Lead Opinion
Tejal Vyas, LLC and Dr. P.K. Vyas (“Dr. Vyas”) (collectively, “plaintiffs”) appeal the trial court’s order granting the motions to dismiss for lack of personal jurisdiction filed by Carriage Park Limited Partnership (“Carriage Park”), Vilas Development Corp., Ganesan Visvabharathy (“Visvabharathy”), and
I. Background
In 1994, Visvabharathy made a presentation concerning financial investments at a conference for physicians practicing in the southeast region of the United States. Dr. Vyas attended this conference held in Georgia. During the presentation, Visvabharathy discussed real estate investments, such as Carriage Park, and informed the conference attendees of the opportunity to invest in Carriage Park through Vilas Development Corp., the general partner of Carriage Park. Visvabharathy provided attendees with contact information for Vilas Development Corp.
After the presentation, Dr. Vyas approached Visvabharathy to further discuss investment opportunities. Visvabharathy “described the Carriage Park investment to him in general terms.” Plaintiffs contacted defendants in Illinois seeking to invest in Carriage Park and invested $100,000.00. The investment was facilitated by plaintiffs’ attorneys, both of whom are licensed North Carolina attorneys. A Subscription Agreement was signed by plaintiffs on 18 July 1994 and sent to defendants in Illinois. Plaintiffs and their attorneys communicated with Visvabharathy via telephone and by mail through 2000.
On 6 August 2002, plaintiffs instituted this action against defendants alleging breach of fiduciary duty, breach of contract, and misrepresentation. On 11 October 2002 and 1 February 2003, defendants filed motions to dismiss plaintiffs’ complaint pursuant to N.C.R. Civ. P. 12(b)(2) for lack of personal jurisdiction over defendants. Following a hearing, the trial court issued an order on 9 May 2003 containing the following findings of fact:
1. The plaintiff, Tejal Vyas, is a North Carolina Limited Liability Company and the plaintiff, Dr. P.K. Vyas, is an individual citizen and resident of Wake County, North Carolina.
2. Carriage Park Limited Partnership is an Illinois limited partnership and Vilas Development Corporation is an Illinois corporation. Defendаnt Ganesan R. Visvabharathy is a citizen and resident of Illinois.
3. Defendants made an investment presentation in the State of Georgia to a group of physicians which included the plaintiff [s].
4. Plaintiffs contacted defendants in Illinois to invest in the Carriage Park Investment property.
5. At no time did any of the defendants solicit business in North Carolina.
6. All of the investment property, the documentation regarding the investments, the investor’s accountants, and the attorneys regarding the property are located in Illinois.
7. The only parties located in North Carolina are the plaintiffs and the plaintiffs’ attorney.
8. There are not sufficient contacts in North Carolina by the defendants to allow the North Carolina courts to assume jurisdiction.
II. Issue
The sole issue on appeal is whether the trial court erred in granting defendants’ motions to dismiss for lack of personal jurisdiction.
III. Standard of Review
“The standard of review of an order determining jurisdiction is whether the findings of fact by the trial court are supported by competent evidence in the record; if so, this Court must affirm the order of the trial court.” Better Business Forms, Inc. v. Davis,
A court must engage in a two-part inquiry to determine whether personal jurisdiction over a non-resident defendant is properly asserted. Better Business Forms, Inc.,
IV. North Carolina’s Long-Arm Statute
Personal jurisdiction is proper here under two provisions of North Carolina’s long-arm statute:
(4) Local Injury; Foreign Act — In any action claiming injury to person or property within this State arising out of an act or omission outside this State by the defendant, provided in addition that at or about the time of the injury:
(a) Solicitation or services activities were carried on within the State by or on behalf of the defendant [and] ....
(5) Local Services, Goods or Contracts — In аny action which:
(d) Relates to goods, documents of title, or other things of value shipped from this State by the plaintiff to the defendant on his order or direction.
N.C. Gen. Stat. § l-75.4(4)(a) and (5)(d) (2003).
