually sell To be sure, the the Financial

Services Defendants' products to allegedly unsuspecting buyers, and there is no allegation or evidence that ARM or the Hennessys either were involved in, or benefitted from, any of those sales. Rather, ARM operated through contracts with the Financial

Services Defendants to mail the lead cards to senior citizens throughout the United States, including in North Carolina, and to collect responses. 263-64). ARM's (Id. ¶ 19; Doc. 42, Ex. A at 71, 98-110, appears to have ended after it

involvement

collected names of responders, and ARM's payment is not alleged to have been contingent upon any sale by the Financial Services Defendants. This case is very similar to In re Pharmaceutical Industry Average (D. Mass. Wholesale 2004). Price Litigation, There, enterprise of 307 F. Supp. 2d 196 an

plaintiffs certain

alleged

association-in-fact

pharmaceutical

companies and publishers to falsely publish the manufacturers'
15

average wholesale prices ("AWP"). the publishers were aware of the

The complaint alleged that manufacturers' scheme to

perpetuate the use of false AWPs but published the information anyway. Id. at 204. In assessing whether a common purpose

existed, however, the court noted that "[w]hile some of these factors may support an inference that some publishers may have been aware of concerns by governmental entities about inflated AWP's, they are insufficient to draw a reasonable inference that each of the publishers knew of the fraudulent nature of the AWP's for the identified drugs." "without a shared illegal Id. The court concluded that to defraud, the shared

purpose

innocent objective of using AWP as a published benchmark would not support a claim of a RICO enterprise" and dismissed the claim. Id. at 205.

Here, the Amended Complaint alleges that the Mail House Defendants and the Financial Services Defendants not only knew of the alleged fraud but, unlike in In re Pharmaceutical

Industry, participated in it.

Further, AARP alleges that all

Defendants continued to distribute the lead cards after being specifically warned that their conduct infringed AARP's rights. (Doc. 3 ¶¶ 23, 31.) While the Mail House Defendants may not

have shared in all the goals of the enterprise, it is sufficient that they are In alleged re to have shared an illegal Supp. purpose 2d at to

defraud.

Pharm.

Indus.,
16

307 F.

205.

Therefore, stage, alleged

the

court

finds

that facts the

AARP to

has, a

at

this

pleading that the

alleged

sufficient shared

state

claim of

enterprise

common

purpose

defrauding

seniors into believing that the Financial Services Defendants' products were AARP-endorsed and thereby profiting as a result. b. Defendants Enterprise Structure finally that AARP fails to allege the

argue

existence of an enterprise that is separate and apart from the racketeering activity. Amended Complaint (Doc. 20 at 7-8.) any allegation They contend that the that the enterprise

lacks

undertook any joint activity or acted in concert for any purpose outside the activities (Id.) alleged to constitute the pattern of

racketeering. 9

In Turkette, the Court stated that an enterprise is "proved by evidence of an ongoing organization, formal or informal," while the "pattern of racketeering" is "proved by evidence of the requisite number of acts of racketeering." 452 U.S. at 583.

The "enterprise" is not the "`pattern of racketeering activity'; it is an entity separate and apart from the pattern of activity in which it engages." Id. The Court observed that the proof

9 AARP points to the statements in Turkette that an enterprise may also be proved by demonstrating it operated as a "continuing unit." (Doc. 31 at 9.) The Fourth Circuit appears to analyze the continuity element as proof of a common purpose, United States v. Tillett, 763 F.2d 628, 631-32 (4th Cir. 1985), which the court has already addressed. 17

used

to

establish but it

these

elements that

may,

in

particular of one

cases, not

coalesce,

cautioned

"proof

does

necessarily establish proof of the other."

Id. 10

Fourth Circuit law presently requires that "the association exist[] separate and apart from the pattern of racketeering

activity in which it engages." Turkette, 452 U.S. at 583).

Tillett, 763 F.2d at 631 (citing

This can be shown through evidence

that the enterprise had "an existence beyond that which was necessary to commit the predicate crimes." Id. at 631. Thus,

evidence that the enterprise existed in the intervals between the predicate acts suggests an ongoing enterprise. Id. at 632.

There must be some organizational structure that removes simple conspiracies L.P., 52 from its reach. 645 (7th Richmond Cir. v. Nationwide (ruling Cassel an

F.3d

640,

1995)

that

enterprise "must be more than a group of people who get together to commit a `pattern of racketeering activity'"). Focusing on

the enterprise structure highlights the fact that it is the defendant's conduct in relation to the enterprise that is "the essence of a RICO violation." Reynolds v. East Dyer Dev. Co.,

882 F.2d 1249, 1251 (7th Cir. 1989).
10 Whether an association-in-fact enterprise requires proof of an ascertainable structure beyond that inherent in the commission of predicate crimes is presently before the Court and awaiting decision. Boyle v. United States, No. 07-1309, 129 S. Ct. 29 (U.S. argued Jan. 14, 2009); see Brief for the Petitioner, Boyle v. United States, 129 S. Ct. 29 (2008) (No. 07-1309). 18

Neither

party

has

cited,

nor

has

the

court

found,

any

precedent in the Fourth Circuit as to the extent to which a RICO complaint must allege the requisites of an "enterprise" as set forth in Turkette. Tillett was decided on a full record after

conviction and therefore does not speak directly to the issue. 763 F.2d at 630-61. The circuits are split in their approach.

