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Inc. v. Highpoint Risk Services, LLC

United States District Court, M.D. North Carolina

April 20, 2018



          N. Carlton Tilley, Jr. Senior United States District Judge.

         This matter is before the Court on a Motion to Dismiss [Doc. #19] and a Motion to Strike [Doc. #27] by Defendants Highpoint Risk Services, LLC (“Highpoint”) and Charles David Wood, Jr. (collectively “Defendants”). Defendants have moved to dismiss the claims against them for lack of personal jurisdiction, or in the alternative, for failure to state a claim for which relief can be granted, or in the alternative, for improper venue. They have also moved to strike Companion Property and Casualty Insurance Company's response to their motion to dismiss as impermissible under the Local Rules. For the reasons explained below, the motion to dismiss is granted, because the Court lacks personal jurisdiction over these two Defendants. The motion to strike is denied.

         I. Plaintiff Debbie's Staffing Services, Inc. (“Debbie's Staffing”), a North Carolina corporation with its principal place of business in Winston-Salem, North Carolina, “is a staffing and personnel placement company engaged in the business of supplying human capital solutions to customers throughout the region, state, and nation.” (Compl. ¶¶ 2, 8 [Doc. #1].) Defendant Companion Property and Casualty Insurance Company n/k/a Sussex Insurance Company (“Companion”), and Dallas National Insurance Company (“DNIC”), who is not a party to this suit, served as workers' compensation insurance carriers for Debbie's Staffing in the states where it operated in 2012 through 2014. (Id. ¶¶ 11, 12.) Because Debbie's Staffing selected a high deductible insurance policy, Companion and DNIC required it to deposit certain amounts of collateral funds with Highpoint, a Texas limited liability company with its principal place of business in Texas. (Id. ¶ 13.) Highpoint, described as an agent and administrator for Companion and DNIC, collected premiums and collateral funds “on behalf of Companion and DNIC, representing that they would appropriately submit same to Companion and DNIC or safe guard same for the benefit of Companion and DNIC.” (Id. ¶¶ 9, 10, 17.) Debbie's Staffing submitted $804, 467.67 in collateral funds “as directed by [Highpoint] and/or Companion”, “some or all of” which Highpoint deposited into trust accounts under Companion's possession and control. (Id. ¶¶ 18, 19.) These funds were to be used “in the event that Debbie's Staffing defaulted or otherwise failed to fulfill its obligation under the” insurance policies. (Id. ¶ 14.)

         Debbie's Staffing believes that none of the collateral funds were used and has demanded their return from Highpoint, Companion, and DNIC pursuant to the terms of the insurance policies “and contracts”. (Id. ¶¶ 14, 24, 25.) However, Companion and Highpoint “have effectively claimed that the funds are in the possession of the other or that they are not in possession of the funds.” (Id. ¶ 33.) As a result, Debbie's Staffing has sued Companion and Highpoint[1] for breach of contract, conversion, unjust enrichment, and breach of fiduciary duty and seeks a declaratory judgment and constructive trust. (Id. ¶¶ 33-58.) Debbie's Staffing has sued Wood, a citizen and resident of Texas who owns all interest in Highpoint and is its only member, hoping to pierce Highpoint's corporate veil. (Id. ¶ 3.) Highpoint and Wood challenge this court's jurisdiction over them. Because it is determined the Court has no personal jurisdiction over Highpoint and Wood, their other bases upon which to dismiss the claims against them are not addressed.


         When a defendant asserts a Rule 12(b)(2) challenge to a court's personal jurisdiction, the question is one for the court and the plaintiff bears the burden to prove the existence of a ground for personal jurisdiction. Combs v. Bakker, 886 F.2d 673, 676 (4th Cir. 1989). The burden “varies according to the posture of a case and the evidence that has been presented to the court.” Grayson v. Anderson, 816 F.3d 262, 268 (4th Cir. 2016). Ultimately, a plaintiff must prove the existence of a ground for jurisdiction by a preponderance of the evidence. Id. (citing Combs, 886 F.2d at 676). However, when, as here, the court addresses the question of personal jurisdiction on the basis of the motion papers, supporting legal memoranda, relevant allegations of the complaint, and, if provided, supporting evidence, [2] the plaintiff has the burden of making a prima facie showing in support of jurisdiction. Id. (citing Combs, 886 F.2d at 676); Universal Leather, LLC v. Koro AR, S.A., 773 F.3d 553, 558 (4th Cir. 2014).

