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KCHM, Inc. v. Mid-Continent Casualty Co.

United States District Court, E.D. North Carolina, Western Division

August 29, 2017

KCHM, INC. f/k/a FDH, INC. and AMERISURE INSURANCE COMPANY, Plaintiffs,
v.
MID-CONTINENT CASUALTY COMPANY and NAVIGATORS INSURANCE COMPANY, Defendants.

          ORDER

          TERRENCE W. BOYLE, UNITED STATES DISTRICT JUDGE

         This cause comes before the Court on defendant Mid-Continent Casualty Company's motion to dismiss pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure. Plaintiffs have responded, Mid-Continent has replied, and the matter is ripe for ruling. For the reasons that follow, Mid-Continent's motion is granted.

         BACKGROUND

         Plaintiffs filed this action alleging claims for unfair or deceptive trade practices, breach of contract, breach of the duty of good faith and fair dealing, and for declaratory relief to determine questions of controversy concerning the availability of insurance coverage for plaintiff KCHM. Defendant Mid-Continent issued a general liability insurance policy and defendant Navigators issued a commercial excess liability policy to S&S Communications Specialists, Inc. (S&S), which is not a party to this action.

         In 2013, SB A Communications (SB A) contracted with FHD Engineering (now plaintiff KCHM) to design plans for structural modifications to a cell phone tower owned by SBA in Clarksburg, West Virginia. KCHM was later engaged as construction manager for the project and subcontracted with S&S to perform the structural modifications to the tower. On February 1, 2014, the cell phone tower undergoing structural modifications collapsed while S&S was performing work. As the first tower collapsed it struck a second tower, causing that tower to collapse. Three people, two S&S employees and one firefighter, were killed as a result of the collapse of the towers and at least two others were injured.

         The wrongful death, personal injury, and other suits arising out of the collapsed towers are pending in the Circuit Court of Harrison County, West Virginia and in the United States District Court for the Northern District of West Virginia. In June 2016, S&S filed for Chapter 7 bankruptcy liquidation in the United States Bankruptcy Court for the Eastern District of Oklahoma. In November 2016, Mid-Continent filed an adversary proceeding arising out of the S&S Chapter 7 proceeding in which it asserts that the Mid-Continent policy proceeds are assets of the bankruptcy estate.

         DISCUSSION

         Mid-Continent seeks dismissal of the claims against it for lack of personal jurisdiction. Fed R. Civ. P. 12(b)(2). Where a defendant moves to dismiss for lack of personal jurisdiction, the plaintiff has the burden of showing that jurisdiction exists. See In re Celotex Corp., 124 F.3d 619, 628 (4th Cir. 1997); Young v. F.D.I.C, 103 F.3d 1180, 1191 (4th Cir. 1997). When a court considers a challenge to personal jurisdiction without an evidentiary hearing and on the papers alone, it must construe the relevant pleadings in the light most favorable to the plaintiff. Combs v. Bakker, 886 F.2d 673, 676 (4th Cir. 1989).

         The jurisdictional facts not in dispute in this case are as follows. Plaintiff KCHM is a company organized under North Carolina law with its principal place of business in Raleigh, North Carolina. Mid-Continent is an Ohio Corporation with its principal place of business in Tulsa, Oklahoma. Mid-Continent is licensed to do business in North Carolina, but writes less than one percent of its gross premiums to North Carolina insureds. Mid-Continent does not maintain an office in North Carolina nor does it own property in North Carolina. The insurance policy at issue in this case was sold by Mid-Continent to S&S Communications, which is an Oklahoma corporation. The policy was negotiated and issued in Oklahoma, and KCHM was not a party to the negotiations. Pursuant to KCHM's master subcontracting agreement with S&S, KCHM was added at S&S's request as a conditional additional insured on the general liability policy that S&S obtained from Mid-Continent. S&S paid all premiums on the Mid-Continent policy. The policy offers a broad coverage territory, including the United States, its territories and possessions, Puerto - Rico, and Canada. The accident giving rise to claims under the policy took place in West Virginia.

         For a district court to properly assert personal jurisdiction over a nonresident defendant, two conditions must be met: (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. See Christian Sci. Bd. of Dirs. of the First Church of Christ v. Nolan, 259 F.3d 209, 215 (4th Cir. 2001). Because North Carolina's long-arm statute is construed to give "the North Carolina courts the full jurisdictional powers permissible under federal due process, " Vishay Intertechnology, Inc. v. Delta Intern. Corp., 696 F.2d 1062, 1065 (4th Cir. 1982), these inquiries collapse into one. See ESAB Grp., Inc. v. Centricut, Inc., 126 F.3d 617, 623 (4th Cir. 1997). This Court may exercise personal jurisdiction consistent with due process if a defendant has "minimum contacts" with the forum such that to require them to defend their interests in North Carolina "does not offend traditional notions of fair play and substantial justice." Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945).

         A. General jurisdiction.

         If the foreign party maintains "continuous and systematic" contacts with a state, a court in that state may assert general jurisdiction over the nonresident and it may be sued in that state on any claim. See Perkins v. Benguet Consol. Mining Co., 342 U.S. 437, 446 (1952). Mid-Continent plainly does not maintain continuous and systematic contacts with North Carolina. Mid-Continent's place of incorporation is Ohio, its principal place of business is Tulsa, Oklahoma, and none of Mid-Continent's contacts with North Carolina are sufficient to render it at home in North Carolina. Daimler AG v. Bauman, 134 S.Ct. 746, 754, 761 (2014) (noting further that the place of incorporation and principal place of business are the paradigm bases for general jurisdiction). This Court may not therefore assert general personal jurisdiction over Mid-Continent.

         B. Specific jurisdiction.

         To determine whether specific jurisdiction exists, a defendant must have purposefully availed itself of the privilege of conducting business within the forum state, giving it "fair warning that a particular activity may subject [it] to the jurisdiction of a foreign sovereign." CFA Inst. v. Inst, of Chartered Fin. Analysts of India,551 F.3d 285, 293 (4th Cir. 2009); see also Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, (2011) ("Specific jurisdiction ... depends on an affiliation between the forum and the underlying controversy, principally, activity or an occurrence that takes places in the forum State and is therefore subject to the State's regulation.") (internal alterations, quotation, and citation omitted). A court thus considers (1) the extent to which, the defendant has purposefully availed itself of the privilege of conducting business in the state, (2) whether the plaintiffs claims arise out of those activities directed toward the state, and (3) whether the exercise of specific jurisdiction would be constitutionally reasonable to determine whether specific jurisdiction has been established. ALS Scan, Inc. v. Digital Serv. Consultants,Inc.,293 ...


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