Padron v. Bentley Marine Grp. , 262 N.C. App. 610 ( 2018 )

IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA18-537
Filed: 4 December 2018
Mecklenburg County, No. 17 CVS 12148
JOSEPH PADRON, Plaintiff,
v.
BENTLEY MARINE GROUP, LLC, LARRY D. BREHM, KEENAN W. GREEN, and
NOEL WINTER, Defendants.
Appeal by defendant Keenan W. Green from order entered 20 March 2018 by
Judge Hugh B. Lewis in Mecklenburg County Superior Court. Heard in the Court of
Appeals 17 October 2018.
Pinto Coates Kyre & Bowers, PLLC, by Jon Ward and Matthew J. Millisor, for
plaintiff-appellee.
Poyner Spruill LLP, by Karen H. Chapman and John M. Durnovich, for
defendant-appellant Keenan W. Green.
ZACHARY, Judge.
Defendant Keenan W. Green appeals from the trial court’s order denying his
motion to dismiss plaintiff Joseph Padron’s complaint against him for lack of personal
jurisdiction. Defendants Bentley Marine Group, LLC, Larry D. Brehm, and Noel
Winter are not parties to the instant appeal. We conclude that North Carolina lacks
personal jurisdiction over Green in the instant case, and accordingly reverse and
remand for entry of an order granting Green’s motion to dismiss.
Background
PADRON V. BENTLEY MARINE GRP., LLC
Opinion of the Court
Plaintiff filed a complaint on 3 July 2017 against defendants Bentley Marine
Group, Brehm, Winter, and Green for damages resulting from a 4 July 2014 boating
accident that took place in North Carolina wherein “Plaintiff’s left hand was severely
injured and disfigured while using a Bentley Industries 2006 Model 240 Cruise
pontoon boat.” According to the complaint, the Boat was manufactured by Bentley
Industries, LLC, “a defunct limited liability company previously organized under the
laws of South Carolina.” The complaint alleges that the Boat “was a dangerous and
defective product at the time it was manufactured and designed, in that it failed to
take account for an inherently deadly flaw in its design—a so-called ‘pinch point’ that
led to the loss of Plaintiff’s finger.” The complaint further alleges that “Bentley
Industries, LLC failed to provide any adequate warning, instruction, or recall related
to the dangerous and defective manufacture and design of the Boat, although it knew
or should have known of that dangerous and defective condition and had the
opportunity to provide timely and effective warning.”
The complaint alleges that sometime in 2008, about two years after Bentley
Industries manufactured the Boat, “there was some sort of transaction involving
Bentley Industries, LLC and Defendants [Bentley Marine Group, Brehm, Green,
and/or Winter], in which one or more of said Defendants purchased Bentley
Industries, LLC, including both its assets and liabilities.” The complaint alleges that
defendants, “by virtue of purchasing Bentley Industries, LLC, at a time when the
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Opinion of the Court
dangerous and defective nature of the Boat and other similar boats was or should
have been evident, . . . are legally liable for all claims based upon the negligent and
defective manufacture and design of the Boat,” and further, that prior to the date that
plaintiff was injured, defendants were “aware of the negligent and defective
manufacture and design of the Boat . . . , yet none of the Defendants . . . issued any
warning, let alone any proper, adequate, or effective warning, regarding the
dangerous and defective nature of the Boat, despite having the opportunity and
responsibility to do so.”
The complaint seeks to hold Green and his fellow defendants jointly and
severally liable for plaintiff’s injuries. The complaint further alleges that Green
“served as the alter ego of Defendant Bentley Marine Group,” and therefore seeks to
“pierce the corporate veil of Defendant Bentley Marine Group, LLC to reach the
personal assets” of Green.
None of the defendants are residents of North Carolina. The complaint alleges
that Green is a resident of South Carolina and that Bentley Marine Group “is or was
a limited liability company organized under the laws of South Carolina.” Plaintiff’s
complaint nevertheless alleges that Green “is subject to personal jurisdiction in the
State of North Carolina pursuant to N.C. Gen. Stat. 1-75.4(4) (Local Injury; Foreign
Act).” Plaintiff makes similar allegations as to the other defendants.
