Curvature, Inc. v. Cantel Comput. Servs. Ltd.

2019 NCBC 47

• Court: North Carolina Business Court
• Decided: August 13, 2019
• Docket: 19-CVS-3095
• Status: Published

Opinion

Curvature, Inc. v. Cantel Comput. Servs. Ltd., 2019 NCBC 47.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION MECKLENBURG COUNTY 19 CVS 3095

CURVATURE, INC.,

Plaintiff,

v. ORDER AND OPINION ON DEFENDANT’S MOTION TO CANTEL COMPUTER SERVICES DISMISS AND ALTERNATIVE LTD., MOTION TO STAY Defendant.

1. This is Curvature, Inc.’s second attempt to assert claims against Cantel

Computer Services Ltd. (“Cantel”) for allegedly stealing its employees, customers,

and trade secrets. Believing itself bound by a written arbitration agreement,

Curvature first initiated an arbitration proceeding in early 2018. That proceeding

was closed without a resolution on the merits after Cantel successfully objected to the

arbitrator’s authority to decide certain threshold questions. Turned away by the

arbitrator, Curvature filed this action to seek judicial resolution of its claims.

2. Cantel now contends that this Court, too, is the wrong forum for resolving

the parties’ disputes. Cantel, an English company, argues that the Court lacks

personal jurisdiction over it and seeks to dismiss the complaint on that basis. (ECF

No. 4.) In the alternative, it seeks to stay all proceedings under N.C.G.S. § 1-75.12

on forum non conveniens grounds. (ECF No. 18.)

3. For the following reasons, the Court GRANTS the motion to dismiss and

DENIES the alternative motion to stay as moot.

Moore & Van Allen PLLC, by Benjamin P. Fryer, Emily C. Pera, and D. Jared Nobles, Jr., for Plaintiff Curvature, Inc. Carruthers & Roth, P.A., by Brandon Kenneth Jones and Michael J. Allen, for Defendant Cantel Computer Services Ltd.

Conrad, Judge.

I. DISCUSSION

4. When, as here, the parties submit dueling affidavits on the subject of

personal jurisdiction, the Court may decide the issue based on the affidavits. See,

e.g., Capitala Grp., LLC v. Columbus Advisory Grp. LTD, 2018 NCBC LEXIS 183, at

*3 (N.C. Super. Ct. Dec. 3, 2018); see also N.C. R. Civ. P. 43(e). The Court “must

determine the weight and sufficiency of the evidence presented in the affidavits much

as a juror.” Banc of Am. Sec. LLC v. Evergreen Int’l Aviation, Inc., 169 N.C. App. 690,

694, 611 S.E.2d 179, 183 (2005) (citation, alteration, and quotation marks omitted);

accord Embark, LLC v. 1105 Media, Inc., 231 N.C. App. 538, 542, 753 S.E.2d 166, 170

(2014). “[T]he plaintiff bears the burden of proving, by a preponderance of the

evidence, grounds for exercising personal jurisdiction over a defendant.” Bauer v.

Douglas Aquatics, Inc., 207 N.C. App. 65, 68, 698 S.E.2d 757, 761 (2010).

5. The Court held a hearing on July 17, 2019, at which both parties were

represented by counsel. Having considered all relevant matters, the Court finds the

following facts by a preponderance of the evidence.

A. Findings of Fact

6. Curvature provides information technology services in the United States

and abroad. (Aff. of Patrick Barry ¶ 3, ECF No. 24 [“Barry Aff.”].) A global business

often demands a global presence, and so Curvature has a number of wholly owned subsidiaries outside the United States in addition to keeping its headquarters in

Charlotte, North Carolina. (See Barry Aff. ¶¶ 3, 4.) Curvature also engages local

subcontractors in foreign countries to provide added customer support. (See Barry

Aff. ¶ 4.)

