Pennsylvania Wood, Inc. v. Martin

Filing 17

ORDER granting 10 Motion to Dismiss.. Signed by Senior Judge Graham Mullen on 7/30/2013. (tmg)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
CHARLOTTE DIVISION
3:13CV83-MU
PENNSYLVANIA WOOD, INC.,
Plaintiff,
vs.
ANDREW G. MARTIN, D/B/A MT LEASING,
Defendants.

)
)
)
)
)
)
)
)
)
)

ORDER

This matter is before the court upon Defendant’s Motion to Dismiss Plaintiff’s Complaint
pursuant to Fed. R. Civ. P. 12(b)(2) for lack of personal jurisdiction.
Plaintiff Pennsylvania Wood, Inc. is a North Carolina furniture designer and seller.
Defendant Andrew G. Martin is a resident of the state of Indiana. Plaintiff alleges claims arising
out of a lease agreement with Defendant. These claims include breach of contract and civil
conversion.
FACTUAL BACKGROUND
Plaintiff sells high-end, hand-made furniture to its customers from its showroom in
Charlotte, North Carolina. Plaintiff utilized the services of craftsmen in Indiana to build and
finish its furniture. Once the furniture was built, it was delivered to Elvin Nolt, a master
craftsman of Elkhart, Indiana, to have the proper finish applied to its exterior. In or around
October 2008, Nolt discussed the possibility of Plaintiff moving its finished and unfinished
furniture from its Charlotte facility to a location near his shop in Elkhart, Indiana in order to
reduce Plaintiff’s rent and production costs. Toward the end of 2008, Nolt suggested the use of
Defendant’s warehouse which was located near Nolt’s shop in Elkart. Nolt made positive
1

representations about the quality of the warehouse and Defendant’s character. On the strength of
Nolt’s representations, Plaintiff agreed, sight unseen, to lease the warehouse so long as the lease
terms were favorable. (Affidavit of Matthews, ¶10). Plaintiff and Defendant negotiated the lease
in January 2009 via telephone and fax. In February 2009, Plaintiff signed the lease agreement in
North Carolina and faxed it to Defendant in Indiana.
After Plaintiff began storing its inventory in Defendant’s warehouse, a dispute arose
concerning the warehouse’s conditions. Plaintiff contacted Defendant to express concern over a
leaky roof that was causing moisture-related damage to Plaintiff’s furniture. Defendant did not
address Plaintiff’s concerns and Plaintiff refused to pay rent until Defendant fixed the problem.
In response, Defendant allegedly unlawfully removed the majority of Plaintiff’s inventory from
the warehouse and sold it at a local auction house.
Defendant has moved to dismiss Plaintiff’s claims for lack of personal jurisdiction.
Plaintiff argues that the Court has specific personal jurisdiction over Defendant because
Defendant purposefully availed himself of the privilege of conducting business in North Carolina
and that Plaintiff’s claims arise out of those business activities.
DISCUSSION
When a court relies on the complaint and affidavits alone, the plaintiff’s burden is to
make a prima facie showing of a sufficient jurisdictional basis to survive the jurisdictional
challenge. In re Celotex Corp, 124 F.3d 619, 628 (4th Cir. 1997). The exercise of personal
jurisdiction must comport with Fourteenth Amendment due process requirements. Christian Sci.
Bd. Of Dirs. Of the First Church of Christ, Scientist v. Nolan, 259 F.3d 209, 215 (4th Cir. 2001).
North Carolina’s long-arm statute applies to nonresident defendants to the extent permitted by
the Fourteenth Amendment Due Process Clause. Therefore, the jurisdictional inquiry becomes