See, e.g., City of New York v. Smokes-Spirts.com, Inc., 541 F.3d 425, 451 (2d Cir. 2008) (affirming dismissal of civil RICO claim for failure to allege facts supporting Turkette factors); v. Microsoft Corp., not 486 F.3d 541 (9th Cir. 2007) and Odom

(holding finding

enterprise

does

require

separate

structure

sufficient under Turkette a complaint alleging enterprise had common purpose, ongoing organization, and continuing unit); AsaBrandt, Inc. v. ADM Investors Servs., Inc., 344 F.3d 738, 752 (8th Cir. 2003) (noting requirement of separate enterprise

structure but affirming grant of summary judgment for lack of proof); Pavlov v. Bank of New York Co., 25 F. App'x 70, 71 (2d Cir. 2002) (holding complaint sufficiently alleged enterprise without pleading centralized hierarchy formed for the sole

purpose of carrying out a pattern of racketeering acts); United States v. Patrick, 248 F.3d 11, 19 (1st Cir. 2001) (refusing to require structure requirement in jury instructions); Begala v. PNC Bank, Ohio, Nat'l Ass'n, 214 F.3d 776, 781-82 (6th Cir. 2000) (dismissing complaint for
19

failing

to

allege

Turkette

factors); Richmond, 52 F.3d at 645 (same); Montesano v. Seafirst Commercial Corp., 818 F.2d 423, 427 (5th Cir. 1987) (same); Seville Indus. Mach. Corp. v. Southmost Mach. Corp., 742 F.2d 786, 790-91 (3d Cir. 1984) (holding Turkette factors are burden of proof, not pleading); see also 1-7 CIVIL RICO P 7.02, at 21

(Matthew Bender & Co., Inc. 2008) (noting that `[t]he importance of the proper pleading of RICO's enterprise element cannot be overemphasized"). on a statute The court must therefore make a determination our circuit has already characterized as

that

"tormented," Combs v. Bakker, 886 F.2d 673, 677 (4th Cir. 1989), and whose interpretation remains in flux at the moment. The question here is to what extent the Amended Complaint must allege that the enterprise functioned with some type of ascertainable structure separate and apart from the predicate acts of mail fraud and trademark counterfeiting constituting the pattern of racketeering activity. generally that the Normans and (Doc. 3, ¶ 39.) Hennessys AARP alleges and

"direct[ed]"

"control[led]" "the illegal conduct" described in the Amended Complaint. (Doc. 3 ¶¶ 4, 5, 9 & 10.) AARP argues that these

allegations support an inference of at least some management role. While that may be true as to the predicate acts, AARP

importantly fails to charge involvement in the management of the alleged "enterprise" itself. Reves v. Ernst & Young, 507 U.S.

170, 179-81 (1993); cf. Davis v. Hudgins, 896 F. Supp. 561, 567
20

(E.D. Va. 1995) (finding no enterprise on motion to dismiss where no management role alleged); Limestone Dev. Corp. v. Vill. of Lemont, 520 F.3d 797, 804-05 (7th Cir. 2008) (dismissing complaint for lack of factual allegations as to a system of governance, hierarchy, management or direction, headquarters or other indicator of a legal or illegal enterprise). AARP argues

that the Amended Complaint further alleges multiple predicate acts in multiple states occurring over a span of three or so years. (Doc. 3 ¶ 90.) While true, there is no allegation that

these activities constituted more than a collection of predicate acts, or a conspiracy to commit them. In fact, the allegations

themselves are limited to discrete purchases and sales of ARM's services without any factual allegation of an ongoing, separate enterprise. (Id. ¶¶ 19, 26-27.)

AARP next urges that its allegations that the formation and existence of American Family and ARM as separate entities that engage in business other than the predicate acts suffice to demonstrate separateness of the enterprise from the racketeering activity. (Doc. 31 at 9-11.) Attempting to analogize to

Tillett, AARP argues that the Amended Complaint alleges that the Financial Services Defendants purchased lead cards both with and without the AARP reference (although there is no allegation of the latter) from other entities not named as Defendants in this case, and that the Mail House Defendants likewise sold lead
21

cards (with and without the AARP reference, although there is no allegation as to the latter) to non-Defendants. 27.) (Doc. 3 ¶¶ 19 &

This argument fails because AARP has alleged only that the

persons in the enterprise continued to exist and do business beyond the predicate acts; nowhere is there an allegation that the enterprise, as alleged, existed. Moreover, unlike in

Tillett, where the various legitimate businesses were formed by the enterprise to further the enterprise's goals, nowhere does the Amended Complaint allege that the enterprise formed any of the corporate Defendants. that the enterprise Cf. Tillett, 763 F.2d at 632 (noting a seafood restaurant as a

established

legitimate business front for the smuggling operation, purchased trucks and equipment, and formed a corporation to buy the boat used for smuggling). look to the It also does not help, as AARP urges, to of the Defendants in their Answers.

admissions

(Doc. 31 at 10-11.)