         A plaintiff makes a prima facie showing in this context when it “present[s] evidence sufficient to defeat a motion for judgment as a matter of law.” In re Polyester Staple Antitrust Litig., No. 3:03CV1516, 2008 WL 906331, at *7 (W.D. N.C. Apr. 1, 2008) (quoting Reese Bros., Inc. v. U.S. Postal Serv., 477 F.Supp.2d 31, 36 (D.D.C. 2007)); see also Mattel, Inc. v. Greiner & Hausser GmbH, 354 F.3d 857, 862 (9th Cir. 2003) cited in Universal Leather, 773 F.3d at 561 (stating that a plaintiff makes a prima facie showing of personal jurisdiction by presenting facts that, if true, would support jurisdiction). Stated another way, a plaintiff makes a prima facie showing when there is evidence which a reasoning mind could accept as sufficient to support the proposition in question.

         Absent an evidentiary hearing, the court “must construe all relevant pleading allegations in the light most favorable to the plaintiff, assume credibility, and draw the most favorable inferences for the existence of jurisdiction.” Combs, 886 F.2d at 676; see also Universal Leather, 773 F.3d at 560 (requiring the court to assume the plaintiff's version of the facts is credible and to construe any conflicting facts in the affidavits in the light most favorable to the plaintiff). However, “[t]he allegations of the complaint are taken as true only if they are not controverted by evidence from the defendant, ” Vision Motor Cars, Inc. v. Valor Motor Co., 981 F.Supp.2d 464, 468 (M.D. N.C. 2013) (citing Wolf v. Richmond Cty. Hosp. Auth., 745 F.2d 904, 908 (4th Cir. 1984)), which is the situation here as Defendants have presented argument without evidence.[3]

         A federal court may exercise personal jurisdiction over a non-resident defendant only if the forum state's long-arm statute authorizes the exercise of jurisdiction and the exercise of jurisdiction comports with Fourteenth Amendment due process requirements. Christian Sci. Bd. of Dirs. of First Church of Christ, Scientist v. Nolan, 259 F.3d 209, 215 (4th Cir. 2001). North Carolina's long-arm statute, General Statute § 1-75.4, “is designed to extend jurisdiction over nonresident defendants to the fullest limits permitted by the Fourteenth Amendment's due-process clause.” Church v. Carter, 380 S.E.2d 167, 169 ( N.C. Ct. App. 1989); see also Christian Sci. Bd. of Dirs., 259 F.3d at 215 (stating the same). Thus, the court's focus becomes whether the plaintiff has made a prima facie showing that the defendant's contacts with North Carolina satisfy constitutional due process. Universal Leather, 773 F.3d at 558-59. Due process allows a court to exercise general or specific jurisdiction over a defendant.


         Defendants first argue that neither Debbie's Staffing's allegations nor supporting evidence permits the Court to exercise general jurisdiction over them. General jurisdiction exists over a foreign corporate defendant when its “continuous corporate operations within a state [are] so substantial and of such a nature as to justify suit against it on causes of action arising from dealings entirely distinct from those activities.” Int'l Shoe Co. v. Washington, 326 U.S. 310, 318 (1945); see also Helicopteros Nactionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 n.9 (1984) (“When a State exercises personal jurisdiction over a defendant in a suit not arising out of or related to the defendant's contacts with the forum, the State has been said to be exercising ‘general jurisdiction' over the defendant.”). General jurisdiction requires a foreign defendant's “affiliations with the State [to be] so ‘continuous and systematic' 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) (citing Int'l Shoe Co., 326 U.S. at 317). “The ‘paradigm' forums in which a corporate defendant is ‘at home, ' . . . are the corporation's place of incorporation and its principal place of business.” BNSF Ry. Co. v. Tyrrell, U.S., 137 S.Ct. 1549, 1558 (2017) (citing Daimler AG v. Bauman, 571 U.S. 117,, 134 S.Ct. 746, 761 n.19 (2015)). Similarly, “[f]or an individual, the paradigm forum for the exercise of general jurisdiction is the individual's domicile”. Goodyear Dunlop Tires Operations, S.A., 564 U.S. at 924. The Supreme Court has recognized the possibility of an exceptional case, though, like Perkins v. Benguet Consol. Mining Co., 342 U.S. 437 (1952), where the war forced the defendant to relocate temporarily from the Philippines to Ohio such that Ohio became “the center of the corporation's wartime activities” and suit was proper there. BNSF Ry. Co., 137 S.Ct. at 1558.