2

whether Defendant has such minimum contacts with the forum state that maintenance of the suit
does not offend traditional notions of fair play and substantial justice. Id.
There are two forms of personal jurisdiction: general and specific. A court exercises
general personal jurisdiction over a defendant when the suit does not arise out of the defendant's
contacts with the forum state. See Helicopteros Nacionales de Columbia, S.A. v. Hall, 466 U.S.
408, 414, n. 9 (1984). A court exercises specific personal jurisdiction over a defendant when the
suit arises out of the defendant’s contacts with the forum state. Id. at 414, n.8. Here, the only
jurisdictional issue is whether the Court has specific personal jurisdiction over Defendant.
The Fourth Circuit has synthesized the due process requirements for asserting specific
personal jurisdiction into a three-part test which concerns, “(1) the extent to which the defendant
purposefully availed itself of the privilege of conducting activities in the forum state; (2) whether
the plaintiff’s claims arise out of those activities; (3) and whether the exercise of personal
jurisdiction would be constitutionally reasonable.” Consulting Eng’rs Corp. v. Geometric Ltd.,
561 F.3d 273, 278 (4th. Cir. 2009). The Court only needs to consider prongs two and three if the
first prong is met. Id.
The first prong of the Consulting test articulates the minimum contacts requirement of
constitutional due process. Id. “The mere unilateral activity of those claiming some relationship
with a nonresident defendant cannot satisfy the requirement of contact with the forum state.”
World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 298 (1980). The aim of the minimum
contacts requirement is that a nonresident defendant’s conduct is such that he should reasonably
anticipate being haled into the courts of the forum state. Id at 297.
Courts have considered various nonexclusive factors to resolve whether a defendant
purposefully availed itself of the privilege of conducting activities in the forum state. Id. These

3

factors include, but are not limited to: (1) whether the defendant maintains offices or agents in
the forum state; (2) whether the defendant owns property in the forum state; (3) whether the
defendant reached into the forum state to solicit or initiate business; (4) whether the defendant
deliberately engaged in significant or long-term business activities in the forum state; (5)
whether the parties contractually agreed that the law of the forum state would govern disputes;
(6) whether the defendant made in-person contact with the resident of the forum in the forum
state regarding the business relationship; (7) the nature, quality, and extent of the parties’
communications about the business being transacted; and (8) whether the performance of
contractual duties was to occur within the forum. Consulting, 561 F.3d at 278.
Plaintiff does not dispute the following assertions by Defendant:
“Defendant does not maintain offices or agents in North Carolina, does not own
property in North Carolina and did not make in-person contact with [Plaintiff] in
North Carolina regarding the lease agreement. In addition, the parties’ lease
agreement does not provide for North Carolina law to govern disputes and does
not require either [Plaintiff] or [Defendant] to perform any duties in North
Carolina. Therefore factors One, Two, Five, Six, and Eight clearly weigh in
[Defendant’s] favor.” [Doc. No. 13 at 6].
Therefore, Plaintiff’s argument that Defendant purposefully availed himself of the privilege of
conducting business activities in North Carolina centers around factors three, four, and seven.
Factor three of the Consulting test involves the initiation or solicitation of the business
relationship by a nonresident defendant. As the record indicates, Nolt initiated and solicited the
business relationship between Plaintiff and Defendant. Nolt suggested that Plaintiff relocate its
inventory near Elkhart, Indiana. Nolt suggested the use of Defendant’s warehouse and made
positive representations concerning its quality and Defendant’s character. It was on the strength
of Nolt’s representations concerning Defendant’s warehouse that Plaintiff agreed, sight unseen,
to lease the warehouse. [Doc. No. 12 at 4]. There has been no satisfactory showing that Nolt

4

acted as an agent of Defendant in this transaction, so his actions cannot be deemed those of
Defendant. Thus, as far as Defendant’s activities are concerned, Plaintiff unilaterally chose to
lease the warehouse. The most Defendant did was negotiate the lease terms after Plaintiff already
agreed to the business prospect. Therefore, Defendant did not reach into North Carolina to
initiate or solicit the business relationship with Plaintiff. Accordingly, Plaintiff’s agreement to
lease Defendant’s warehouse does not establish a contact with North Carolina and factor three
favors Defendant.
Factor four involves the significant or long-term business activity of a nonresident
defendant. The Fourth Circuit has held that “[a] contract with a resident of a forum state does not
automatically constitute sufficient contacts to support the forum’s assertion of specific
jurisdiction, even where the dispute arises from the contract.” Le Bleu Corp. v. Standard Capital
Group, Inc., No. 00-2392, 2001 WL 672066 *2 (4th Cir. June 15, 2001). Rather, the contract’s
prior negotiations and contemplated future consequences, along with the terms of the contract
and the parties’ course of dealing must evidence a substantial connection between the contract
and the forum in order for personal jurisdiction to properly lie. CEM Corp. v. Personal
Chemistry AB, 192 F.Supp.2d 438, 442 (W.D.N.C. 2002) (referencing Burger King v. Rudzewicz,
471 U.S. 462, 479 (1985)).
Regarding the lease negotiations in the case at bar, CEM is instructive. In CEM this court
held that “the fact that the defendant travelled to North Carolina to negotiate the contract and
made several telephone calls and faxes to North Carolina during negotiations does not create
specific jurisdiction in the absence of a contract substantially connected to North Carolina.” Id. at
442. Here, Defendant’s negotiations are even more attenuated than the defendant’s in CEM
because Defendant never travelled to North Carolina for negotiations. Accordingly, Defendant’s