Procedurally, on motions to dismiss, the

court looks only to the allegations of the Amended Complaint. Fed. R. Civ. P. 12(b)(6). Answers do not Moreover, admit that for the the reasons noted itself

above,

the

enterprise

formed the other corporate Defendants or that it directed, or engaged in, such separate activities. Defendants argue that the relationship between the parties is contractual and is best characterized as one of vendor and vendee. (Doc. 20 at 7.) Simple contractual relationships are
22

not ordinarily the stuff of which RICO enterprises are made. See Jubelirer v. MasterCard Int'l, Inc., 68 F. Supp. 2d 1049, 1052-52 (W.D. Wis. 1999) (holding that a contractual combination for financial services failed to constitute an enterprise).

This is true even if some actors, for example the Mail House Defendants, performed improper acts themselves, such as the

mailing of allegedly infringing lead cards. What is required of the is participation enterprise. in the

(Doc. 3 ¶ 19.) operation 507 U.S. and at

management 179-81.

alleged

Reves,

As the Fourth Circuit has cautioned, due to RICO's

heightened penalties, courts should "not lightly permit ordinary business contract or fraud disputes to be transformed into

federal RICO claims."

Flip Mortgage Corp. v. McElhone, 841 F.2d

531, 538 (4th Cir. 1988). While the Supreme Court has rejected the notion that

Rule 8, Fed. R. Civ. P., sets a heightened pleading standard that requires that a complaint allege "specific facts" beyond those necessary to to state a claim and S. the Ct. grounds at showing a

entitlement

relief,

Twombly,

127

1973-74,

pleading must still allege "enough facts to state a claim to relief that is plausible on its face." Id. at 1974. A well-

pleaded complaint should not be struck even if actual proof of those facts may be improbable, id. at 1965, but there must still be sufficient facts alleged. This is especially true in a case
23

rested on predicate acts sounding in fraud and given RICO's complexity and incalculable stigmatizing effect. n.14. Id. at 1973

Twombly reaffirmed that district courts "must retain the

power to insist on some specificity in pleading before allowing a potentially massive factual controversy to proceed." Id. at

1967 (quoting Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 528 n.17 (1983)). This is especially important where, as here, the federal claim carries a certain in terrorem effect. Construing all factual Id. at 1966. in the light most

allegations

favorable to AARP, Martin Marietta, 991 F.2d at 97, the court finds that the Amended Complaint, even though prolix, is largely a compilation of repetitive predicate acts and fails to

sufficiently allege a RICO enterprise that existed separate and apart from the alleged racketeering activity. Though AARP

alleges a conspiracy to commit the predicate acts of mail fraud and trademark counterfeiting, a conspiracy without more does not rise to the level of a RICO claim. There must be sufficient

facts alleged from which to fairly infer an entity that exists separately in structure. Defendants' motion to dismiss AARP's

federal RICO claim (Doc. 19) will therefore be granted, but because the deficiency may reflect merely a defect in pleading and not in fact, and given the pendency of Boyle in the Supreme

24

Court

which

could

affect

this

analysis,

the

claim

will

be

dismissed without prejudice. B. The North Carolina RICO Financial Services Defendants also move to dismiss

AARP's claims under the North Carolina RICO statute, N.C. Gen. Stat. § 75D-1-14, relying of on the their federal arguments claim as to the any

"enterprise"

element

without

independent analysis. 4.)

(Doc. 19 at 1-2; Doc. 20 at 5; Doc. 27 at

AARP provides no specific analysis other than to correctly

point out that the North Carolina RICO statute does not require proof of an "enterprise." 11 (Doc. 31 at 4.) N.C. Gen.

Stat. § 75D-4; Delk v. ArvinMeritor, Inc., 179 F. Supp. 2d 615, 628 n.5. (W.D.N.C. 2002). to the extent it sought Thus, Defendants' motion to dismiss, to address the North Carolina RICO

statute with respect to any "enterprise" requirement, is denied. III. MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION Individual Defendants Tom and Tina Hennessy and Stanley and Jeffrey Norman move to dismiss the remaining claims against them for lack of personal jurisdiction, pursuant to Rule 12(b)(2), Fed. R. Civ. P. (Docs. 19, 20 & 27.) Defendants also

11 North Carolina's RICO statute states that "no person shall engage in a pattern of racketeering activity or through a pattern of racketeering activities or through proceeds derived therefrom, acquire or maintain, directly or indirectly, any interest in or control of any enterprise . . . ." N.C. Gen. Stat. § 75D-4(a)(1). 25

collectively

move

to

dismiss

claims (Id.)

arising

out

of

mailings

directed outside North Carolina. A. The discovery. by a

Personal Jurisdiction Standards parties in this case conducted jurisdictional

Thus, AARP must demonstrate grounds for jurisdiction of the WL evidence. 516747, at Trivette *1 n.1 v. Risher, (E.D.N.C.

preponderance

No. 7:07-CV-16-D,

2008

Feb. 25, 2008); see Mylan Lab., Inc. v. Akzo, N.V., 2 F.3d 56, 59-60 (4th Cir. 1993). To determine whether personal jurisdiction is proper, the court engages in a two-part inquiry: first, North Carolina's long-arm statute must provide a statutory basis for the

assertion of personal jurisdiction, and second, the exercise of personal jurisdiction must comply with the Due Process Clause of the Fourteenth Amendment. Christian Sci. Bd. of Dirs. of the

First Church of Christ, Scientist v. Nolan, 259 F.3d 209, 215 (4th Cir. 2001); Vogel v. Wolters Kluwer Health, Inc.,

No. 1:07CV62, 2008 WL 5453835, at *8 (M.D.N.C. Dec. 30, 2008). North Carolina's long-arm statute is construed to be coextensive with the Due Process Clause; therefore, the two requirements collapse into a single inquiry of whether the non-resident

defendant has such "minimum contacts" with the forum state that exercising "traditional jurisdiction notions of over fair the play
26

defendant and

does

not

offend

substantial

justice."

