Universal Leather, LLC v. KORO AR, S.A. , 773 F.3d 553 ( 2014 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 13-2241
UNIVERSAL LEATHER, LLC,
Plaintiff - Appellant,
v.
KORO AR, S.A.,
Defendant - Appellee.
Appeal from the United States District Court for the Middle
District of North Carolina, at Greensboro. William L. Osteen,
Jr., Chief District Judge. (1:12-cv-00604-WO-JLW)
Argued: October 29, 2014 Decided: December 8, 2014
Before MOTZ, KING, and KEENAN, Circuit Judges.
Vacated and remanded by published opinion. Judge Keenan wrote
the opinion, in which Judge Motz and Judge King joined.
ARGUED: Norman B. Smith, SMITH, JAMES, ROWLETT & COHEN, LLP,
Greensboro, North Carolina, for Appellant. Christopher Grafflin
Browning, Jr., WILLIAMS MULLEN, Raleigh, North Carolina, for
Appellee. ON BRIEF: Garrick A. Sevilla, C. Elizabeth Hall,
WILLIAMS MULLEN, Raleigh, North Carolina, for Appellee.
BARBARA MILANO KEENAN, Circuit Judge:
In this appeal, we consider whether the district court
erred in dismissing a civil action brought against a foreign
corporation on the ground that the plaintiff failed to satisfy
its prima facie burden of showing that the defendant
“purposefully availed” itself of the privilege of conducting
business in the forum state. Upon our review, we conclude that
the plaintiff met its initial burden regarding that required
element of personal jurisdiction, by submitting affidavits
stating that the defendant contacted the plaintiff in the forum
state, conducted repeated in-person solicitations and meetings
concerning the parties’ business relationship there, and engaged
in numerous business transactions over a two-year period.
Accordingly, we vacate the district court’s judgment and remand
this action for the court to complete its jurisdictional
analysis.
I.
Koro AR, S.A. (Koro) is a leather company in Argentina that
purchases raw cow hides and tanning chemicals, and pays various
Argentine tanneries to produce finished leather products.
Between 2009 and 2011, Koro sold finished leather goods to
Universal Leather, LLC (Universal), a leather wholesaler located
in North Carolina. However, the parties’ relationship
2
eventually deteriorated and, in September 2011, Universal filed
a complaint against Koro in North Carolina state court, alleging
breaches of contract based on late deliveries, nonpayment of
certain shipping costs, impermissible price increases, and
defective products.
After removing the civil action to federal district court,
Koro filed a motion to dismiss for lack of personal
jurisdiction. In support of its motion, Koro submitted a
declaration from a company representative stating that Universal
purchased about $2.85 million in leather goods from Koro by
executing various purchase orders over a two-year period, but
that those transactions were facilitated by another Argentine
corporation that primarily communicated and bargained with
Universal. In addition, the Koro declarant stated that Koro did
not have any offices, property, or business operations in the
United States, that Koro had never solicited nor sent agents or
employees to the United States, and that Koro performed all its
work in Argentina and shipped all its goods “F.O.B. Argentina,”
requiring Universal to accept delivery of the goods in
Argentina.
Universal opposed Koro’s motion to dismiss, and submitted
two affidavits given by its assistant manager, Kenneth
Kochekian. In those affidavits, Kochekian made several
statements that conflicted with the averments in the declaration
3
filed by Koro. 1 For example, Kochekian stated that between 2009
and 2011, Universal bought more than $5 million in leather goods
from Koro and that, during this time frame, Universal dealt
directly and exclusively with Koro. Kochekian also stated that
two Koro employees visited Universal’s offices in North Carolina
in April 2010 to solicit purchases of Koro’s goods. According
to Kochekian, one of those individuals visited Universal’s
offices on at least six occasions between 2009 and 2011,
engaging in “continued solicitations” and “discussions of
various aspects of the purchaser and seller relationship.”
Kochekian averred that the same individual received “weekly e-
mails” from Universal employees, and that Universal and Koro
“maintained regular e-mail communications during the years that
they did business.”
