In Cohen v. Continental, 2020 NCBC Order 12 (N.C. Super. Ct. Mar. 12, 2020) Judge Gale discussed several practical PJ issues – including waiver and website/e-mail contacts. Some takeaways are:
- PJ is a waivable defense. Raise it in your answer, and don’t wait too long to file your motion.
- Having an interactive website – even one with NC subscribers – may not establish PJ, particularly if the content is not NC-specific.
- In a specific PJ analysis – contacts unrelated to the claims are (much) less important.
Presiding over this Rule 2.1 “exceptional” case, Judge Gale ruled that Continental did not waive its PJ defense and that Continental’s subscription-based website, email blasts, and its broader (unrelated) NC contacts did not establish personal jurisdiction over the foreign defendant.
This suit arose from the deadly crash of a small airplane in Winston-Salem. The plaintiff, as executor, claimed the crash was caused by engine failure and sued the out-of-state seller of an overhauled engine part (Aircraft Accessories), the out-of-state engine manufacturer (Continental), and the NC airplane maintenance company (Air Care) that installed the component. The foreign defendants challenged personal jurisdiction. This opinion dealt with Continental’s Rule 12(b)(2) motion.
Waiver: Despite waiting 3+ years to file its PJ motion, Continental did not waive its PJ defense.
The procedural history was critical to whether Continental waived its PJ defense. The complaint was filed in 2015. Out of the gate, a different defendant, Aircraft Accessories (the Oklahoma company that sold the overhauled part into NC), moved to dismiss for lack of PJ. The motion was denied, Aircraft Accessories appealed, and the case was stayed pending appeal. The Court of Appeals affirmed, holding that Aircraft Accessories was subject to PJ in NC because it sold the allegedly defective engine part into NC, shipped it here, and routinely engaged in similar part to others in NC. Cohen v. Continental Motors, Inc., 253 N.C. App. 407, 799 S.E.2d 72 (2017) (unpublished). After remand, limited discovery commenced. According to Continental, as soon as it learned of Plaintiff’s precise causation theory against Continental, it promptly filed its Rule 12(b)(2) motion to dismiss for lack of PJ.
Nearly three-and-a-half years had passed from when Continental first raised its personal jurisdiction defense in its answer and when it filed its motion. Plaintiff argued that the years-long delay was a waiver. They relied on prior Business Court case – LendingTree, LLC v. Anderson, 2012 NCBC LEXIS 21 (N.C. Super. Ct. Apr. 11, 2012) – which had held that a venue defense in an answer could be waived based on post-answer conduct.
Noting sparse NC appellate authority on the issue, Judge Gale discussed a number of Federal cases that addressed when a party’s litigation conduct may waive a PJ defense. Judge Gale identified the two primary considerations: (1) dilatoriness, and (2) participation/encouragement of judicial proceedings (e.g., filing motions, participating in hearings, etc.), concluding that neither was present. Judge Gale distinguished LendingTree, where the defendant actively litigated the case for three years before moving to transfer venue. This situation was different. First, at least some of the delay was caused by the appeal. Second, despite the passage of time, Continental participated only in limited written discovery on matters related to PJ, and it requested no affirmative relief from the Court (e.g. by engaging in substantive motions practice). And when Continental learned of Plaintiffs’ causation theory in discovery (apparently narrowing the defect claim to the overhauled part supplied by Aircraft Accessories), Continental promptly filed its PJ motion. Under these facts, Judge Gale concluded that Continental did not waive its PJ defense.
The key takeaway is that while a prudent defendant always should assert its PJ motion as soon as practicable, not every “delay” will constitute a waiver. A Rule 12(b)(2) motion can be made, even after relatively lengthy “delay” if: (1) there is a legitimate reason for the delay (e.g., the case was stayed); (2) the Plaintiff was put on notice of the PJ defense (through the answer or otherwise); and (3) the defendant has not actively participated in the case, or otherwise engaged in conduct that would signal intent to waive PJ defense.
Continental’s website and email contacts were not sufficient to justify PJ.
Judge Gale then assessed Continental’s “minimum contacts.” It was not registered or licensed to do business in North Carolina. It had no offices, bank accounts or other physical presence or property here. It was a Delaware corporation with its principal place of business in Alabama. The engine was designed and manufactured in Alabama and shipped to Oregon where it was installed more than a decade ago. Unbeknownst to Continental the plane changed hands and was eventually sold to a North Carolina resident, where it was maintained for some years before the accident.
Continental did, however, sell various parts into North Carolina via distributors and it had substantial sales. It also maintained a subscription-based website with technical manuals and bulletins for its engines and parts. The NC entity that installed the overhauled part at issue – Air Care – was a subscriber to the website.
These contacts were not sufficient. As Judge Gale explained, Continental’s website, emails, and other sales were not connected to the accident, nor were they directed specifically to North Carolina. First, assuming that generalized and indirect sales via distributors into North Carolina could establish personal jurisdiction for claims arising from those sales, there was no evidence connecting general part sales by Continental into North Carolina and the accident. The allegedly defective part at issue was an overhauled part, sold into NC by Aircraft Accessories, not Continental.
Second, maintaining the online technical manuals (an FAA mandate) and email blasts to NC subscribers were not purposeful contacts with NC primarily because these things were regulatory mandates and were not targeted or particular to North Carolina. Finally, Judge Gale rejected Plaintiff’s argument that Continental’s broader contacts (e.g., sales of other parts, having distributors here, etc.) were related enough to justify personal jurisdiction. As Judge Gale explained, these other contacts were not so substantial as to establish general personal jurisdiction; and since the claims at issue did not arise from these other contacts, they were irrelevant to the purposeful availment inquiry.
The broad takeaway here is that claims need to “arise from” or “relate to” a foreign defendant’s purposeful contacts with the forum – a point recently reiterated by North Carolina’s Supreme Court in Beem USA Limited-Liability Ltd. P’ship v. Grax Consulting, LLC, — N.C. –, 838 S.E.2d 158 (2020) and the subject of my recent post. And when it comes to operation of a website, even one involving NC subscribers, a plaintiff must demonstrate that the website and interactions are unique or particular to NC residents.
The Plaintiff has filed a notice of appeal.