State ex rel. Stein v. E.I. DuPont de Nemours & Co. ( 2022 )

IN THE SUPREME COURT OF NORTH CAROLINA
2022-NCSC-110
No. 436A21
Filed 4 November 2022
STATE OF NORTH CAROLINA ex rel. JOSHUA H. STEIN, ATTORNEY
GENERAL
v.
E. I. DU PONT DE NEMOURS AND COMPANY; THE CHEMOURS COMPANY;
THE CHEMOURS COMPANY FC, LLC; CORTEVA, INC.; DUPONT DE
NEMOURS, INC.; and BUSINESS ENTITIES 1-10
Appeal as of right directly to the Supreme Court pursuant to N.C.G.S. § 7A-
27(a)(2) from an order and opinion, entered on 9 September 2021 by Judge Michael
L. Robinson, Special Superior Court Judge for Complex Business Cases, in Superior
Court, Cumberland County, after being designated a mandatory complex business
case pursuant to N.C.G.S. § 7A-45(b). Heard in the Supreme Court on 19 September
2022.
Joshua H. Stein, Attorney General, by Ryan Y. Park, Solicitor General, Daniel
S. Hirschman, Senior Deputy Attorney General, and Marc Bernstein, Special
Deputy Attorney General; and Kelley Drye & Warren LLP, by David Zalman,
pro hac vice, Levi Downing, pro hac vice, Elizabeth N. Krasnow, pro hac vice,
Julia Schuurman, pro hac vice, and Lauren H. Shah, pro hac vice, for plaintiff-
appellee.
Bradley Arant Boult Cummings LLP, by Robert R. Marcus, C. Bailey King, Jr.,
and Brian M. Rowlson; and Bartlit Beck LLP, by Katherine L.I. Hacker, pro
hac vice, and Joshua P. Ackerman, pro hac vice, for defendant-appellants.
EARLS, Justice.
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Opinion of the Court
¶1 Individuals and corporate entities have a “liberty interest in not being subject
to the binding judgments of a forum with which [they] ha[ve] no meaningful contacts,
ties, or relations” See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 471-72 (1985)
(quoting Int’l Shoe Co. v. Washington, 326 U.S. 310, 319 (1945)). That liberty interest
is protected by requiring courts—both state and federal—to have personal
jurisdiction over a party before subjecting it to legal proceedings. Where personal
jurisdiction exists, it follows that individuals or entities had a “fair warning” they
might be subject to legal proceedings in that forum. Id. In this sense, personal
jurisdiction is a shield—not a sword. Though it protects against the threat of
litigation in arbitrary jurisdictions, it is not a tool to be weaponized against claimants
by enabling defendants to evade accountability for potentially tortious conduct. But
according to the State, that is precisely what E.I. DuPont de Nemours and Company
(“Old DuPont”) sought to do when, facing liability for releasing harmful chemicals
into the environment in North Carolina over a period of decades, it underwent a
significant corporate reorganization and transferred millions of dollars in assets to
out-of-state companies, creating substantial losses for itself. This appeal concerns
whether the Due Process Clause allows North Carolina courts to exercise personal
jurisdiction over the companies that received those assets, even though they do not
have any contacts of their own in this state. We hold that due process indeed allows
as much.
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I. Factual Background
A. Old DuPont’s Use of Per- and Polyfluoroalkyl Substances (“PFAS”)
¶2 Old DuPont is a chemical company that produces agricultural and other
specialty products. In 2020, North Carolina (the State) brought an action against Old
DuPont and its corporate successors, including Chemours, New DuPont, and
Corteva,1 alleging that Old DuPont knowingly operated a plant in North Carolina
that released harmful chemicals called per- and polyfluoroalkyl substances (“PFAS”)
into the environment for over forty years.
¶3 PFAS are a class of manmade chemicals nicknamed “forever chemicals”
because they are resistant to degradation and thus persist in the environment. In the
1950s, Old DuPont began using various kinds of PFAS, such as perfluorooctanoic acid
(“PFOA”), at chemical plants around the country.2 In 1969, Old DuPont purchased
the Fayetteville Works plant, located in Fayetteville, North Carolina, and began
producing PFAS at that location in the early 1970s.
¶4 PFOA, one of the most widely studied PFAS, is highly soluble, meaning it can
be freely transported through water and soil. Thus, because it does not degrade, it
can cause environmental damage over long distances. PFOA accumulates and
1 The legal names of these entities are The Chemours Company, The Chemours
Company FC, LLC, Corteva, Inc., and DuPont de Nemours, Inc.