Christian

Sci.,

259

F.3d

at

215

(quoting

Int'l

Shoe

Co.

v.

Washington, 326 U.S. 310, 316 (1945)); Red Bull GmbH v. RLED, LLC, 515 F. Supp. 2d 641, 646-47 (M.D.N.C. 2007). over a defendant may be either general Jurisdiction or specific.

Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 nn.8, 9 (1984). over with, defendants or who A court may exercise general jurisdiction have systematic and continuous of the contacts of

purposefully

avail

themselves

privilege

conducing activities within, the forum state. v. Rudzewicz, 471 U.S. 462, 475-76 (1985).

Burger King Corp. Minimum contacts

exist where a non-resident defendant "purposefully directs" his activities toward the forum state. Id. at 473. If the nature

of the contacts with the forum state falls below that required for the exercise of general jurisdiction, courts are authorized to exercise specific jurisdiction where the cause of action

"aris[es] out of or relate[s] to" the defendant's contacts with the forum state. B. Helicopteros, 466 U.S. at 413-14.

Tina and Tom Hennessy (Doc. 21 ¶ 2; Doc. 22

The Hennessys are Texas residents. ¶ 2.)

AARP contends that they have contacts with North Carolina (Doc. 42 at

that are "intentional, continuous and substantial." 6.)

In support, AARP points to admissions that ARM maintained a

website (armleads.com) that was accessible in North Carolina and had clients in the state. (Id.)
27

Maintenance of a website on which a defendant advertises its services and which is accessible to North Carolina

residents, without more, is an insufficient basis upon which to support a finding of general jurisdiction. ALS Scan, Inc. v.

Digital Serv. Consultants, Inc., 293 F.3d 707, 711-12 (4th Cir. 2002); Burleson v. Toback, 391 F. Supp. 2d 401, 414 (M.D.N.C. 2005) ("it is [of well-settled a website] in alone the Fourth Circuit that

accessibility

cannot sets

establish a higher than a

personal bar and

jurisdiction"). usually internet requires presence

General that or

jurisdiction website a

the that

be

more

passive maintain

defendant

personally

ownership of the domain name, neither of which is alleged here. ALS Scan, 293 F.3d at 714-15; Mkt. Am. v. Optihealth Prod., Inc., No. 1:07CV855, 2008 WL 5069802, at *7-*8 (M.D.N.C.

Nov. 21, 2008). Tina Hennessy is an officer, and Tom Hennessy an employee, of ARM, and, as such, they are separate and distinct entities from it. May Apparel Group, Inc. v. Ava Imp.-Exp., Inc., 902 F. The fact that ARM has customers

Supp. 93, 97 (M.D.N.C. 1995).

in the state, without more, therefore fails to extend general jurisdiction to the corporate officers and employees merely

because of their employment status.

Uniprop Manufactured Hous.

Cmties. Income Fund II v. Home Owners Funding, 753 F. Supp. 1315, 1319-1321 (W.D.N.C. 1990) (finding lack of jurisdiction
28

over

non-resident

officer

and

board

member

of

out-of-state

corporation with North Carolina branch office because plaintiffs failed to show sufficient individual contacts). 12 Ordinarily, the acts of a corporate representative

transacting corporate business cannot form the basis for the exercise of personal in v. his First or jurisdiction her personal Bank, 713 over the corporate Columbia 1055-56

representative Briargate Co.

capacity. F.2d 1052,

Nat'l

(4th Cir. 1983).

However, this "fiduciary shield" doctrine does

not apply where the state's long-arm statute is co-extensive with due process. Pittsburgh Terminal Corp. v. Mid Allegheny The relevant inquiry employee. Whereas

Corp., 831 F.2d 522, 525 (4th Cir. 1987). is the action taken by the officer or

"[g]eneral actions by such persons on behalf of the corporation will not generally subject them to an out-of-state court's

jurisdiction, [] actions related to the events in question may do so." exercise Mkt. Am., 2008 WL 5069802, at *8. such specific jurisdiction Whether a court may analysis of the

requires

12 At oral argument, Defendants cited Saft Am. Inc. v. Plainview Batteries, Inc., No. 204A08, 2009 WL 279071, at *1 (N.C. Feb. 6, 2009) (adopting dissent from North Carolina Court of Appeals decision and reversing dismissal of jurisdictional motion by out-of-state officer), to resolve the issue whether North Carolina courts would exercise jurisdiction over the Hennessys and Normans. While this case may be helpful by way of analogy, the jurisdiction whose power the federal courts exercise is the United States of America, not the state of North Carolina. The proper inquiry, then, is whether the Defendants have sufficient minimum contacts under the Constitution. See ISI Int'l, Inc. v. Borden Ladner Gervais LLP, 256 F.3d 548, 551 (7th Cir. 2001). 29

following

factors:

(1)

whether

the

defendant

purposefully

availed himself of the privileges of conducting activities in North Carolina, (2) whether the plaintiff's claims arise out of the defendant's the activities exercise of relating to North is Carolina, and

(3) whether reasonable.

jurisdiction

constitutionally

Christian Sci., 259 F.3d at 216.

