Opinion
No. COA09-396
Filed 15 June 2010 This case not for publication
Appeal by defendant from order entered 17 December 2008 by Judge Jay D. Hockenbury in New Hanover County Superior Court. Heard in the Court of Appeals 30 September 2009.
Murchison, Taylor Gibson, PLLC, by Michael Murchison, for plaintiff-appellee. Johnston, Allison Hord, P.A., by Daniel A. Merlin and Michael L. Wilson, for defendant-appellant.
New Hanover County No. 08 CVS 3753.
Defendant Cognition Pharmaceuticals, LLC appeals from an order denying its motion to dismiss for lack of personal jurisdiction under Rule 12(b)(2). Because we have concluded that the trial court's findings of fact support its determination that defendant has sufficient minimum contacts with North Carolina to meet the requirements of due process, we affirm.
Facts
The trial court made the following findings of fact in denying the motion to dismiss. Since these findings were not assigned as error, they are binding on appeal. See Thomas v. Overland Express, Inc., 101 N.C. App. 90, 94, 398 S.E.2d 921, 924 (1990) ("Since plaintiff has not excepted to these findings, they are binding on appeal."), disc. review denied, 328 N.C. 576, 403 S.E.2d 522 (1991).
Defendant assigned error to only one finding of fact, which is discussed below.
Plaintiff PPD Development, LP is a clinical research organization that performs clinical drug trials on behalf of clients in the pharmaceutical and biotechnology industries. It is a Texas limited partnership that has its headquarters and principal office and place of business in Wilmington, North Carolina ("Wilmington office"). It is a wholly-owned subsidiary of another North Carolina corporation, Pharmaceutical Product Development, Inc., that is also headquartered in Wilmington, North Carolina. In addition to its headquarters, plaintiff has additional significantly-sized offices in Research Triangle Park ("RTP"), North Carolina, and Austin, Texas, together with smaller offices in 13 other U.S. locations (not including New York) and 33 other countries.
Defendant is a Delaware limited liability company with its principal office and place of business in New York, New York. It has one other office in Connecticut, but no office in North Carolina. Defendant has been working on developing a drug designed to assist multiple sclerosis ("MS") patients suffering from cognitive dysfunction.
Sometime prior to 1 August 2006, defendant's Director of Clinical Operations called plaintiff's Director of Product Development (based in the Wilmington office) to express defendant's interest in obtaining plaintiff's services. After this conversation, plaintiff sent a team to New York to make a sales pitch to defendant.
The sales pitch was successful, and on approximately 1 August 2006, plaintiff and defendant entered into a Master Services Agreement ("agreement") under which plaintiff agreed to provide certain clinical research and other services to defendant with respect to its MS drug. The services that plaintiff was to perform on behalf of defendant were set forth in two project addenda ("Project Addendum 1" and "Project Addendum 2"), both of which were subsequently amended several times.
The initial drafting of the agreement, addenda, and amendments occurred in plaintiff's Wilmington office. The agreement, addenda, and various amendments were all first signed by defendant's representatives in New York and then returned to plaintiff's Wilmington office, where they were signed and executed by plaintiff's representatives.
The agreement did not contain a choice of forum clause, but it did provide that in the event of a dispute, New York law would govern the rights and obligations of the parties. Additionally, the agreement specified that all payments were to be mailed to Chicago, Illinois. The payments were collected in a lock box before being processed by the bank and deposited into plaintiff's accounts. Plaintiff's personnel in the Wilmington office then credited the payment to client invoices. Plaintiff did not maintain an office in Illinois.
Project Addendum 1 called for plaintiff to conduct a Phase II clinical trial of defendant's MS drug to determine its safety and effectiveness. The clinical trial involved administration of the MS drug to MS patients at various sites throughout the country. The project manager, the data manager, and the biostatistical personnel who worked on the trial were based in California or Texas. The regulatory, safety, and pharmacovigilance components of the trial were handled by employees at plaintiff's RTP office. Plaintiff's Interactive Voice Response System ("IVRS") group, also based in RTP, performed programming and administration of the IVRS used during the trial. One of the 35 sites where the MS drug was administered was in North Carolina, and one of the five clinical research associates, who ensured that the trial was properly conducted, was based in North Carolina.