2 Unless otherwise indicated, throughout this opinion, we rely on the facts as stated
in the State’s complaint and take them as true for purposes of this motion to dismiss under
Rule 12(b)(2).
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persists in people and other organisms, and it has been shown to be carcinogenic at
very low concentrations.
¶5 The State alleges that, as early as 1961, company scientists warned Old
DuPont of the risks associated with PFOA. The warnings were based on internal
studies concluding that PFOA caused liver damage in rats and dogs. These early
studies led company scientists to caution that PFOA should be handled with extreme
care and should not come into direct contact with skin. Old DuPont continued to
conduct studies about the health effects of PFOA on plant workers throughout the
late 1970s and early 1980s, which similarly concluded that the chemical is toxic and
causes adverse health effects. The State also alleges that by 1984, Old DuPont was
aware of PFOA’s lasting environmental effects. The State alleges that, despite
knowing of the consequences associated with PFOA, Old DuPont both concealed such
knowledge and refused to adopt technologies that would reduce its PFOA output and
thus its human and environmental impact. In 2002, Old DuPont’s supplier ceased
production of PFOA, leading the company to begin producing its own, including at
Fayetteville Works. According to the State’s brief, by 2006, Fayetteville Works was
the only facility in the United States still producing PFOA. Publicly, the company
maintained that PFOA did not cause adverse health or environmental consequences.
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B. Old DuPont’s Restructuring
¶6 Since approximately 2000, Old DuPont’s liabilities arising from its PFOA use
have been mounting around the country, including a $10.25 million fine paid to the
EPA stemming from its failure to report the risks associated with PFOA exposure, a
class action settlement for over $300 million arising out of its PFOA discharges at a
facility in West Virginia, and a settlement in federal multidistrict litigation for
approximately $670 million. The State alleges that, recognizing the scope of its
liability for contamination caused by its PFAS and PFOA use, Old DuPont chose to
restructure its business to limit future liability and protect its remaining assets. The
restructuring took form over three stages.
¶7 First, Old DuPont transferred its Performance Chemicals Business, which
included its PFOA and other PFAS-related assets, such as Fayetteville Works, to a
wholly-owned subsidiary called Chemours.3 Old DuPont then spun off Chemours as
a separate public company, but the State claims that Chemours was intentionally
undercapitalized and unable to satisfy Old DuPont’s PFAS liabilities. For instance,
aside from assuming Old DuPont’s PFAS liabilities, Chemours transferred
approximately $3.4 billion to Old DuPont as a cash dividend and issued promissory
notes with a principal amount totaling $507 million. Following the spinoff, Chemours
reported that its assets totaled $6.298 billion, while its liabilities totaled $6.168
3 Chemours is a defendant in this litigation, but it is not an appellant here.
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billion. The State alleges that this figure was an underestimate, and had the estimate
been accurate, Chemours would have been deemed insolvent at the time of the
spinoff. In fact, in an unrelated lawsuit brought by Chemours against Old DuPont,
Chemours made a similar argument and contended that Old DuPont intentionally
downplayed the extent of its PFAS liability. See Chemours Co. v. DowDuPont Inc.,
No. 2019-0351-SG, 2020 WL 1527783, at *7 (Del. Ch. Mar. 30, 2020) (unpublished),
aff'd, 243 A.3d 441 (Del. 2020) (unpublished order). Because Old DuPont knew that
Chemours would be unable to satisfy all of Old DuPont’s PFAS-related liabilities, the
State argues that Old DuPont also knew that it remained responsible for them.
¶8 After the Chemours spinoff, the next step in Old DuPont’s reorganization plan
was a merger with a company called The Dow Chemical Company (“Old Dow”). But,
according to the State’s brief, instead of completing the merger as originally
announced, Old DuPont and Old Dow formed a new holding company called
DowDuPont. Old DuPont and Old Dow became subsidiaries of DowDuPont. During
this step of the reorganization, DowDuPont executed numerous business segment
and product line realignments and divestitures, which reallocated a substantial
portion of Old DuPont’s assets to DowDuPont.
¶9 Finally, during the third stage in the reorganization, the State argues
DowDuPont took additional steps to shield its remaining good assets. As part of this
reorganization, DowDuPont formed three separate business lines: (1) the Materials
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Science Business; (2) the Agriculture Business; and (3) the Specialty Products
Business. It then formed two new companies called Dow, Inc. (“New Dow”), which
holds Old Dow as a subsidiary, and Corteva, which holds Old DuPont. DowDuPont
also renamed itself DuPont de Nemours, Inc (“New DuPont”). The Materials Science
Business was transferred to New Dow, the Agriculture Business was transferred to
Corteva, and New DuPont retained ownership of the Specialty Products Business.