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PADRON V. BENTLEY MARINE GRP., LLC
Opinion of the Court
Green filed a motion to dismiss plaintiff’s complaint against him for lack of
personal jurisdiction, among other grounds. Green attached to his motion to dismiss
an affidavit in which he provided, inter alia, that:
2. I am a citizen and resident of Charleston, South
Carolina where I have resided almost all of my life.
3. I received a copy of the Complaint at my office in
Summerville, South Carolina.
4. I have never been a resident of the State of North
Carolina.
5. I have no ownership interest in any company located
or doing business in North Carolina.
6. I do not have any family members that reside in
North Carolina.
7. I have never personally derived revenue directly
from goods used or consumed or services rendered in North
Carolina.
8. I have never owned, used or possessed rights to any
real or personal property located in North Carolina, nor do
I maintain any banking or other financial accounts in
North Carolina.
9. I am not licensed or registered to do business in
North Carolina.
10. I have never had a personal office or address of any
kind in North Carolina.
11. Prior to the filing of this matter, I have never been
sued or made a general appearance in North Carolina.
12. I do not have a registered agent for service of process
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Opinion of the Court
in North Carolina.
With regard to his involvement with Bentley Marine Group, Green’s affidavit
further provided that “I have never commingled my funds or assets with those of
Bentley Marine Group, LLC” and that “I have never personally co-owned any
financial accounts or assets owned or controlled by Bentley Marine Group, LLC.”
Finally, Green maintained that “[w]ith respect to allegations [in the complaint], I was
not involved in the day-to-day activities or management of Bentley Marine Group,
LLC. The extent of my involvement with Bentley Marine Group, LLC was as a silent
member for a very brief period of time in 2008.”
Plaintiff responded by submitting an affidavit in which he stated that:
1) As this lawsuit reveals, I was injured badly while
using [the] [B]oat in North Carolina.
2) My research of this type of “Bentley” boat shows that
it was a brand that was sold all over the United States,
including in North Carolina.
3) I have confirmed that to this day, boats of the type
in question are available for sale in North Carolina.
4) My personal research also shows that injuries of the
type that happened to me had happened to other people
before it happened to me.
5) When I got on [the] [B]oat in North Carolina, I did
not expect to suffer a terrible injury there that would force
me to have to sue the boat owners. Unfortunately, that is
what happened, and I want my day in court against
whoever is determined to be legally responsible.
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PADRON V. BENTLEY MARINE GRP., LLC
Opinion of the Court
Green’s motion to dismiss was heard before the Honorable Hugh B. Lewis at
the 28 February 2018 session of the Mecklenburg County Superior Court. The trial
court denied Green’s motion to dismiss by order entered 20 March 2018. The trial
court’s order does not contain findings of fact. Defendant Green timely appealed.
On appeal, Green argues that it was error for the trial court to deny his motion
to dismiss in that the record does not reveal the requisite level of contacts with North
Carolina needed in order for North Carolina to exercise personal jurisdiction over
him. We agree.
Grounds for Appellate Review
Despite the trial court’s order being interlocutory, Green nevertheless has a
right of immediate appeal from the denial of his motion to dismiss in that it
constitutes “an adverse ruling as to the jurisdiction of the court over the person.”
Strategic Outsourcing, Inc. v. Stacks, 176 N.C. App. 247, 249, 625 S.E.2d 800, 802
(2006) (quoting N.C. Gen. Stat. § 1-277(b)).
Standard of Review
It is settled that “[t]he determination of whether jurisdiction is statutorily and
constitutionally permissible due to contact with the forum is a question of fact.”
Replacements, Ltd. v. MidweSterling, 133 N.C. App. 139, 140, 515 S.E.2d 46, 48
(1999). “[U]pon a defendant’s motion to dismiss for lack of personal jurisdiction, the
plaintiff bears the burden of making out a prima facie case that jurisdiction exists.”
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Bauer v. Douglas Aquatics, Inc., 207 N.C. App. 65, 68, 698 S.E.2d 757, 761 (2010). If
the defendant “supplements [his] motion with affidavits or other supporting evidence,
the allegations of the plaintiff’s complaint can no longer be taken as true or
controlling and plaintiff cannot rest on the allegations of the complaint[.]” Wyatt v.
