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Krebs v. Charlotte School of Law, LLC

United States District Court, W.D. North Carolina, Charlotte Division

July 27, 2017

SPENCER KREBS, MORGAN SWITZER DAVE WYATT KRYSTAL HORSLEY JACENTA MARIE PRICE MARKISHA DOBSON, on behalf of themselves and all others similarly situated, Plaintiffs,
v.
CHARLOTTE SCHOOL OF LAW, LLC INFILAW CORPORATION INFILAW HOLDING, LLC STERLING CAPITAL PARTNERS, L.P. STERLING CAPITAL GMBH & CO. KG JAY CONISON CHIDI OGENE DON LIVELY BETSY DEVOS, Defendants.

          ORDER

          Graham C. Mullen, United States District Judge

         THIS MATTER is before the Court upon Defendants Sterling Capital Partners, L.P. and Sterling Capital Partners, GMBH & CO. KG's (collectively “Sterling Entities”) Motion to Dismiss pursuant to Rules 12(b)(2) and 12(b)(6) of the Federal Rules of Civil Procedure. (Doc. No. 63.) Plaintiffs have filed a response and Sterling Entities have filed a reply. Accordingly, this matter is ripe for disposition.

         I. Background

         Plaintiffs are current or former students at Charlotte School of Law (“CSL”). On behalf of themselves and a putative class, they assert a number of claims stemming from issues concerning CSL's accreditation status with the American Bar Association (“ABA”), including allegations that the Defendants made misrepresentations to them, breached contracts with and fiduciary duties to them, and engaged in unfair and deceptive trade practices, all to entice Plaintiffs to enroll at, or to continue to attend, CSL.

         Sterling Entities are affiliated with a private equity firm that is based in Illinois, with its headquarters in Chicago. That private equity firm holds investments in InfiLaw Holding. InfiLaw Holding holds an ownership interest in InfiLaw Corporation. InfiLaw Corporation owns shares in CSL. To say it another way: Sterling Entities are two corporate levels removed from CSL.

         II. Standard of Review

         In order to survive a motion to dismiss under Rule 12(b)(6), Plaintiffs' Complaint must contain “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). As the United States Supreme Court has held, the “short and plain statement of the claim, ” as set forth in Rule 8(a)(2), “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). A complaint is only plausible when it “pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. A court need not accept as true a plaintiff's “unwarranted inferences, unreasonable conclusions, or arguments.” Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir. 2008).

         A federal court may exercise personal jurisdiction over a foreign defendant only if the state in which the court sits could exercise personal jurisdiction. Carefirst of Md., Inc. v. Carefirst Pregnancy Ctrs., Inc., 334 F.3d 390, 396 (4th Cir. 2003). Plaintiffs must therefore show that North Carolina's exercise of personal jurisdiction over the Sterling Entities would comport with both: (1) North Carolina's long-arm statute, N.C. G.S. 1-75.4, and (2) constitutional due process. Universal Leather, LLC v. Koro AR, S.A., 773 F.3d 553, 558 (4th Cir. 2014). Because North Carolina's long-arm statute is co-extensive with the limits of due process, the “dual jurisdictional requirements collapse into a single inquiry, ” and only the due process inquiry need be addressed. Christian Sci. Bd. of Directors of First Church of Christ, Scientist v. Nolan, 259 F.3d 209, 215 (4th Cir. 2001).

         The due process inquiry focuses on whether the defendant has “minimum contacts” with North Carolina such that “maintenance of the suit does not offend traditional notions of fair play and substantial justice.” Id. (quoting Int'l Shoe Co. v. State of Wash., 326 U.S. 310, 316 (1945)). Under the due process inquiry, there are two paths for a district court to assert jurisdiction over an out-of-state defendant: general and specific jurisdiction. Universal Leather, 773 F.3d at 559. General jurisdiction requires a “showing of continuous and systematic activities in the forum state, ” whereas specific jurisdiction applies where “defendant's qualifying contacts with the forum state also constitute the basis for the suit.” Id.

         Lastly, when determining if a court has personal jurisdiction over defendants in a case, plaintiff bears the burden of proof. See Carefirst, 334 F.3d at 396 (“When personal jurisdiction is properly challenged under Rule 12(b)(2), the jurisdictional question is to be resolved by the judge, with the burden on the plaintiff ultimately to prove grounds for jurisdiction by a preponderance of the evidence.”). But, when “adjudicating [a 12(b)(2)] motion, the court construes all disputed facts and draws all reasonable inferences from the proof in favor of jurisdiction.” Manley v. Air Canada, 753 F.Supp.2d 551, 556 (E.D. N.C. 2010) (citing Carefirst, 334 F.3d at 396). “However, where the court does not conduct an evidentiary hearing and relies instead only on the pleadings and affidavits alone, plaintiff need only make a prima facie showing of jurisdiction.” Id. (citing In re Celotex Corp., 124 F.3d 619, 628 (4th Cir. 1997)). And “[m]ere allegations of in personam jurisdiction are sufficient for a party to make [such] a prima facie showing.” Barclays Leasing, Inc. v. National Business Systems, Inc., 750 F.Supp. 184, 186 (W.D. N.C. 1990).

         III. Discussion

         A. Defendants' 12(b)(2) Motion

         Imputing general personal jurisdiction over a corporation can be done in a number of ways. The most common way is for the forum state to be the corporation's “place of incorporation [or] principal place of business.” Daimler AG v. Bauman, 134 S.Ct. 746, 760-61 (2014). In addition, a court can exercise general personal jurisdiction over a corporate defendant if the corporation has “continuous and systematic” contacts so as to render it “essentially at home” in the forum state. Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011).

         It is undisputed that Sterling Entities are not incorporated in North Carolina and their principal places of business are also not in North Carolina, so the inquiry turns to whether Sterling Entities have “continuous and systematic” contacts with North Carolina. Plaintiffs have alleged no facts, other than a conclusory allegation, that would allow the Court to find the necessary “continuous and systematic” contacts required for general personal jurisdiction. Goodyear Dunlop Tires Operations, S.A., 564 U.S. at 919. Indeed, Plaintiffs seem to recognize this shortcoming as they fail to address general jurisdiction in ...


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