The Business Court found that Old DuPont transferred these business lines for less
than their assets’ value. The court further found that, since these transfers took place,
Old DuPont’s value has dropped continuously, at one point falling at least as low as
negative $1.125 billion. In 2019, New DuPont spun off Corteva and New Dow as
separate public companies. Corteva and New DuPont are the corporate successors
that bring this appeal. New Dow is not a party in this litigation.
¶ 10 A Separation and Distribution Agreement (“the Separation Agreement”), dated
1 April 2019, governs the separation of Corteva and New Dow from New DuPont. In
June 2019, the parties entered into a Letter Agreement (“the Letter Agreement”),
which amended certain provisions in the Separation Agreement.4 Based on the
Separation Agreement, in conjunction with the Letter Agreement, the Business Court
4 Certain terms of these agreements have been filed under seal, and we therefore do
not disclose them here.
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found that New DuPont agreed to assume all the Specialty Products liabilities and
Corteva agreed to assume all the Agriculture Business liabilities.
C. Defendant’s Motion to Dismiss and the Business Court’s Order
¶ 11 In 2020, North Carolina brought an action against Old DuPont, Corteva, New
DuPont, and Chemours asserting claims of negligence, trespass, public nuisance,
fraud, and fraudulent transfer related to Old DuPont’s use of PFAS at Fayetteville
Works and its subsequent reorganization to avoid liability. New DuPont and Corteva
moved to dismiss the State’s action, arguing that the trial court could not exercise
personal jurisdiction over them because they are Delaware holding companies that
do not conduct business in North Carolina. They assert that they never owned or
operated the Fayetteville Works plant, nor have they ever made, sold, distributed, or
discharged PFAS. Rather, Corteva and New DuPont assert that they are “just holding
companies” that exist only in Delaware. At this stage, Corteva and New DuPont did
not, however, contest the State’s allegations regarding Old DuPont’s fraudulent
restructuring.
¶ 12 Relying on a significant body of case law from both state and federal courts,
the Business Court held that the Due Process Clause permits jurisdiction to be
exercised over a corporate successor when (1) the predecessor is subject to jurisdiction
in the forum; and (2) state law subjects the successor to liability. Recognizing that
the first requirement was easily established given Old DuPont’s history in North
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Carolina, the Business Court focused on the second factor and identified the extent
to which North Carolina law imputes the liabilities of a predecessor to its successors.
Citing a previous Court of Appeals decision, the Business Court first explained that
“[a] corporation which purchases all, or substantially all, of the assets of another
corporation is generally not liable for the old corporation’s debts or liabilities.” State
ex rel. Stein v. E.I. du Pont de Nemours & Co., No. 20 CVS 5612, 2021 WL 4127106,
at *6, 2021 NCBC 54, ¶ 44 (N.C. Super. Ct. Cumberland County (Bus. Ct.) Sept. 9,
2021) (unpublished) (alteration in original) (quoting Budd Tire Corp. v. Pierce Tire
Co., 90 N.C. App. 684, 687 (1988)). But in Budd Tire, the Court of Appeals recognized
four exceptions to this principle—two of which the Business Court found to be
relevant here. The first exception the Business Court applied imputes the liabilities
of a predecessor to its successor when “there is an express or implied agreement by
the purchasing corporation to assume the debt or liability.” Budd Tire, 90 N.C. App.
at 687. The second exception imputes liability to the successor when “the transfer of
assets was done for the purpose of defrauding the corporation’s creditors.” Id.
¶ 13 In its opposition to the motion to dismiss, the State argued that, as an
alternative ground for jurisdiction, defendants’ allegedly fraudulent conduct was
aimed at North Carolina and justified exercising direct jurisdiction over Corteva and
New DuPont under the Supreme Court’s decision in Calder v. Jones. 465 U.S. 783(1984). In Calder, the Court held that courts may exercise jurisdiction over
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defendants who commit “intentional, and allegedly tortious, actions” outside the
forum that “were expressly aimed at” the forum. Id. at 789. Exercising Calder
jurisdiction would obviate the need to conduct the imputation analysis to determine
whether personal jurisdiction is proper under North Carolina law. The Business
Court declined to address this argument, however, finding it an unnecessary step
because jurisdiction was established by imputing Old DuPont’s liabilities to Corteva
and New DuPont.