Project Addendum 1 had incorporated plaintiff's proposal that the regulatory, safety, pharmacovigilance, and IVRS work be performed by personnel in plaintiff's RTP office, and it identified eight project leaders, including two based in RTP. Project Addendum 1 further incorporated plaintiff's proposal that all data management, programming activities, and clinical supplies activities be performed in Austin, Texas. Additionally, Project Addendum 1 assumed that two-thirds of the face-to-face client meetings would occur in defendant's New York office. The face-to-face client meetings actually took place in New York, California, and Texas.
Project Addendum 2 called for plaintiff to provide various program management, regulatory consulting, Investigational New Drug maintenance, and other services designed to guide defendant through the Food and Drug Administration's regulatory process. Project Addendum 2 identified the project leader as plaintiff's Associate Director of Regulatory Affairs who was based in plaintiff's RTP office. The amendments to Project Addendum 2 also noted that plaintiff's Associate Director of Product Development, Chase Hawk, who was based in plaintiff's Wilmington office, would direct program management services. The trial court found, but defendant disputes, that 75% of the work for Project Addendum 2 was performed by employees of plaintiff based in North Carolina.
During the course of the services identified in Project Addendum 2, defendant's senior management met with plaintiff's representatives four times in plaintiff's RTP office during a period from 5 April 2007 through 29 April 2008. All four meetings were attended by defendant's President and Chief Scientific Officer and defendant's Director of Clinical Operations. Defendant's Clinical Trial Manager and defendant's Director of Clinical Affairs attended three of the meetings. Defendant's Chairman of the Board also attended one of the meetings. In addition to these meetings, plaintiff's North Carolina-based representatives had numerous telephone conferences and e-mail communications with defendant's personnel in New York.
On 26 August 2008, plaintiff filed suit in New Hanover County Superior Court to collect nearly $1.1 million allegedly owed by defendant for services rendered by plaintiff to defendant. In its complaint, plaintiff stated that the court had personal jurisdiction over defendant "pursuant to N.C. Gen. Stat. § 1-75.4 in that, inter alia, this action [arose] out of a contract to pay for services to be performed in whole or in part in North Carolina and [defendant] has had minimum purposeful contracts [sic] with North Carolina." Defendant, on 9 October 2008, filed a motion to dismiss for lack of personal jurisdiction under Rule 12(b)(2). Both parties submitted affidavits in support of their positions on the motion.
The trial court, in denying defendant's motion, concluded that § 1-75.4(5) provided the court with a statutory basis for exercising personal jurisdiction over defendant and that defendant had sufficient minimum contacts with North Carolina to satisfy the requirements of due process. Defendant appealed to this Court.
Although this appeal is interlocutory, this Court has jurisdiction under N.C. Gen. Stat. § 1-277(b) (2009). See Love v. Moore, 305 N.C. 575, 579, 291 S.E.2d 141, 146 (1982).
Discussion
"A two-step analysis applies in determining whether a North Carolina court has personal jurisdiction over a nonresident defendant: `First, the transaction must fall within the language of the State's "long-arm" statute. Second, the exercise of jurisdiction must not violate the due process clause of the fourteenth amendment to the United States Constitution.'" Banc of America Secs. LLC v. Evergreen Int'l Aviation, Inc., 169 N.C. App. 690, 693, 611 S.E.2d 179, 182 (2005) (quoting Tom Togs, Inc. v. Ben Elias Indus. Corp., 318 N.C. 361, 364, 348 S.E.2d 782, 785 (1986)). Since defendant does not dispute the applicability of the long-arm statute and only challenges the sufficiency of the contacts between defendant and North Carolina, "the sole issue before this Court is whether the trial court properly concluded that the exercise of jurisdiction over defendant[] did not violate due process." Id.
If, as here, both parties have submitted affidavits supporting their contentions on the motion to dismiss, the trial court may resolve the matter based upon the affidavits, or it may hold an evidentiary hearing and decide based upon oral testimony and depositions. Id. at 694, 611 S.E.2d at 183 (citing N.C.R. Civ. P. 43(e)). If the trial court chooses to rely on the affidavits, the trial court still bears the responsibility of determining the weight and sufficiency of the evidence. Id. The trial court's assessment of the weight of the evidence may not be revisited on appeal. Id. at 695, 611 S.E.2d at 183.
