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US Chemical Storage, LLC v. Berto Construction, Inc.

Court of Appeals of North Carolina

May 2, 2017

US CHEMICAL STORAGE, LLC, Plaintiff
v.
BERTO CONSTRUCTION, INC., Defendant

          Heard in the Court of Appeals 11 January 2017.

         Appeal by defendant from order entered 26 January 2016 by Judge Lindsay R. Davis, Jr., in Wilkes County No. 15 CVS 1042 Superior Court.

          Vannoy, Colvard, Triplett & Vannoy, P.L.L.C., by Daniel S. Johnson and Jay Vannoy, for plaintiff-appellee.

          Blanco Tackabery & Matamoros, P.A., by James E. Vaughan and M. Rachael Dimont, for defendant-appellant.

          CALABRIA, Judge.

         Where a forum selection clause, pursuant to New Jersey law, was valid, mandatory, and enforceable, the trial court erred in denying defendant's motion to dismiss. Where defendant's contacts with the State of North Carolina were insufficient to create personal jurisdiction, the trial court erred in denying defendant's motion to dismiss. We vacate and remand.

         I. Factual and Procedural Background

         Berto Construction, Inc. ("Berto") is a New Jersey corporation with its principal and only place of business located in Rahway, New Jersey. Berto performs concrete construction in the New Jersey-New York-Pennsylvania tristate area. As part of its business, Berto entered into a contract (the "Contract") with the Port Authority of New York and New Jersey (the "Port Authority") to perform construction. In connection with the Contract, the Port Authority required Berto to furnish and install hazmat and supply storage buildings. The Contract limited the suppliers for this project to one of five manufacturers, one of whom was U.S. Chemical Storage, LLC ("US Chemical"). U.S. Chemical is a North Carolina limited liability company. Berto chose U.S. Chemical as its subcontractor, and the two entered into a subcontract agreement (the "Subcontract").

         On 9 September 2015, U.S. Chemical filed a complaint against Berto, alleging breach of contract. Specifically, U.S. Chemical alleged that Berto had agreed to pay U.S. Chemical $736, 400.00, that U.S. Chemical complied with its obligation under the Subcontract, and that Berto failed to pay an overdue balance of $199, 344.25. In response to the complaint, Berto filed a motion to dismiss, pursuant to Rule 12(b)(2) of the North Carolina Rules of Civil Procedure, alleging that the court lacked personal jurisdiction over Berto. In an affidavit in support of the motion, Douglas R. Birdsall ("Birdsall"), a project manager for Berto, alleged that Berto had had no contact with the State of North Carolina prior to its contract with U.S. Chemical; that the Contract was explicitly subject to the jurisdiction and laws of New York and New Jersey; and that in the Subcontract U.S. Chemical agreed to be bound by the terms of the Contract, including a specific provision providing that the Subcontract was subject to New Jersey law. Birdsall further averred that U.S. Chemical had failed to satisfactorily perform its work; that its submissions pertaining to the buildings required multiple revisions; that it supplied incorrect piping on three buildings; that it delivered a building to the wrong location; that it failed to provide certain pieces of equipment; that its defective submissions caused delay to the project; and that all of these defects and delays resulted in $180, 933.80 in increased costs to Berto, and the possibility of Berto being assessed for liquidated damages by the Port Authority. Additional arguments, both on the forum selection provision and Berto's minimum contacts, were presented at a hearing on Berto's motion to dismiss.

