Opinion
No. COA13–119.
2013-08-6
R.H. DONNELLEY INC., a subsidiary of Dex One Corporation, Plaintiff v. EMBARQ CORPORATION; Embarq Directory Trademark Company, LLC; Embarq Minnesota, Inc.; Embarq Florida, Inc.; Carolina Telephone & Telegraph Co.; United Telephone—Southeast, Inc.; United Telephone Company of the Carolinas; United Telephone Company of Southcentral Kansas; United Telephone Company of Eastern Kansas; United Telephone Company of Kansas; Embarq Missouri, Inc; United Telephone Company of Texas, Inc.; United Telephone Company of the West; The United Telephone Company of Pennsylvania; United Telephone Company of New Jersey, Inc.; United Telephone Company of the Northwest; United Telephone Company of Ohio; United Telephone Company of Indiana, Inc.; Central Telephone Company; Central Telephone Company of Virginia; Central Telephone Company of Texas; All Subsidiaries of Centurylink, Inc., Defendants.
Law Offices of Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P., by Clifton L. Brinson, Christopher G. Smith and Isaac A. Linnartz, for plaintiff-appellee. Law Offices of Bryan Cave, L.L.P., by Mark Vasco and Christina Davidson Trimmer, for defendant-appellants.
Appeal by defendants from order entered 31 October 2012 by Judge Michael J. O'Foghludha in Wake County Superior Court. Heard in the Court of Appeals 22 May 2013. Law Offices of Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P., by Clifton L. Brinson, Christopher G. Smith and Isaac A. Linnartz, for plaintiff-appellee. Law Offices of Bryan Cave, L.L.P., by Mark Vasco and Christina Davidson Trimmer, for defendant-appellants.
CALABRIA, Judge.
Embarq Corporation, et al. (“defendants”) appeal from the trial court's order denying their motion to dismiss the declaratory judgment action filed by R.H. Donnelley Inc. (“plaintiff”) for lack of personal jurisdiction. We affirm.
Defendants Carolina Telephone and Telegraph Company and Central Telephone Company did not file a motion to dismiss based upon lack of personal jurisdiction and are not parties to the appeal.
I. Background
Plaintiff is a subsidiary of Dex One Corporation (“Dex”), which is headquartered in Cary, North Carolina. Defendants are local telephone exchange service providers located throughout the country, operating under the common name of their parent company, CenturyLink. On 16 May 2006, plaintiff entered into a contract with defendants to “produce, publish, and distribute” telephone directories to CenturyLink subscribers within defendants' service areas (“the contract”).
Defendants had previously entered into a similar contract with Dex during which Dex performed much of the work related to the publishing of the telephone directories in North Carolina. Dex has similarly substantially performed the present contract in North Carolina. Specifically, thirty of Dex's employees spend in excess of 1,300 hours per month performing the contract. Dex's employees in North Carolina carry out a variety of tasks that constitute a substantial part of the performance of the contract such as producing and publishing the directories. However, Dex also uses subsidiaries in Illinois, Washington, Colorado, and Iowa to print and distribute the directories.
The contract includes a choice of law provision which states that Delaware law governs “the rights and obligations of the parties” under the contract. The contract also includes a forum selection clause, which states that “any court proceeding brought by either Party shall be brought in the United States District Court for the District of Delaware in Wilmington, Delaware.”
During its performance of the contract, Dex attempted to alter its directory distribution policy from compulsory distribution to every subscriber to “upon-request” distribution. On 4 May 2012, plaintiff initiated a declaratory judgment action against defendants in Wake County Superior Court seeking a declaration that the contract permitted plaintiff to unilaterally change its distribution policy. On 13 July 2012, defendants filed a motion to dismiss for lack of personal jurisdiction. After a hearing, the trial court denied defendants' motion on 31 October 2012. Defendants appeal.
II. Interlocutory Appeal
As an initial matter, we note that defendants appeal from an interlocutory order. An interlocutory order may be appealed when it affects a substantial right, and “motions to dismiss for lack of personal jurisdiction affect a substantial right and are immediately appealable.” A.R. Haire, Inc. v. St. Denis, 176 N.C.App. 255, 257–58, 625 S.E.2d 894, 898 (2006). Thus, defendants' appeal is properly before us.
III. Standard of Review
When this Court reviews a decision as to personal jurisdiction, it considers only 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. Where no exception is taken to a finding of fact by the trial court, the finding is presumed to be supported by competent evidence and is binding on appeal.
Nat'l Util. Review, LLC v. Care Ctrs., Inc., 200 N.C.App. 301, 303, 683 S.E.2d 460, 463 (2009). The Court will then “conduct a de novo review of the trial court's conclusions of law to determine whether, given the facts found by the trial court, the exercise of personal jurisdiction would violate defendant's due process rights.” Deer Corp. v. Carter, 177 N.C.App. 314, 322, 629 S.E.2d 159, 165 (2006).