AARP alleges that Tom and Tina Hennessy knew of, authorized and approved the mailing of two million infringing lead cards into North Carolina over a four-year period and that they The

received revenue from these mailings.

(Doc. 42 at 6-7.)

Hennessys argue that neither had contacts with North Carolina, were involved in placing the allegedly infringing language onto the lead cards, or took part in their mailing into the state. (Doc. 20 at 12-14.) Tina Hennessy also argues that she ceased

actively participating in the day-to-day operations of ARM in 1998 and that her involvement in ARM had become limited to

payroll issues.

(Doc. 42, Ex. B at 57-58, 66.)

Where an allegation sounds in tort, a court may exercise jurisdiction over a non-resident defendant who is a "primary participant[] in an alleged wrongdoing intentionally directed" at a resident in the forum state. Calder v. Jones, 465

U.S. 783, 790 (1984).

Here, AARP's trademark infringement and Mid Atl. Telecomm., Inc. v.

remaining claims sound in tort.

Long Distance Servs., Inc., 18 F.3d 260, 263 (4th Cir. 1994)
30

(civil RICO is a statutory tort remedy); Alitalia-Linee Aeree Italiane S.p.A. v. Casinoalitalia.com, 128 F. Supp. 2d 340, 348 (E.D. Va. 2001) (Lanham Act claims are tortious in nature);

Richardson v. Bank of Am., N.A., 182 N.C. App. 531, 562, 643 S.E.2d 410, 429 (2007) (unfair and deceptive trade practices are neither wholly tortious nor wholly contractual in nature);

Henderson v. United States Fid. & Guar. Co., 124 N.C. App. 103, 109, 476 S.E.2d 459, 463 (1996) (unfair competition and passing off are common law torts). A corporate officer who actively

participates in a tort may be liable even if he or she was acting in a corporate capacity. 472 F. Supp. 2d 690, Blue Mako, Inc., v. Minidis, (M.D.N.C. 2007) (finding

701-702

jurisdiction over non-resident corporate officer who allegedly sent false and misleading or inaccurate information to North Carolina to induce plaintiff to sign contract forming the basis of the action). In trademark infringement cases, a non-resident employee-defendant may be held jointly and severally liable

"with that corporation if the individual defendant has direct involvement in the infringing activities of the corporation." Musselwhite v. Int'l Learning Works, Inc., No. 2:97CV460, 1997 U.S. Dist. LEXIS 21427, at *7 (M.D.N.C. Oct. 17, 1997); 13 accord
13 Musselwhite is particularly relevant. There, the court jurisdiction over an individual defendant who was the president, and majority owner of the corporate defendants there was evidence that he had called the plaintiff, a North resident, to obtain a copy of the training material that 31 asserted founder, because Carolina was the

Flexible Benefits Council v. Feltman, No. 1:08CV371, 2008 WL 2465457, officers at *7 (E.D. Va. directors Jun. 16, 2008) (holding for corporate trademark

and

personally

liable

infringement, particularly where the individuals authorized and approved the acts of infringement); Christian Sci. Bd. of Dirs. of the First Church of Christ, Scientist v. Robinson, 123 F. Supp. 2d 965, 975 (W.D.N.C. 2000) ("trademark infringement is akin to tort cases and thus jurisdiction may attach when the defendant's conduct is either aimed at or has an effect on the forum state"); see Polo Fashions, Inc. v. Craftex, Inc., 816 F.2d 145, 149 (4th Cir. 1987) (reversing district court's

exoneration of individual defendants from liability because they participated in corporation's willful infringement and, thus, may be held personally liable); Rhee Bros., Inc. v. Han Ah Reum Corp., 178 F. Supp. 2d 525, 532 (D. Md. 2001) (allowing

trademark claim to proceed against non-resident owner, operator and president of a non-resident corporation pending

determination of whether the individual defendant was "culpably

subject of plaintiff's trademark infringement claim. 1997 U.S. Dist. LEXIS 21427, at *11. Requiring the plaintiff to make only a prima facie showing because no jurisdictional discovery had occurred, the court concluded that the evidence supported a reasonable inference that the individual defendant participated directly in the The court further concluded corporation's infringing conduct. Id. that the defendant's continued marketing of the product after being informed of possible trademark and copyright violations supported the inference that his actions were committed with knowledge that harm would occur in North Carolina. Id. 32

involved in the commission of a `trademark tort'" in the forum state). The record demonstrates sufficient evidence that Tina

Hennessy, founder and sole officer, shareholder and director of ARM, and Tom Hennessy, its general manager since 2000 (Doc. 42, Ex. A at 11-12, 16-17), were aware of the corporate activity and collaborated in the development of the lead cards with knowledge that they would be mailed into the state and potentially cause injury here. Both Hennessys participated in the design of lead

cards containing the phrase AARP that form the basis of AARP's trademark infringement claim. the cards at issue, Tom Hennessy identified one of as having been provided by

ARM-00002,

American Family "in text or another format." 125.) He explained that it was modified

(Id., Ex. A at under their

"part

direction" and "part under ours" and characterized the design process as a "collaborative effort between ARM and [American Family]." American (Id., Ex. A at 125, 130.) Family, and Tom Hennessy had The original came from some input as to it

because he was concerned about a "copyright issue" and did not think it should be mailed in the form he received it from

American Family. with Julian Ford

(Id., Ex. A at 131-32.) at American Family

He recalled talking about the potential

copyright issue but does not recall exactly what changes were made to the card as a result. (Id., Ex. A at 132-34.)
33

Tina Hennessy had input on the contents of at least one lead card containing the allegedly infringing AARP mark,

ARM-00005.

