DAVID C. KEESLER, Magistrate Judge.
Plaintiff Axxon International, LLC ("Plaintiff" or "Axxon"), initiated this action with the filing of its Complaint (Document No. 1) against Defendant GC Equipment, LLC, doing business as Globecore GmbH, on July 20, 2017. GC Equipment, LLC ("GC Equipment" or "Defendant") originally argued for dismissal based on insufficient process and insufficient service of process pursuant to Fed.R.Civ.P 12(b)(4) and 12(b)(5) in a "Motion To Dismiss" filed on September 5, 2017. (Document No. 12). GC Equipment later withdrew its original motion to dismiss on September 20, 2017. (Document No. 20).
On November 20, 2017, GC Equipment filed a "Motion to Dismiss, Answer, And Affirmative Defenses." (Document No. 21). GC Equipment's Answer asserted for the first time that there is a lack of personal jurisdiction. (Document No. 21, p. 1). The Answer also asserted that GC Equipment should be dismissed pursuant to Fed.R.Civ.P. 12(b)(6). (Document No. 21, p. 2).
The parties consented to Magistrate Judge jurisdiction on December 8, 2017, and this case was reassigned to the undersigned. (Document Nos. 22 and 23). On January 31, 2018, the Court issued the "Pretrial Order And Case Management Plan" (Document No. 26). The " . . . Case Management Plan" includes the following deadlines: discovery — September 24, 2018; mediation — October 15, 2018; and dispositive motions — October 22, 2018.
Plaintiff filed an "Amended Complaint" on March 20, 2018, naming both GC Equipment and Globecore GmbH ("Globecore") as Defendants. (Document No. 28).
The Amended Complaint states that Plaintiff is a limited liability company, organized and existing under the laws of the State of North Carolina, with its principal place of business in Rock Hill, South Carolina. (Document No. 28, p. 1). Plaintiff's members are Randy Lenz ("Lenz"), Art Ward ("Ward"), and Equity Investment Partners, LLC ("EIP").
The Amended Complaint describes GC Equipment as "a limited liability company, organized and existing under the laws of the State of California, with its principal place of business in Los Angeles, California." (Document 28, p. 2). GC Equipment's members are Dylan Baum ("Baum") and Richard Messina ("Messina"), both citizens of California.
Defendant Globecore "is a foreign corporation organized and existing under the laws of Germany, with its principal place of business in Oldenburg Eversten, Germany."
Plaintiff entered into a contract (the "USACE Contract") with the U.S. Army Corp. of Engineers (the "USACE") on September 30, 2016, that was later modified on October 17, 2017.
Plaintiff contracted with Globecore through a "Purchase Order" in November 2016, to provide an oil filtration system in fulfillment of Plaintiff's USACE contract. (Document No. 28, p. 4). Baum, of GC Equipment, executed the "Purchase Order" agreement (the "Globecore Contract") as Globecore's authorized agent on November 9, 2016.
According to the Complaint, this Court has in personam jurisdiction over GC Equipment and Globecore because of their "substantial and continuous contacts with the State of North Carolina, including entering into a subcontractor agreement with North Carolina." (Document No. 28, p. 2). Additionally, Plaintiff asserts that the Globecore Contract "has a mandatory venue provision, which requires that venue for any dispute shall be in North Carolina."
The Amended Complaint asserts claims for: (1) breach of contract against Globecore; and (2) intentional interference with contract against both GC Equipment and Globecore. (Document No. 28, pp. 7-10). Plaintiff contends that GC Equipment and Globecore "knowingly and willfully interfered with Axxon's contractual relationship with USACE." (Document No. 28, p.9).
The "Amended Complaint" notes that it was filed with opposing counsel's written consent. (Document No. 28, p. 1, n. 1). Moreover, on April 3, 2018, "Defendant GC Equipment LLC's Written Consent To Amend Complaint" was filed with the Court confirming that GC Equipment consented to allowing Plaintiff to amend its Complaint, naming GC Equipment as a Defendant, on March 20, 2018. (Document No. 29). Neither the "Amended Complaint," nor "Defendant GC Equipment LLC's Written Consent To Amend Complaint" suggest that GC Equipment disputed the Court's jurisdiction in this matter. (Document Nos. 28 and 29). However, "Defendant GC Equipment LLC's Motion To Dismiss, Answer, And Affirmative Defenses In Response To Plaintiff's Amended Complaint" (Document No. 30) was also filed on April 3, 2018, and in that pleading again included motions to dismiss pursuant to Fed.R.Civ.P. 12 (b)(2) and 12(b)(6).