The memorandum sent to plaintiffs’ attorney in North Carolina to consider defendants’ investment proposal constitutes a solicitation under N.C. Gen. Stat. § 1-75.4(4)(a). See Godwin v. Walls,
V. Due Process
Since at least one requirement under North Carolina’s long-arm statute allows plaintiffs to assert jurisdiction over defendants, the inquiry becomes whether plaintiffs’ assertion of jurisdiction over defendants complies with due process. “When personal jurisdiction is alleged to exist pursuant to the long-arm statute, the question of statutory authority collapses into one inquiry — whether defendant has the minimum contacts with North Carolina necessary to meet the requirements of due process.” Hiwassee Stables, Inc. v. Cunningham,
The Due Process- Clause of the Fourteenth Amendment limits the power of a state to exercise in personam jurisdiction over a nonresident defendant. Hiwassee Stables, Inc.,
To generate minimum contacts, the defendant must have purposefully availed itself of the privilege of conducting activities within the forum state and invoked the benefits and protections of the laws of North Carolina. International Shoe Co.,
Here, we hold defendants did not engage in sufficient minimum contacts in North Carolina to justify the exercise of personal jurisdiction without violating defendants’ due process rights.
Plaintiffs assign error to only two of the trial court’s findings of facts: “5) At no time did any of the defendants solicit business in North Carolina;” and “8) There are not sufficient minimum contacts in North Carolina by defendants to allow the North Carolina courts to assume jurisdiction.” Finding of fact No. 8 is the ultimate issue on appeal and will be addressed after weighing all of the evidence. See Hiwassee Stables, Inc.,
To determine whether the remaining finding of fact is supported by competent evidence, and thus conclusive on appeal, we review five factors from precedents to determine whether minimum contacts existed. Eluhu v. Rosenhaus,
The factors are: “(1) the quantity of the contacts, (2) nature and quality of the contacts, (3) the source and connection of the cause of action to the contacts, (4) the interest of the forum state, and (5) convenience of the parties.” Cherry Bekaert,
This Court must also weigh and consider the interests of and fairness to the parties involved in the litigation. Tutterrow,
A.Quantity of Contacts
The evidence shows that plaintiffs and defendants independently traveled to Georgia to give and attend a presentation at a physicians’ convention. After returning to North Carolina, plaintiffs initiated contact with defendants in Illinois to inquire about the investment opportunities discussed in Georgia and requested defendants to mail investment materials to North Carolina. See CFA Medical, Inc. v. Burkhalter,
Defendants have never been physically present in North Carolina. Any contact by defendants with plaintiffs in North Carolina resulted from an initiation and request by plaintiffs. Defendants’ contacts were to mail the brochure and place a telephone call to plaintiffs’ attorney in North Carolina, at plaintiffs’ request.
C.Source and Connection of the Cause of the Action to the Contacts
Plaintiffs’ cause of action arises out of partnerships, real property, services, and activities located solely in Illinois. Neither defendants nor any of the investment property is located in North Carolina.
D. Interest of the Forum State
Plaintiffs expressly agreed that the Subscription Agreement was to be governed by the laws of Illinois. While choice of law clauses are not determinаtive of personal jurisdiction, they express the intention of the parties and are a factor in determining whether minimum contacts exist and due process was met. Corbin Russwin, Inc. v. Alexander’s Hdwe., Inc.,
E. Convenience of the Parties
Defendants all reside in or are entities based in Illinois. None have been physically present in North Carolina. Defending against a suit in North Carolina would be inconvenient.
After reviewing all five factors, competent evidence supports the trial court’s conclusion that defendants did not engage in requisite minimum contacts to satisfy the Due Process Clause. U.S. Const, amend. V and amend. XIV, § 1. The trial court properly granted defendants’ motions to dismiss. Plaintiffs’ assignments of error are overruled.
The dissenting opinion argues that defendants’ activities satisfy the statutory and constitutional requirements for personal jurisdiction and cites Carson v. Brodin,
In Carson, a North Carolina couple sued a Virginia resident they hired to construct a home in Virginia. This Court upheld the plaintiffs’ assertion of personal jurisdiction over the defendant based on two factors which are distinguishable from the facts here.