IV. Personal Jurisdiction
Defendants argue that the trial court erred by denying their motion to dismiss for lack of personal jurisdiction. We disagree.
For a North Carolina court to exercise personal jurisdiction over a nonresident, it must satisfy a two-part test: (1) the transaction must fall within North Carolina's long-arm statute; and (2) the exercise of jurisdiction must not violate due process. Tom Togs, Inc. v. Ben Elias Indus. Corp., 318 N.C. 361, 364, 348 S.E.2d 782, 785 (1986).
In North Carolina, the controlling long-arm statute is N.C. Gen.Stat. § 1–75.4 (2011). This Court has previously explained that this statute should be
liberally construed to find personal jurisdiction over nonresident defendants to the full extent allowed by due process. Accordingly, when evaluating the existence of personal jurisdiction pursuant to [this statute], the question of statutory authorization collapses into the question of whether [the defendant] has the minimum contacts with North Carolina necessary to meet the requirements of due process.
Lulla v. Effective Minds, LLC, 184 N.C.App. 274, 277, 646 S.E .2d 129, 132 (2007) (internal quotations and citation omitted). Thus, the ultimate question in determining whether the trial court properly exercised personal jurisdiction over defendants is whether defendants have sufficient minimum contacts with North Carolina to satisfy the requirements of due process.
The United States Supreme Court has held that the Constitution requires that parties brought into state court have “minimum contacts with it such that the 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, 66 S.Ct. 154, 158, 90 L.Ed. 95, 102 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 343, 85 L.Ed. 278, 283 (1940)). In order to establish these minimum contacts, a defendant must purposefully avail himself “of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws[.]” Tom Togs, 318 N.C. at 365, 348 S.E .2d at 786. “[A] single contract may be a sufficient basis for the exercise of in personam jurisdiction if it has a substantial connection with this State.” Id. at 367, 348 S.E.2d at 786 (emphasis added). In the instant case, the parties dispute whether the contract between plaintiff and defendants has a substantial connection with North Carolina.
Initially, we note that neither the forum selection clause nor the choice of law clause included in the contract are determinative on the issue of personal jurisdiction. In regards to the forum selection clause, this Court has stated that
the general rule is when a jurisdiction is specified in a provision of contract, the provision generally will not be enforced as a mandatory selection clause without some further language that indicates the parties' intent to make jurisdiction exclusive. See, e.g., S & D Coffee, Inc. v. GEI Auto Wrappers, 995 F.Supp. 607, 610 (M.D.N.C.1997). Indeed, mandatory forum selection clauses recognized by our appellate courts have contained words such as “exclusive” or “sole” or “only” which indicate that the contracting parties intended to make jurisdiction exclusive.
Mark Grp. Int'l, Inc. v. Still, 151 N.C.App. 565, 568, 566 S.E.2d 160, 162 (2002). Thus, in Mark Grp., this Court found the following forum selection clause was not mandatory:
The parties shall attempt to amicably settle any disagreement or dispute which may arise between them. In the case said dispute cannot be settled amicably then it shall finally be settled, and the undersigned hereby submits itself to the jurisdiction of the 13th Judicial District Court of Hillsborough County Florida U.S.A. in order to resolve any such dispute.
Id. at 566, 566 S.E.2d at 161.
The forum selection clause in the contract in the instant case cannot be materially distinguished from the clause at issue in Mark Grp., which purported to cover “any disagreement or dispute which may arise....” Id. The contract in this case states that “[a]ny court proceeding brought by either Party shall be brought in the United States District Court for the District of Delaware in Wilmington, Delaware. Each Party agrees to personal jurisdiction in such court.” While this clause subjects the parties to jurisdiction in Delaware, it does not constitute a mandatory forum selection clause because it did not include the necessary additional words to demonstrate an intention to establish exclusive jurisdiction. This Court has not interpreted the phrase “shall be” as sufficient to create a mandatory forum selection clause. See id. at 568, 566 S.E.2d at 162;see also Cable Tel Servs., Inc. v. Overland Contr'g, Inc., 154 N.C.App. 639, 645, 574 S.E.2d 31, 35 (2002) (holding that a forum selection clause that “provide[d] that the contract ‘shall be subject to the ... jurisdiction of the State of Colorado ...’ but d[id] not indicate that the state courts in Colorado ... have ‘sole’ or ‘exclusive’ jurisdiction” was insufficient to establish exclusive jurisdiction). Thus, the forum selection clause in the contract is not a mandatory forum selection clause and does not prevent courts in North Carolina from exercising personal jurisdiction over defendants.