II. Analysis
¶ 14 There are two questions on appeal. The first is whether the Due Process Clause
permits personal jurisdiction over out-of-state corporate successors to be based on the
contacts of their in-state predecessor company by imputing the conduct and liabilities
of the predecessor to its successors. Second, the State asks this Court to determine
whether Old DuPont’s allegedly fraudulent conduct was expressly aimed at North
Carolina, justifying the exercise of direct jurisdiction pursuant to the United States
Supreme Court’s decision in Calder v. Jones.
A. Personal Jurisdiction
¶ 15 When the parties have submitted affidavits and other documentary evidence,
a trial court reviewing a motion to dismiss for lack of personal jurisdiction under Rule
12(b)(2) must determine whether the plaintiff has established that jurisdiction exists
by a preponderance of the evidence. See Bauer v. Douglas Aquatics, Inc., 207 N.C.
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App. 65, 68 (2010). The documentary evidence may include “any allegations in the
complaint that are not controverted by the defendant's affidavit.” Banc of Am. Sec.
LLC v. Evergreen Int'l Aviation, Inc., 169 N.C. App. 690, 693-94 (2005) (quoting
Bruggeman v. Meditrust Acquisition Co., 138 N.C. App. 612, 615-16 (2000) (citations
omitted)). As an appellate court, we consider whether the trial court’s determination
regarding personal jurisdiction is supported by competent evidence in the record.
Toshiba Glob. Com. Sols., Inc. v. Smart & Final Stores LLC, 2381 N.C. 692, 2022-
NCSC-81, ¶ 8 (2022) (“[W]hether personal jurisdiction exists is a question of fact and
. . . appellate courts . . . assess whether the determination is supported by competent
evidence in the record”). “However, when the pertinent inquiry on appeal is based on
a question of law[,] we conduct de novo review.” Id. (citing Da Silva v. WakeMed, 375
N.C. 1, 5 (2020)).
¶ 16 Determining whether a nonresident defendant is subject to personal
jurisdiction in this State’s courts involves a two-step analysis. Beem USA Ltd.-Liab.
Ltd. P’shp v. Grax Consulting LLC, 373 N.C. 297, 302 (2020). “First, jurisdiction over
the defendant must be authorized by N.C.G.S. § 1-75.4—North Carolina’s long-arm
statute.” Id. Relevant here, § 1-75.4 states that personal jurisdiction exists where a
party “[i]s engaged in substantial activity within this State, whether such activity is
wholly interstate, intrastate, or otherwise.” N.C.G.S. § 1-75.4(1)(d) (2021). This
statute is “intended to make available to the North Carolina courts the full
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jurisdictional powers permissible under federal due process.” Dillon v. Numismatic
Funding Corp., 291 N.C. 674, 676 (1977). Therefore, in this case, the statutory
analysis merges with the due process analysis.
¶ 17 Second, “if the long-arm statute permits consideration of the action, exercise of
jurisdiction must not violate the Due Process Clause of the Fourteenth Amendment
to the U.S. Constitution.” Beem USA, 373 N.C. at 302 (quoting Skinner v. Preferred
Credit, 361 N.C. 114, 119 (2006)). Exercising jurisdiction over an out-of-state
defendant comports with the Due Process Clause when the defendant has “certain
minimum contacts with [the forum state] such that the maintenance of the suit does
not offend ‘traditional notions of fair play and substantial justice.’” Id. (alteration in
original) (quoting Int’l Shoe, 326 U.S. at 316 (internal quotation marks omitted)).
Minimum contacts, in turn, result from ‘some act by which the defendant
purposefully avails itself of the privilege of conducting activities within the forum
State, thus invoking the benefits and protections of its laws.” Id. at 303 (quoting
Skinner, 361 N.C. at 133).
¶ 18 There are two types of personal jurisdiction: general jurisdiction and specific
jurisdiction. See Daimler AG v. Bauman, 571 U.S. 117, 126–27 (2014). General
jurisdiction exists when the defendant’s “affiliations with the State are so ‘continuous
and systematic’ as to render them essentially at home in the forum State.” Goodyear
Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011) (quoting Int’l Shoe,
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326 U.S. at 317). Specific jurisdiction, however, exists only when “the suit ‘arise[s]
out of or relate[s] to the defendant’s contacts with the forum.’” Daimler, 571 U.S. at
127 (alterations in original) (quoting Helicopteros Nacionales de Colombia, S.A. v.