First, the defendant in Carson made two, possibly three, trips to North Carolina. Carson,
Unlike Carson, no evidence shows defendants ever visited North Carolina during the events at issue or for any other business transaction, a fact acknowledged by the dissenting opinion. The only personal contact between the parties occurred in Georgia following defendants’ investment presentation. After returning to North Carolina, plaintiffs telephoned defendants and requested investment literature. The remaining relationship existed over the telephone and through the mail with plaintiffs in North Carolina and defendants in Illinois. The lack of any prior visits to or physical presence in North Carolina by defendants distinguishes this case from Carson. Also, the contract in Carson involved a consumer contract between homeowners and a builder. Here, the parties are sophisticated investors in a speculative commercial venture and represented by counsel.
The second distinction the dissenting opinion shows to justify upholding personal jurisdiction over defendants are three particular items mailed between the two parties: (1) a memo from defendants to plaintiffs soliciting investments for a real estate venture in Illinois; (2) a Subscription Agreement executed
Our Supreme Court ruled that a “substantial connection” to the state is required in addition to a single contract to uphold personal jurisdiction. Tom Togs, Inc.,
This Court has ruled that “the mere act of entering into a contract with a forum resident . . . will not provide the necessary minimum contacts with the forum state, especially when all the elements of the defendants’ performanсe . . . are to take place outside the forum.” Phoenix America Corp. v. Brissey,
The contract’s purpose was to invest in real estate ventures located in Illinois. The agreement required defendants to perform their obligations in Illinois, governed by Illinois law. Defendants’ only connection to North Carolina was plaintiffs’ limited liability company registered and located in North Carolina that contracted with defendants to become an investor. Our Courts require more than a single contact with an out of state defendant to satisfy thе due process requirements for personal jurisdiction. Phoenix America Corp.,
The dissenting opinion also cites New Bern Pool & Supply Co. where personal jurisdiction was upheld despite the defendant never having physically visited North Carolina.
[i]n terms of convenience to the parties . . . repairs to the aircraft in question were performed in North Carolina[,] . . . witnesses to [the] repairs . . . are residents of North Carolina, and FAA personnel who were potential witnesses as a result of having inspected the plane in North Carolina, were also residents of North Carolina.
Id. at 625,
The key distinctions between the case at bar and New Bern Pool & Supply Co. are how the parties became acquainted and where the post-contractual activities occurred. Defendants here never visited North Carolina. They did not advertise directly to the State or its citizens to solicit or maintain commercial interests within North Carolina. The sales presentation occurred in Georgia. The defendant in New Bern Pool & Supply Co. placed an advertisement in a
The dissenting opinion also cites New Bern Pool & Supply Co. and its discussion on the convenience of the parties that where the post-contractual activities occurred strengthens a finding of personаl jurisdiction. In New Bern Pool & Supply Co., witnesses to the repairs of the faulty aircraft, the FAA inspectors, and the repairs themselves were located and occurred in North Carolina.
VI. Conclusion
Plaintiffs failed to show the trial court erred in granting defendants’ motions to dismiss for lack of personal jurisdiction. The order of the trial court is affirmed.
Affirmed.
Dissenting Opinion
dissenting.
I respectfully dissent from the majority’s opinion which affirms summary judgment in favor of defendants.
The majority has established that defendants’ activity satisfies the statutory requirements of the jurisdictional analysis. Thus, I focus this dissent on the question of whether defendants have the minimum contaсts with North Carolina necessary to meet the requirements of due process. I find the cases of Carson v. Brodin,
In Carson, the plaintiffs were North Carolina residents who decided to build a vacation home in Virginia. They entered into a contract with the defendant, a Virginia resident, to construct the home. The plaintiffs initiated contact with the defendant in Virginia. The plaintiffs signed the initial construction contract in Virginia. The defendant mailed a subsequent contract to the plaintiffs in North Carolina, which they signed and mailed back to the defendant in Virginia. The defendant visited the plaintiffs in North Carolina two or three times to discuss the construction project, he telephoned them in North Carolina on numerous occasions, and sent numerous mailings to them in North Carolina. The plaintiffs sued the defendant in North Carolina for breach of contract, breach of warranty, and negligence, all relating to the construction of their home in Virginia. The defendant challenged North Carolina’s jurisdiction over the matter, arguing that his contacts in North Carolina werе not sufficient to give the state personal jurisdiction over him.
