1. Jurisdiction--long-arm--specific
The trial court erred in an action for misappropriation of trade secrets by granting
defendant's motion to dismiss for lack of personal jurisdiction where the controversy arose out
of defendant's contacts with this state and specific jurisdiction was sought. Defendant admitted
sending the mail in question to at least 50 North Carolina suppliers soliciting their business and
the misappropriation therefore concluded in North Carolina. Moreover, defendant engaged in
other acts which may have originated in Missouri but were directed to and concluded in North
Carolina. Defendant therefore availed itself of the privilege of conducting business in North
Carolina on numerous occasions.
2. Jurisdiction--long-arm--general
The trial court erred in an action for misappropriation of trade secrets by granting
defendant's motion to dismiss for lack of personal jurisdiction where, assuming that general
jurisdiction analysis applied, defendant maintained systematic and continuous contacts with
North Carolina through its business relationship with plaintiff and availed itself of the privilege
of doing business here through direct mail to at least 50 residents, advertisements in journals
circulated in North Carolina, and advertisement on an Internet website available to North
Carolina citizens. Appeal by plaintiff from an order entered 25 March 1998 by
Judge Michael E. Beale in Guilford County Superior Court. Heard
in the Court of Appeals 1 April 1999.
Brooks, Pierce, McLendon, Humphrey & Leonard, LLP, by Jim W.
Phillips, Jr. and Natasha Rath Marcus, for plaintiff-
appellant.
Anderson & Associates, P.C., by Joseph L. Anderson, for
defendant-appellee.
HUNTER, Judge.
The dispositive issue in this case is whether the trial
court erred in granting the defendant MidweSterling's motion to
dismiss for lack of personal jurisdiction.
Plaintiff Replacements, Inc. (Replacements) is a North
Carolina corporation which buys and sells discontinued and active
china, crystal, flatware, and collectibles. Defendant
MidweSterling (MidweSterling) is a general partnership
headquartered in Missouri which deals in sterling flatware,
holloware, and other silverware. Replacements filed the
complaint in this matter alleging causes of action against
defendant MidweSterling for misappropriation of trade secrets
under the North Carolina Trade Secrets Protection Act.
Specifically, Replacements contends that in August 1997,
MidweSterling came into possession of its suppliers list and used
it to contact potential customers in North Carolina without the
consent of Replacements. MidweSterling did not answer, but
instead filed a motion to dismiss for lack of personal
jurisdiction. The trial court granted MidweSterling's motion todismiss on 25 March 1998. Replacements appeals.
The determination of whether jurisdiction is statutorily and
constitutionally permissible due to contact with the forum is a
question of fact. See Chadbourn, Inc. v. Katz, 285 N.C. 700, 208
S.E.2d 676 (1974); Parris v. Disposal, Inc., 40 N.C. App. 282,
253 S.E.2d 29, disc. review denied, 297 N.C. 455, 256 S.E.2d 808
(1979). The standard of review of an order determining personal
jurisdiction is whether the findings of fact by the trial court
are supported by competent evidence in the record; if so, this
Court must affirm the order of the trial court. Better Business
Forms, Inc. v. Davis, 120 N.C. App. 498, 462 S.E.2d 832 (1995).
A claim should be dismissed under Rule 12(b)(6) where it appears
that plaintiff is not entitled to relief under any set of facts
which could be proven. Miller v. Nationwide Mutual Ins. Co., 112
N.C. App. 295, 435 S.E.2d 537 (1993), disc. review denied, 335
N.C. 770, 442 S.E.2d 519 (1994). Therefore, [t]he question for
the [appellate] court is whether, as a matter of law, the
allegations of the complaint, treated as true, are sufficient to
state a claim upon which relief can be granted under some legal
theory, whether properly labeled or not. Id. at 300, 435
S.E.2d. at 541.
