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Pennsylvania Manufacturers Indemnity Co. v. Air Power, Inc.

United States District Court, M.D. North Carolina

April 16, 2014

PENNSYLVANIA MANUFACTURERS INDEMNITY COMPANY, Plaintiff,
v.
AIR POWER, INC., GRACO, INC., and STEVEN RAY FREEMAN, Defendants.

MEMORANDUM OPINION AND ORDER

JAMES A. BEATY, District Judge.

This matter is before the Court on a Motion to Dismiss or Transfer [Doc. #6] filed by Defendant Steven Ray Freeman ("Defendant Freeman"), a Motion to Dismiss [Doc. #13] filed by Defendant Graco, Inc. ("Defendant Graco"), and a Motion to Stay [Doc. #21] filed by Air Power, Inc. ("Defendant Air Power" or "Air Power"). For the reasons set forth herein, the Court will grant Defendant Freeman's Motion to Dismiss, pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure. Further, the Court will grant Defendant Graco's Motion to Dismiss for failure to state a claim, pursuant to Rule 12(b)(6). Finally, the Court will also grant Defendant Air Power's Motion to Stay.

I. FACTUAL BACKGROUND

The factual allegations of Plaintiff's Amended Complaint, taken as true for purposes of Defendants' Motions, allege that an accident occurred on October 4, 2012, at a Unique Fabricating South, Inc. ("Unique Fabricating") facility in Lafayette, Georgia. Unique Fabricating acquired a piece of industrial equipment manufactured by Defendant Graco, which malfunctioned on October 4, 2012. Unique Fabricating contacted Defendant Graco seeking a recommendation for a distributor of Graco equipment that would be able to provide maintenance and service assistance on the malfunctioning equipment. Defendant Graco referred Unique Fabricating to Defendant Air Power for this matter.

Defendant Freeman, an employee of Unique Fabricating, was servicing the malfunctioning equipment on October 4, 2012. Unique Fabricating called Defendant Air Power seeking technical assistance and advice regarding the malfunctioning equipment, and an Air Power agent located in North Carolina attempted to provide assistance over the phone. While on the phone with the Air Power agent and while Defendant Freeman was attempting to service the malfunctioning equipment, the equipment unexpectedly and suddenly began operating, injuring Defendant Freeman. On January 30, 2013, Defendant Freeman brought a personal injury lawsuit against Defendant Graco and Defendant Air Power in Dekalb County, Georgia. Defendant Graco removed the action ("underlying litigation") to the Northern District of Georgia on March 1, 2013.[1]

When this incident occurred on October 4, 2012, Defendant Air Power was insured under a commercial insurance policy issued by Plaintiff. Plaintiff's current action before this Court seeks a declaratory judgment that it is not required to defend or indemnify the insured, Defendant Air Power, in the underlying litigation in Georgia. In addition to suing Defendant Air Power in this declaratory judgment action, Plaintiff also seeks a declaratory judgment against Defendant Freeman and Defendant Graco that Plaintiff is not required to defend or indemnify Defendant Air Power in the underlying litigation, with respect to any claims that have been or may be asserted by Defendant Freeman.

Defendant Freeman moves for this Court to dismiss, or alternatively transfer, this declaratory judgment action against him, contending that there is a lack of personal jurisdiction over him, venue is improper, and the Northern District of Georgia would be more convenient, as that is the district in which the underlying litigation is taking place. (Def. Freeman's Mot. to Dismiss/Transfer [Doc. #6]). In addition, Defendant Graco moves for this Court to dismiss the declaratory judgment action against it, on the basis that Plaintiff has failed to state a claim against Defendant Graco that can be granted. (Def. Graco's Mot. to Dismiss [Doc. #13]. Finally, Defendant Air Power asks the Court to stay this proceeding, [2] pending the outcome of the underlying litigation in the Northern District of Georgia. (Def. Air Power's Mot. to Stay [Doc. #21]).

II. DEFENDANT FREEMAN'S MOTION TO DISMISS OR TRANSFER

Defendant Freeman moves for dismissal (or transfer, as an alternative request) first on the basis that this Court does not possess personal jurisdiction over him. "When personal jurisdiction is challenged under Rule 12(b)(2), the jurisdictional question is resolved by the judge, with the burden on the plaintiff ultimately to prove grounds for jurisdiction by a preponderance of the evidence." Human Res. Certification Inst. v. Human Res. Prof'l Ass'n, 453 F.Appx. 349, 350 (4th Cir. 2011) (citing Mylan Labs., Inc. v. Akzo, N.V. , 2 F.3d 56, 59-60 (4th Cir. 1993)). Where, as here, neither party disputes the factual allegations in Plaintiff's Amended Complaint, "the court must construe all relevant pleading allegations in the light most favorable to the plaintiff." In re Celotex Corp. , 124 F.3d 619, 628 (4th Cir. 1997) (quoting Combs v. Bakker , 886 F.2d 673, 676 (4th Cir. 1989)) (internal quotation marks omitted).