7. The parties dispute whether Cantel, a technology company based solely in

England, agreed to serve as one of Curvature’s subcontractors. (See, e.g., Barry Aff.

¶ 6; Aff. of Richard Sharpe ¶¶ 2, 3, 27, 34, ECF No. 15 [“Sharpe Aff.”].) It is clear that

no contractual relationship existed between Curvature and Cantel before September

2017. Up to that point, Cantel had done some work for a company that would become

known as Curvature Services (UK) Limited, one of Curvature’s wholly owned

subsidiaries. (See Sharpe Aff. ¶ 23; Barry Aff. ¶ 12.) All of that work took place in

the United Kingdom, and the relevant contracts were between Cantel and the

subsidiary, not Cantel and Curvature. (See Sharpe Aff. ¶ 23.) Then, in September

2017, Curvature provided a Master Services Agreement, which purported to create a

direct contractual relationship between Curvature and Cantel. (See Sharpe Aff.

¶ 27.) Cantel signed that agreement, later attempted to withdraw its assent, and

now challenges the agreement’s validity. (See Sharpe Aff. ¶¶ 58, 59, 63.)

8. Whether valid or not, the Master Services Agreement was not negotiated in

North Carolina. In fact, there were no negotiations at all. Richard Sharpe, one of

Cantel’s directors, signed the Master Services Agreement on its behalf. (See Sharpe

Aff. ¶ 28.) Sharpe’s unrebutted testimony is that he received an unsolicited and

unexpected e-mail from a Dutch representative of Curvature, requesting that he sign and return the agreement and a few other forms. (See Sharpe Aff. ¶ 26, Ex. A.)

Sharpe went along with the request, signed the agreement without reading most of

it, and then e-mailed it back to the same Dutch employee just a few hours later. (See

Sharpe Aff. ¶ 28.) That brief exchange between individuals in England and the

Netherlands did not involve anyone based in North Carolina. (See Sharpe Aff. ¶ 26.)

9. Nor did the Master Services Agreement contemplate that Cantel would

perform any services in North Carolina. Whether Cantel performed any services at

all under the agreement is disputed. (See Sharpe Aff. ¶¶ 43–47, Ex. D; see also Barry

Aff. ¶ 13.) The Court need not decide that question because any services Cantel did

perform occurred entirely within the United Kingdom (and, thus, outside North

Carolina). (See Sharpe Aff. ¶¶ 43, 44.) Based on this unrebutted evidence, the Court

finds that no services were intended to be performed or actually performed in North

Carolina.

10. Though the Master Services Agreement was neither negotiated in nor

performed in North Carolina, it does include two relevant references to the State.

The first is a choice-of-law provision stating that the agreement shall be governed by

North Carolina law. (See Barry Aff. Attachment 1 § 17, ECF No. 24.1.)1 The other

provision is an arbitration clause stating, in relevant part, that

any dispute between the parties arising under this Agreement, excluding any claim related to Curvature’s collection of fees and charges payable under this Agreement, shall be submitted exclusively to binding arbitration in accordance with the rules of the American Arbitration

1 The parties dispute the legitimacy of the signatures on this copy of the Master Services

Agreement. The Court makes no finding on that issue and cites this version solely for ease of reference to relevant terms. Association. The venue of such arbitration shall be in Charlotte, North Carolina.

(Barry Aff. Attachment 1 § 17.)

11. In April 2018, Curvature invoked the arbitration clause and filed a demand

with the American Arbitration Association. (See Sharpe Aff. Ex. M.) It alleged that

Cantel had breached the Master Services Agreement by, among other things, hiring

away three employees of Curvature’s UK-based subsidiary and using Curvature’s

confidential and trade-secret information to compete against it. (See Sharpe Aff. Ex.

M.) Cantel opposed the arbitration and persuaded the arbitrator to close the

proceeding without rendering a decision on the merits. (See Sharpe Aff. ¶ 64, Ex. N.)

