Embark, LLC v. 1105 Media, Inc.Embark, LLC v. 1105 Media, Inc.
Case Information
*1 NO. COA13-263
NORTH CAROLINA COURT OF APPEALS Filed: 7 January 2014 EMBARK, LLC and DAVID B. WHEELER,
Plaintiffs, v. Mitchell County No. 12 CVS 49 1105 MEDIA, INC.,
Defendant. Appeal by defendant from order entered 17 October 2012 by Judge C. Philip Ginn in Mitchell County Superior Court. Heard in the Court of Appeals 28 August 2013.
Adams, Hendon, Carson, Crow and Saenger, P.A., by Robert C. Carpenter, for plaintiffs-appellees.
Van Winkle, Buck, Wall, Starnes & Davis, P.A., by Heather Whitaker Goldstein, Larry McDevitt and David M. Wilkerson, for defendant-appellant.
GEER, Judge.
Defendant 1105 Media, Inc. appeals from an order (1) denying
its motion to dismiss for lack of personal jurisdiction as to
plaintiff David B. Wheeler's claims and (2) deferring ruling on
its motion to dismiss as to plaintiff Embark, LLC's claims.
Because the trial court's unchallenged findings of fact support
its conclusion that (1) the exercise of personal jurisdiction
satisfies the requirements of our State's long arm statute,
Facts
Plaintiff Wheeler is the president, founder, and sole employee of plaintiff Embark, an event planning company organized in Illinois on 25 September 2007. Defendant 1105 Media is a Delaware corporation with its principal place of business in California. Neal Vitale is the president and Chief Executive Officer of 1105 Media. David Myers is the Vice President of Event Operations at 1105 Media.
On 29 March 2011, Wheeler, Embark, and 1105 Media entered into a contract as a result of which Embark became a division of 1105 Media and Wheeler became an employee of 1105 Media and the head of "Embark Events, a division of 1105 Media." The contract became effective 1 April 2011 and was terminable by either party after 1 January 2012 with 12 months notice. 1105 Media terminated the contract on 31 August 2011 without providing Wheeler or Embark any reason for the termination and refused to pay Wheeler's salary or other benefits after 31 August 2011.
Wheeler and Embark filed an action for breach of contract against 1105 Media on 9 March 2012 in Mitchell County Superior Court. 1105 Media moved to dismiss for lack of personal jurisdiction on 30 April 2012. On 17 October 2012, the trial court entered an order denying 1105 Media's motion to dismiss as to the claims of Wheeler, but withheld ruling on the motion to dismiss as to the claims of Embark.
In support of its decision, the trial court made the following findings of fact. Wheeler, the president and founder of Embark, was a resident of Mitchell County, North Carolina, and had been since August 2010. 1105 Media was at all relevant times a Delaware corporation with its principal place of business in California.
Prior to entering into a contract with 1105 Media, Wheeler, on multiple occasions, told Mr. Vitale, Mr. Myers, and other 1105 Media employees that he lived in and operated Embark from North Carolina. He also provided 1105 Media with Embark business cards that listed Embark's North Carolina address.
The contract between Wheeler, Embark, and 1105 Media was negotiated via email and telephone communications, and Wheeler wrote many of the emails and placed most of the telephone calls from North Carolina. Although Wheeler invited Mr. Myers and Mr. Vitale to North Carolina on several occasions, no officers or agents of 1105 Media ever came to North Carolina to meet with Wheeler or for any other purpose related to the contract. The contract was signed by the parties in Washington, D.C.
The contract was an employment contract between Wheeler and 1105 Media. The trial court found that it was unclear how the contract affected Embark, but, at Mr. Vitale's suggestion, Embark operated as a division of 1105 Media headed by Wheeler. The name of the division, coined by Mr. Myers, was "Embark Events, a Division of 1105 Media, Inc."