"When this Court reviews a decision as to personal jurisdiction, it considers only `whether the findings of fact by the trial court are supported by competent evidence in the record; if so, this Court must affirm the order of the trial court.'" Id. at 694, 611 S.E.2d at 183 (quoting Replacements, Ltd. v. MidweSterling, 133 N.C. App. 139, 140-41, 515 S.E.2d 46, 48 (1999)). A trial court's conclusions of law, however, are subject to de novo review. Cambridge Homes of N.C. LP v. Hyundai Constr., Inc., 194 N.C. App. 407, 417, 670 S.E.2d 290, 298 (2008).
There are two types of personal jurisdiction: specific and general. Wells Fargo Bank, N.A. v. Affiliated FM Ins. Co., 193 N.C. App. 35, 45, 666 S.E.2d 774, 780 (2008). Specific jurisdiction may be exercised "when `the controversy arises out of the defendant's contacts with the forum state.'" Id. (quoting Tom Togs, 318 N.C. at 366, 348 S.E.2d at 786). General jurisdiction may be exercised "`as long as there are sufficient continuous and systematic contacts between defendant and the forum state.'" Id. (quoting Replacements, Ltd., 133 N.C. App. at 145, 515 S.E.2d at 51). Here, the sole basis asserted for personal jurisdiction is specific jurisdiction.
In cases where specific jurisdiction is at issue, the focus must be on the relationship between the defendant, the forum state, and the cause of action. Banc of America, 169 N.C. App. at 696, 611 S.E.2d at 184. In evaluating minimum contacts, we consider several factors, including: "(1) the quantity of the contacts, (2) the nature and quality of the contacts, (3) the source and connection of the cause of action to the contacts, (4) the interest of the forum state, and (5) the convenience to the parties." Id.
Determining whether the requirements of due process are satisfied necessitates a fact-specific evaluation of each case. Lulla v. Effective Minds, LLC, 184 N.C. App. 274, 278, 646 S.E.2d 129, 133 (2007). Courts should resist applying the factors "mechanically" and instead "must weigh the factors and determine what is fair and reasonable to both parties." A.R. Haire, Inc. v. St. Denis, 176 N.C. App. 255, 260, 625 S.E.2d 894, 899 (2006). "No single factor controls; rather, all factors `must be weighed in light of fundamental fairness and the circumstances of the case.'" Id. (quoting B.F. Goodrich Co. v. Tire King of Greensboro, Inc., 80 N.C. App. 129, 132, 341 S.E.2d 65, 67 (1986)).
Reviewing the "quantity," the "nature and quality," and the "source" of the contacts, we have held that the existence of a contract between the parties "`alone does not automatically establish'" personal jurisdiction, but it may suffice "`if [the contract] has a substantial connection with this State.'" Banc of America, 169 N.C. App. at 696, 611 S.E.2d at 184 (quoting Tom Togs, 318 N.C. at 367, 348 S.E.2d at 786). In Banc of America, we held that there was sufficient evidence of a substantial connection with this State when the evidence showed that the defendants solicited the plaintiff in North Carolina to perform services for it, that the plaintiff agreed to do so in North Carolina, and that the contracts were substantially performed in North Carolina. Id. at 698, 611 S.E.2d at 185. See also Tom Togs, 318 N.C. at 367, 348 S.E.2d at 786-87 (concluding that there was sufficient evidence of substantial connection with this State when (1) "the defendant made an offer to plaintiff whom defendant knew to be located in North Carolina," (2) "[p]laintiff accepted the offer in North Carolina," and (3) "[d]efendant was . . . aware that the contract was going to be substantially performed in this State"); Inspirational Network, Inc. v. Combs, 131 N.C. App. 231, 241, 506 S.E.2d 754, 761 (1998) (holding sufficient minimum contacts existed when (1) defendants "initiated and voluntarily entered into a contractual arrangement" with North Carolina-based corporation and (2) "series" of services were performed in North Carolina by plaintiff for defendant).