(Id., Ex. A, Ex. 2.)

ARM-00005 is a lead card

containing the AARP phrase which Tom Hennessy identified as a stock mailer that ARM sends on behalf of its customers. Ex. A at 127.) (Id.,

A "stock" mailer refers to "pieces that were

created at some time at ARM and mailed with other clients at ARM." (Id., Ex. A at 127.) While Tina Hennessy denies having

helped design ARM-00005, she stated that she "may have reworded a few things on it" but does not recall specifically how or what was reworded. (Id., Ex. B at 73-75.) To what extent the

ARM-00005 card was shown to American Family and adapted for its use remains to be determined. 14 There is, moreover, evidence showing that the Hennessys

expressly aimed their actions toward North Carolina with the knowledge that harm in this forum was highly probable. Calder, 465 U.S. at 789-90. See

Tom Hennessy received two cease and

desist letters from AARP that were addressed to Tina Hennessy: one dated November 3, 2004; and the other February 9, 2005. both letters, AARP's trademark attorneys requested that In ARM

cease mailing lead cards containing the AARP mark. Ex. A at 232-38, Exs. 6 & 7.)

(Doc. 42,

ARM sent out approximately 1.3

14 Jeffrey Norman testified that ARM provided American Family with lead cards containing AARP language but did not specify which cards those were. (Doc. 41, Ex. A at 147) 34

million cards to North Carolina after the November 2004 cease and desist letter, and approximately 1.1 million cards to North Carolina after the February 2005 letter. (Id., Ex. A, Ex. 3.)

Tom Hennessy conceded that he knew after receiving these letters that getting sued was "a very real possibility." (Id., Ex. A at 238.) 64,000 Family. Carolina Furthermore, on October 30, 2006, ARM sent approximately lead cards to North Carolina on behalf of American

(Id., Ex. A, Ex. 3.) Attorney General, on

ARM sent these after the North October 4, 2006, obtained a

preliminary injunction from the Superior Court of Wake County, North Carolina, enjoining ARM and the Hennessys from, in

pertinent part, "directly . . . sending out mailings or other written solicitations to North Carolina customers." (Id., Ex. A, Ex. 8 at ¶ 14). This also occurred after the original complaint

in this case was filed in the Superior Court of Guilford County on September 20, 2006. (Doc. 1, Ex. A.) Tina stated that she

"[couldn't] tell you if I did or I didn't" participate in the decision to stop mailing anything with AARP on it after this lawsuit began. (Doc. 42, Ex. B at 65-68.)

In sum, the evidence before the court indicates that AARP's claims arise from or relate to the Hennessys' purposeful

direction of allegedly tortious activity into North Carolina for commercial occur. gain with the knowledge that harm was likely to

See Calder, 465 U.S. at 790; Musselwhite, 1997 U.S.
35

Dist.

LEXIS

21427,

at

*11.

The

court

finds

that

the

inconvenience to the Hennessys in defending this action in North Carolina does not offend traditional notions of fair play and substantial justice. over them is Consequently, the exercise of jurisdiction reasonable, and the Hennessys'

constitutionally

Rule 12(b)(2) motion to dismiss for want of jurisdiction is therefore denied. C. Christian Sci., 259 F.3d at 217-18.

Jeffrey and Stanley Norman

Like the Hennessys, the Normans argue that this court lacks jurisdiction over their persons. (Docs. 19 & 27.)

AARP contends that the Normans have contacts with North Carolina that are "intentional, continuous and substantial" and that they have purposefully availed themselves of the privilege of conducting business in this state. points Carolina to contacts to between this both of (Doc. 41 at 5, 10.) the Normans and of AARP North

support

court's

exercise

general

jurisdiction over them.

From 2002 to 2006, American Family and (Id., Ex. A at 94-95,

Heritage had offices in North Carolina. 120-122.)

Jeffrey Norman, acting in his corporate capacity,

executed a lease on May 15, 2004 for office space in North Carolina on behalf of American Family while he was physically in California. (Id., Ex. A at 272, Ex. 9 at 14.) He also made two

visits to North Carolina.

The first was in 2003 to visit the

Greensboro facility for American Family, and the second was in
36

August 2005 to meet with legal counsel to obtain advice with regard to the North Carolina Attorney General's investigation into American Family and Heritage. (Id., Ex. A at 279,

285-288.) Stanley Norman made four visits to North Carolina. On his

first visit in 2003, he interviewed and hired a state marketing director. (Id., Ex. B at 17.) On September 30, 2004, while in

North Carolina, he executed a lease for office space on behalf of American Family. (Id., Ex. A at 271-72.) His third visit

occurred over two years later in October 2006, when he explained to employees the terms and conditions of the October 4, 2006 preliminary County. injunction issued by the Superior Court of Wake

(Id., Ex. A at 20-21.)

