Ash v. Burnham Corp.

343 S.E.2d 2, 80 N.C. App. 459, 1986 N.C. App. LEXIS 2216
CourtCourt of Appeals of North Carolina
DecidedMay 6, 1986
Docket8526SC1061
StatusPublished
Cited by18 cases

This text of 343 S.E.2d 2 (Ash v. Burnham Corp.) is published on Counsel Stack Legal Research, covering Court of Appeals of North Carolina primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Ash v. Burnham Corp., 343 S.E.2d 2, 80 N.C. App. 459, 1986 N.C. App. LEXIS 2216 (N.C. Ct. App. 1986).

Opinions

ARNOLD, Judge.

Determining whether foreign defendants may be subjected to in personam jurisdiction in this state involves a two-pronged test. First, the Court must determine whether jurisdiction is proper under the North Carolina “long-arm” statute, G.S. 1-75.4. Second, the Court must determine whether the exercise of jurisdiction violates due process of law. See Dillon v. Funding Corp., 291 N.C. 674, 231 S.E. 2d 629 (1977). Our Supreme Court has stated that the North Carolina “long-arm” statute provides for in personam jurisdiction to the full extent permitted by the United States Constitution. Id. Defendant does not deny that there are statutory grounds for the exercise of jurisdiction. Therefore, the only question before this Court is whether the North Carolina court’s assertion of jurisdiction over defendant is consistent with the Due Process Clause of the Fourteenth Amendment.

Generally, due process requirements demand that defendant have “certain minimum contacts with [the forum] such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.’ ” International Shoe Co. v. Washington, 326 U.S. 310, 316, 90 L.Ed. 95, 102, 66 S.Ct. 154, 158 (1945). Within the broad principle of International Shoe, different stand[461]*461ards apply in cases where the contact with the state gives rise to the cause of action and where, as in the instant case, plaintiffs claims arise totally outside of the state. Wolf v. Richmond Cty. Hosp. Authority, 745 F. 2d 904 (4th Cir. 1984), cert. denied, --- U.S. ---, 88 L.Ed. 2d 68, 106 S.Ct. 83, 54 U.S.L.W. 3224 (1985); accord, Dollar Sav. Bank v. First Sec. Bank of Utah, 746 F. 2d 208 (3rd Cir. 1984). The sufficiency of contacts threshold is elevated when the cause does not arise in the forum state or derive from the foreign corporation’s transactions in the state. Id. The United States Supreme Court has characterized the test applied when a plaintiff s claim does not arise out of or relate to a defendant’s activities in the forum state as whether the contacts are of a “continuous and systematic” nature. Wolf, 745 F. 2d at 909, citing Helicopteros Nacionales de Columbia, S.A. v. Hall, 466 U.S. 408, 80 L.Ed. 2d 404, 104 S.Ct. 1868 (1984). Thus, if Burnham conducts “continuous and systematic” corporate activities within this state, those activities are enough to make it fair and reasonable to subject Burnham to proceedings in personam in North Carolina, even though the cause of action arises out of an alleged malfunction of a boiler manufactured in Pennsylvania and installed in Ohio. See Perkins v. Benguet Consolidated Mining Co., 342 U.S. 437, 96 L.Ed. 485, 72 S.Ct. 413 (1952). Whether the type of activity conducted within the state is adequate to satisfy the due process requirements depends upon the facts of the particular case. Dillon, 291 N.C. at 679, 231 S.E. 2d at 632, citing Perkins, supra.

The relevant facts in the instant case are as follows: Burn-ham is a New York corporation with its principal place of business in New York. Burnham is not authorized to do business in North Carolina nor does it have an agent for service of process in this state. Burnham has never owned or leased any real property in North Carolina and has never maintained an office here. Burn-ham has no bank account or phone listings in this state. In 1984, Burnham sold approximately $520,000 worth of boilers to North Carolina customers accounting for about one-half percent of Burn-ham’s total boiler sales for the year. These sales were solicited by independent contractors who act as sales representatives for Burnham and other manufacturers. These representatives are paid by commission only. Burnham does not pay workers’ compensation or unemployment charges on their behalf. In addition Burn-ham lists certain offices of these representatives as places [462]*462through which customers can order repair parts from Lancaster, Pennsylvania. All orders for boilers placed through the representatives are accepted in either New York or Pennsylvania, and payments are mailed directly to a lock box in Pennsylvania. The boilers are shipped by common carrier f.o.b. Lancaster, Pennsylvania and are subject to a twenty-year limited warranty valid within the 48 contiguous United States. At least since 1978, Burn-ham has placed advertisements in several national magazines which reach North Carolina. Finally, a wholly owned subsidiary of Burnham, which is engaged in the business of greenhouse construction, is authorized to do business in North Carolina.

We find that these contacts with North Carolina are not so “continuous and systematic” as to warrant the exercise of in per-sonam jurisdiction in this case. First, “[w]hen a subsidiary of a foreign corporation is carrying on business in a particular jurisdiction, the parent is not automatically subject to jurisdiction in the state. Thus, if the subsidiary’s presence in the state is primarily for the purpose of carrying on its own business and the subsidiary has preserved some semblance of independence from the parent, jurisdiction over the parent may not be acquired on the basis of the local activities of the subsidiary.” 4 Wright and Miller, Federal Practice and Procedure: Civil § 1069, at 255-56 (1969); accord, Mills, Inc. v. Transit Co., 265 N.C. 61, 143 S.E. 2d 235 (1965). Burnham’s subsidiary constructs greenhouses. The subsidiary’s books are kept separate from those of Burnham and each files a separate tax return. The sales representatives who solicit orders for Burnham products in North Carolina do not solicit orders for the subsidiary. There is no evidence that Burnham and the subsidiary are not separate and independent, and we thus determine that the subsidiary’s presence in this state is not to be considered as a basis for asserting jurisdiction over Burnham.

The national advertising that reaches North Carolina is a factor to be considered; however, it alone does not constitute sufficient contacts to support jurisdiction. Marion v. Long, 72 N.C. App. 585, 325 S.E. 2d 300, disc. rev. denied, 313 N.C. 604, 330 S.E. 2d 612 (1985). The standard of “continuous and systematic” general business contacts requires more. Nor do we find the limited warranties sufficient to meet this elevated standard.

[463]*463Finally, though it is a close question, we do not believe that Burnham’s system of employing independent sales representatives and the resultant $520,000 in sales are sufficient to support jurisdiction. In reaching this decision we rely on the following cases. Putnam v. Publications, 245 N.C. 432, 96 S.E. 2d 445 (1957), was a civil action for libel and invasion of privacy in which the defendant, a magazine and newspaper publisher, delivered its magazines by common carrier f.o.b. locations outside North Carolina to 18 independent wholesale dealers in this state for resale. This business transaction included a provision for credit to the dealers for unsold copies. The defendant also employed sales promotion representatives who made several business trips within this state. The court held that these were insufficient contacts for the purpose of in personam jurisdiction.

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Ash v. Burnham Corp.
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Bluebook (online)
343 S.E.2d 2, 80 N.C. App. 459, 1986 N.C. App. LEXIS 2216, Counsel Stack Legal Research, https://law.counselstack.com/opinion/ash-v-burnham-corp-ncctapp-1986.