The evidence presented to the trial court indicates that
MidweSterling, by its own admission, mailed an advertisement to
at least fifty North Carolina residents in August 1997. While
MidweSterling denies appropriating Replacements' trade secrets
with the mass mailing, it does not deny that it directly
solicited business in this state by mailing advertisement toresidents of North Carolina. Additionally, Replacements
submitted evidence that MidweSterling has had continual business
and contractual business with Replacements prior to the August
1997 mass mailing, including (1) selling and shipping merchandise
to Replacements in the amount of approximately $65,000.00; (2)
purchasing merchandise from Replacements on at least ten
occasions; (3) telephoning Replacements' office in North Carolina
on several occasions; (4) contracting with Replacements to
participate in Replacements' Star Supplier program, for which
MidweSterling has paid $100.00 per year; and (5) maintaining with
Replacements a supplier list of various patterns of silverware it
is interested in purchasing. MidweSterling admits soliciting
virtually all of its business through advertisements in
nationally-distributed antique, home, interior and similar trade
journals and magazines. Those journals and magazines are
distributed in North Carolina and are available to North Carolina
residents. MidweSterling also maintains a website, which allows
residents throughout all the United States, including North
Carolina, to place orders via internet access. Following its
examination of the evidence and oral arguments of counsel, the
trial court made the following findings of fact:
[T]he plaintiff has offered no evidence to
support that the alleged misconduct
complained about in the Complaint occurred
within the state of North Carolina, but that
instead all of the evidence is that the
alleged conduct occurred outside the state of
North Carolina, in the state of Missouri, the
Court so finds as a fact, and therefore
applies the heightened analysis required by
the general jurisdiction cases[.]
[P]laintiff has not produced evidence ofsystematic and continuous contacts between
the defendant and the forum state of North
Carolina sufficient to support this Court's
exercise of personal jurisdiction over the
defendant.
Based on these findings, the case was dismissed for lack of
personal jurisdiction over the defendant.
In order for MidweSterling to be subject to personal
jurisdiction in the case sub judice, North Carolina's long-arm
statute and the Due Process Clause of the United States
Constitution must be satisfied. Dillon v. Funding Corp., 291
N.C. 674, 231 S.E.2d 629 (1977). Our long-arm statute provides
for personal jurisdiction in any action claiming injury to person
or property within this state arising out of an act or omission
in this state, N.C. Gen. Stat. § 1-75.4(3) (1996); an act or
omission outside this state by the defendant, provided in
addition that at or about the time of the injury either:
a. Solicitation or services activities were
carried on within this State by or on
behalf of the defendant; or
b. Products, materials, or thing processed,
serviced or manufactured by the
defendant were used or consumed, within
this State in the ordinary course of
trade.
N.C. Gen. Stat. § 1-75.4(4)a, b (1996). Personal jurisdiction is
also property in any action which:
a. Arises out of a promise . . . by the
defendant to perform services . . . or
to pay for services . . . in this
State . . .; or
b. Arises out of services . . . performed
for the plaintiff by the defendant
within this State . . .; or
c. Arises out of a promise, made anywhere
. . . by the defendant to deliver or
receive within this State . . . things
of value; or d. Relates to goods . . . shipped from this
State by the plaintiff to the defendant
on his order or direction; or
e. Relates to goods, documents of title, or
other things of value actually received
by plaintiff in this State from the
defendant . . . .
N.C. Gen. Stat. § 1-75.4(5)a-e (1996).
When personal jurisdiction is alleged to exist pursuant to
the long-arm statute, the question of statutory authority
collapses into one inquiry -- whether the defendant has the
minimum contacts with North Carolina necessary to meet the
requirements of due process. Murphy v. Glafenhein, 110 N.C. App.