He made his fourth visit in

February or March of 2007 to obtain legal advice about "the matter of the North Carolina attorney general." 32.) The court concludes that the Norman's contacts with the state of North Carolina do not rise to the level of the type of continuous and systematic contacts to establish a basis for the exercise of general jurisdiction. See, e.g., Estate of Stephen (Id., Ex. A at

Bank v. Swiss Valley Farms, Co., 286 F. Supp. 2d 514, 517-18 (D. Md. 2003) (finding lack of substantial contacts for out of state resident); Smith v. Jefferson County Chamber of Commerce, 683 F. Supp. 536, 538 (D. Md. 1988) (holding non-resident business

37

owners'

monthly gross

trips, revenue

deliveries, from forum

advertising state

to

and to

significant

insufficient

constitute continuous and systematic contacts). The record does reveal, however, that the Normans

purposefully directed their activities related to the claims in this case toward North Carolina. As AARP argues, there is

evidence that the core business model of American Family and Heritage, to solicit interest in their products, is founded upon the trademark infringing activity. Stanley Norman, as president

of American Family and president or chief executive officer of Heritage, devised the plan to refer to the AARP probate study in the lead cards to implement the model and personally oversaw operations to mail the lead cards to North Carolina. Ex. B at 10-12.) Moreover, he personally (Doc. 41, in

participated

American Family's business operations in North Carolina to chase respondents generated from the lead cards until the North

Carolina Attorney General enjoined them. The record thus in demonstrates the a high

(Id., Ex. B at 10-15.) level of personal with

involvement

causing

allegedly

infringing

actions

knowledge of potential consequences in North Carolina.

His son,

Jeffrey Norman, as chief executive officer of American Family, personally authorized the mailings of approximately 1.5 million lead cards into North Carolina that contained the allegedly

infringing AARP language to solicit sales.
38

(Doc. 41, Ex. A at

155; Doc. 42, Ex. A, Ex.3.)

Stanley Norman's response to the

jurisdictional issue is a defense on the merits, contending that the lead cards contained both a truthful, fair use reference to a nationwide AARP study on probate conducted in the 1990s and a disclaimer that the mailings were not associated with AARP.

(Doc. 41, Ex. B at 13.)

The merits of the infringement claim,

however, are not before the court on the present motions. The record therefore contains sufficient evidence that the Normans participated directly in the alleged tortious conduct by authorizing and approving the creation and purposeful direction of lead cards containing AARP references in the to North Carolina.

Given

the

Normans'

participation

alleged

infringement

that is causally-related to AARP's alleged damages, jurisdiction over them is appropriate. See Polo Fashions, 816 F.2d at 149;

Stafford Urgent Care, Inc. v. Garrisonville Urgent Care, P.C., 224 F. Supp. 2d was the 1062, proper entity 1065-66 over that (E.D. Va. 2002) (holding who

jurisdiction incorporated

individual the

defendants

used

allegedly

infringing

language in its signage with the intent to divert patients and business from plaintiff's facility); see also Donsco, Inc. v. Casper Corp., 587 F.2d 602, 606 (3d Cir. 1978) (imposing tort liability upon individual defendant who was central figure in the infringing acts corporation that formed who the
39

authorized basis of

and the

approved

the

tortious

corporation's

liability). alleged

The Normans' argument that there is no evidence the of trademark infringement occurred in North

tort

Carolina (Doc. 27 at 9-10) is unavailing, as the harm in a trademark confusion affixed. McCarthy, infringement occurs as case as occurs where at the the place where label the is

well

infringing

Robinson, 123 F. Supp. 2d at 972 (citing 6 J. Thomas McCarthy on Trademarks and Unfair Competition, §

32:39, and Keds Corp. v. Renee Int'l Trading Corp., 888 F.2d 215, 218 (1st Cir. 1989)). Here, the alleged confusion is

alleged to have taken place in North Carolina. The Normans point to Rich Food Services, Inc. v. Rich Plan Corp., No. 5:99CV677BR, 2001 U.S. Dist. LEXIS 25956 (E.D.N.C. May 12, 2001), to argue that the fact that they were officers and directors of American Family and Heritage with knowledge and control over the corporations' alleged tortious activities is insufficient to confer personal jurisdiction over them.

(Doc. 27 at 8.) do not suffice

As a general rule, their status and knowledge for jurisdiction. Rich Food Contrary supports to the the Norman's of

contentions,

however,

assertion

specific jurisdiction.

In that case, North Carolina plaintiffs

had entered into a franchise agreement with the defendant, an out-of-state 25956, at corporation. As sell part their of Rich Food, 2001 U.S. Dist. LEXIS were

*2. to

their

agreement, a Full

plaintiffs

encouraged

customers
40

Service

Agreement

("FSA") and did so. North Carolina

Id.

Plaintiffs were later sued by the General because one of the FSA's

Attorney

provisions violated North Carolina law prohibiting unlicensed insurers (such as the plaintiffs) from selling insurance. Id.