Now pending before the Court is "Defendant GC Equipment LLC's Motion to Dismiss for Lack of Personal Jurisdiction" (Document No. 32) and "Brief in Support . . ." (Document No. 33), filed April 17, 2018. GC Equipment seeks dismissal of this action pursuant to Fed.R.Civ.P. 12(b)(2), for lack of personal jurisdiction. (Document No. 32). GC Equipment contends that it is not subject to personal jurisdiction in North Carolina because it lacks the requisite contacts with the forum state. (Document No. 33, p. 7). "Plaintiff's Brief in Opposition to Defendant's Motion to Dismiss" was filed May 1, 2018; and "Defendant GC Equipment LLC's Reply Brief in Support of . . ." was filed May 8, 2018.
The pending " . . . Motion to Dismiss for Lack of Personal Jurisdiction" is now ripe for review and disposition.
A party invoking federal court jurisdiction has the burden of establishing that personal jurisdiction exists over the defendant.
There are two varieties of personal jurisdiction, general and specific. General jurisdiction requires "substantial" or "continuous and systematic" contacts or activities in the forum state and is not at issue in the instant case. Specific jurisdiction exists when a court exercises personal jurisdiction over a defendant in a suit arising out of or related to the defendant's contacts with the forum.
Questions of jurisdiction are answered by a two-step analysis: (1) the court must determine whether the North Carolina long-arm statute confers personal jurisdiction; and (2) the court must determine whether the exercise of that statutory power will violate the due process clause of the U.S. Constitution.
Due process precludes a court from asserting jurisdiction over a defendant unless the defendant has certain minimum contacts with the forum state. The Fourth Circuit has "synthesized the Due Process Clause for asserting specific jurisdiction into a three-part test . . . `(1) the extent to which the defendant purposefully availed itself of the privilege of conducting activities in the State; (2) whether the plaintiff's claims arise out of those activities directed at the State; and (3) whether the exercise of personal jurisdiction would be constitutionally reasonable.'"
In seeking dismissal of this action, GC Equipment asserts three main arguments: (1) it had insufficient contacts with North Carolina to support jurisdiction; (2) the forum selection clause in the Globecore Contract does not bind GC; and (3) its personal jurisdiction defense had been properly preserved — and not waived. (Document No. 32, p. 2). GC Equipment concludes, based on its contacts with North Carolina, or lack thereof, that personal jurisdiction does not exist. (Document No. 32). GC Equipment appears to have abandoned its initial argument that this matter be dismissed pursuant to Fed.R.Civ.P. 12(b)(6).
GC Equipment first argues that it did not engage in substantial activities in North Carolina and that there is no documentary support showing otherwise. (Document No. 33, p. 8). GC Equipment contends that Plaintiff has failed to show, "that any events giving rise to this Claim for Relief occurred in the State of North Carolina." (Document No. 33 p. 2) (citing Document No. 28, pp. 8-10). GC Equipment asserts that Plaintiff does not identify a business office in North Carolina, and that the USACE Contract and the deposit check both bore the address of Plaintiff's office in South Carolina. (Document No. 33, pp. 8-9). Furthermore, GC Equipment maintains that "the relevant inquiry lies in the activities undertaken by GC Equipment by which it purposely availed itself of the privilege of conducting business in the State of North Carolina," and that, "the contacts in question must be contacts that the `defendant himself creates with the forum state.'" (Document No. 33, p. 9) (quoting
In opposition to the motion, Plaintiff maintains that specific personal jurisdiction over GC Equipment is constitutionally reasonable due to GC Equipment's contacts with Plaintiff. (Document No. 34, p. 14). Plaintiff explains that it is not the number of contacts a defendant has with a forum but the "quality and nature" of the contacts which guide the specific jurisdiction determination.