Walt Disney World, Co., 151 N.C. App. 158, 163, 565 S.E.2d 705, 708 (2002) (citation
and quotation marks omitted). Instead, the plaintiff “must respond by affidavit or
otherwise setting forth specific facts showing that the court has jurisdiction.” Id.(citation and quotation marks omitted).
In the instant case, the trial court’s order does not contain findings of fact, nor
did either party request the same. “In such a situation it is presumed that the trial
court found facts sufficient to support [its] order,” State ex rel. Cooper v. Ridgeway
Brands Mfg., LLC, 188 N.C. App. 302, 306, 655 S.E.2d 446, 449 (2008), “and our role
on appeal is to review the record for competent evidence to support these presumed
findings.” Stetser v. TAP Pharm. Prods., 162 N.C. App. 518, 520, 591 S.E.2d 572, 574
(2004); see also N.C. Gen. Stat. § 1A-1, Rule 52(a)(2) (2017).
Discussion
The analysis of “whether a non-resident defendant is subject to personal
jurisdiction of North Carolina’s courts” is two-pronged. Robbins v. Ingham, 179 N.C.
App. 764, 768, 635 S.E.2d 610, 614 (2006), appeal dismissed and disc. review denied,
361 N.C. 221, 642 S.E.2d 448 (2007). “First, there must be a basis for jurisdiction
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under the North Carolina long-arm statute, and second, jurisdiction over the
defendant must comport with the constitutional standards of due process.” Id.; N.C.
Gen. Stat. § 1-75.4 (2017). Nevertheless, “our long-arm statute was intended to make
available to North Carolina courts the full jurisdictional powers permissible under
due process.” Robbins, 179 N.C. App. at 770, 635 S.E.2d at 615 (citing Dillon v.
Numismatic Funding Corp., 291 N.C. 674, 676, 231 S.E.2d 629, 630 (1977)).
Accordingly, because the “statutory authorization for personal jurisdiction is
coextensive with federal due process, the critical inquiry in determining whether
North Carolina may assert in personam jurisdiction over a defendant is whether the
assertion comports with due process.” J.M. Thompson Co. v. Doral Mfg. Co., 72 N.C.
App. 419, 424, 324 S.E.2d 909, 913 (1985).
As our Supreme Court has stated, in order for the exercise of personal
jurisdiction over a non-resident defendant to comply with due process, “there must
exist certain minimum contacts between the non-resident defendant and the forum
such that the maintenance of the suit does not offend traditional notions of fair play
and substantial justice.” Tom Togs, Inc., v. Ben Elias Indus. Corp., 318 N.C. 361, 365,
348 S.E.2d 782, 786 (1986). The minimum contacts test requires “some act by which
the defendant purposefully avail[ed] himself of the privilege of conducting activities
within the forum state, thus invoking the benefits and protections of its laws.” Id.“Whether minimum contacts are present is determined by ascertaining what is fair
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and reasonable under the circumstances, not by using a mechanical formula.”
Robbins, 179 N.C. App. at 770, 635 S.E.2d at 615.
In light of these standards, although the order does not contain findings of fact,
we may nevertheless presume that the trial court found that North Carolina could
appropriately exercise personal jurisdiction over Green (1) because the provisions of
North Carolina’s long-arm statute had been satisfied, and (2) because Green had the
requisite minimum contacts with North Carolina to satisfy the demands of due
process. Green’s primary contention on appeal pertains to the latter finding: that
“endorsing the exercise of personal jurisdiction” based on the record in this case
“would eviscerate fundamental due-process protections.” That is, as an out-of-state
resident, Green maintains that he cannot “be hauled into court in North Carolina for
a product-liability lawsuit against an out-of-state company simply because of his
brief, passive investment in that company more than a decade ago.”
In response, plaintiff first argues that Bentley Marine Group’s involvement in
the stream of commerce in North Carolina, through its sale of boats in this State, is
sufficient to confer personal jurisdiction not only over Bentley Marine Group, but also
Green. Plaintiff’s argument on this point is misplaced.