Hall, 466 U.S. 408, 414 n.8 (1984)). The parties here agree that Corteva and New
DuPont are not subject to general jurisdiction. The question then is whether these
out-of-state successors of Old DuPont can be subject to specific jurisdiction in North
Carolina courts based on Old DuPont’s conduct and liabilities in the State.
¶ 19 ‘“The great weight of persuasive authority permits imputation of a
predecessor's actions upon its successor whenever forum law would hold the successor
liable for its predecessor's actions.’”5 City of Richmond v. Madison Mgmt. Grp., Inc.,
918 F.2d 438, 454 (4th Cir. 1990) (quoting Simmers v. Am. Cyanamid Corp., 576 A.2d
5 See, e.g., Hawkins v. i-TV Digitális Távközlési zrt., 935 F.3d 211, 227 (4th Cir. 2019)
(“[W]here one corporation has succeeded to another’s liabilities, the predecessor corporation’s
forum contacts can be imputed to the successor corporation.”); Perry Drug Stores v. CSK Auto
Corp., 93 F. App’x 677, 681 (6th Cir. 2003) (opining that “[a] court may impute the
jurisdictional contacts of a corporate predecessor to its successor where the successor
expressly assumed the liability of the predecessor” and explaining that “a contrary result
would allow corporations to ‘immunize themselves by formalistically changing their titles’”)
(quoting Duris v. Erato Shipping, Inc., 684 F.2d 352, 356 (6th Cir. 1982), aff’d sub nom, Pallas
Shipping Agency, Ltd. V. Duris, 461 U.S. 529 (1983)); Williams v. Bowman Livestock Equip.
Co., 927 F.2d 1128, 1132 (10th Cir. 1991) (“A corporation’s contacts with a forum may be
imputed to its successor if forum law would hold the successor liable for the actions of its
predecessor.”); Jeffrey v. Rapid Am. Corp., 529 N.W.2d 644, 654-55 (Mich. 1995) (“We hold
that the actions of a constituent corporation may be attributed to a surviving corporation
following a merger for purposes of determining the surviving corporation's amenability to
personal jurisdiction for liabilities allegedly incurred by the constituent corporation . . . [W]e
find the rule equally applicable when a corporation expressly assumes the liabilities of its
predecessors.”).
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376, 385 (Pa. Super. Ct. 1990) (emphasis in original); see also Patin v. Thoroughbred
Power Boats, Inc., 294 F.3d 640, 653 (5th Cir. 2002) (explaining that “federal courts
have consistently acknowledged that it is compatible with due process for a court to
exercise personal jurisdiction over an individual or a corporation that would not
ordinarily be subject to personal jurisdiction in that court when the individual or
corporation is an alter ego or successor” of an entity that is subject to jurisdiction
there).
¶ 20 “The theory underlying these cases is that, because the two corporations . . .
are the same entity, the jurisdictional contacts of one are the jurisdictional contacts
of the other for the purposes of the International Shoe due process analysis.” Patin,
294 F.3d at 653. Further, as the Business Court acknowledged, declining to impute
contacts for jurisdictional purposes in all cases would enable corporations to “avoid
all consequences . . . by just reforming in some other jurisdiction[.]” Madison Mgmt.
Grp., 918 F.2d at 455; see also E.I. du Pont de Nemours, 2021 WL 4127106, at *6,
2021 NCBC 54, ¶ 43.
¶ 21 Cases from other jurisdictions reaching the same conclusion are instructive. In
Simmers v. American Cyanamid Corp., for example, a Pennsylvania court held that
a company not otherwise operating in the state that purchased a product line from a
second in-state company and expressly assumed the second company’s related
liabilities could be subject to personal jurisdiction in Pennsylvania. See Simmers, 576
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A.2d at 387. In so holding, the court “recognize[d] the realities of modern corporate
law and the ever increasing frequency of corporate reorganizations.” Id. at 389. It
reasoned that refusing to impute a predecessor’s liabilities to its successor would
allow the successor to “avoid the jurisdiction of the very forum where the liability
accrued simply because it never did business within that forum.” Id. at 390. The court
explained that this would be an “absurd” result, particularly when “the assets
purchased by the successor, at least in part, were derived from the forum and the
successor no doubt had knowledge of its predecessor’s presence within the forum.” Id.
