231 N.C. App. 538
N.C. Ct. App.2014Background
- Wheeler (North Carolina resident) was president and sole employee of Embark, an Illinois-formed event-planning business; Embark and Wheeler entered an employment/division agreement with 1105 Media (Delaware corp., principal place California) effective April 1, 2011.
- 1105 Media terminated the agreement Aug. 31, 2011 and stopped paying Wheeler; Wheeler and Embark sued for breach of contract in Mitchell County, NC Superior Court.
- Trial court found 1105 Media negotiated with knowledge Wheeler lived and worked in NC, paid for a North Carolina office and telephone, deposited wages into a NC bank, paid NC payroll taxes and other benefits, shipped a work computer to NC, and branded Embark as a division of 1105 Media with a NC address.
- Based on those facts, the trial court denied 1105 Media’s Rule 12(b)(2) motion as to Wheeler for lack of personal jurisdiction but deferred ruling as to Embark pending further discovery about Embark’s cause of action.
- 1105 Media appealed the denial re: Wheeler and the deferral re: Embark; the Court of Appeals reviewed whether the long-arm statute and due process minimum-contacts standards were satisfied.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether NC long-arm statute N.C. Gen. Stat. § 1-75.4(5) applies to Wheeler’s claims | Wheeler: 1105 Media promised to pay for services performed in NC and sent things of value (paychecks, computer) to NC, bringing claims within § 1-75.4(5)(a),(b),(c) | 1105: trial court made no finding that 1105 Media authorized or ratified Wheeler’s performance in NC, so § 1-75.4(5)(b) not satisfied | Court: Findings (office rent, payroll, taxes, branded materials, shipped computer) support that 1105 Media authorized/ratified services and satisfied subsections (a),(b),(c); long-arm statute applies |
| Whether exercising personal jurisdiction satisfies Due Process (minimum contacts) for Wheeler | Wheeler: 1105 Media purposefully availed itself of NC by creating a division headed by Wheeler, marketing Embark as its NC division, and receiving benefits of services performed largely in NC | 1105: contacts amount to mere accommodation of a telecommuting employee; payroll taxes and unemployment filings alone insufficient for purposeful availment | Court: Contacts (contract knowingly entered with NC resident, NC office paid by employer, 75% of duties performed in NC, branded NC operation) show purposeful availment and specific jurisdiction; due process satisfied |
| Whether trial court abused discretion by deferring ruling on Embark’s claims | Plaintiffs: Plaintiffs argued facts needed to resolve jurisdiction for Embark were not yet developed | 1105: jurisdictional analysis for Wheeler should apply equally to Embark; deferral was improper | Court: No abuse of discretion — trial court reasonably deferred on Embark because the nature/source of Embark’s cause of action was unclear and discovery was needed |
Key Cases Cited
- Tom Togs, Inc. v. Ben Elias Indus. Corp., 318 N.C. 361 (1986) (two-step long-arm and due-process personal jurisdiction framework)
- Skinner v. Preferred Credit, 361 N.C. 114 (2007) (minimum contacts and fair play/substantial justice standard)
- Better Bus. Forms, Inc. v. Davis, 120 N.C. App. 498 (1995) (specific jurisdiction based on contract creating substantial connection with forum)
- Banc of Am. Secs. LLC v. Evergreen Int'l Aviation, Inc., 169 N.C. App. 690 (2005) (procedure for resolving 12(b)(2) challenges and weighing affidavits/depositions)
- Int'l Shoe Co. v. Washington, 326 U.S. 310 (1945) (foundation of minimum contacts test)
- Wells Fargo Bank, N.A. v. Affiliated FM Ins. Co., 193 N.C. App. 35 (2008) (restating long-arm then due-process two-step test)