We believe that the trial court's findings of fact in this case directly parallel the facts found sufficient in Banc of America. First, defendant's Director of Clinical Operations initiated contact by calling plaintiff's North Carolina-based Director of Product Development in order to express defendant's interest in obtaining plaintiff's services and to solicit a sales pitch. "As this Court has previously held: `Which party initiates the contact is taken to be a critical factor in assessing whether a nonresident defendant has made "purposeful availment" [of the privilege of conducting activities within the forum State].'" Banc of America, 169 N.C. App. at 698, 611 S.E.2d at 185 (quoting CFA Med., Inc. v. Burkhalter, 95 N.C. App. 391, 395, 383 S.E.2d 214, 216 (1989)).
Further, plaintiff sent the relevant contract documents from North Carolina to New York. Defendant signed and returned the documents to North Carolina. Upon return of the executed documents, plaintiff signed the contract documents. See Tom Togs, 318 N.C. at 365, 348 S.E.2d at 785 ("Under North Carolina law, a contract is made in the place where the last act necessary to make it binding occurred."). While the agreement provided that New York law would apply in construing the contract, the same was true in Banc of America, 169 N.C. App. at 700, 611 S.E.2d at 186.
Plaintiff then performed substantial services under the contract in North Carolina. Under Project Addendum 1, the regulatory, safety, and pharmacovigilance components of the trial and the IVRS programming and administration were handled by North Carolina personnel as specified in Project Addendum 1. Two of the identified project leaders were based in RTP. The trial court further found that "[a]pproximately seventy-five (75%) of [the Project Addendum 2] work was performed by nine North Carolina based [employees of plaintiff]." Although defendant challenges this finding of fact, it is supported by the affidavit of Chase Hawk, plaintiff's Associate Director of Product Development and the person identified in Project Addendum 2 as being responsible for project management. Since the finding is supported by evidence, it is binding on appeal.
We hold that the trial court's findings of fact establish that the contract at issue in this case had a substantial connection with this State, as required by Tom Togs and Banc of America. Accordingly, the trial court properly concluded that "[t]here are sufficient minimum contacts between defendant Cognition and the State of North Carolina to justify the Court's exercise of personal jurisdiction over defendant Cognition without violating the due process clause of the Fourteenth Amendment to the United States Constitution."
Defendant, however, urges that Lulla, 184 N.C. App. at 279-80, 646 S.E.2d at 134, in which this Court held that the requisite minimum contacts between the defendant and North Carolina did not exist, is "on all fours" with this case. We disagree. In contrast to this case, while the defendant in Lulla similarly entered into a contract with a North Carolina resident, the plaintiff in Lulla failed to demonstrate that the contract had a substantial connection with North Carolina. In Lulla, (1) there was no evidence where the contract was entered into, (2) there was nothing in the contract specifying that any of the work under the contract would be performed in North Carolina, (3) the work was in fact performed in New Jersey and Texas, and (4) the defendant's key personnel had never been to North Carolina. Id. at 279, 646 S.E.2d at 134.
In this case, the contract was last signed by plaintiff in North Carolina; the contract addenda specifically identified certain individuals based in North Carolina as working on the contract and identified certain aspects of the contract as being performed in North Carolina; and a substantial part of the work was in fact performed in North Carolina. Further, the trial court found that various senior officials of defendant made four visits to North Carolina while services were being rendered. We hold that this case is more like Banc of America than Lulla.
"Even when the trial court concludes that a defendant has `purposefully established minimum contacts within the forum State,' the court must also consider those contacts `in light of other factors to determine whether the assertion of personal jurisdiction would comport with "fair play and substantial justice."'" Banc of America, 169 N.C. App. at 699, 611 S.E.2d at 186 (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476, 85 L. Ed. 2d 528, 543, 105 S. Ct. 2174, 2184 (1985)). In making such an assessment, our appellate courts have considered the interest of North Carolina and the convenience of the forum to the parties. Id. See also Burger King, 471 U.S. at 477, 85 L. Ed. 2d at 543, 105 S. Ct. at 2185 (noting that courts should consider "`the forum State's interest in adjudicating the dispute'" and "`the plaintiff's interest in obtaining convenient and effective relief'" (quoting World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292, 62 L. Ed. 2d 490, 498, 100 S. Ct. 559, 564 (1980))).