830, 431 S.E.2d 241, disc. review denied, 335 N.C. 176, 436
S.E.2d 382 (1993). In order to satisfy the requirements of the
Due Process Clause, the pivotal inquiry is whether the defendant
has established certain minimum contacts with [the forum state]
such that maintenance of the suit does not offend 'traditional
notions of fair play and substantial justice.' Id. at 835, 431
S.E.2d at 244 (quoting International Shoe Co. v. Washington, 326
U.S. 310, 316, 90 L. Ed. 95, 102 (1945)). The factors used in
determining the existence of minimum contacts include '(1)
quantity of the contacts, (2) nature and quality of the contacts,
(3) the source and connection of the cause of action to the
contacts, (4) the interest of the forum state, and (5)
convenience to the parties.' Murphy, 110 N.C. App. at 835, 431
S.E.2d at 244 (quoting Cherry Bekaert & Holland v. Brown, 99
N.C. App. at 632, 394 S.E.2d at 655-56 (1990)).
[1]/A HREF>The United States Supreme Court has noted two types of
long-arm jurisdiction: specific jurisdiction, where thecontroversy arises out of the defendant's contacts with the forum
state, and general jurisdiction, where the controversy is
unrelated to the defendant's activities within the forum, but
there are sufficient contacts between the forum and the
defendant. Helicopteros Nacionales de Colombia, S.A. v. Hall,
466 U.S. 408, 414, 80 L. Ed. 2d 404, 411 (1984). The controversy
in this case arises out of the alleged misappropriation of trade
secrets of the plaintiff by the defendant. The misappropriation
occurred when the defendant obtained the list and used it to send
advertisement literature to North Carolina residents. Because
the controversy arises out of defendant's contacts with this
state, specific jurisdiction is sought. See Tom Togs, Inc. v.
Ben Elias Industries Corp., 318 N.C. 361, 348 S.E.2d 782 (1986).
With specific jurisdiction, the court must analyze the
relationship among the defendant, the forum state, and the cause
of action. Buck v. Heavner, 93 N.C. App. 142, 145, 377 S.E.2d
75, 77 (1989). In a case similar to the present one, our Supreme
Court held that by making an offer to a North Carolina plaintiff
to enter into a contract made in this state and having
substantial connection with it, a defendant purposefully availed
itself of the protection and benefits of our law and sufficient
minimum contacts justified the exercise of specific jurisdiction.
Tom Togs, Inc., 318 N.C. at 367-68, 348 S.E.2d at 787. In that
case, the Court found that a single contract had substantial
connection to North Carolina when (1) defendant contacted
plaintiff, whom plaintiff knew to be located in North Carolina,
thus the contract for the manufacture of shirts was made in NorthCarolina; (2) defendant was told the shirts would be cut in North
Carolina, and defendant agreed to send its personal labels to
plaintiff in North Carolina to be attached, thus defendant was
aware that the contract would be performed in this state; (3)
shirts were manufactured and shipped from this state; and (4)
after defendant became dissatisfied with the shirts, it returned
them to this state. Id. at 367, 348 S.E.2d at 786-87.
In the present case, the controversy concerns
MidweSterling's alleged misappropriation of trade secrets under
the North Carolina Trade Secrets Protection Act (Act).
"Misappropriation" is defined in the act as acquisition,
disclosure, or use of a trade secret of another without express
or implied authority or consent, unless such trade secret was
arrived at by independent development, reverse engineering, or
was obtained from another person with a right to disclose the
trade secret. N.C. Gen. Stat. § 66-152(1) (1992). The alleged
misappropriation in the present case includes use of the trade
secret information to address mail to at least fifty North
Carolina suppliers soliciting their business. By its own
admission, MidweSterling sent the mail in question, which was
received in this state in August 1997. Therefore, the
misappropriation, or use, concluded in North Carolina. If a
defendant has purposefully directed activities towards the
state's residents, it has fair warning that it may be sued in
this forum, and the assertion of specific jurisdiction is proper.