Plaintiffs in turn sued alleging, among other things, that the defendants fraudulently failed to disclose Id. at *4. be the FSA's

noncompliance with North Carolina law. held that specific jurisdiction

The court over

could

asserted

defendants who had come to North Carolina to urge plaintiffs to sell the FSAs and who came to discuss with a plaintiff and his attorney the North Carolina Attorney General's investigation. Id. at *24. This is consistent with the assertion of

jurisdiction over a corporate officer who allegedly sent false and misleading information into a state to fraudulently induce a plaintiff to sign a franchise contract. 2d at 701. Blue Mako, 472 F. Supp.

Blue Mako and Rich Food thus support the assertion

of specific jurisdiction where a defendant directly participates in the corporate tort either through the direct commission of fraud while present in North Carolina or by sending false and misleading information into the state. 15 Id.; Rich Food,

2001 U.S. Dist. LEXIS 25956, at *24.
15 Defendants' reliance on Indiana Plumbing Supply, Inc. v. Standard of Lynn, Inc., 880 F. Supp. 743 (C.D. Cal. 1995), is misplaced. There, the court found jurisdiction over a non-resident corporate employee lacking based on the Ninth Circuit standard that personal liability for corporate officers is only proper where the defendant is 41

In

sum,

the

court

finds

that

AARP

has

shown

by

a

preponderance of the evidence that the Hennessys and the Normans sufficiently participated in and/or directed the alleged

trademark infringement through purposeful activity directed to North Carolina. that defending North Carolina has a sufficient interest such this lawsuit of fair here play cannot and to be said to offend

traditional Accordingly,

notions the

substantial dismiss for

justice. lack of

Normans'

motions

jurisdiction are denied. 16
the "`guiding spirit' behind the wrongful conduct . . . or the `central figure' in the challenged corporate activity." Id. at 750. Unlike the non-resident corporate director there who neither developed the advertising campaign that formed the basis of the infringement claim nor chose the advertisement containing the allegedly infringing phrase, id. at 751, Stanley Norman developed the concept of American Family, including the sending of lead cards referring to AARP, and Jeffrey Norman personally authorized the mailing of those lead cards into North Carolina. Such a level of involvement with awareness of the potential consequences within North Carolina meets even the test in Indiana Plumbing, were it to apply. In reaching this conclusion, the court declines to find that AARP has demonstrated personal jurisdiction over the Normans in part because both are alter egos of American Family and Heritage. (Doc. 3 ¶ 32.) Under North Carolina's "mere instrumentality rule," to pierce the corporate veil there must be evidence of a combination of factors which, taken together, suggest that the "corporate entity attacked had no separate mind, will or existence of its own." Monteau v. Reis Trucking & Constr., Inc., 147 N.C. App. 121, 127, 553 S.E.2d 709, 712 (2001) (internal citations and quotation marks omitted); see Atl. Tobacco Co. v. Honeycutt, 101 N.C. App. 160, 165-66, 398 S.E.2d 641, 643-44 (1990) (piercing corporate veil because individual defendant was president and sole shareholder of corporations, and evidence indicated that he dominated the corporations' activities). While there is evidence that the Normans had substantial control over the corporate activities of American Family and Heritage, AARP fails to provide evidence of inadequate capitalization, comingling of assets, or non-compliance with corporate formalities to demonstrate that the corporate entities had no separate mind, will, or existence. Atl. Tobacco, 101 N.C. App. at 164-65, 398 S.E.2d at 643. 42
16

IV.

CLAIMS AGAINST NORTH CAROLINA Defendants

DEFENDANTS that

ARISING

FROM

CONDUCT

OUTSIDE not

argue

all

claims

against

them

associated with mailings in North Carolina should be dismissed because, they contend, AARP cannot recover damages for conduct occurring outside North Carolina. at 14-20; Doc. 27 at 11-15.) (Doc. 19 at 3-4; Doc. 21

Because the court has dismissed

the federal RICO claims, the issue relates to the remaining claims under state law and the Lanham Act. AARP responds only with respect to injunctions under the Lanham Act, contending the court has jurisdiction to enjoin ARM, the Hennessys, American Family, Heritage, and the Normans for violations of the Lanham Act outside North Carolina. (Doc. 41 at 17-19; Doc. 42 at 18.) Once the court has jurisdiction over

a party, it has authority under the Lanham Act to enjoin the party from unlawful conduct nationwide. 15 U.S.C. § 1116(a);

SKS Merch, LLC v. Barry, 233 F. Supp. 2d 841, 850 (E.D. Ky. 2002); Five Platters, Inc. v. Purdie, 419 F. Supp. 372, 384 (D. Md. 1976). The Lanham Act does not authorize nationwide service of process, ISI Int'l, 256 F.3d at 550, thus this court's

jurisdiction is limited under Rule 4(k)(1)(A), Fed. R. Civ. P. Sea-Roy Corp. v. Parts R Parts, Inc., No. 9:94CV00059, 1996 WL 557857, at *4 (M.D.N.C. Jul. 30, 1996) ("in the absence of a

43

federal personal

statute

authorizing over a

nationwide

service

of

process, may be

jurisdiction

nonresident

defendant

obtained only pursuant to the provisions of [Fed. R. Civ. P. 4]"). Because this court's exercise of jurisdiction is

specific, it naturally extends to damages result