         On 26 January 2016, the trial court entered an order on Berto's motion to dismiss. The trial court found that the Subcontract "provided that it would be governed by New Jersey law and that the plaintiff would be bound to the defendant by the terms of the defendant's contract with the Port Authority[;]" and that the Contract "provided that the defendant agreed to 'irrevocably submit[ ] [it]self to the jurisdiction of the Courts of the State of New York and to the jurisdiction of the Courts of the State of New Jersey in regard to any controversy' arising out of the project." The trial court then noted that the Subcontract "did not provide, however, that the parties selected these courts as the exclusive jurisdictions for any disputes arising out of the project[, ]" and concluded that U.S. Chemical's suit "is not barred by the parties' subcontract, because the forum selection clause is permissive, not mandatory[.]" With respect to minimum contacts, the trial court noted that

North Carolina extends the jurisdiction of its courts to actions arising out of "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"; and actions relating to "goods . . . or other things of value shipped from this State by the plaintiff to the defendant on his order or direction." N.C. Gen. Stat. § 1-75.4(5)(b), (d).

         The trial court found that, with Berto's knowledge, U.S. Chemical "designed and constructed twelve hazmat and supply storage buildings at its plant in North Carolina[;]" and that "[t]he buildings were shipped from the plaintiff's facility in North Carolina to the defendant[.]" The trial court therefore concluded that the action arose "out of services actually performed by the plaintiff within North Carolina for the defendant, " and that it "relates to goods and things of value shipped from North Carolina by the plaintiff to the defendant on its order or direction, " and thus that "personal jurisdiction is extended by N.C. Gen. Stat. § 1-75.4(5)(b) & (d)." The trial court concluded that the Contract and Subcontract did not grant exclusive jurisdiction to New York or New Jersey, that Berto purposefully availed itself of the privilege of doing business in North Carolina, and that its contacts were sufficient to establish personal jurisdiction. It therefore denied Berto's motion to dismiss.

         Berto appeals.

         II. Interlocutory Appeal

         As a preliminary matter, we note that this is an interlocutory appeal.

"The denial of a motion to dismiss is an interlocutory order which is not immediately appealable unless that denial affects a substantial right of the appellant." Carl v. State, 192 N.C.App. 544, 550, 665 S.E.2d 787, 793 (2008). "The appealing party bears the burden of demonstrating that the order from which he or she seeks to appeal is appealable despite its interlocutory nature." Hamilton v. Mortgage Information Services, 212 N.C.App. 73, 77, 711 S.E.2d 185, 189 (2011) (citing Jeffreys v. Raleigh Oaks Joint Venture, 115 N.C.App. 377, 379, 444 S.E.2d 252, 253 (1994)). Thus, the extent to which an appellant is entitled to immediate interlocutory review of the merits of his or her claims depends upon his or her establishing that the trial court's order deprives the appellant of a right that will be jeopardized absent review prior to final judgment. Id.; see also Harbour Point Homeowners' Ass'n, Inc. v. DJF Enters., Inc., 206 N.C.App. 152, 157, 697 S.E.2d 439, 444 (2010).

Richmond Cty. Bd. of Educ. v. Cowell, 225 N.C.App. 583, 585, 739 S.E.2d 566, 568 (2013). Thus, in order for us to hear Berto's appeal, Berto must establish the existence of a substantial right.

         Berto correctly argues that the validity of a forum selection clause constitutes a substantial right. Cox v. Dine-A-Mate, Inc., 129 N.C.App. 773, 776, 501 S.E.2d 353, 355 (1998) (holding that the trial court's denial of a defendant's motion to dismiss based on a forum selection clause was appealable). Similarly, Berto correctly argues that N.C. Gen. Stat. § 1-277(b) guarantees the right to immediately appeal an adverse ruling with respect to the jurisdiction of the court over a person or property based upon minimum contacts. See Credit Union Auto Buying Servs., Inc. v. Burkshire Props. Grp. Corp., ___ N.C.App. ___, ___, 776 S.E.2d 737, 739 (2015) (holding that N.C. Gen. Stat. § 1-277(b) guarantees a right to immediate appeal that is limited to minimum contacts questions, the subject matter of Rule 12(b)(2)). We hold that Berto has demonstrated the existence of a substantial right that would be jeopardized absent review, and consider Berto's interlocutory appeal.

         III. ...


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