Yates v. Motivation Industrial Equipment Ltd.

38 F. App'x 174

• Court: Court of Appeals for the Fourth Circuit
• Decided: June 20, 2002
• Docket: 01-1938
• Status: Unpublished

Opinions

OPINION

PER CURIAM.

Motivation Industrial Equipment, Ltd. (Motivation), a Canadian corporation, appeals the district court’s order denying its motion to dismiss for lack of personal jurisdiction. Because the record does not establish that Motivation had the necessary minimum contacts with North Carolina so as to comport with the requirements of due process, we reverse.

I.

Thomas Yates, an employee of Polar Plastics Inc. (Polar), located in Moores-ville, North Carolina, was fatally injured on July 18, 1997, when a gantry crane manufactured by Motivation collapsed and fell on him.¹ Trina Yates, as administra-trix of her husband’s estate, filed a wrongful death action against Motivation in North Carolina Superior Court on July 14, 1999, alleging negligence and breach of warranties. Motivation, a corporation with its principal place of business in Canada, removed the case to federal district court in North Carolina on the basis of diversity of citizenship, see 28 U.S.C. § 1332(a), and moved to dismiss the case pursuant to Fed.R.Civ.P. 12(b)(2), for lack of personal jurisdiction. After allowing Yates additional time to conduct jurisdictional discovery, the magistrate judge, presiding by consent of the parties, found that the exercise of personal jurisdiction in this case was appropriate and denied Motivation’s motion to dismiss. This appeal followed.

II.

Yates contends, and the magistrate judge found, that Motivation is subject to the personal jurisdiction of the district court. We disagree. For the reasons that follow, we find that the district court’s exercise of personal jurisdiction over Motivation exceeds the limits of due process and is therefore constitutionally impermissible.

Whether Motivation’s contacts with North Carolina were sufficient to support the district court’s exercise of personal jurisdiction is a question of law which we review de novo. Christian Science Board of Directors of the First Church of Christ v. Nolan, 259 F.3d 209, 215 (4th Cir.2001). It is well established that, in order for a district court to validly assert personal jurisdiction over a non-resident defendant, two conditions must be satisfied. Id. First, the exercise of jurisdiction must be authorized by the long-arm statute of the forum state, and second, the exercise of personal jurisdiction must not “overstep the bounds” of Fourteenth Amendment due process requirements. Anita’s New Mexico Style Mexican Food, Inc. v. Anita’s Mexican Foods Corp., 201 F.3d 314, 317 (4th Cir.2000). Motivation does not separately contest that it is subject to North Carolina’s long-arm statute, which has been construed to extend to the outer limits allowed by the Due Process Clause.² See Hiwassee Stables, Inc. v. Cunningham, 135 N.C.App. 24, 27, 519 S.E.2d 317, 320 (1999). Thus, the scope of our inquiry is simply whether North Carolina may, consistent with due process, exercise personal jurisdiction over Motivation. In other words, we must decide whether Motivation has “certain minimum contacts” with the forum, such that “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, 66 S.Ct. 154, 90 L.Ed. 95 (1945) (citations omitted).

We view the two species of personal jurisdiction, general and specific, through distinct lenses. See generally ESAB Group v. Centricut, 126 F.3d 617, 623-24 (4th Cir.1997). When a cause of action arises out of a defendant’s contacts with the forum, a court may seek to exercise specific jurisdiction over that defendant if it purposefully directs activities toward the forum state and the litigation results from alleged injuries that arise out of or relate to those activities. See Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984). However, when the cause of action does not arise out of the defendant’s contacts with the forum, general jurisdiction may be exercised upon a showing that the defendant’s contacts are of a “continuous and systematic” nature. Id. at 416.

Yates has never claimed that Motivation’s contacts with North Carolina are sufficiently continuous and systematic to subject Motivation to general personal jurisdiction in North Carolina. Here, as the district court duly observed, Motivation clearly was not engaged in “substantial” or “continuous and systematic” activities in North Carolina such as to subject it to general jurisdiction in the state. Thus, we need only determine whether Motivation’s contacts were sufficient to subject it to specific personal jurisdiction in North Carolina.