In one affidavit, Kochekian acknowledged that Koro shipped
its goods “F.O.B. Argentina.” Kochekian estimated that the
various transactions between Universal and Koro resulted in over
200 shipments of goods from Argentina, at least 160 of which
were sent to North Carolina and to other locations within the
United States.
1
Koro’s representative filed a second declaration “to
correct a number of misstatements” in Kochekian’s first
affidavit.
4
In July 2013, a magistrate judge reviewed the pleadings and
the parties’ affidavits and declarations, and recommended that
the district court dismiss Universal’s action for lack of
personal jurisdiction. The magistrate judge concluded that,
even viewing the “[m]any” disputed facts in the record in the
light most favorable to Universal, Universal had failed to make
a prima facie showing of sufficient “minimum contacts” with
North Carolina to establish personal jurisdiction. In support
of this conclusion, the magistrate judge cited: (1) Koro’s
failure to enter into any contract with Universal while Koro’s
employees visited North Carolina; (2) Koro’s performance of the
parties’ contracts entirely within Argentina; and (3) Koro’s
terms of shipment declining to assume responsibility for
delivery of the goods outside Argentina.
In rejecting Universal’s arguments, the magistrate judge
noted that the required “minimum contacts” were not established
by the Koro employees’ visit to North Carolina in April 2010 or
by Koro’s direction of products into North Carolina, and that
the parties’ e-mail communications likewise were insufficient
because “e-mails alone do not constitute ‘minimum contacts.’”
The magistrate judge also stated several facts that he
considered relevant to the analysis, including that Koro did not
have offices or property in North Carolina and was not exposed
to taxation there, that the parties did not engage in
5
significant long-term activities in North Carolina, that none of
the parties’ agreements set forth any choice-of-law provisions,
and that the parties primarily chose to communicate by e-mail.
In September 2013, the district court adopted the
magistrate judge’s recommendation. The district court concluded
that any visits and in-person meetings between representatives
of Koro and Universal in North Carolina “may support a finding
of minimum contacts,” but were not themselves “automatically
sufficient” to establish personal jurisdiction. The court
agreed with the magistrate judge that “regardless of any
meetings that may have occurred, the balance of the factors
weighed against a finding of personal jurisdiction.” 2
Accordingly, the district court dismissed Universal’s action,
and Universal timely filed this appeal.
II.
Universal’s sole argument on appeal is that the district
court erred in determining that it lacked personal jurisdiction
over Koro. We review de novo a court’s dismissal of an action
for lack of personal jurisdiction, but we review for clear error
2
The district court declined to consider a third affidavit
executed by Kochekian, which Universal filed after the
magistrate judge issued his recommendation. The district court
concluded that the third affidavit was time-barred and, in the
alternative, that the affidavit’s new allegations did not
materially affect the magistrate judge’s conclusions. Universal
does not appeal the district court’s ruling on this issue.
6
the court’s underlying factual findings. Consulting Eng’rs
Corp. v. Geometric Ltd., 561 F.3d 273, 276 (4th Cir. 2009).
When a district court considers a question of personal
jurisdiction based on the contents of a complaint and supporting
affidavits, the plaintiff has the burden of making a prima facie
showing in support of its assertion of jurisdiction. Id. In
considering whether the plaintiff has met this burden, the
district court “must construe all relevant pleading allegations
in the light most favorable to the plaintiff, assume
credibility, and draw the most favorable inferences for the
existence of jurisdiction.” Combs v. Bakker, 886 F.2d 673, 676
(4th Cir. 1989).
A.
A federal district court may exercise personal jurisdiction
over a foreign corporation only if: (1) such jurisdiction is
authorized by the long-arm statute of the state in which the
district court sits; and (2) application of the relevant long-
arm statute is consistent with the Due Process Clause of the
Fourteenth Amendment. ESAB Grp., Inc. v. Zurich Ins. PLC, 685
F.3d 376, 391 (4th Cir. 2012). In the present case, Universal
contends, and Koro does not dispute, that North Carolina
authorizes long-arm jurisdiction over foreign defendants in
qualifying civil actions under N.C.G.S. § 1-75.4(1)(d).
7
The North Carolina Supreme Court has held that N.C.G.S.