B. Conclusions of Law

12. “Personal jurisdiction refers to the Court’s ability to assert judicial power

over the parties and bind them by its adjudication.” In re A.B.D., 173 N.C. App. 77,

83, 617 S.E.2d 707, 711 (2005) (citation and quotation marks omitted). The Court

usually asks, first, whether any statute grants jurisdiction over the defendant and,

second, whether exercising jurisdiction would comport with principles of due process.

In most cases, this two-step inquiry boils down to one: whether the defendant has

“certain minimum contacts” with North Carolina “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 (1945) (citation and quotation marks omitted).

13. Here, Curvature contends that Cantel consented to jurisdiction in North

Carolina, thus obviating the usual minimum-contacts analysis. (See Opp’n to Mot.

Dismiss 9–10, ECF No. 22 [“Opp’n”].) Curvature relies on the Master Services Agreement’s requirements that disputes arising under the agreement be arbitrated

in North Carolina and governed by North Carolina law. (See Barry Aff. Attachment

1 § 17.) By agreeing to these terms, Curvature contends, Cantel consented to a North

Carolina forum and waived its jurisdictional objections. (See Opp’n 9–10.) Cantel,

on the other hand, argues that the Master Services Agreement is not enforceable,

thus negating any contractual consent. (See Br. in Supp. of Mot. Dismiss 8, ECF No.

13 [“Br. in Supp.”].) It further argues that an agreement to arbitrate in North

Carolina does not amount to consent to personal jurisdiction in the courts of this

State. (See Br. in Supp. 12–16.)

14. The Court need not and does not decide whether the Master Services

Agreement is enforceable.2 Even if it is, Cantel is correct that any consent to arbitrate

disputes arising under that agreement in North Carolina is not also consent to

adjudicate those disputes in the State’s courts.

15. It is certainly true that “parties to a contract may agree in advance to submit

to the jurisdiction of a given court.” Ins. Corp. of Ir., Ltd. v. Compagnie des Bauxites

de Guinee, 456 U.S. 694, 704 (1982) (quoting National Equip. Rental, Ltd. v.

Szukhent, 375 U.S. 311, 316 (1964)). When they do, there is no need to consider

separately whether a defendant also has minimum contacts with the forum State.

See, e.g., Retail Inv’rs, Inc. v. Henzlik Inv. Co., 113 N.C. App. 549, 552, 439 S.E.2d

2 Each party has objected to the other’s affidavit testimony as to the events surrounding the

execution of the Master Services Agreement and Cantel’s alleged breaches of the agreement. (See Opp’n 1 n.1; Def.’s Mot. Strike Aff. Test., ECF No. 29.) The disputed evidence has no bearing on the Court’s decision. Thus, the Court denies and overrules the objections as moot. 196, 198 (1994). Absent fraud or similar unfairness, a contractual consent-to-suit

provision satisfies the requirements of due process. See id.

16. Some courts also treat a party’s agreement to arbitrate in a particular forum

as implied consent to personal jurisdiction as to matters ancillary to arbitration, such

as enforcement of the arbitration agreement or confirmation of an arbitral award.

See, e.g., Doctor’s Assocs., Inc. v. Stuart, 85 F.3d 975, 979 (2d Cir. 1996). The reason

is simple: “if the court in the selected forum did not have personal jurisdiction to

compel arbitration, the agreement to arbitrate would be effectively unenforceable

. . . .” St. Paul Fire & Marine Ins. Co. v. Courtney Enters., Inc., 270 F.3d 621, 624 (8th

Cir. 2001). That outcome would be contrary to the intent of the parties in agreeing

to arbitrate and to the strong policy in favor of arbitration.

17. This rule does not apply here. Curvature is not seeking to enforce the

arbitration clause in the Master Services Agreement. Rather, it asks this Court to

adjudicate the parties’ disputes in the first instance. Yet Curvature has not cited any

case holding that a defendant’s agreement to arbitrate certain claims in a forum

represents consent to have those claims adjudicated by the forum’s courts.