During his employment with 1105 Media, Wheeler lived and worked in Mitchell County, North Carolina, where he performed 75% of his duties for 1105 Media. All of his travel originated from North Carolina, and he did not perform any of his duties for 1105 Media at any of their other offices. He maintained an office and home phone number with a North Carolina area code, paid income and property taxes in North Carolina, and maintained a personal North Carolina checking and savings account. He received health care in North Carolina that was covered by 1105 Media's health insurance plan.
1105 Media paid for the rent and telephone bill for Wheeler's office in Mitchell County, and, at Wheeler's request, shipped his work computer to the North Carolina office. 1105 Media paid a monthly allowance of $450.00 for Wheeler's car, which was titled in North Carolina. 1105 Media directly deposited Wheeler's paycheck into his North Carolina checking account, paid North Carolina payroll taxes, and had an "employer account number" with the North Carolina Employment Security Commission. No one at 1105 Media ever brought up any concerns about Wheeler living and working in North Carolina.
1105 Media marketed Embark Events and Wheeler as part of the 1105 Media brand and operation. It created specific 1105 Media thank you cards for Wheeler that he sent to 1105 Media clients. The cards contained Wheeler's name, the Embark Events logo, and listed the company name as "Embark Events, a division of 1105 Media, Inc." The only address on the card was the North Carolina office address.
Based on its findings, the trial court concluded that North
Carolina had jurisdiction over Wheeler's claims against 1105 Media
pursuant to North Carolina's Long Arm Statute,
The trial court also concluded that it was unclear whether the court had jurisdiction over 1105 Media with respect to Embark's claims. The order, therefore, denied 1105 Media's motion to dismiss as to Wheeler's claims, but withheld ruling as to Embark's claims until the parties completed discovery. 1105 Media appealed the order to this Court. [1]
I
"In order to determine whether North Carolina courts have
personal jurisdiction over a nonresident defendant, a court must
apply a two-step analysis: 'First, the transaction must fall within
the language of the State's "long-arm" statute. Second, the
exercise of jurisdiction must not violate the due process clause
of the fourteenth amendment to the United States Constitution.'"
Wells Fargo Bank, N.A. v. Affiliated FM Ins. Co.
, 193 N.C. App.
35, 39,
"The standard of review to be applied by a trial court in
deciding a motion under Rule 12(b)(2) depends upon the procedural
context confronting the court."
Banc of Am. Secs. LLC v. Evergreen
Int'l Aviation, Inc.
,
The standard of review for this Court is "'whether the
findings of fact by the trial court are supported by competent
evidence in the record[.]'"
Miller v. Szilagyi
, ___ N.C. App.
___, ___,
A. Long Arm Statute
1105 Media first argues that the trial court erred in
concluding that jurisdiction was proper pursuant to North
Carolina's Long Arm Statute,
a. Arises out of a promise, made anywhere to the plaintiff or to some third party for the plaintiff's benefit, by the defendant to perform services within this State or to pay for services to be performed in this State by the plaintiff; or b. Arises out of services actually performed for the plaintiff by the defendant within this State, or services actually performed for the defendant by the plaintiff within this State if such performance within this State was authorized or ratified by the defendant; or
c. Arises out of a promise, made anywhere to the plaintiff or to some third party for the plaintiff's benefit, by the defendant to deliver or receive within this State, or to ship from this State goods, documents of title, or other things of value; . . .
1105 Media argues that the requirements of
However, based on our review of the order, the trial court did make sufficient findings supporting the conclusion that Wheeler's performance was "authorized or ratified." The court found that 1105 Media paid for Wheeler's North Carolina office space, directly deposited Wheeler's paycheck into his North Carolina checking account, paid North Carolina payroll taxes, never brought up any concerns about Wheeler living and working in North Carolina, created specific 1105 Media thank you cards with Wheeler's North Carolina address for him to send to 1105 Media clients, paid the telephone bill for Wheeler's North Carolina office, and shipped a computer to his office. These findings are more than enough to support the conclusion that Wheeler's performance of services in North Carolina for 1105 Media was authorized and ratified by 1105 Media.
In any event, although 1105 Media does not address
The trial court, therefore, properly concluded that jurisdiction existed under North Carolina's long arm statute.
