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Smith v. Healthcare Financial Services

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

January 12, 2018

RECO D. SMITH, Plaintiff,



         On July 21, 2017, Reco D. Smith ("Smith" or "plaintiff'), a federal prisoner proceeding pro se and currently detained at the Federal Medical Center in Burner, North Carolina, filed a complaint against Healthcare Financial Services ("HCFS") and CAMC Physicians Group ("CAMC"). Compl. [D.E. 1]; see [D.E. 1-3]; [D.E. 20] 3. Smith alleged violations of the Fair Debt Collection Practices Act and the Fair Credit Reporting Act, and state-law claims under the North Carolina Debt Collection Act and for negligence. See Compl. at 8-12. On October 20, 2017, defendant CAMC moved to dismiss the action under Federal Rule of Civil Procedure 12(b)(2) [D.E. 15], and defendant HCFS moved to dismiss the action under Federal Rules of Civil Procedure 12(b)(4), (5), and (6) [D.E. 17]. On November 14, 2017, Smith responded in opposition to both motions [D.E. 20]. As explained below, the court grants CAMC s motion to dismiss, denies HCFS's motion to dismiss, and transfers this action to the United States District Court for the Southern District of West Virginia.


         Smith is a prisoner at the Federal Medical Center in Burner, North Carolina. Compl. ¶ 4; [D.E. 20] 3. HCFS is a debt collection agency with its principal place of business in Knoxville, Tennessee. See Id. ¶ 5. CAMC is a medical provider headquartered in Charleston, West Virginia. See Id. ¶ 6. Smith alleges that CAMC and HCFS engaged in unfair and deceptive trade practices while trying to collect a $302.00 debt, which Smith alleges is not properly attributable to him. See id. ¶¶ 10, 12, 35. Smith became aware of the $302.00 debt when it appeared on his Transunion credit report, which indicated that he owed the debt to "Healthcare Fincl Svcs" and listed a post office box in Charleston, West Virginia as HCFS's address. See Id. ¶ 12; [D.E. 1-1]. Defendant CAMC is the original creditor for this debt. See [D.E. 1-1]. CAMC contends that Smith incurred this debt for medical services while a prisoner at the Gilmer Federal Correction Center in Glenville, West Virginia. See [D.E. 16] 7; Crotty Dec. [D.E. 16-1] ¶ 13. Smith contends that CAMC sold this debt to HCFS for collection and that each organization violated federal and state law in attempting to collect the debt. See Compl. ¶¶ 6, 10-19.

         CAMC moves to dismiss the action for lack of personal jurisdiction. See [D.E. 15-16]; Fed.R.Civ.P. 12(b)(2). In support, CAMC states that it is a "nonprofit corporation organized and existing under the laws of the State of West Virginia, " which operates exclusively within West Virginia, and does not do business, employ workers, or supply services within North Carolina. [D.E. 16-1] ¶¶ 2, 5-6.

         A plaintiff must prove personal jurisdiction by a preponderance of the evidence. See Grayson v. Anderson, 816 F.3d 262, 268 (4th Cir. 2016); Combs v. Rakker, 886 F.2d 673, 676 (4th Cir. 1989). If a court rules on a motion to dismiss for lack of personal jurisdiction without an evidentiary hearing, the plaintiff need only establish a prima facie case. Combs, 886 F.2d at 676. When determining whether the plaintiff has met this burden, courts resolve all factual disputes and draw all reasonable inferences in the light most favorable to the plaintiff. Id.; see Mylan Labs., Inc. v. Akzo, N.V., 2 F.3d 56, 60 (4th Cir. 1993). However, an evidentiary hearing need not include live testimony, but merely the opportunity for the parties to present evidence and argument concerning jurisdiction. Grayson, 816 F.3d at 268. After the court has considered such evidence and argument, it determines whether a plaintiff has proven by a preponderance of the evidence that the court has personal jurisdiction over the defendant. Id.

         A federal court may exercise personal jurisdiction over a person to the extent allowed by state law in the state where the federal court sits. See Fed.R.Civ.P. 4(e)(1), (h)(1)(A), (k)(1)(A). The North Carolina long-arm statute extends personal jurisdiction over out-of-state defendants to the fullest limits permitted by the Fourteenth Amendment's Due Process Clause. See Dillon v. Numismatic Funding Corp., 291 N.C. 674, 676, 231 S.E.2d 629, 630-31 (1977); Century Data Sys., Inc. v. McDonald, 109 N.C.App. 425, 427, 428 S.E.2d 190, 191 (1993). To determine whether the North Carolina long-arm statute reaches a particular defendant, courts analyze whether the defendant has sufficient minimum contacts with North Carolina such that "maintenance of the suit does not offend traditional notions of fair play and substantial justice." Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (quotation omitted); see Dillon, 291 N.C. at 676-80, 231 S, E.2d at 630-33.