5

lease negotiations do not evidence a substantial connection between the lease and North
Carolina. Therefore, the lease and the negotiations surrounding it do not justify the exercise of
specific personal jurisdiction.
Regarding the lease’s contemplated future consequences, Burger King Corp. v.
Rudzewicz is instructive. 471 U.S. 462 (1985). In Burger King the Supreme Court reasoned that,
in light of the contract’s terms, the franchisee’s breach of the contract caused foreseeable injuries
to the Burger King corporation in Florida such that the franchisee could reasonably anticipate
being haled into court there. Id. at 480. The contract emphasized that all Burger King operations
were conducted and supervised from Florida, that all relevant notices and payments were to be
sent there, and that the agreements were made in and enforced from Florida. Also, the contract
contained a Florida choice of law provision. Id. at 481. In light of these terms, the Court
concluded that the franchisee purposefully availed himself of the benefits and protections of
Florida’s laws by entering into contracts expressly providing that those laws would govern
franchise disputes. Id. at 482. Unlike the contract in Burger King, this lease has no terms
evidencing a substantial connection with North Carolina. This lease does not require either party
to perform duties in North Carolina. Nor is this lease to be enforced from North Carolina. Also,
this lease has no North Carolina choice of law provision. The lease’s future contemplated
consequences do not justify the exercise of specific personal jurisdiction.
Though the lease contract itself does not automatically establish sufficient minimum
contacts to warrant jurisdiction, the size of the contract is relevant in determining whether a
nonresident defendant’s actions toward a plaintiff’s home-state establish personal jurisdiction.
Hanes Co., Inc. v. Galvin Bros., Inc., No. 1:09CV918, 2013 WL 594013, at *10 (M.D.N.C. Feb.
15, 2013). Here, the lease agreement between the parties provided for rent of $600.00 per month

6

and was for a one-year term. This equates to rental payments by Defendant totaling only
$7,200.00 per year. This is a relatively small sum for a commercial lease agreement. Therefore,
the size of the lease agreement does not justify the exercise of specific personal jurisdiction.
Factor four weighs in Defendant’s favor.
Factor seven involves communications between a plaintiff and a nonresident defendant.
Since the communications between Plaintiff and Defendant were lease negotiations, these
communications cannot constitute minimum contacts for the reasons discussed above. Thus,
factor seven weighs in Defendant’s favor.
Plaintiff also relies heavily on the case of English & Smith, 901 F.2d 36 (4th Cir. 1990).
in support of its argument that this Court has specific personal jurisdiction over Defendant. In
English & Smith the Fourth Circuit held that the exercise of specific personal jurisdiction over a
nonresident defendant did not violate due process. English & Smith concerned a dispute over a
shared contingency fee contract between a California attorney (defendant) and a Virginia law
firm (plaintiff). 901 F.2d at 37-38. The defendant hired one of plaintiff’s attorneys to work on a
case. Id. Both the defendant and the plaintiff’s attorney performed their work in their respective
states and neither party travelled to the other state, communicating entirely by phone and letters.
Id. The court reasoned that the defendant purposefully directed his activities toward Virginia by
initiating the relationship with the plaintiff, entering into contracts with the defendant’s attorney
by virtue of action taken in Virginia, and carrying on a continuing relationship with the
defendant’s attorney while the two worked on the case.
However, unlike the contract in English & Smith, the lease contract herein was performed
in Indiana by Plaintiff since Plaintiff’s rent payments were tendered in Indiana, not in North
Carolina. Also, unlike the defendant in English & Smith, the Defendant in this case did not

7

initiate the business relationship with Plaintiff. Rather, the lease contract arose because of the
unilateral activity of Plaintiff. Therefore, English & Smith is easily distinguishable from the case
at bar.
Because all the Fourth Circuit Consulting factors weigh in Defendant’s favor and
Plaintiff has not otherwise established minimum contacts by Defendant with North Carolina, the
Court need not reach prongs two and three of the Consulting test for specific personal
jurisdiction.
IT IS THEREFORE ORDERED that Defendant’s Motion to Dismiss Plaintiff’s
Complaint is hereby GRANTED.
Signed: July 30, 2013

8