First, Plaintiff argues that its tortious interference with contract claim against GC Equipment "establishes the necessary elements and provides an additional basis for jurisdiction over GC Equipment in North Carolina." (Document No. 34, pp. 14-15). Plaintiff further states that "Axxon is a North Carolina company" and that "the contract is under North Carolina law and venue is mandatory in North Carolina."
Next, Plaintiff maintains that the claims arise directly from GC Equipment's contacts with North Carolina. (Document No. 34, p. 16). Plaintiff explains that it "is a North Carolina Limited Liability Company and is organized and exists under the laws of the state of North Carolina." (citing Document No. 34-6, p. 2). Plaintiff has an office located in Charlotte, North Carolina and asserts that "[a]ll major business dealings, legal issues, and issues pertaining to the contract at issue in this case were conducted by Lenz out of the Charlotte office."
Finally, Plaintiff contends that this Court's exercise of personal jurisdiction over GC Equipment is constitutionally reasonable. (Document No. 34, p. 17). This third factor, considers whether litigation in the forum state would be too burdensome as to place the defendant at a "severe disadvantage in comparison to his opponent."
As to the first factor, Plaintiff explains that the burden on GC Equipment would be minimal since "GC Equipment has already engaged North Carolina counsel to represent its interests," and "this Court and the Fourth Circuit have noted, a defendant's hiring of local counsel weighs in favor of exercising jurisdiction." (Document No. 34, pp. 17-18) (citing
In reply, GC Equipment first asserts that Plaintiff failed to show that GC Equipment created substantial contacts with the state of North Carolina. (Document No. 35, p. 3) (citing
Next, GC Equipment argues that Plaintiff does not demonstrate that any of GC Equipment's alleged wrongful acts were directed at the state of North Carolina.
GC Equipment maintains that Plaintiff "fails to satisfy the third requirement of the
The Globecore Contract signed by Defendant GC Equipment's member and representative, Dylan Baum, acting as an agent for Defendant Globecore states:
(Document No. 28-3, p. 2) (emphasis added).
GC Equipment asserts that it is not subject to the forum selection clause because Plaintiff contracted with Globecore and not GC Equipment, as is acknowledged in the Amended Complaint. (Document No. 33, p. 10) (citing Document No. 28, p. 4). GC Equipment contends that it "acted merely as Globecore's agent in signing the contract for Globecore."
In addition, GC Equipment maintains that Plaintiff's claim of intentional interference did not "grow out of" the Globecore Contract; rather, Plaintiff's claim arises from GC Equipment's alleged interference with Plaintiff's USACE Contract. (Document No. 33, p. 12). Moreover, Plaintiff has not alleged that GC Equipment is the alter ego of Globecore.
Plaintiff responds by asserting that the forum selection clause in the Globecore Contract is binding on GC Equipment. (Document No. 34, p. 8). Plaintiff notes the following holding from the Eastern District of North Carolina:
Plaintiff contends that "[as] an agent of Globecore, and the entity that entered into the Globecore Contract, GC Equipment is bound by the forum selection clause." (Document No. 34, p. 12-13). Additionally, Plaintiff argues that the claims against both Defendants are interrelated and that "GC Equipment's tortious interference with the contractual relationship between Axxon and the USACE violates the clear provisions of the Globecore Contract in which Globecore and its agent, GC Equipment, agreed they would `not interact with any personnel representing the Federal Government regarding this contract."
In reply, GC Equipment relies on
GC Equipment next asserts that it preserved its personal jurisdiction defense by raising the defense as a motion to dismiss in its Answer to Plaintiff's original Complaint. (Document No. 33, p. 13) (citing Document No. 21). GC Equipment explains that it also raised the personal jurisdiction defense in response to Plaintiff's Amended Complaint, which was filed on April 3, 2018.
GC Equipment contends that "it did not file a separate motion to dismiss and supporting brief due to Axxon's allegation of a direct contract between Axxon and GC Equipment containing a forum selection clause." (Document No. 33, p. 14). However, in the Amended Complaint, GC Equipment asserts that Plaintiff admits that "Axxon contracted with Globecore; not GC Equipment."