         It is clear that Highpoint is neither incorporated nor maintains its principal place of business in North Carolina. Furthermore, neither the allegations in the Complaint, (see Compl. ¶ 6 (alleging that “representatives of Defendants [including Companion] traveled to North Carolina in furtherance of relationships with . . . other clients with operations or domicile in North Carolina”)), nor any evidence Debbie's Staffing has provided in response to Defendants' motion, (see Highpoint Application & Annual Reports, Ex. F to Resp. [Doc. #22-6]), classify this case as an exceptional one. Long-standing precedent forecloses Debbie's Staffing's argument that general jurisdiction exists over Highpoint in North Carolina because of its Certificate of Authority and registered agent. See Public Impact, LLC v. Boston Consulting Grp, Inc., 117 F.Supp.3d 732, 738 (M.D. N.C. 2015). In Ratliff v. Cooper Laboratories, Inc., 444 F.2d 745, 748 (1971), the Fourth Circuit Court of Appeals explained,

We think the application to do business and the appointment of an agent for service to fulfill a state law requirement is of no special weight . . . . Applying for the privilege of doing business is one thing, but the actual exercise of that privilege is quite another. The principles of due process require a firmer foundation than mere compliance with the state domestication statutes.

         See also Public Impact, LLC, 117 F.Supp.3d at 738 (citing district courts within the Fourth Circuit applying Ratliff and finding that circuit law “forecloses Public Impact's argument that this court has general jurisdiction over BCG because it is registered to do business in this State”). Highpoint simply does not have continuous and systematic affiliations with North Carolina that render it at home in the state.

         The same is true for Wood. He is domiciled in Texas and is not alleged to have taken actions that constitute continuous and systematic affiliations with North Carolina. The general allegation that “representatives of Defendants” - as used in the Complaint, this includes all three defendants - “upon information and belief” “traveled to North Carolina in furtherance of relationships with . . . other clients with operations of domicile in North Carolina” cannot sustain the exercise of general jurisdiction over Wood. See Vision Motor Cars, Inc. v. Valor Motor Co., 981 F.Supp.2d 464, 471 (M.D. N.C. 2013) (refusing to consider conclusory allegations that made “few specific factual assertions as to any particular defendant's contacts with North Carolina”).

         In response to Defendants' motion, Debbie's Staffing provided evidence that, as Highpoint's sole member and manager, Wood applied for Highpoint's Certificate of Authority, filed its annual reports, and withdrew its Certificate of Authority. (Highpoint Texas Articles of Organization, Ex. A to Resp. [Doc. #22-1], Highpoint Texas Business Inquiry, Ex. B to Resp. [Doc. #22-2], Highpoint Application & Annual Reports.) He also applied for a Certificate of Authority on behalf of AMS Staff Leasing, Inc. and filed its annual reports for approximately nine years as its sole member. (AMS Staff Leasing, Inc. Application & Annual Reports, Ex. G to Resp. [Doc. #22-7].) However, “[g]eneral actions by [an officer] on behalf of the corporation will not generally subject [him] to an out-of-state court's jurisdiction.” AARP v. Am. Family Prepaid Legal Corp., Inc., 604 F.Supp.2d 785, 799 (M.D. N.C. 2009) (quoting Mkt. Am. v. Optihealth Prods., Inc., No. 1:07CV855, 2008 WL 5069802, at *8 (M.D. N.C. Nov. 21, 2008), adopted, (M.D. N.C. Jan. 6, 2009)). As with Highpoint, Wood cannot be found to be at home in North Carolina. Therefore, the Court cannot exercise general jurisdiction over either Highpoint or Wood.


         Defendants next argue that neither Debbie's Staffing's allegations nor supporting evidence permit the Court to exercise specific jurisdiction over them. “Specific jurisdiction is very different” from general jurisdiction. Bristol-MyersSquibb Co. v. Superior Ct. of Cal., San Francisco Cty., U.S., 137 S.Ct. 1773, 1780 (2017). It exists when the forum state exercises personal jurisdiction over the defendant “in a suit arising out of or related to the defendant's contacts with the forum[.]” Helicopteros Nacionales de Colombia, S.A., 466 U.S. at 414 n.8. “[T]here must be an ‘affiliation between the forum and the underlying controversy, principally, [an] activity or an occurrence that takes place in the forum State.'” Bristol-Myers Squibb Co., 137 S.Ct. at 1780 (quoting Goodyear, 564 U.S. ...

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