To be sure, there will exist sufficient minimum contacts to permit a forum state
to exercise personal jurisdiction over a corporation where that corporation has “
‘deliver[ed] its products into the stream of commerce with the expectation that they
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will be purchased by consumers in the forum State.’ ” Tart v. Prescott’s Pharm., Inc.,
118 N.C. App. 516, 521-22, 456 S.E.2d 121, 126 (1995) (quoting World-Wide
Volkswagen Corp. v. Woodson, 444 U.S. 286, 298, 62 L. Ed. 2d 490, 502 (1980)).
However, the fact that a court may properly exercise personal jurisdiction over a
corporation under a “stream of commerce” analysis does not establish that a court
may properly exercise personal jurisdiction over the corporation’s individual
shareholders. Id. Instead, the minimum contacts analysis must “focus[] on the
actions of the non-resident defendant over whom jurisdiction is asserted, and not on
the unilateral actions of some other entity.” Centura Bank v. Pee Dee Express, Inc.,
119 N.C. App. 210, 213, 458 S.E.2d 15, 18 (1995).
If an individual shareholder “conducts business in North Carolina as principal
agent for the corporation, then his corporate acts may be attributed to him for the
purpose of determining whether the courts of this State may assert personal
jurisdiction over him.” United Buying Grp., Inc. v. Coleman, 296 N.C. 510, 515, 251
S.E.2d 610, 614 (1979). Absent sufficient individual contacts with the forum state,
however, “personal jurisdiction over an individual officer or employee of a corporation
may not be predicated merely upon the corporate contacts with the forum.” Robbins,
179 N.C. App. at 771, 635 S.E.2d at 615. Nor may the requisite level of minimum
contacts sufficient to confer personal jurisdiction be established based solely upon an
individual’s status as a shareholder. See Saft Am., Inc. v. Plainview Batteries, Inc.,
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Opinion of the Court
189 N.C. App. 579, 595, 659 S.E.2d 39, 50 (2008) (Arrowood, J., dissenting), rev’d for
the reasons stated in the dissent, 363 N.C. 5, 673 S.E.2d 864 (2009); see also J.M.
Thompson Co., 72 N.C. App. at 427, 324 S.E.2d at 915 (“If, by merely acquiring . . .
an economic interest in a foreign corporation, a person became responsible for every
obligation incurred by that corporation, and subject to suit in whatever state the
corporation happened to be located or incorporated, a negative impact on corporate
investing and mergers would result. We find no justification in logic or law for
discouraging investments in this fashion.”).
Here, it is well established that Green’s investment in Bentley Marine Group
does not, on its own, constitute “some act by which” Green purposefully availed
himself “of the privilege of conducting activities within [North Carolina], thus
invoking the benefits and protections of [our] laws.” Carswell Distrib. Co. v. U.S.A.’s
Wild Thing, 122 N.C. App. 105, 107, 468 S.E.2d 566, 568 (1996). And while Bentley
Marine Group would indeed be subject to personal jurisdiction under a stream of
commerce analysis, the record is otherwise devoid of any act by Green that would
subject him to the same.
For instance, the record does not suggest that after investing in Bentley
Marine Group, Green personally participated in the marketing, sale, design,
manufacture, or recall of its boats. Nor does plaintiff’s affidavit contradict Green’s
assertions that he was “not involved in the day-to-day activities or management of
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Opinion of the Court
Bentley Marine Group,” or that his involvement was limited to that of “a silent
member for a very brief period of time in 2008.” E.g., Rauch v. Urgent Care Pharm.,
178 N.C. App. 510, 518, 632 S.E.2d 211, 217-18 (2006). Instead, the record reveals
that Green has never been a North Carolina resident, nor has he ever owned real or
personal property in North Carolina. E.g., id. Quite plainly, plaintiff has proffered
no evidence to suggest that Green’s contacts with North Carolina consist of anything
beyond mere investments in a company that manufactures boats which were or can
be purchased here. E.g., Robbins, 179 N.C. App. at 771, 635 S.E.2d at 615.
