Le Bleu Corp. v. Standard Capital Group, Inc. , 11 F. App'x 377 ( 2001 )

Filed: June 27, 2001
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 00-2392
(CA-99-246-1)
Le Bleu Corporation,
Plaintiff - Appellant,
versus
Standard Capital Group, Incorporated,
Defendant - Appellee.
O R D E R
The court amends its opinion filed June 15, 2001, as follows:
On page 5, third full paragraph, line 2 -- the word “con-
tracts” is corrected to read “contacts.”
For the Court - By Direction
/s/ Patricia S. Connor
Clerk
UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
LE BLEU CORPORATION,
Plaintiff-Appellant,
v.
No. 00-2392
STANDARD CAPITAL GROUP,
INCORPORATED,
Defendant-Appellee.
Appeal from the United States District Court
for the Middle District of North Carolina, at Durham.
William L. Osteen, District Judge.
(CA-99-246-1)
Argued: April 6, 2001
Decided: June 15, 2001
Before LUTTIG and GREGORY, Circuit Judges, and
Rebecca Beach SMITH, United States District Judge
for the Eastern District of Virginia,
sitting by designation.
_________________________________________________________________
Affirmed by unpublished per curiam opinion.
_________________________________________________________________
COUNSEL
ARGUED: Linda L. Helms, WILSON & ISEMAN, L.L.P., Winston-
Salem, North Carolina, for Appellant. Martin Nesbitt Erwin, SMITH,
HELMS, MULLISS & MOORE, L.L.P., Greensboro, North Carolina,
for Appellee. ON BRIEF: G. Gray Wilson, Urs R. Gsteiger, WIL-
SON & ISEMAN, L.L.P., Winston-Salem, North Carolina, for Appel-
lant.
_________________________________________________________________
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
_________________________________________________________________
OPINION
PER CURIAM:
Plaintiff-appellant Le Bleu Corporation appeals the district court's
order granting defendant-appellee Standard Capital Group, Inc.'s
motion to dismiss for lack of personal jurisdiction. We affirm on the
reasoning of the district court.
I.
In February 1999, Robert Wilson ("Wilson"), an independent ven-
ture capital consultant, contacted Standard Capital Group, Inc.
("Standard"), a California corporation, regarding a $20 million capital
contribution sought by Le Bleu Corporation ("Le Bleu"), a North Car-
olina corporation engaged in the business of bottling water for retail
distribution. Wilson submitted Le Bleu's financial records to Standard
for review and traveled to California to meet with Standard. Subse-
quently, Standard sent two of its employees to North Carolina to meet
with Wilson and Jerry Smith, Le Bleu's president, and to view Le
Bleu's operations.
Thereafter, on April 28, 1999, Standard mailed a signed agreement
(the "Agreement") to Le Bleu. The Agreement provided that Standard
would serve as Le Bleu's financial advisor in connection with either
the private placement of debt or the arrangement of a strategic part-
nership and related financing.
In exchange, Le Bleu agreed to provide Standard a non-refundable
retainer fee of $100,000 and also agreed to pay Standard, upon private
2
placement of any debt, a percentage of the proceeds raised, and to
issue to Standard an unspecified number of options to purchase com-
mon stock in Le Bleu. J.A. 14. The Agreement did not specify where
Standard would perform the work related to the transaction.
Le Bleu signed the agreement in North Carolina and mailed it to
Standard in California on May 3, 1999. The contemplated term of the
Agreement was only three months, since either party could terminate
the Agreement "at any time after July 31, 1999," with or without
cause. J.A. 15.1
1
Subsequently, Le Bleu sent Standard a $100,000 retainer, and Stan-
dard began work in California on a memorandum related to the trans-
action. Although Standard took a draft memorandum to North
Carolina for Le Bleu's review, the memorandum was completed in
California and none of the fourteen potential investors to whom the
memorandum was sent were located in North Carolina. Four inves-
tors, all located in Los Angeles, California, responded, and arrange-
ments were made for a joint team of Standard and Le Bleu employees
to make presentations to these investors in Los Angeles. Before the
presentations could take place, however, Le Bleu sent Standard new
financial figures which, according to Standard, reflected a net change
in Le Bleu's financial position of negative $2.571 million. Thereafter,
Standard canceled the meetings in California, and Le Bleu requested
that Standard return the $100,000 retainer. When Standard declined
to return the non-refundable retainer, Le Bleu filed suit in the Supe-
rior Court of Forsyth County, North Carolina, alleging breach of con-
tract, fraud, and unfair and deceptive business practices in violation
of N.C.G.S. § 75-1.1. Standard removed the case to federal district
court in North Carolina on the basis of diversity of citizenship, see 28
U.S.C. § 1332(a), and moved to dismiss the case, pursuant to Fed. R.
Civ. P. 12(b)(2), for lack of personal jurisdiction. The district court
referred the motion to a magistrate judge, who recommended dismiss-
ing the case for lack of personal jurisdiction over Standard. After con-
sidering Le Bleu's objections to the magistrate judge's report and
_________________________________________________________________
1 The "Governing Law" clause provided that the agreement "shall be
governed and construed in accordance with the laws of the State of Cali-
fornia." J.A. 17.