III.

This circuit has applied a three part test when evaluating the propriety of exercising specific jurisdiction: 1) whether and to what extent the defendant “purposely availed” itself of the privileges of conducting activities in the forum state, and thus invoked the benefits and protections of its laws, 2) whether the plaintiffs claim arises out of those forum-related activities, and 3) whether the exercise of jurisdiction is constitutionally “reasonable.” Nolan, 259 F.3d at 215-16 (citing Helicopteros, 466 U.S. at 415-16, and Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472, 476-77, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985)). For the reasons discussed below, Yates cannot satisfy this test.

A.

1.

Yates contends that the agency relationship between The Shannon Group, Inc. (Shannon) and Motivation proves that Motivation purposefully availed itself of the benefits and protections of North Carolina law. In 1994, Shannon, located in Good-lettsville, Tennessee, agreed to represent Motivation as its agent in Tennessee, North Carolina, South Carolina, Alabama, Georgia, and Florida.³ The agreement was for an initial term of one year and would be automatically renewed for successive one year terms, unless either party gave notice to the other party two months prior to the expiration of the original term.

Robert Shannon, President of Shannon and the North Carolina sales agent for Motivation, stated in an affidavit that as part of the agreement with Motivation, the Shannon Group retained the right to represent other manufacturers. Shannon was not, nor has ever been an exclusive agent for Motivation. Furthermore, prior to July 18, 1997, the day of Thomas Yates’ death, Shannon made no sales and received no revenue on behalf of Motivation from any entity in North Carolina. Yates offered no evidence to contradict Robert Shannon’s representations.⁴ There is no evidence in the record that Shannon took Motivation’s brochures, products or sales materials to North Carolina. There is also no evidence that Shannon made any solicitations in person or otherwise on behalf of Motivation in North Carolina. Yates offered no evidence that Shannon, as Motivation’s agent, conducted any activities whatsoever in North Carolina. Motivation’s agreement with Shannon therefore does not satisfy the first prong of the test for specific jurisdiction.

Our dissenting colleague suggests that hiring a sales representative for the forum state as part of a strategy of targeting this country and the particular state for increased sales would amount to purposeful availment, even if, as here, the agent was not an exclusive agent and no actions were taken by that agent on behalf of the company. We believe more is needed. However, even if we were to assume that the agency relationship in this case amounted to purposeful availment, because Thomas Yates’ death did not arise from, or relate to in any way, Motivation’s agency relationship with Shannon, the second prong of the test is not met.⁵ Even if Yates had offered evidence that Shannon took some actions on behalf of Motivation in North Carolina before Thomas Yates’ death, there was no evidence presented that Shannon, or any other sales representative in the United States, was involved in the sale of the crane in any capacity. The sale of the crane had nothing to do with sales efforts in North Carolina, or sales efforts in the United States for that matter. The crane was sold in Canada, by one Canadian corporation to another Canadian corporation.⁶

Yates also contends that Motivation purposely availed itself to North Carolina when it made two sales to North Carolina entities in 1998. Even if we were to find that these sales showed purposeful availment, Thomas Yates’ death in 1997 simply could not arise from or relate to sales made in 1998, after his death.

2.

Motivation’s general solicitation activities, separately or taken as a whole, likewise do not establish purposeful availment.⁷ Its advertisements in the Thomas Register are not sufficient contacts. This circuit has held that a listing in the Thomas Register, a nationally distributed trade journal, is not enough to confer personal jurisdiction in a particular state. Federal Insurance Co. v. Lake Shore Inc., 886 F.2d 654, 659 (4th Cir.1989). While Motivation placed advertisements in the Thomas Register, there is no evidence in the record that the advertisements were directed toward North Carolina residents, that North Carolina residents responded to them, or that Motivation sent any products to North Carolina as a result of them. Like the advertisements in the Thomas Register, Motivation’s advertisement in Crane Magazine also does not show purposeful availment to North Carolina. There is no evidence in the record that the advertisement in Crane Magazine was directed toward North Carolina residents, or that inquiries or sales were generated from the advertisement. See Cancun Adventure Tours, Inc. v. Underwater Designer Co., 862 F.2d 1044, 1046 (4th Cir.1989).