         Courts recognize two types of personal jurisdiction: general and specific. See Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011). Smith does not argue that the court has general jurisdiction over CAMC. See [D.E. 20] 4. When assessing specific jurisdiction, courts consider three factors: "(1) the extent to which the defendant has purposefully availed itself of the privilege of conducting activities in the [forum] state; (2) whether the plaintiffs' claims arise out of those activities directed at the state; and (3) whether the exercise of personal jurisdiction would be constitutionally 'reasonable.'" Carefirst of Md., Inc. v. Carefirst Pregnancy Ctrs., Inc., 334 F.3d 390, 397 (4th Cir. 2003); see Bristol-Myers Squibb Co. v. Superior Court of Cal., 137 S.Ct. 1773, 1780-81 (2017); Walden v. Fiore, 134 S.Ct. 1115, 1121-22 (2014); Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474-77 (1985). When analyzing the first two elements, courts consider only the defendant's activities-those contacts that the defendant itself has created with the forum. See Bristol-Myers Squibb Co., 137 S.Ct. at 1781-82; Walden, 134 S.Ct. at 1122; Burger King, 471 U.S. at 472-78. In accordance with this principle, "[t]he substantial connection between the defendant and the forum State necessary for a finding of minimum contacts must come about by an action of the defendant purposefully directed toward the forum State." Asahi Metal Indus. Co. v. Superior Court of Cal., 480 U.S. 102, 112 (1987) (plurality opinion) (citations and emphasis omitted); see Bristol-Myers Squibb Co., 137 S.Ct. at 1781-82; Walden, 134 S.Ct. at 1122.

         Smith argues that CAMC targeted the conduct alleged in the complaint at him while he resided in North Carolina. See [D.E. 20] 4. Thus, according to Smith, CAMC has sufficient contacts with North Carolina for the court to exercise personal jurisdiction. See id.

         CAMC s alleged conduct does not suffice for this court to exercise personal jurisdiction over CAMC. The only contact Smith alleges between CAMC and North Carolina is the contact that Smith made with CAMC when Smith began to reside in North Carolina. Nothing in the complaint suggests that CAMC purposefully directed actions towards North Carolina, and CAMC's alleged conduct would not cause CAMC to "reasonably anticipate being haled into court" in North Carolina. See, e.g., Calder v. Jones, 465 U.S. 783, 790 (1984). Accordingly, exercising personal jurisdiction over CAMC would violate due process. See, e.g., Bristol-Myers Squibb Co., 137 S.Ct. at 1781-82; Walden, 134 S.Ct. at 1122-26; World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292 (1980); Hanson v. Denckla, 357 U.S. 235, 251-52 (1958). Thus, this court lacks personal jurisdiction over CAMC and grants CAMC's motion to dismiss.


         Defendant HCFS moves to quash service of process, or alternatively, to dismiss the complaint based on Federal Rules of Civil Procedure 12(b)(4), (5), and (6). See [D.E. 17]. HCFS argues that it is the wrong defendant, and that another organization with a similar name, but which is based in West Virginia and not Tennessee, is the organization that Smith should have sued. In support of its motion to quash, HCFS cites the address listed on Smith's original Transunion credit report and a registered mail receipt both of which list a Charleston, West Virginia address. See [D.E. 18] ¶¶ 2-6. A motion to quash or dismiss under Rule 12(b)(4) challenges the sufficiency or "form" of the process itself, while a motion to quash or dismiss under Rule 12(b)(5) challenges the sufficiency of the act of "service" of process. See Fed.R.Civ.P. 12(b)(4), (b)(5); Lee v. City of Fayetteville, No. 5:15-CV-638-FL, 2016 WL 1266597, at *2 (E.D. N.C. Mar. 30, 2016) (unpublished). In other words, a Rule 12(b)(4) motion to dismiss objects to a defect in the content of the documents served, while a Rule 12(b)(5) motion to dismiss objects to a defect in the act (or lack) of delivery. See, e.g., 5B Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1353 (3d ed. 2004). A typical Rule 12(b)(4) challenge alleges that the entity named in the summons is different from the entity named in the complaint, and a typical Rule 12(b)(5) challenge alleges that the process was delivered by a person incapable of serving process (e.g., a party), to a person or entity incapable of receiving service (e.g., a minor), or that the service was delivered in an improper way (e.g., via first-class mail). See Stokes v. JPMorgan Chase Bank, NA, No. JFM 8:11-cv-2620, 2012 WL 527600, at *5-6 (D. Md. Feb. 16, 2012) (unpublished). Plaintiff bears the burden of establishing proper service of process. See Mylan Labs., 2 F.3d at 60; Dalenko v. Stephens, 917 F.Supp.2d 535, 542 (E.D. N.C. 2013).

         HCFS alleges that the conduct described in Smith's complaint is properly ascribed to a different entity with a similar name, but which is based in West Virginia and not in Tennessee. Under Rule 12(b)(4), HCFS argues that Smith named the wrong party in the complaint and summons. See [D.E. 18] 4-6. Under Rule 12(b)(5), HCFS argues that the service was improper because Smith failed to satisfy either Rule 4(h)(1)(B) or Rule 4(h)(1)(A), incorporating the Tennessee state law governing service on a domestic corporation. See [D.E. 18] 4. Specifically, HCFS argues that both rules require the delivery of a summons and a copy of the complaint to a corporate officer who is authorized to receive process. See Fed.R.Civ.P. 4(h); Term. R. Civ. P. 4.04. HCFS argues that service was improper because service was made to an agent of the Tennessee HCFS, not the West Virginia HCFS. See [D.E. 18] 4-6.

         HCFS's misconstrues Rule 12(b)(4) and (5). Under Rules 12(b)(4) and (5), "wrong" does not mean "not liable." Instead, it means "a party not named in the summons." See 5B Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1353 (3d ed. 2004). The Tennessee entity named HCFS, with its principal place of business at 265 Brookview Centre Way, Suite 400, Knoxville, TN 37919, is named as a defendant in the complaint, and in the summons, copies of which were delivered in a manner prescribed under the rules. See Compl. 1-2; [D.E. 1-4] 1; Affidavit of Service [D.E. 14]. HCFS's factual claim that it is not liable to Smith is not properly expressed via ...

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