§ 1-75.4(1)(d) permits the exercise of personal jurisdiction
over a defendant to the outer limits allowable under federal due
process. 3 See Dillon v. Numismatic Funding Corp., 231 S.E.2d
629, 630 (N.C. 1977) (“[I]t is apparent that the [North
Carolina] General Assembly intended to make available to the
North Carolina courts the full jurisdictional powers permissible
under federal due process.”); see also Combs, 886 F.2d at 676
n.3 (same). Thus, because personal jurisdiction in the present
case is asserted under N.C.G.S. § 1-75.4(1)(d), our two-prong
test merges into the single question whether Universal has made
a prima facie showing that Koro had sufficient contacts with
North Carolina to satisfy constitutional due process. See A.R.
Haire, Inc. v. St. Denis, 625 S.E.2d 894, 899 (N.C. Ct. App.
2006); see also Tire Eng’g v. Shandong Linglong Rubber Co., 682
F.3d 292, 301 (4th Cir. 2012) (observing that our two-prong test
3
N.C.G.S. § 1-75.4(1)(d) provides for jurisdiction “whether
the claim arises within or without [North Carolina]” when the
defendant “[i]s engaged in substantial activity within this
State, whether such activity is wholly interstate, intrastate,
or otherwise.” The plaintiff also asserts jurisdiction under
N.C.G.S. § 1-75.4(5)(e), which extends jurisdiction over civil
actions relating to goods “actually received by the plaintiff in
this State from the defendant through a carrier without regard
to where delivery to the carrier occurred.” We need not reach
this alternative basis for jurisdiction because we conclude
that, for the purposes of this appeal, the plaintiff met its
burden of showing the existence of the “minimum contacts”
required to satisfy federal due process, and thus, N.C.G.S. § 1-
75.4(1)(d).
8
“collapses into a single inquiry” when a state’s long-arm
statute “extends personal jurisdiction to the outer bounds of
due process”). Accordingly, we turn to engage in this
constitutional analysis.
Under the Fourteenth Amendment’s Due Process Clause, there
are two paths permitting a court to assert personal jurisdiction
over a nonresident defendant. The first path is “specific
jurisdiction,” which may be established if the defendant’s
qualifying contacts with the forum state also constitute the
basis for the suit. Tire Eng’g, 682 F.3d at 301. The second
path is “general jurisdiction,” which requires a “more demanding
showing of continuous and systematic activities in the forum
state.” Id. (citation and internal quotation marks omitted).
Because Universal asserts only that the district court had
specific jurisdiction over Koro based on its contacts with
Universal, we confine our inquiry to this type of personal
jurisdiction.
We recognize that “[f]airness is the touchstone of the
jurisdictional inquiry,” and we employ a three-part test to
determine whether the exercise of specific personal jurisdiction
over a nonresident defendant comports with the requirements of
due process. Id. at 301-02. Under this test, we analyze: “(1)
the extent to which the defendant purposefully availed itself of
the privilege of conducting activities in the forum state; (2)
9
whether the plaintiff’s claims [arose] out of those activities;
and (3) whether the exercise of personal jurisdiction is
constitutionally reasonable.” Id. at 302 (citation omitted).
In the present case, the district court undertook only the first
step of this analysis, and dismissed Universal’s complaint on
the ground that Universal failed to make a prima facie showing
that Koro had purposefully availed itself of the privilege of
conducting business in North Carolina. See Consulting Eng’rs,
561 F.3d at 278 (stating that a court is required to consider
prongs two and three of the personal jurisdictional analysis
only if the court finds that the plaintiff has met the first
requirement of purposeful availment).
The purposeful availment inquiry is grounded on the
traditional due process concept of “minimum contacts,” which
itself is based on the premise that “a corporation that enjoys
the privilege of conducting business within a state bears the
reciprocal obligation of answering to legal proceedings there.”
Tire Eng’g, 682 F.3d at 301 (citation and internal quotation
marks omitted); see Int’l Shoe Co. v. Washington, 326 U.S. 310,
320 (1945) (examining whether the defendant has “establish[ed]
sufficient contacts or ties with the state of the forum to make
it reasonable and just according to our traditional conception
of fair play and substantial justice to permit the state to
enforce the obligations which [the defendant] has incurred
10
there”). Thus, in determining whether a foreign defendant has
purposefully availed itself of the privilege of conducting
business in a forum state, we ask whether “the defendant’s
conduct and connection with the forum [s]tate are such that he
should reasonably anticipate being haled into court there.”