In determining whether the Court has personal jurisdiction over a non-resident defendant, the Court must perform a two-step analysis: "(1) the exercise of jurisdiction must be authorized under the state's long-arm statute; and (2) the exercise of jurisdiction must comport with the due process requirements of the Fourteenth Amendment." Carefirst of Md., Inc. v. Carefirst Pregnancy Ctrs., Inc. , 334 F.3d 390, 396 (4th Cir. 2003) (citing 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 establishes jurisdiction over a defendant "engaged in substantial activity within this State, whether such activity is wholly interstate, intrastate, or otherwise." N.C. Gen. Stat. § 1-75.4(1)(d) (2013). North Carolina's long-arm statute has been interpreted to extend to the outer limits allowed by the Due Process Clause. Nolan , 259 F.3d at 215 (citing Century Data Systems, Inc. v. McDonald , 109 N.C.App. 425, 427, 428 S.E.2d 190, 191 (1993)). "Thus, the dual jurisdictional requirements collapse into a single inquiry as to whether the defendant has such minimal contacts' with the forum state that maintenance of the suit does not offend "traditional notions of fair play and substantial justice."'" Id. at 215 (quoting Int'l. Shoe Co. v. Washington , 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945)).

In addressing this inquiry, courts differentiate between general jurisdiction and specific jurisdiction. Goodyear Dunlop Tires Operations, S.A. v. Brown , 131 S.Ct. 2846, 2853, 180 L.Ed.2d 796 (2011) (citing Helicopteros Nacionales de Colombia, S.A. v. Hall , 466 U.S. 408, 414, nn.8-9, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984)). "A court may assert general jurisdiction over foreign (sister-state or foreign-country) corporations to hear any and all claims against them when their affiliations with the State are so continuous and systematic' as to render them essentially at home in the forum State." Id . (citing Int'l Shoe , 326 U.S. at 317, 66 S.Ct. at 159). By contrast, whether a forum state may assert specific jurisdiction over a non-resident defendant depends on "the relationship among the defendant, the forum, and the litigation." Walden v. Fiore , 134 S.Ct. 1115, 1121 (2013) (quoting Keeton v. Hustler Magazine, Inc. , 465 U.S. 770, 775, 104 S.Ct. 1473, 79 L.Ed.2d 790 (1984)). "For a State to exercise jurisdiction consistent with due process, the defendant's suit-related conduct must create a substantial connection with the forum State." Id.

Here, Plaintiff contends that the Court has specific jurisdiction over non-resident Defendant Freeman, because he "contact[ed] a North Carolina company and seek[s] benefits under a North Carolina insurance policy." (Pl.'s Resp. to Def. Freeman's Mot. to Dismiss or Transfer [Doc. #10], at 7.) Plaintiff does not contend that Defendant Freeman is subject to general jurisdiction in this declaratory judgment action. Nor does Plaintiff allege facts consistent with Defendant Freeman having an affiliation with North Carolina so "continuous and systematic" as to render him at home in the forum state of North Carolina. Therefore, the Court will limit its discussion to the question of whether specific jurisdiction applies to Defendant Freeman.

In determining whether specific jurisdiction exists, the Fourth Circuit considers three factors: "(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; and (3) whether the exercise of personal jurisdiction is constitutionally reasonable." Tire Eng'g and Distrib., LLC v. Shandong Linglong Rubber Co. , 682 F.3d 292, 301-02 (4th Cir. 2012) (citing CFA Inst. v. Inst. of Chartered Fin. Analysts of India , 551 F.3d 285, 294 (4th Cir. 2009)). "If, and only if, [the Court] find[s] that the plaintiff has satisfied th[e] first prong of the test for specific jurisdiction need [the Court] move on to a consideration of prongs two and three." Consulting Eng'rs Corp. v. Geometric Ltd. , 561 F.3d 273, 278 (4th Cir. 2009).

Here, Plaintiff claims that although Defendant Freeman never traveled in person to North Carolina, he nonetheless purposefully availed himself of the privilege of conducting activities in North Carolina when he contacted Defendant Air Power, a North Carolina corporation, via telephone, in order to obtain assistance with the malfunctioning Graco equipment at the Unique Fabricating facility in Georgia. Plaintiff does not allege any additional contacts by Defendant Freeman with North Carolina other than this one phone call. Indeed, Plaintiff's Amended Complaint does not even allege that Defendant Freeman placed the call to Defendant Air Power. Rather, the Plaintiff alleges that Unique Fabricating contacted Defendant Graco requesting a recommendation for another distributor of Graco equipment that could provide maintenance and service assistance, to which, Defendant Graco responded by referring Unique Fabricating to Air Power. (Am. Compl. [Doc. #5], ¶¶ 14-15.) Then, Plaintiff alleges that Unique Fabricating placed the phone call to Air Power. ( Id. ¶ 18.) The Amended ...


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