Next, regarding the choice of law clause in the contract, “[t]his Court has held that [w]hile choice of law clauses are not determinative of personal jurisdiction, they express the intention of the parties and are a factor in determining whether minimum contacts exist and due process was met.” Banc of Am. Secs. LLC v. Evergreen Int'l Aviation, Inc., 169 N.C.App. 690, 700, 611 S.E.2d 179, 186 (2005)(internal quotations and citation omitted). Thus, while we must consider this clause in our due process analysis, it does not, standing alone, operate to defeat personal jurisdiction over defendants. See id. (concluding that a choice of law provision did not prevent personal jurisdiction in North Carolina when the defendant had sufficient minimum contacts in North Carolina to satisfy due process).
Our Supreme Court has held that a contract has a substantial connection with North Carolina sufficient to establish minimum contacts when (1) the defendant made a contract with a plaintiff whom the defendant knew to be located in North Carolina; and (2) when the defendant knew the contract was to be substantially performed in North Carolina. Tom Togs, 318 N.C. at 367, 348 S.E .2d at 786–87;see also Nat'l Util. Review, 200 N.C.App. at 305, 683 S.E.2d at 464.
In the instant case, the trial court found that defendants knew that Dex would be substantially performing the contract in North Carolina when they entered into the contract and that defendants were aware on an ongoing basis that Dex continued to perform work on the contract in North Carolina. Defendants challenge the trial court's findings regarding their knowledge of Dex's performance as being unsupported by the evidence.
However, defendants do not challenge the trial court's finding that Dex is headquartered in North Carolina, as stated in the contract, or the finding that there was a prior contract between Dex and defendants during which Dex performed, with defendants' knowledge, a substantial amount of the work related to the publishing of the directories in North Carolina. Indeed, multiple Dex employees submitted affidavits which averred that defendants knew that the previous contract was substantially performed by Dex in North Carolina. Since defendants knew both that Dex was located in North Carolina and that Dex had previously performed the same work for defendants in North Carolina pursuant to a prior contract, it was logical for the trial court to find that defendants had knowledge that Dex would also substantially perform the present contract in North Carolina. See Climatological Consulting Corp. v. Trattner, 105 N.C.App. 669, 674, 414 S.E.2d 382, 385 (1992)(“Based upon his previous work experience with plaintiff and the location of plaintiff's offices, it is logical to conclude that defendant knew the majority of plaintiff's services would be performed in North Carolina.”). Thus, the trial court's findings were supported by competent evidence.
Defendants also contend that even if the trial court's findings were supported by the evidence, they are insufficient to support the conclusion that defendants had sufficient minimum contacts with North Carolina. Defendants note that Dex has a presence throughout the country, and therefore contend that they were “free to assume that Dex would perform the Agreement in any of these locations.”
This Court has previously explained that
[i]t is the clear, consistent rule that knowledge of the location of the work is relevant and does matter for a purposeful availment analysis. Defendant's knowledge that plaintiff is located in North Carolina and that the services expected from plaintiff were to be performed in North Carolina enabled it to reasonably anticipate being brought into court in North Carolina. Therefore, defendant purposefully availed itself of the benefits of doing business in North Carolina and reasonably could have expected that it would be brought into this state's courts.
Nat'l Util. Review, 200 N.C.App. at 305, 683 S.E.2d at 464–65. Thus, the trial court's findings in the instant case, which establish that defendants had knowledge that Dex was located in North Carolina and that Dex substantially performed the contract with defendants in North Carolina, demonstrate that defendants “purposefully availed [themselves] of the benefits of doing business in North Carolina and reasonably could have expected that [they] would be brought into this state's courts.” Id. Consequently, the trial court properly concluded that defendants “could reasonably expect to be subject to jurisdiction in North Carolina courts.”
Finally, defendants contend that it would be inconvenient for them to litigate this case in North Carolina. However, “[l]itigation on interstate business transactions inevitably involves inconvenience to one of the parties. When [t]he inconvenience to defendant of litigating in North Carolina is no greater than would be the inconvenience of plaintiff of litigating in [defendant's state] ... no convenience factors ... are determinative[.]” Cherry Bekaert & Holland v. Brown, 99 N.C.App. 626, 635, 394 S.E.2d 651, 657 (1990) (internal quotations and citations omitted). Furthermore, defendants neither submitted any evidence showing that it would be inconvenient for them to appear in North Carolina for proceedings nor any evidence that they lack the resources to litigate in North Carolina. Therefore, the trial court did not err in denying defendants' motion to dismiss for lack of personal jurisdiction because defendants had sufficient minimum contacts with North Carolina, satisfying due process. This argument is overruled.
V. Conclusion
The trial court's findings of fact were supported by competent evidence and support its determination that defendants had sufficient minimum contacts with North Carolina such that the exercise of personal jurisdiction over defendants satisfied due process. The trial court's order denying defendants' motion to dismiss is affirmed.
Affirmed. Judges STEELMAN and McCULLOUGH concur.
Report per Rule 30(e).