Fed. Ins. Co. v. Lake Shore Inc., 886 F.2d 654, 658 (4th Cir.
1989) (quoting World-Wide Volkswagen v. Woodson, 444 U.S. 286,
297 (1980)) (internal quotation marks omitted).
We have noted that this analysis is “flexible,” and depends
on a number of factors that courts consider on a case-by-case
basis. Tire Eng’g, 682 F.3d at 302. In the business context,
those factors include, but are not limited to, an evaluation of:
(1) “whether the defendant maintains offices or agents in the
forum state;” (2) “whether the defendant owns property in the
forum state;” (3) “whether the defendant reached into the forum
state to solicit or initiate business;” (4) “whether the
defendant deliberately engaged in significant or long-term
business activities in the forum state;” (5) “whether the
parties contractually agreed that the law of the forum state
would govern disputes;” (6) “whether the defendant made in-
person contact with the resident of the forum in the forum state
regarding the business relationship;” (7) “the nature, quality
and extent of the parties’ communications about the business
being transacted;” and (8) “whether the performance of
11
contractual duties was to occur within the forum.” Consulting
Eng’rs, 561 F.3d at 278 (citations omitted). We generally have
concluded that a foreign defendant has purposefully availed
itself of the privilege of conducting business in the forum
state when the defendant “substantially collaborated with a
forum resident and that joint enterprise constituted an integral
element of the dispute.” Tire Eng’g, 682 F.3d at 302. In
contrast, we typically have found such purposeful availment
lacking in cases in which “the locus of the parties’ interaction
was overwhelmingly abroad.” Id.
B.
Universal contends that it sufficiently showed that Koro
purposefully availed itself of the privilege of doing business
in North Carolina. In support of its argument, Universal notes
its affiant’s statements that Koro employees personally
solicited purchases from Universal during visits to North
Carolina, sold over $5 million in leather goods to Universal,
and exchanged frequent e-mail correspondence with Universal
employees regarding those transactions.
In response, Koro contends that Universal failed to make
the required prima facie showing of purposeful availment because
Koro did not have offices, agents, or property in North
Carolina, produced all its goods in Argentina, and contractually
agreed that Universal would accept delivery of goods within
12
Argentina. Koro also urges us to reject as inadmissible hearsay
Kochekian’s statements regarding in-person solicitations by Koro
employees, which Koro’s representative contradicted in opposing
declarations.
At the outset, we find no merit in Koro’s attempt at this
stage of proceedings to discredit the facts adduced in the
affidavits filed by Universal. Because the district court did
not conduct an evidentiary hearing, the court was required to
assume the credibility of Universal’s version of the facts, and
to construe any conflicting facts in the parties’ affidavits and
declarations in the light most favorable to Universal. See,
e.g., Carefirst of Md., Inc. v. Carefirst Pregnancy Ctrs., Inc.,
334 F.3d 390, 396 (4th Cir. 2003) (stating that absent an
evidentiary hearing, the district court “must take all disputed
facts and reasonable inferences in favor of the plaintiff” in
determining whether the plaintiff has met its initial burden of
proof with regard to personal jurisdiction) (citing Combs, 886
F.2d at 676); O’Hare Int’l Bank v. Hampton, 437 F.2d 1173, 1176-
77 (7th Cir. 1971) (accepting as true, for purposes of appeal,
facts related in the plaintiff’s affidavits and complaint when
the parties’ affidavits contained contradictory factual
allegations with respect to personal jurisdiction); cf. Dowless
v. Warren-Rupp Houdailles, Inc., 800 F.2d 1305, 1307-08 (4th
Cir. 1986) (noting that the plaintiff “need not present evidence
13
in making a prima facie case to oppose a motion to dismiss,” and
that “[m]ere allegations are sufficient” to satisfy the pleading
requirements for personal jurisdiction).