B. Minimum Contacts
Under the Due Process Clause, a court may exercise personal
jurisdiction over a non-resident defendant only if there exists
"sufficient 'minimum contacts' between the nonresident defendant
and our state 'such that the maintenance of the suit does not
offend traditional notions of fair play and substantial justice.'"
Skinner v. Preferred Credit
, 361 N.C. 114, 122, 638 S.E.2d 203,
210 (2006) (quoting
Int'l Shoe Co. v. Washington
, 326 U.S. 310,
316, 90 L. Ed. 95, 102, 66 S. Ct. 154, 158 (1945)). More
specifically, "[i]n each case, there must be some act by which the
defendant purposefully avails himself of the privilege of
conducting activities within the forum state, thus invoking the
benefits and protections of its laws; the unilateral activity
within the forum state of others who claim some relationship with
a non-resident defendant will not suffice."
Tom Togs
, 318 N.C. at
365, 348 S.E.2d at 786. Instead, the "relationship between the
defendant and the forum must be 'such that he should reasonably
anticipate being haled into court there.'"
Id
. (quoting
World–
Wide Volkswagen Corp. v. Woodson
,
"There are two types of personal jurisdiction. General jurisdiction exists when the defendant's contacts with the state are not related to the cause of action but the defendant's activities in the forum are sufficiently 'continuous and systematic.' Specific jurisdiction exists when the cause of action arises from or is related to defendant's contacts with the forum." Skinner , 361 N.C. at 122, 638 S.E.2d at 210 (internal citation omitted). Here, the trial court denied the motion to dismiss as to Wheeler's claims based on specific jurisdiction.
For specific jurisdiction, the focus is on "the relationship
among the defendant, this State, and the cause of action."
Tom
Togs
,
In
Better Bus. Forms, Inc. v. Davis
,
In its due process analysis, this Court noted that the "active
negotiations to purchase a North Carolina business, some of which
were conducted in North Carolina, demonstrate a purposeful attempt
by defendants to avail themselves of the privilege of conducting
business in this State."
Id.
at 500,
We believe that the facts here parallel those in Better Business . The trial court's findings show that 1105 Media voluntarily entered into a contract whereby it created a division of its company that had an office and head of operations in North Carolina. 1105 Media negotiated the contract knowing that Wheeler was a resident of North Carolina and that Embark was operated out of North Carolina. [2] 1105 Media's proposal to make Embark a division of 1105 Media and hire Wheeler to head the division "demonstrate[s] a purposeful attempt by [1105 Media] to avail [itself] of the privilege of conducting business in this State." Id. at 500, 462 S.E.2d at 834.
Additionally, 1105 Media's performance during the course of
the contract further demonstrates that the contract at issue in
this case is materially indistinguishable from the one in
Better
Business
that this Court concluded had a substantial connection
with North Carolina. 1105 Media treated the North Carolina
operation as part of itself: it paid for the North Carolina office
rent and telephone and created 1105 Media thank you cards for
Wheeler to send to 1105 Media clients that identified "Embark
Events, a Division of 1105 Media, Inc." as having a North Carolina
address. As in
Better Business
, "jurisdiction here is based on
the benefits received by defendants from the underlying contract
which has a substantial connection with North Carolina."
Id.
at
501,
Defendant attempts to distinguish Better Business on the bases that (1) Embark was incorporated in Illinois and not North Carolina; (2) no events were produced, performed, or contemplated in North Carolina; and (3) no significant revenue was generated from any operations of Embark Events. None of these purported distinctions is material.
Better Business
focused not on the purchased business' state
of incorporation, but rather on the location of its offices and
where it did business.
Id.
at 500-01,
Finally, although the Court noted in
Better Business
that the
defendants did financially benefit from the Winston-Salem office,
id.
at 501, 462 S.E.2d at 834, the Court did not hold that a
generation of revenues was necessary. The focus was on "the
benefits received by defendants from the underlying contract."
Id.
