Marx Indus., Inc. v. Chestnut Ridge Foam, Inc.

903 F.Supp.2d 358

MARX INDUSTRIES, INC., Plaintiff,

v.CHESTNUT RIDGE FOAM, INC., Defendant.

No. 5:11CV139–RLV.

United States District Court,

W.D. North Carolina,

Statesville Division.

Oct. 12, 2012.

Matthew Kyle Rogers, Hickory, NC, for Plaintiff.

Michael A. Metcalfe, Robert M. Linn, Cohen & Grigsby, P.C., Pittsburgh, PA, Patrick Goddard Barry, Law Office of Patrick G. Barry, Waxhaw, NC, for Defendant.

MEMORANDUM and ORDER

RICHARD L. VOORHEES, District Judge.

THIS MATTER is before the Court on a Motion to Dismiss (Doc. 3) by Defendant Chestnut Ridge Foam, Inc. (“CRF”), pursuant to Rules 12(b)(2) and 12(b)(6) of the Federal Rules of Civil Procedure. The parties have conducted discovery on the issue of personal jurisdiction and have filed briefs, reply briefs, affidavits, and other discovery materials to support their respective positions on the motion now before this Court, which is ripe for disposition. The Court concludes, for the reasons discussed below, that it has personal jurisdiction over CRF and an actual controversy exists in this case. Therefore, CRF's Motion to Dismiss will be DENIED.

I. BACKGROUND

Plaintiff Marx Industries, Inc. (“Marx”) is incorporated in North Carolina, with its principal place of business in Granite Falls, North Carolina. Defendant CRF is a Pennsylvania corporation with its principal place of business in Latrobe, Pennsylvania. Both parties manufacture foam products and compete for customers in North Carolina in the foam manufacturing industry.

Prior to the initiation of this action by Marx, CRF commenced a lawsuit in Pennsylvania against another foam manufacturing company, Innovative Foam Products (“IFP”). In the Pennsylvania suit, CRF asserted that IFP misappropriated trade secrets regarding CRF's process and operation of certain equipment used to manufacture foam products.¹

In early 2011, as a result of IFP's insolvency, Marx purchased the equipment previously belonging to IFP—the same equipment at issue in the earlier Pennsylvania litigation.² (Compl. 12, 13.) In connection with the equipment purchase, Marx entered into a Confidential Agreement (“Agreement”) with IFP in which IFP represented to Marx that CRF “does not possess trade secrets relating to the equipment.” (Compl. 25.)

Defendant CRF, believing that its “competitively sensitive operational information may have been transferred to Marx,” wrote the President of Marx on April 22, 2011, and asked Marx “to confirm that [Marx] did not intend to use [CRF's] trade secrets to compete unfairly against Chestnut Ridge.” (Doc. 9, at 2. / Compl. Exh. 2). On May 5, 2011, Marx, through counsel, responded to the letter from CRF, asking for clarification. (Compl. 17 / Exh. 3) On May 18, 2011, counsel for CRF sent a second letter, detailing CRF's concerns and threatening that CRF was willing to “take any and all necessary legal actions to protect its confidential proprietary information and trade secrets.” ³ (Doc. 1, at 21. / Comp. Exh. 4)

On August 31, 2011, Marx filed suit in the North Carolina General Court of Justice, Caldwell County Superior Court, against CRF seeking declaratory judgment pursuant to the North Carolina Uniform Declaratory Judgment Act, N.C. Gen.Stat. §§ 1–253 et seq. (Doc. 1) Marx seeks a declaratory judgment holding that use of the foam manufacturing equipment purchased from IFP's creditor did not constitute a misappropriation of trade secrets purportedly held by any competitor (i.e., CRF). (Id.) Marx also seeks damages from CRF for unfair competition, unfair trade practices under N.C. Gen.Stat. § 75–1.1, and tortious interference of Marx's Agreement with IFP. (Id.)

On September 30, 2011, CRF removed the suit to this federal district court pursuant to 28 U.S.C. § 1441. (Doc. 3.) CRF simultaneously filed a Motion to Dismiss, arguing that this Court lacks personal jurisdictionover CRF and that there is no controversy sufficient to support a claim for declaratory relief. (Id.) Limited discovery to probe the jurisdictional issue was ordered on December 16, 2011. (Doc. 12.)

The following facts are taken from the Complaint, the briefs of the parties, and the deposition testimony of CRF's corporate representative, Carl Ogburn. From 2007 to 2011, CRF had, on average, between thirteen and seventeen North Carolina-based customers (Doc. 19–11), including municipal public transportation departments in North Carolina (Doc. 19, Ex. 13.) From 2007 to 2011, North Carolina “was in the top 10 states (and some years top 5 states) to which [CRF] sold products 3 or 4 years.” (Doc. 19–10.) During jurisdictional discovery, CRF's Rule 30(b)(6) Deponent (“Deponent” or “Ogburn”) testified that Chestnut Ridge's total annual revenue for the years 2007 to 2011 ranged from $18 million to $22 million. With regard to sales to North Carolina-based customers, Marx's counsel asked Deponent, “On any given year, does North Carolina account for 10 to 20 percent of Chestnut Ridge's business, sales to North Carolina?” Mr. Ogburn replied, “Yeah, I think so.” Id.⁴ In that same time frame, CRF's purchases from North Carolina suppliers ranged from $3 million to $4.1 million annually. Id. These purchases represented between 20% and 31.5% of total annual purchases. As much as $3.8 million in purchases were from CRF's single largest supplier in North Carolina.