On appellate review, this Court held that “[b]y negotiating within the state and entering into a contract with North Carolina residents, defendant purposefully availed himself of the privilege of conducting activities within North Carolina with the benefits and protection of its laws.” Carson,
In the case sub judice, the evidence presented tends to show that defendants corresponded with plaintiffs or plaintiffs’ attorneys in North Carolina via mail and telephone on numerous occasions. The mail correspondence included the following: a memorandum mailed by defendants to North Carolina soliciting investments in the Carriage Park project; a subscription document executed by plaintiffs in North Carolina and mailed to defendants in Illinois; and a check issued by plaintiffs in North Carolina, drawn on a North Carolina bank, and mailed to defendants in Illinois. I submit that these mailings and telephone calls are evidence of three factors in a minimum contacts analysis. See New Bern Pool & Supply Co.,
The minimum contacts analysis is satisfied as follows: The mailings and telephone calls demonstrate the “quantity of the contacts” by demonstrating the volume of communication between plaintiffs and defendants at the time of the transaction. The communications demonstrate the “nature and quality of the contacts” as evidence of a high-level transaction involving substantial documentation and a sum of $100,000. Finally, the communications demonstrate the “source аnd connection of the cause of action to the contacts” as evidence that the transaction that is the subject of these communications is the transaction that is in dispute in this case.
The fourth factor, “the interest of the forum state,” is best described by the following language from New Bern Pool & Supply Co.: “The interest of the State of North Carolina in providing consumer protection for its citizens and corporate entities and a forum for the adjudication of controversies involving them is substantial.”
With regard to the fifth factor, “convenience of the parties,” we note that “[t]here is almost always some hardship to the party required to litigate away from home.” Byham v. House Corp.,
I concede that the case sub judice is distinguished from Carson by the fact that defendant did not travel to North Carolina as the defendant in Carson did. However, I do not consider this to be a determinative factor in awarding personal jurisdiction. In New Bern Pool & Supply Co., this Court asserted personal jurisdiction over a defendant who did not travel to North Carolina in connection with the transaction at issue.
In New Bern Pool & Supply Co., the plaintiff was a resident of Craven County, North Carolina, who responded to an advertisement for a Beechcraft Baron airplane that the defendant, a New Jersey resident, placed in an aviation trade magazine. After their initial telephone conversation, the defendant mailed to the plaintiff photographs and specifications for the airplane. The plaintiff mailed to the defendant a check for $5,000 in exchange for the defendant’s promise not to sell the airplane until the plaintiff had the opportunity to travel to New York to examine and inspect the airplane. The parties also negotiated the terms of a potential deal before the plaintiff went to New York.
The plaintiff filed a complaint against the defendant, which the defendant sought to have dismissed on summary judgment for lack of personal and subject matter jurisdiction. The trial court denied the defendant’s motion for summary judgment, and this Court found no error in the trial court’s judgment. This Court held as follows:
Defendant’s intentional acts in this case are such that defendant can be said to have purposely availed himself of the privilege of doing business in the State of North Carolina to the extent that defendant should have reasonably anticipated being haled into court in this State. We conclude that defendant had sufficient minimum contacts with the State of North Carolina so as to allow the trial court to exert personal jurisdiction over him and that the maintenance of this action in North Carolina does not offend traditional notions of fair play and substantial justice.
I am satisfied, pursuant to Carson and New Bern Pool & Supply Co., that defendants’ actions establish minimum contacts in North Carolina to establish jurisdiction without offending our “traditional conception of fair play and substantial justice.” International Shoe Co. v. Washington,