Here, those benefits were Wheeler's services, 75% of which
were rendered in North Carolina. Accordingly, under
Better
Business
, the trial court properly concluded that 1105 Media had
sufficient minimum contacts with respect to Wheeler's claims.
See
also Brickman v. Codella
,
Moreover, where the cause of action is a breach of contract,
the substantial performance of the contract by the plaintiff in
the forum state with the defendant's knowledge, permission, or
endorsement is a factor weighing in favor of a finding of specific
jurisdiction over the defendant. Here, 1105 Media employed Wheeler
as the head of a division of its company and marketed Wheeler and
Embark as part of the 1105 Media brand and operation. With 1105
Media's knowledge and, therefore, its permission, Wheeler
performed 75% of his duties under the contract from North Carolina.
See Chapman v. Janko, U.S.A., Inc.
, 120 N.C. App. 371, 373, 462
S.E.2d 534, 536 (1995) (finding jurisdiction over non-resident,
non-domesticated corporation in action for breach of contract for
consultation services by resident plaintiff where plaintiff
performed substantial services for corporation in North Carolina
and corporation listed plaintiff as a "'U.S.A. sales rep'" on its
own letterhead, even though employer had no employees residing in
North Carolina, only contacted plaintiff through telephone,
letter, or outside North Carolina, and contacts involved
negotiations only);
Dataflow Cos. v. Hutto
, 114 N.C. App. 209,
213,
However, 1105 Media vigorously argues that Wheeler was simply
a telecommuting employee and that this Court should adopt the
reasoning of other courts that have held that when a telecommuting
employee brings suit against his out-of-state employer in an action
related to the employment relationship, the employer's withholding
of state payroll taxes and payment of unemployment insurance to
the forum state, alone, is not enough to establish purposeful
availment or minimum contacts with that state. In support of this
argument, defendant cites
Slepian v. Guerin
,
In
Slepian
, the Court, in considering a telecommuting
employee's lawsuit, held it did not have personal jurisdiction
over the defendant employer because the defendant's actions toward
the forum state amounted to nothing more than an "accommodation of
[the plaintiff's] choice of residence." 1999 WL 109676, at *2,
In this case, the trial court found that Wheeler did not
simply work from home, but rather worked out of his "1105 Media
office" in Mitchell County, North Carolina -- an office paid for
by 1105 Media and constituting a traditional work site of 1105
Media.
See Wait v. Travelers Indem. Co. of Ill.
,
More importantly, the trial court's findings establish that
1105 Media's actions were not merely an accommodation to Wheeler's
choice of residence, but rather a result of 1105 Media's own
initiative to create an operating division and office in North
Carolina in an ongoing and mutually beneficial business
relationship.
See Sheets v. Integrated Info. Util. Sys., Inc.
,
No. CIV. 98-1328-KI,
Defendant also argues that the trial court erred by failing
to make a finding as to which party initiated contact. While this
is a relevant factor to the minimum contacts analysis, our Supreme
Court has noted that "[n]o single factor controls, but they all
must be weighed in light of fundamental fairness and the
circumstances of the case."
B. F. Goodrich Co. v. Tire King of
Greensboro, Inc.
,
In this case, the fact that Wheeler sent out the first email was not a determinative factor in the minimum contacts analysis. The trial court made sufficient findings of 1105 Media's contacts with the State to support its exercise of jurisdiction. The court was not then required to make findings of fact on issues that would not alter the conclusion. The trial court could reasonably determine that the question of whom initiated the contact was not material in light of the facts of this case, where the parties engaged in a balanced negotiation, the ultimate structure of their business relationship was proposed by 1105 Media, and 1105 Media entered into a contract with the North Carolina plaintiffs knowingly, voluntarily, and for their own economic benefit. We, therefore, hold that the trial court did not err in concluding that 1105 Media had purposeful minimum contacts with North Carolina.
Once a court finds that a defendant has established minimum
contacts with the forum State, it must consider those contacts in
light of (1) the interests of North Carolina and (2) the
convenience of the forum to the parties. We note, however, that
"once the first prong of purposeful minimum contacts is satisfied,
the defendant will bear a heavy burden in escaping the exercise of
jurisdiction based on other factors."