Given the procedural posture of this appeal, we do not
evaluate the credibility of the statements in affidavits filed
on Universal’s behalf or address any questions regarding the
ultimate admissibility of evidence, nor do we decide whether
Universal has proved its contentions. Instead, we are required
to determine whether Universal has made at the motion to dismiss
stage a prima facie showing that Koro purposefully availed
itself of the privilege of doing business in North Carolina, in
satisfaction of the first prong of our jurisdictional analysis.
See, e.g., Carefirst, 334 F.3d at 396 (stating that when the
district court decides a pretrial motion challenging personal
jurisdiction without conducting an evidentiary hearing, the
plaintiff need only make a prima facie showing of jurisdiction);
Mattel, Inc. v. Greiner & Hausser GmbH, 354 F.3d 857, 862 (9th
Cir. 2003) (stating that a plaintiff makes a prima facie showing
of personal jurisdiction by presenting facts that, if true,
would support jurisdiction over the defendant).
We conclude that Universal sufficiently has shown such
purposeful availment, and that the district court erred in
reaching a contrary conclusion. Although we agree with the
district court’s observation that in-person business meetings
14
are not “automatically sufficient” to confer jurisdiction, such
instances may not be viewed in isolation from the totality of
the facts before the court. When considered as a whole,
Universal’s allegations and supporting affidavits describe
vigorous business solicitations undertaken by Koro in North
Carolina, which gave rise to a two-year relationship between the
parties that spanned a series of transactions and resulted in
the sale of millions of dollars in goods.
Koro argues, nevertheless, that the “clear center” of the
parties’ interactions was in Argentina, and analogizes this
appeal to our decision in Consulting Engineers. In that case, a
Virginia corporation entered into a non-disclosure agreement
with an Indian corporation regarding a potential software
project. 561 F.3d at 275. The non-disclosure agreement
contained a choice-of-law provision requiring that Virginia law
would govern the parties’ agreement. Id. The Indian
corporation ultimately declined to pursue the project, after a
single meeting of the parties in India to discuss the proposed
work, but allegedly hired an India-based employee of the
Virginia corporation in violation of the non-disclosure
agreement. Id. at 276.
In the ensuing lawsuit, we held that despite the parties’
agreement on a choice-of-law provision requiring the application
of Virginia law, the Indian corporation’s contacts with Virginia
15
were “too attenuated” to support a finding of specific personal
jurisdiction. Id. at 282. In addition to the fact that the
defendant did not have offices, property, employees, or ongoing
business in Virginia, we further observed that none of the
defendant’s employees had traveled to Virginia; that the
defendant did not initiate contact with the plaintiff; that the
only in-person meeting between the parties occurred in India;
that the relevant communications between the parties consisted
of four brief emails, several telephone conversations, and the
exchange of draft agreements; and that the activity forming the
basis of the plaintiff’s complaint took place abroad. Id. at
281-82.
In contrast, the affidavits filed by Universal in the
present case detail many of the factual circumstances not
present in Consulting Engineers. For example, Universal’s
representative averred that Koro employees made “first contact”
with Universal, traveled to Universal’s offices in North
Carolina on several occasions, conducted at least six business
meetings with Universal in North Carolina that involved
“continued solicitations” and “discussions . . . of the
purchaser and seller relationship,” and corresponded by e-mail
with Universal employees on a “weekly” basis over the course of
two years.
16
We have identified similar circumstances as significantly
impacting the outcome of a personal jurisdiction analysis,
including the fact that a defendant “initiated contact” with the
plaintiff in the forum state and “repeatedly reached” into the
forum state to transact business during in-person visits there.
CFA Inst. v. Inst. of Chartered Fin. Analysts of India, 551 F.3d
285, 295 & n.17 (4th Cir. 2009) (according “special weight” to
the fact that the defendant initiated contact with the
plaintiff, and noting that the defendant “repeatedly reached
into [the forum state] to transact business with the
[defendant], invoking the benefits and protections of [forum]
law”); see also Tire Eng’g, 682 F.3d at 304 (observing that the
relationship between the foreign defendant and the resident
plaintiff “originated” in the forum state during in-person
visits by the defendant’s representative). We particularly have
observed in jurisdictional analysis the importance of a
defendant’s solicitations and in-person contact regarding the
business relationship in the forum state. See Consulting
Eng’rs, 561 F.3d at 278 (stating that courts should consider
“whether the defendant reached into the forum state to solicit
or initiate business,” and “whether the defendant made in-person
contact with the resident of the forum in the forum state
regarding the business relationship”); see also Lesnick v.