See Tom Togs, Inc., 318 N.C. at 366, 348 S.E.2d at 786 (citing
Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474, 85 L. Ed. 2d528, 540-41 (1985)). Beyond the contact from which the
controversy in this case arises, MidweSterling has, throughout
the past several years, entered into numerous sales contracts
with Replacements, a North Carolina corporation doing business in
this state. The contracts were substantially performed and the
goods were shipped from this state. MidweSterling also
contracted to participate in an ongoing Star Supplier program
with Replacements, has maintained a supplier list with
Replacements, and has contacted Replacements by telephone calls
to North Carolina on several occasions. At the same time,
MidweSterling has regularly advertised in magazines and journals
which are distributed in North Carolina. While all of these acts
may have originated in Missouri, most were directed to, and all
concluded in, the state of North Carolina. Most required or
solicited performance in North Carolina. Therefore,
MidweSterling has availed itself of the privilege of conducting
business in this state on numerous occasions, and personal
jurisdiction is proper.
Here, the trial court determined that the alleged conduct
occurred outside the state of North Carolina, in the state of
Missouri, and therefore applied the heightened analysis required
by the 'general jurisdiction' cases. Based on the meaning of
misappropriation in the Act and evidence presented to the trial
court, we disagree with this finding and the court's ultimate
conclusion. However, assuming arguendo that the controversy in
this case did not arise from the contacts with this forum because
the misappropriation of trade secrets occurred outside of NorthCarolina, we find that the exercise of general jurisdiction would
be proper.
[2]General jurisdiction may be asserted over the
defendant even if the cause of action is unrelated to defendant's
activities in the forum as long as there are sufficient
"continuous and systematic" contacts between defendant and the
forum state. Fraser v. Littlejohn, 96 N.C. App. 377, 383, 386
S.E.2d 230, 234 (1989) (citing Helicopteros Nacionales de
Colombia v. Hall, 466 U.S. 408, 414, 80 L. Ed. 2d 404, 411. The
United States Supreme Court recognized that the threshold for
satisfying minimum contacts for general jurisdiction is higher
than in specific jurisdiction cases. In order to assert general
jurisdiction there must be "substantial" forum-related minimum
contacts on the part of the defendant. Id.
In the present case, there are substantial forum-related
minimum contacts on the part of the defendant. As discussed
previously, MidweSterling has maintained systematic and
continuous contacts with North Carolina since 1994 through its
business relationship with Replacements, including purchases of
approximately $65,000.00, participation in Replacements' Star
Supplier program, and maintenance of a supplier list with
Replacements of patterns of silverware MidweSterling is
interested in purchasing. MidweSterling has placed several phone
calls to Replacements' North Carolina headquarters regarding
business transactions. It has purposely availed itself of the
privilege of doing business here through direct mail to at least
fifty residents and advertisements in journals which arecirculated in North Carolina. It advertises on an internet
website which is available to North Carolina citizens. If a
defendant has purposefully avail[ed] itself of the privilege of
conducting activities within the forum State, it has thus
invok[ed] the benefits and protections of its laws. Hanson v.
Denckla, 357 U.S. 235, 253, 2 L. Ed. 2d 1283, 1298 (1958); see
Dillon v. Funding Corp., 291 N.C. 674, 231 S.E.2d 629 (1977)
(exercise of personal jurisdiction proper over non-resident
defendant corporation where it had purposely availed itself of
the privilege of doing business here by actively soliciting
orders by mailing twenty-seven advertisements to North
Carolinians). Therefore, a finding of general jurisdiction in
this case would also be proper.
Based on the foregoing, we find controversy at issue arises
from the contacts by MidweSterling in the state of North
Carolina, which are sufficient to satisfy the requirements of our
long-arm statute and the Due Process Clause. Therefore, the
exercise of personal jurisdiction is proper. Competent evidence
does not support the trial court's findings of fact. Where a
trial court's finding of fact is not supported by competent
evidence, the corresponding conclusions of law are likewise
erroneous. Ronald G. Hinson Electric, Inc. v. Union County Bd.
of Educ., 125 N.C. App. 373, 379, 481 S.E.2d 326, 330 (1997).
Accordingly, we find that the trial court erred in the order of
25 March 1998.
Reversed and remanded.
Judges WYNN and WALKER concur.
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