Banc of Am. Secs.
, 169 N.C.
App. at 701,
With respect to North Carolina's interest, "[i]t is generally
conceded that a state has a 'manifest interest' in providing its
residents with a convenient forum for redressing injuries
inflicted by out-of-state actors."
Tom Togs
,
As for the convenience of the parties, litigating in North
Carolina would not be convenient for 1105 Media, but, by the same
token, litigation in another state would not be convenient for
Wheeler. The record does "not indicate that any one State would
be more convenient to all of the parties and witnesses than
another."
Banc of Am. Secs.
,
Finally, with respect to the fairness of this State's
exercising jurisdiction, "[i]t is well settled that a defendant
need not physically enter North Carolina in order for personal
jurisdiction to arise."
Better Bus.
, 120 N.C. App. at 501, 462
S.E.2d at 834. Moreover, 1105 Media has not "pointed to any
disparity between plaintiff[s] and itself which might render the
exercise of personal jurisdiction over it unfair."
Tom Togs
, 318
N.C. at 368,
We, therefore, hold that the contacts in this case rose to the level satisfying the constitutional minimum under the Due Process Clause necessary in order to justify the exercise of personal jurisdiction over 1105 Media. Accordingly, we affirm the trial court's order denying 1105 Media's motion to dismiss Wheeler's claims.
II
Defendant next argues that the trial court erred in limiting
its ruling to Wheeler's claims and withholding ruling on 1105
Media's motion to dismiss with respect to Embark's claims.
Defendant points out that the jurisdictional analysis does not
consider a plaintiff's contacts with North Carolina, but rather
"the relationship among the defendant, this State, and the cause
of action."
Id.
at 366,
While under this reasoning, our holding in this opinion would
result in the conclusion that 1105 Media's motion to dismiss should
have been denied as to both plaintiffs, we do not agree with 1105
Media's analysis. The trial court did not defer ruling as to
jurisdiction over Embark's claims because of any confusion over
Embark's contacts with North Carolina, but rather because it was
unclear about the nature of Embark's cause of action. For specific
jurisdiction, the sole basis for personal jurisdiction in this
case, the focus is on "the relationship among the defendant, this
State,
and the cause of action
."
Id.
(emphasis added). Defendant
has not cited any authority suggesting that it was error for the
trial court to defer ruling when it had insufficient information
regarding the nature of Embark's cause of action.
See also Cambridge Homes of N.C.
, 194 N.C. App. at 412-13, 670 S.E.2d at
295-96 (holding that trial court, in determining minimum contacts,
should consider, among other factors, "'the source and connection
of the cause of action to the contacts'" (quoting
Cooper
, 140 N.C.
App. at 734,
In federal court, deferral of a motion to dismiss for lack of
personal jurisdiction pending discovery is within the discretion
of the trial court.
Combs v. Bakker
,
Because the trial court was unable to determine based on the affidavits and pleadings the precise nature of Embark's cause of action, we cannot conclude that the trial court abused its discretion in deciding that the motion to dismiss as to Embark should be heard based on deposition testimony that more fully fleshes out that cause of action. Consequently, we also affirm the trial court's order to the extent that it defers ruling on the motion to dismiss as to Embark's claims.
Affirmed.
Judges ROBERT C. HUNTER and McCULLOUGH concur.
Notes
[1] Although the order denying 1105 Media's motion to dismiss is
interlocutory, this Court has jurisdiction over the appeal
pursuant to
[2] Defendant argues that the trial court made no findings as to 1105 Media's knowledge that Wheeler resided in and operated Embark from North Carolina. We disagree. The trial court's finding of fact that Wheeler told 1105 Media's officers that he lived in North Carolina and operated Embark from this State is a sufficient finding regarding 1105 Media's knowledge of those facts.
[3] 1105 Media also cites
Waldron v. Atradius Collections, Inc.
,
No. 1:10-cv-551,