Hollingsworth & Vose Co., 35 F.3d 939, 946 (4th Cir. 1994)
17
(observing that the defendant did not purposefully avail itself
of conducting business in the forum state when the defendant had
not “directed [any] marketing effort or other activities” toward
that state); Ellicott Mach. Corp. v. John Holland Party Ltd.,
995 F.2d 474, 478 (4th Cir. 1993) (noting that the defendant’s
decision not to advertise or solicit business in the forum state
weighed against a finding of minimum contacts); Fed. Ins. Co.,
886 F.2d at 658-59 (concluding that the defendant did not
purposefully avail itself of the privilege of conducting
business in the forum state, in part because the defendants’
sales of goods to residents of the forum state were initiated by
the customers and because the defendants did not “directly
advertise or solicit customers” or engage in “sales efforts” in
the forum state); cf. Asahi Metal Indus. v. Superior Court of
Cal., 480 U.S. 102, 112-13 (1987) (plurality opinion) (analyzing
a defendant’s purposeful availment of a forum state by
examining, among other things, whether the defendant advertised
or solicited business within that state).
Although the magistrate judge and the district court
identified several other factors to support their respective
conclusions, the considerations we have identified above
sufficiently show at this stage of the proceedings that Koro
initiated contact with Universal in North Carolina and, during a
series of in-person solicitations and business meetings held
18
there, established significant, ongoing business dealings with
Universal over a two-year period. The testimony in the
affidavits regarding robust business activity within the forum
state distinguishes this case from other cases in which the
parties’ interactions occurred “overwhelmingly abroad,” Tire
Eng’g, 682 F.3d at 302, and from cases in which the defendant’s
goods were directed at the forum state in only a “random,
fortuitous, or attenuated way,” ESAB Grp., 685 F.3d at 392
(citation omitted). Instead, the averments of Universal’s
representative portray a defendant that engaged in a course of
conduct that “targeted the forum with its goods.” Id. (citation
and internal quotation marks omitted).
We acknowledge that certain other facts weigh in Koro’s
favor, including that Koro is a foreign corporation without
offices, property, or employees in North Carolina, that the
breaches of contract alleged in the complaint appear to have
occurred abroad, and that Universal accepted delivery of the
goods within Argentina. Nevertheless, we are constrained to
conclude that Universal’s allegations and supporting affidavits,
when construed in the light most favorable to Universal, satisfy
its prima facie burden of showing that Koro purposefully availed
itself of the privilege of conducting business in North
Carolina.
19
Because Universal satisfied at this stage of the
proceedings its burden of showing Koro’s purposeful availment,
we conclude that the district court erred in dismissing
Universal’s complaint before considering the additional aspects
of the jurisdictional inquiry. In reaching this conclusion, we
express no opinion regarding whether Universal has satisfied its
prima facie burden with respect to the additional requirements
of specific personal jurisdiction that the district court did
not address, including the requirement that the exercise of
jurisdiction be constitutionally reasonable. See Foster v.
Arletty 3 Sarl, 278 F.3d 409, 415 n.5 (4th Cir. 2002) (noting
that a defendant’s “purposefully established contacts, even if
meeting the minimal threshold mandated by due process, must
still ‘be considered in light of other factors’ to determine
whether personal jurisdiction is appropriate”) (quoting Burger
King Corp. v. Rudzewicz, 471 U.S. 462, 476 (1985)). And, as
noted above, we do not pass judgment on the credibility of the
affidavits filed by Universal’s assistant manager. In its
discretion, the district court may address such questions at an
evidentiary hearing or at trial if the court concludes that
Universal has satisfied its initial burden with respect to the
remaining required elements of personal jurisdiction.
III.
20
For these reasons, we vacate the district court’s judgment
and remand the case for further proceedings consistent with the
principles expressed in this opinion.
VACATED AND REMANDED
21