The fact that Motivation operates a website likewise does not prove purposeful availment here. There is no evidence in the record to suggest, nor has Yates argued at any point, that the website is anything more than a “passive” website, where general information about Motivation is posted. See Cybersell Inc. v. Cyber-sell, Inc., 130 F.3d 414, 418 (9th Cir.1997) (citing Zippo Manufacturing Co. v. Zippo Dot Com, Inc. 952 F.Supp. 1119 (W.D.Pa.1997)). There is also no evidence in the record that any North Carolina entity purchased products from the website or purchased products because of the website.

Again, even if we were to assume that the advertisements or the website established Motivation’s purposeful availment to North Carolina, it would strain credulity for us to find that Yates’ claim somehow arose out of these contacts. Yates has offered no evidence that would establish even a tenuous link between the advertisements or the website and the death of her husband.

B.

Yates contends that the district court could exercise specific jurisdiction over Motivation simply because Motivation manufactured the crane and did not limit its distribution of the crane so as to exclude North Carolina. We disagree. A “stream of commerce” theory of personal jurisdiction will not save Yates’ case. See World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980). Motivation manufactured the crane in Canada and sold it to a Canadian sales representative, who in turn sold it to Polar, a Canadian corporation. The crane was initially delivered to Polar in Brampton, Ontario. There is simply no evidence in the record that Motivation was aware that the gantry crane at issue might be sent to or used in North Carolina. Polar, fortuitously, transported the crane to its North Carolina plant. The Supreme Court has rejected the application of a stream of commerce theory when, as here, the defendant delivers the product into the stream of commerce without any expectation that it would be purchased or used by a consumer in the forum state. See Lesnick v. Hollingsworth & Vose Co., 35 F.3d 939, 943 (4th Cir.1994) (quoting World Wide Volkswagen, 444 U.S. at 297-98). We find no evidence in the record to indicate that Motivation should have “reasonably anticipated being haled into court” in North Carolina when it placed the crane into the stream of commerce in Canada. World Wide Volkswagen, 444 U.S. at 297.

C.

Because Yates cannot show that Motivation “purposely availed” itself of the privileges of conducting activities in North Carolina or that her claims arise out of Motivation’s North Carolina-related activities, we need not consider the third prong of the test for specific jurisdiction—whether jurisdiction would be reasonable.⁸ See Phillips Exeter Academy v. Howard Phillips Fund, Inc. 196 F.3d 284, 288 (1st Cir.1999) (explaining that because an affirmative finding on each of the three elements is required to support a finding of specific jurisdiction, only “if the proponent’s case clears the first two hurdles” must the court then analyze the overall reasonableness of an exercise of jurisdiction); see also Doe I v. Unocal Corp., 248 F.3d 915, 925 (9th Cir.2001) (stating that the court need not reach the third prong of the specific jurisdiction test when plaintiffs evidence is insufficient to establish either purposeful availment or that the cause of action arises out of defendant’s contacts with the forum).

IV.

On the facts and record set before us, Yates did not establish personal jurisdiction over Motivation in North Carolina. As such, we reverse and remand with instructions to dismiss for lack of personal jurisdiction.

REVERSED AND REMANDED.

1 . Motivation sold the crane to Metric Storage Systems (Metric), a Canadian corporation, knowing that Metric, in turn, would sell the crane to Polar, also a Canadian corporation. Sometime after the crane arrived at Polar’s Canadian plant, Polar shipped the crane to North Carolina. However, Motivation had no knowledge that the crane was being shipped to North Carolina, and the record is void of any evidence indicating Motivation was even aware that Polar had a North Carolina plant.

2 . N.C. GEN. STAT. § 1-75.4(4) states in part,

Local Injury; Foreign Act.—In any action for wrongful death occurring within this State or in any action claiming injury to person or property within this State arising out of an act or omission outside this State by the defendant, provided in addition that at or about the time of the injury either:

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.

3 . In 1995, the contract was amended to ex-elude Florida and include Mississippi.