With respect to North Carolina's interest, the Supreme Court explained in Tom Togs that "[i]t is generally conceded that a state has a `manifest interest' in providing its residents with a convenient forum for redressing injuries inflicted by out-of-state actors." 318 N.C. at 367, 348 S.E.2d at 787 (quoting Burger King, 471 U.S. at 473, 85 L. Ed. 2d at 541, 105 S. Ct. at 2182). Defendant argues, however, that this interest is minimal because the contract includes a provision that New York law shall apply. Although North Carolina law governed the dispute in Tom Togs, this Court applied the same principle in Banc of America where New York law governed the dispute. Banc of America, 169 N.C. App. at 700, 611 S.E.2d at 186. Choice of law clauses "`express the intention of the parties and are a factor in determining whether minimum contacts exist and due process was met[,]'" but such clauses "`are not determinative of personal jurisdiction.'" Id. (quoting Tejal Vyas, LLC v. Carriage Park, Ltd. P'ship, 166 N.C. App. 34, 41, 600 S.E.2d 881, 887 (2004), aff'd per curiam, 359 N.C. 315, 608 S.E.2d 751 (2005)). Thus, the choice of law clause "factor does not . . . favor one party over the other." Id.
With respect to the convenience to the parties, the findings of fact — by which we are bound — do not weigh definitively in favor of either party. On the one hand, for example, defendant does not have an office or place of business in North Carolina, and its witnesses and evidence are located outside of North Carolina. On the other hand, plaintiff has its headquarters and place of business, as well as additional "substantial offices," in North Carolina. Plaintiff's witnesses and evidence will to a large extent come from North Carolina. Moreover, defendant's top officials made multiple trips to North Carolina in the course of the contract, as well as attended meetings in California and Texas.
Hence, "it is apparent that this factor is inconclusive" because "[t]he record does not indicate that any one State would be more convenient to all of the parties and witnesses than another." Id. We came to the same conclusion in Banc of America, where we explained that "[o]f course, engaging in litigation in North Carolina would not be convenient for defendants' employees located in Oregon, but, by the same token, litigation in another state would not be convenient for plaintiff's witnesses." Id. See also Tom Togs, 318 N.C. at 368, 348 S.E.2d at 787 (noting that "defendant has failed to show any other reason why the exercise of such jurisdiction would be unfair" and that defendant had not "pointed to any disparity between plaintiff and itself which might render the exercise of personal jurisdiction over it unfair"); Climatological Consulting Corp. v. Trattner, 105 N.C. App. 669, 675, 414 S.E.2d 382, 385 (holding that although three material witnesses were located in Washington, D.C., "this fact is counterbalanced by the fact that plaintiff's materials and offices are located here[;] North Carolina is a convenient forum to determine the rights of the parties"), disc. review denied, 332 N.C. 343, 421 S.E.2d 145 (1992).
We, therefore, reach the same conclusion that this Court did in Banc of America: "In sum, we cannot say that the factors regarding the State's interest and the convenience to the parties favor one party over the other to the extent that subjecting defendants to the jurisdiction of North Carolina's courts would be unfair. We also observe that the United States Supreme Court has stressed that once the first prong of purposeful minimum contacts is satisfied, the defendant will bear a heavy burden in escaping the exercise of jurisdiction based on other factors." Banc of America, 169 N.C. App. at 701, 611 S.E.2d at 187 (citing Burger King, 471 U.S. at 476-78, 85 L. Ed. 2d at 543-44, 105 S. Ct. at 2184-85).
We have concluded that defendant failed to make the "compelling case" for dismissal required in Burger King if minimum contacts exist. Burger King, 471 U.S. at 477, 85 L. Ed. 2d at 544, 105 S. Ct. at 2185. We, therefore, hold that the trial court did not err in denying the motion to dismiss for lack of personal jurisdiction.
Affirmed.
Judges STROUD and ROBERT N. HUNTER, JR. concur.
Report per Rule 30(e).