Additionally, several of CRF's employees and representatives have made at least one trip annually to North Carolina to visit both customers and vendors. (Doc. 19, Ex. 21.) There is evidence that CRF maintains no office in North Carolina and has had no salespeople, employees, agents, or representatives in North Carolina since at least 2008. CRF has not applied to do business in North Carolina and has not appointed an agent for service of process in the forum state. CRF advertises in some national publications and trade journals, accessible by North Carolina residents. CRF also maintains social media accounts, and evidence indicates that none of these accounts actively direct activity to or from North Carolina.

II. STANDARD OF REVIEW

Questions of jurisdiction are answered by a two-step analysis: (1) the court must determine whether the North Carolina long-arm statute confers personal jurisdiction, and (2) the court must determine whether the exercise of that statutory power will violate the due process clause of the Constitution. Gen. Latex & Chem. Corp. v. Phoenix Med. Tech., 765 F.Supp. 1246, 1248–49 (W.D.N.C.1991). This two-part inquiry collapses into one, where, as here, jurisdiction is asserted pursuant to N.C. Gen.Stat. § 1–75.4(1)(d), which North Carolina courts have interpreted to permit the exercise of personal jurisdiction to the outer limits allowable by the Due Process Clause of the United States Constitution. See Dillon v. Numismatic Funding Corp. 291 N.C. 674, 231 S.E.2d 629, 630–31 (1977). Thus, when personal jurisdiction is determined under this statutory provision, the only question is “whether the defendant has the minimum contacts with North Carolina necessary to meet the requirements of due process.” A.R. Haire, Inc. v. St. Denis, 176 N.C.App. 255, 625 S.E.2d 894, 899 (2006) (citing Sherlock v. Sherlock, 143 N.C.App. 300, 545 S.E.2d 757, 760 (2001)). This Court resolves all questions of fact and draws all reasonable inferences in the light most favorable to the plaintiff. See ESAB Group, Inc. v. Centricut, Inc., 126 F.3d 617, 623 (4th Cir.1997). In determining a motion to dismiss for lack of personal jurisdiction, the Court may postpone the decision and permit discovery, determine the motion on the basis of the pleadings and affidavits, or hold an evidentiary hearing. Rich v. KIS Cal., Inc., 121 F.R.D. 254, 259 (M.D.N.C.1988).

A party invoking federal jurisdiction has the burden of establishing that personal jurisdiction exists over the defendant. New Wellington Fin. Corp. v. Flagship Resort Dev. Corp., 416 F.3d 290, 294 (4th Cir.2005); Combs v. Bakker, 886 F.2d 673, 676 (4th Cir.1989). Although an evidentiary hearing has not been held, the parties did pursue jurisdictional discovery. As a result, in addition to the Complaint and CRF's initial brief in support of the Motion and accompanying affidavit of Mr. Ogburn, the parties have submitted excerpts of Ogburn's deposition. “This information is more similar to information presented at an evidentiary hearing than merely ‘motion papers, supporting legal memoranda, and the relevant allegations of a complaint.’ ” Culp, Inc. v. Huntington Fabrics, Inc., 1:09CV611, 2011 WL 1230820, at *2 (M.D.N.C. Mar. 28, 2011) (quoting Combs v. Bakker, 886 F.2d 673, 676 (4th Cir.1989)). Thus, Marx must prove by a preponderance of the evidence that this Court may exercise personal jurisdiction over CRF. See AARP v. Am. Family Prepaid Legal Corp., Inc., 604 F.Supp.2d 785, 797 (M.D.N.C.2009) (applying preponderance of the evidence standard since parties conducted jurisdictional discovery); Trivette v. Risher, No. 7:07–CV–16–D, 2008 WL 516747, at *1 n. 1 (E.D.N.C. Feb. 25, 2008) (same) (citing Harrell v. Duke Univ. Health Sys., Inc., No. 7:07–813–HMH, 2008 WL 80122, at *1 (D.S.C. Jan. 7, 2008)).

A plaintiff may establish personal jurisdiction under either general or specific jurisdiction. General jurisdiction “requires ‘continuous and systematic’ contacts with a forum state, such that a defendant may be sued in that state for any reason, regardless of where the relevant conduct occurred.” CFA Inst. v. Inst. of Chartered Fin. Analysts of India, 551 F.3d 285, 292 n. 15 (4th Cir.2009). A court may only assert general jurisdiction over a sister-state corporation when its affiliations with the forum state render them “essentially at home” in that state. Goodyear Dunlop Tires Operations, S.A. v. Brown, ––– U.S. ––––, 131 S.Ct. 2846, 2854, 180 L.Ed.2d 796 (2011). Conduct of “single or isolated items of activities in a state in the corporation's behalf are not enough to subject it to [general jurisdiction].” Int'l Shoe Co. v. Washington, 326 U.S....