Nevertheless, plaintiff also argues that because Green “served as the alter-ego”
of Bentley Marine Group, and because North Carolina has personal jurisdiction over
Bentley Marine Group, Green is likewise subject to personal jurisdiction in North
Carolina under a veil-piercing analysis. Plaintiff’s arguments on this point are also
misplaced.
“Piercing the corporate veil . . . allows a plaintiff to impose legal liability for a
corporation’s obligations, or for torts committed by the corporation, upon some other
. . . individual that controls and dominates a corporation” to such an extent that the
corporation exists as “a mere instrumentality or alter ego” of that individual. Green
v. Freeman, 367 N.C. 136, 145, 749 S.E.2d 262, 270 (2013) (emphasis omitted). “The
doctrine of piercing the corporate veil is not a theory of liability. Rather, it provides
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Opinion of the Court
an avenue to pursue legal claims against corporate officers or directors who would
otherwise be shielded by the corporate form.” Id. at 146, 749 S.E.2d at 271.
Plaintiff relies on veil piercing to assert personal jurisdiction over Green on the
theory that “if the corporate form of a liable entity is disregarded, and an individual
defendant is identified as the alter ego thereof, []he will be held liable for claims
against the corporation.” This assertion is indeed true. However, it does not
necessarily follow that the individual defendant could be held liable in a North
Carolina court. Plaintiff confuses veil piercing with personal jurisdiction. Cf.
Ridgeway Brands Mfg., LLC, 188 N.C. App. at 306, 655 S.E.2d at 449 (“[P]laintiff
cites no authority for its proposition that if an out-of-state corporation is the alter ego
of a North Carolina corporation, then the courts of North Carolina have personal
jurisdiction over the out-of-state corporation.”).
By way of contrast, in Tart v. Prescott’s Pharmacies—one of the primary cases
upon which plaintiff relies—personal jurisdiction was properly exercised over the
individual defendants because they had specifically orchestrated the advertising and
sale in North Carolina of their principal corporation’s weight-loss drugs that injured
the plaintiff. 118 N.C. App. at 522, 456 S.E.2d at 126. In fact, the individual
defendants were the “principal officers and directors” of the corporation and had been
federally charged, in their individual capacities, for their fraudulent representations
concerning the weight-loss drugs. Id. at 521, 518, 456 S.E.2d at 125, 123. It was
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Opinion of the Court
these specific contacts that conferred personal jurisdiction upon the defendants, not
the status of the individual defendants as “alter egos” of the corporation.
In any event, in the instant case, plaintiff’s complaint contains but one
allegation to support Green’s status as an alter ego:
21. Upon information and belief, . . . [Defendant Green]
served as the alter ego of Defendant Bentley Marine
Group[.]
The record is devoid of any pertinent facts tending to establish Green’s control over
Bentley Marine Group beyond this single conclusory allegation. In response to
Green’s motion to dismiss and accompanying affidavit, the only additional evidence
that plaintiff introduced was his own affidavit, which makes no mention of Green
whatsoever. Accordingly, we conclude that the pleadings and affidavits fall short of
constituting competent evidence that Green operated as the alter ego of Bentley
Marine Group for purposes of establishing personal jurisdiction. See Ridgeway
Brands Mfg., LLC, 188 N.C. App. at 306, 655 S.E.2d at 449 (“We hold that plaintiff’s
conclusory allegation in the Second Amended Complaint is insufficient to establish
that Trevally is the alter ego of Ridgeway for purposes of determining whether the
courts of North Carolina have jurisdiction over Trevally.”). Thus, the trial court’s
order cannot be sustained on this ground.
Conclusion
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Opinion of the Court
In sum, because the record reveals that Green’s only contact with North
Carolina was Green’s status as an investor in a corporation that may be subject to
personal jurisdiction in North Carolina, the evidence is insufficient to establish the
level of minimum contacts that due process demands for the proper exercise of
personal jurisdiction over an individual. Accordingly, the trial court’s order denying
Green’s motion to dismiss for lack of personal jurisdiction must be reversed as a
matter of law.
REVERSED.
Judges CALABRIA and TYSON concur.
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