18. Indeed, the only case from North Carolina on this subject holds otherwise.

See Taurus Textiles, Inc. v. John M. Fulmer Co., 91 N.C. App. 553, 558, 372 S.E.2d

735, 738 (1988). There, the Court of Appeals held that the defendant had not

expressly submitted to personal jurisdiction by agreeing to arbitrate contractual

claims in North Carolina. At most, the arbitration clause subjected defendant to

personal jurisdiction “for the purpose of arbitration” but did not also “provide a sufficient basis for asserting personal jurisdiction over defendant since plaintiff filed

suit rather than pursuing arbitration.” Id.

19. This is consistent with the overwhelming weight of authority in other

jurisdictions.3 As the federal Court of Appeals for the Fifth Circuit recently

explained, by agreeing to arbitrate in a given forum, a party does not also “consent to

the personal jurisdiction of [the forum’s] courts to adjudicate [the] claims in the first

instance.” Int’l Energy Ventures Mgmt., L.L.C. v. United Energy Grp., Ltd., 818 F.3d

193, 212 (5th Cir. 2016); accord Halliburton Energy Servs., Inc. v. Ironshore Specialty

Ins. Co., 921 F.3d 522, 541 (5th Cir. 2019). At most, the “courts of the agreed-upon

state may exercise personal jurisdiction over the parties for the limited purpose of

compelling arbitration.” Int’l Energy Ventures Mgmt., 818 F.3d at 212 (citation and

quotation marks omitted).

3 See, e.g., APL Co. Pte, Ltd. v. Intergro, Inc., 2014 U.S. Dist. LEXIS 133172, at *7–8 (N.D.

Cal. Sept. 22, 2014) (“District courts and other circuits have consistently held that such an agreement constitutes only consent to personal jurisdiction if it is in the limited context of enforcing an arbitration agreement or award.”); Krones, Inc. v. Bomatic, Inc., 2014 U.S. Dist. LEXIS 122111, at *15 (E.D. Wis. Aug. 29, 2014) (discussing “federal court decisions which found that a clause establishing the forum for arbitration does not alone confer personal jurisdiction”); Foster v. Device Partners Int’l, LLC, 2012 U.S. Dist. LEXIS 175560, at *12 (N.D. Cal. Nov. 21, 2012) (“However, by and large, these courts have not demonstrated a willingness to find that agreements to arbitrate give rise to personal jurisdiction for purposes not directly related to the agreement to arbitrate.”); Mariac Shipping Co. v. Meta Corp., N.V., 2006 U.S. Dist. LEXIS 1184, at *8–9 (S.D.N.Y. Jan. 12, 2006) (“While an agreement to arbitrate in a given venue at least arguably constitutes a consent to personal jurisdiction in that venue for the purpose of enforcing the agreement to arbitrate, this consent goes no farther than proceedings relating to enforcement of the arbitration agreement.” (citation and quotation marks omitted)); United Fin. Mortg. Corp. v. Bayshores Funding Corp., 245 F. Supp. 2d 884, 892 (N.D. Ill. 2002) (“The Plaintiff does not cite to any case where a court held that the defendant had consented to jurisdiction to litigate in a particular forum based solely on the parties’ agreement to arbitrate in that forum.”); Kahn Lucas Lancaster, Inc. v. Lark Int’l, 956 F. Supp. 1131, 1139 (S.D.N.Y. 1997) (“The rationale of this rule, however, means that this Court has jurisdiction over Lark only in support of arbitration.”); see also Guam Indus. Servs., Inc. v. Dresser-Rand Co., 514 S.W.3d 828, 834–35 (Tex. Ct. App. 2017). 20. Curvature calls this “a technicality.” (Opp’n 10.) It isn’t. The essence of

contract law, including the law governing arbitration agreements, is that parties are

bound only to the extent of their mutual assent. Contracting parties are free to draft

agreements as they see fit. That includes the right to include or to omit clauses

selecting a forum for litigation or consenting to suit there. The omission of these

terms strongly suggests an intentional decision to reserve consent—all the more so

when silence as to litigation is paired with the express designation of a venue for

arbitration. In addition, it bears repeating that “restrictions on personal jurisdiction

‘are more than a guarantee of immunity from inconvenient or distant litigation. They

are a consequence of territorial limitations on the power of the respective States.’”

Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773, 1780 (2017) (quoting

Hanson v. Denckla, 357 U.S. 235, 251 (1958)). This Court perceives no legitimate

local interest in reaching out to exercise authority over a foreign party—particularly

one from a foreign country—based on contractual consent when the consent is not

express and when it is unnecessary to imply consent to effectuate or preserve the

parties’ bargain.

21. Curvature also argues that this case is different because it tried arbitration

before litigation. In support, it cites cases holding that a party may not oppose

arbitration or otherwise forfeit a right to arbitration and then, when sued, demand

that the court send the dispute back to arbitration. See Sink v. Aden Enters., 352

F.3d 1197, 1200 (9th Cir. 2003); Garcia v. Mason Contract Prods., LLC, 2010 U.S.

Dist. LEXIS 92869, at *7 (S.D. Fla. Aug. 18, 2010); Stanley v. A Better Way Wholesome Autos, Inc., 2018 U.S. Dist. LEXIS 137645, at *18–19 (D. Conn. Aug. 15, 2018). These

cases are inapposite. Cantel has not argued that the asserted claims should be sent

back to arbitration. Its view is that the claims are neither arbitrable nor subject to

the jurisdiction of this Court. These positions are not inconsistent, and Cantel’s

opposition to arbitration does not work a waiver of its opposition to personal

jurisdiction.

22. In the absence of Cantel’s consent to suit, there is no other basis to exercise

jurisdiction over it. As a backstop, Curvature argues that jurisdiction is appropriate

under the usual two-step inquiry, but all of its arguments are grounded in Cantel’s

alleged consent. (See Opp’n 19–22.) The only statutory authority that Curvature

points to is section 1G-4, which states that a party to a business contract “consents to

the personal jurisdiction of the courts of this State” if the contract includes, among

other things, a “provision where the parties agree to litigate a dispute arising from

the business contract in the courts of this State.” N.C.G.S. §§ 1G-4(a), (b). The

Master Services Agreement includes an agreement to arbitrate disputes in North

Carolina, not an agreement to litigate in the courts of this State. Section 1G-4 does

not apply.

23. Nor has Curvature shown that the exercise of jurisdiction would comport

with due process in the absence of Cantel’s consent. A choice-of-law clause, without

other meaningful contacts between defendant and forum, is not enough. See, e.g.,

Corbin Russwin, Inc. v. Alexander’s Hardware, Inc., 147 N.C. App. 722, 728, 556

S.E.2d 592, 597 (2001). And Curvature has not identified any such meaningful contacts between Cantel and this State. The record is clear: Cantel is based solely in

England and performs services only in the United Kingdom; the Master Services

Agreement was not negotiated in North Carolina or with anyone located there; and

the agreement does not contemplate that Cantel would perform any services in North

Carolina. The Court concludes that Cantel lacks sufficient minimum contacts with

this State to permit the exercise of personal jurisdiction over it.

II. CONCLUSION

24. For these reasons, the Court GRANTS Cantel’s motion to dismiss for lack

of personal jurisdiction. The Court DENIES Cantel’s alternative motion to stay

pursuant to N.C.G.S. § 1-75.12(a) and its ancillary motion to strike affidavit

testimony as moot.

SO ORDERED, this the 13th day of August, 2019.

/s/ Adam M. Conrad Adam M. Conrad Special Superior Court Judge for Complex Business Cases