4 . Yates had over one year and ten months, the period of time between Motivation filing its motion to dismiss and the magistrate judge ruling on the motion, to depose Robert Shannon, but did not.

5 . The district court found that Motivation conceded that Yates’ claim arose out of or related to Motivation’s activities in North Carolina. (J.A. 508). This finding was erroneous. Motivation merely conceded that the injury to Yates’ decedent occurred in North Carolina.

In Motivation's supplemental brief in support of its motion to dismiss, Motivation stated:

[I]n Honeycutt, this Court discussed the two tests set forth by the Supreme Court in determining whether defendant’s contact satisfied the requirements of due process for the Court to assert jurisdiction and for the Plaintiff to establish a prima facie case of jurisdiction. If a cause of action did not arise in or is unrelated to the defendant's activity in the forum state, then the appropriate standard is the continuous and systematic test set forth in Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984) (i.e., general jurisdiction). If the cause of action either arose in or is related to the defendant’s activities in the forum state, the lesser burden of showing the defendant purposely [sic] directed its activities toward the forum state applies. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 105 S.Ct. 2174, 85 L.Ed. 528 (1985). (i.e., specific jurisdiction).

In this case, since the injury to the Plaintiffs Decedent occurred in North Carolina, the prima facie burden the Plaintiff needs to establish is that the Defendant purposely [sic] directed its activities toward the forum state, (emphasis added).

Defendant’s Supp. Brief in Support of its Motion to Dismiss, 6.

As evidenced above, Motivation relied on Honeycutt v. Tour Carriage, Inc., 997 F.Supp. 694, 704 (W.D.N.C.1996). Unfortunately, Honeycutt misstates Helicopteros. In Helicopteros, the Supreme Court explained that a state exercises specific jurisdiction in a suit “arising out of or related to the defendant’s contacts with a forum." 466 U.S. at 414, n. 8. (emphasis added). It did not state that specific jurisdiction is conferred in cases simply because an injury occurs in that state, which is perhaps how Honeycutt could be read.

After citing Honeycutt, Motivation merely stated that because Thomas Yates’ injury occurred in North Carolina, Yates needed to establish purposeful availment, i.e., specific jurisdictional analysis was proper. It never conceded that the cause of action arose out of its contacts with North Carolina. Whether the district court found a concession because it misread Motivation’s statement, or because it accepted Motivation's (and Honeycutt's) misapplication of the law, we are not bound by the misreading or the misapplication.

6 . In determining whether a claim arises out of forum-related activities, circuits have applied different tests. For example, the Ninth Circuit applies a "but for” test, where courts consider whether a plaintiff's claims would have arisen but for the defendant’s contacts with the forum state. See Doe I. v. Unocal Corp., 248 F.3d 915, 924 (9th Cir.2001). On the other hand, the Sixth Circuit does not require that "the cause of action formally 'arise from’ defendant’s contacts with the forum; rather, this criterion requires only 'that the cause of action, of whatever type, have a substantial connection with the defendant’s in-state activities.' ” Bird v. Parsons, 289 F.3d 865, 2002 WL 1012175, *7 (6th Cir. 2002). Even if we employ the less stringent Sixth Circuit test, the evidence before us establishes no substantial connection between the cause of action and any of Motivation's alleged in-state activities.

7 . Motivation had a liability insurance policy with Commercial Union Assurance Company of Canada at the time of Thomas Yates’ death. The policy covered Motivation if a liability suit was brought against it in the United States. Yates argues that Motivation is subject to personal jurisdiction in North Carolina because it owned an insurance policy that covered claims throughout the United States. We find this argument unpersuasive. Motivation neither directed activity toward North Carolina nor purposefully availed itself to North Carolina by merely purchasing this broad, nationwide insurance policy.

8 . The overall reasonableness of whether jurisdiction would offend traditional notions of fair play and substantial justice, depends on severed factors—1) the burden on the defendant, 2) the interests of the forum state, 3) the plaintiff's interest in obtaining relief in the forum, 4) the efficient resolution of controversies as between states, and 5) the shared interests of the several states in furthering fundamental substantive social policies. Lesnick, 35 F.3d at 946.