3
recommendation, the district court adopted the report and dismissed
the case without prejudice. This appeal followed.
II.
A federal court may exercise personal jurisdiction over nonresident
individuals and corporations in a manner prescribed by state law, so
long as the application of the state's long-arm statute comports with
the Due Process Clause of the Fourteenth Amendment. See Stover v.
O'Connell Assoc., Inc., 84 F.3d 132, 136 (4th Cir. 1994).
Standard concedes that it is subject to North Carolina's long-arm
statute, N.C.G.S. § 1-75.4(5)(c), which has been interpreted to extend
to the outer limits allowed by the Due Process Clause. See Hiwasse
Stables, Inc. v. Cunningham, 519 S.E.2d 317 (N.C. 1999). Thus, the
scope of our inquiry is limited to whether North Carolina may, consis-
tent with due process, exercise personal jurisdiction over Standard.
Le Bleu has never claimed that Standard's contacts with North Car-
olina are sufficiently continuous and systematic to subject Standard
to general personal jurisdiction in North Carolina. See Helicopteros
Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 415 n.9 (1984)
(explaining that general jurisdiction is an exercise of personal juris-
diction over a defendant in a suit not arising out of or related to the
defendant's contacts with the forum). Rather, the issue is one of spe-
cific jurisdiction.
In specific jurisdiction cases, "a ``relationship among the defendant,
the forum, and the litigation' is the essential foundation," Helicop-
teros, 466 U.S. at 414 (citing Shaffer v. Heitner, 433 U.S. 186, 204
(1977)), while the "constitutional touchstone remains whether the
defendant purposefully established ``minimum contacts' with the
forum State." Burger King v. Rudzewicz, 471 U.S. 462, 475 (1985)
(citing International Shoe Co. v. Washington, 326 U.S. 310, 316
(1945)). A contract with a resident of a forum state does not automati-
cally constitute sufficient contacts to support the forum's assertion of
specific jurisdiction, even where the dispute arises from the contract.
See Burger King, 471 U.S. at 478. Rather, for purposes of the due
process analysis, the contract must have a "substantial connection
with the State," so that the "quality and nature" of a defendant's rela-
4
tionship to the forum "can in no sense be viewed as ``random,' ``fortu-
itous,' or ``attenuated.'" Burger King, 471 U.S. at 479-480 (citations
omitted).
Le Bleu claims on appeal that the district court erred in adopting
the recommendation of the magistrate judge. According to Le Bleu,
"that the parties exchanged ``some mail and telephone calls,' that two
visits were made to North Carolina by defendant's employees, [and]
that a payment was mailed from North Carolina and that the contract
was signed in North Carolina" were "facts sufficient to support a find-
ing of personal jurisdiction." Appellant's Br. at 13.
The magistrate judge considered factors that elucidate the "prior
negotiation and contemplated future consequences, along with the
terms of the contract and the parties' course of dealing," Burger King,
471 U.S. at 479, and concluded that Le Bleu had shown only a "negli-
gible connection with North Carolina," and thus had failed to make
a prima facie showing that specific jurisdiction over Standard was
proper in North Carolina. See Combs v. Bakker, 886 F.2d 673, 676
(4th Cir. 1989) (holding that once the jurisdictional issue is properly
raised by an out-of-state defendant at a preliminary stage of the case,
as here, the plaintiff need only make a prima facie showing of per-
sonal jurisdiction).
The magistrate judge declined to aggregate Standard's other
alleged contacts with North Carolina -- contracts alluded to in Wil-
son's affidavit and not part of the contract between Standard and Le
Bleu -- for purposes of determining whether specific jurisdiction lay
in North Carolina, noting that such inquiry would be relevant only to
an inquiry into general jurisdiction, which Le Bleu had not claimed.2
2
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2 Nor is the status of Wilson relevant to whether Standard was subject
to personal jurisdiction in North Carolina. For, while Le Bleu referred to
Wilson as "defendant's agent," or, "at a minimum a dual agent" in its
brief and at argument, Le Bleu failed to adduce evidence from which the
legal conclusion that Wilson was Standard's agent can be inferred. Nor
did the magistrate judge make any such finding. Indeed, Le Bleu itself
earlier characterized Wilson as "a self-employed investment consultant
working in Charlotte, North Carolina." Dist. Ct. Rec. Vol. I, Tab 16 at
3.
5
J.A. 223 n.3. See also RAR, Inc. v. Turner Diesel, Ltd., 107 F.3d
1272, 1277-78 (7th Cir. 1997) (noting that even prior contracts
between parties to the suit are not to be considered in a specific juris-
diction analysis).
Consequently, the magistrate judge's report recommended that
Standard's motion to dismiss for lack of personal jurisdiction be
granted. And after considering Le Bleu's objections and conducting
a de novo review, the district court adopted the magistrate judge's
report and dismissed Le Bleu's action without prejudice. J.A. 231.
Upon review of the parties' briefs and the applicable law, and hav-
ing had the benefit of oral argument, we conclude that the district
court correctly decided the issue before it. Accordingly, we affirm on
the reasoning of the district court, as embodied in the magistrate
judge's report and recommendation.
AFFIRMED
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