GC Equipment further asserts it "has not been dilatory in seeking a ruling from the Court on its preserved Motion to Dismiss for Lack of Personal Jurisdiction."
In opposition to the instant motion, Plaintiff maintains that GC Equipment has waived its right to assert the defense of lack of personal jurisdiction due to its untimely response and its engagement in discovery. (Document No. 34, p. 19). Plaintiff argues that pursuant to Local Rule 7.1(c)(1), GC Equipment had to file a separate motion and supporting brief.
(Document No. 34, p. 20) (quoting
Plaintiff argues that GC Equipment, "raised the exact same defense to personal jurisdiction that it initially raised in its Answer to the Complaint filed on November 20, 2017." (Document No. 34, p. 20). Additionally, Plaintiff claims that GC Equipment failed to pursue the defense in a timely manner.
Finally, Plaintiff contends that GC Equipment's excuse as to why it did not file its motion to dismiss until after Plaintiff filed its Amended Complaint is irrelevant.
In reply, GC Equipment first explains that Plaintiff's error in naming GC Equipment instead of Globecore as the contracting party was the cause of GC Equipment's delay in filing a proper motion to dismiss. (Document No. 35, p. 12). Furthermore, GC Equipment timely sought a decision on its preserved motion to dismiss when "Axxon corrected its erroneous pleadings and filed the Amended Complaint." (Document No. 35, p. 12). GC Equipment asserts that Plaintiff is attempting to benefit from the delay that was created by Plaintiff's initial erroneous pleading. (Document No. 35, p. 13).
GC Equipment next contends that the cases Plaintiff relies on are distinguishable on their facts. (Document No. 35, p. 14);
In response to the motion to dismiss, Plaintiff Axxon concludes that if this Court determines that it does not have personal jurisdiction over Defendant GC Equipment, then this matter should be transferred to the District of South Carolina or the Central District of California. (Document No. 34, p. 23) (citing
GC Equipment opposes transfer by noting Plaintiff's argument that the only proper forum, at least with respect to the claims against Globecore, is North Carolina, based on the "mandatory forum selection clause" in the Globecore Contract. (Document No. 35, p.16). GC Equipment concludes that the entire case cannot be transferred, and so, GC Equipment should be dismissed.
The undersigned finds that Defendant GC Equipment's arguments for dismissal present a close call. However, it appears that Plaintiff has sufficiently satisfied its burden of showing jurisdiction here is appropriate. Construing "all relevant pleading allegations in the light most favorable to the plaintiff, assum[ing] credibility, and draw[ing] the most favorable inferences for the existence of jurisdiction" the undersigned will deny GC Equipment's motion to dismiss.
Notably, the undersigned finds that the forum selection clause in the Globecore Contract requires this action to be litigated in North Carolina, at least as to Defendant Globecore.
Based largely on the undisputed fact that Baum and GC Equipment executed that contract on behalf of Globecore, and that the conduct and claims in this lawsuit are so closely related to that document, the undersigned is reluctant to dismiss GC Equipment. Baum and GC Equipment's involvement with the Globecore Contract appears likely to be relevant to Plaintiff's claims against GC Equipment for interference with the USACE Contract. The undersigned is not convinced that GC Equipment's argument that an agent is not liable for a principal's breach of contract is applicable here. The issue here is not whether GC Equipment is liable for Globecore's alleged breach, but whether this Court has jurisdiction over GC Equipment regarding the claim that it intentionally interfered with Plaintiff Axxon's "USACE Contract."
In addition, although the instant case appears to be distinguishable from other cases that found a waiver of the personal jurisdiction defense, the undersigned finds it difficult to reconcile how GC Equipment could consent to Magistrate Judge jurisdiction, file a Rule 26 Report, and engage in discovery without objection, all the while believing that this Court lacked personal jurisdiction.
At least at this stage of the litigation, the undersigned finds that the interests of judicial economy and efficient case management are best served if this action continues before this Court. The Court may consider renewed arguments regarding jurisdiction and/or venue at a later date, following further development of the record and Defendant Globecore's appearance in this matter.