We find this reasoning persuasive and hold that due process permits courts to
exercise successor jurisdiction whenever (1) the predecessor is subject to personal
jurisdiction in a particular forum; and (2) that forum’s law permits courts to impute
the liabilities of the predecessor to its successors.6 Because neither party disputes
that Old DuPont is subject to jurisdiction in North Carolina, this appeal focuses on
the second factor.
¶ 22 It is true that, in North Carolina, “[a] corporation which purchases all, or
substantially all, of the assets of another corporation is generally not liable for the
old corporation’s debts or liabilities.” Budd Tire, 90 N.C. App. at 687; see also
McAlister v. Am. Ry. Express Co. 179 N.C. 556, 561 (1920) (“As a general rule [ ] the
6 As explained below, forum law dictates the extent to which imputation to establish
both liability and jurisdiction is permissible. The predecessor company’s liability alone is not
enough to establish successor jurisdiction.
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mere purchase of the assets and franchise[s] of one corporation by another will not
imply a promise on the part of the new to pay or satisfy the debts and obligations of
the old.”) (quoting 5 Seymour D. Thompson, Commentaries on the Law of
Corporations § 6090 (2d Ed.)). But there are several exceptions to this principle,
which the Court of Appeals encapsulated in Budd Tire, where:
(1) there is an express or implied agreement by the
purchasing corporation to assume the debt or liability; (2)
the transfer amounts to a de facto merger of the two
corporations; (3) the transfer of assets was done for the
purpose of defrauding the corporation's creditors, or; (4) the
purchasing corporation is a “mere continuation” of the
selling corporation in that the purchasing corporation has
some of the same shareholders, directors, and officers.
Budd Tire Corp. v. Pierce Tire Co., 90 N.C. App. at 687 (citations omitted); see also
McAlister, 179 N.C. at 560. If any one of these circumstances is present, North
Carolina law permits a predecessor company’s liabilities to be imputed to its
corporate successors, making jurisdiction over out-of-state successors proper under
the Due Process Clause.7
¶ 23 Importantly, exercising jurisdiction over out-of-state successors in these
circumstances does not offend “our traditional conception of fair play and substantial
justice.” Int’l Shoe, 326 U.S. at 324. Where any of these conditions exist, it cannot be
7 We clarify, however, that this list is not exhaustive. Additional circumstances may
arise that warrant expanding these limitations. Such circumstances are not before us now,
and we need not decide what they might be.
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said that a successor’s contacts are “random, fortuitous, or attenuated.” See Burger
King, 471 U.S. at 475 (cleaned up). Rather, in these situations, a successor likely has
or should have notice of the liabilities of its predecessor in a given jurisdiction.
¶ 24 The court in Simmers put it well. In holding that due process permits
jurisdiction to be established by imputing a predecessor company’s contacts to its out-
of-state successors, the court explained, “[n]o doubt in today’s sophisticated world of
corporate takeovers, a corporation, which assumes another's liabilities . . . seriously
considers the possible extent of any liabilities and where those liabilities may exist.”
Simmers, 576 A.2d at 3. Here, for instance, the Business Court found that both
Corteva and New DuPont expressly assumed Old DuPont’s PFAS-related liabilities
via the April 2019 Separation Agreement and the June 2019 Letter Agreement. And
“[w]hen a successor corporation assumes the liabilities of its corporate predecessors,
the successor in effect consents to be held liable in the same locations where its
predecessor would have been exposed.” Id. By assuming the liabilities of Old DuPont,
Corteva and New DuPont’s “conduct and connection with the forum State are such
that [they] should reasonably anticipate being haled into court” in North Carolina.
See Burger King, 471 U.S. at 474 (quoting Worldwide Volkswagon Corp. v. Woodson,
444 U.S. 286, 297 (1980)).
¶ 25 Corteva and New DuPont argue that imputing Old DuPont’s contacts to
establish personal jurisdiction is inappropriate because they are not the corporate
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continuations or embodiments of Old DuPont, which continues to exist as its own
entity. They argue that the cases that allow personal jurisdiction to be established
for out-of-state successors through imputation have involved actual or de facto
mergers. See, e.g., Synergy Ins. Co. v. Unique Pers. Consultants, Inc., No. 3:16CV611,
2017 WL 5474058, at *2 (W.D.N.C. Nov. 14, 2017) (unpublished order) (finding that
an entity was a corporate successor when, among other things, it purchased all assets
and took over the headquarters, satellite branches, phone numbers, and website
content of its predecessor); Simmers, 576 A.2d at 386–88 (imputing predecessors’
contacts to establish jurisdiction over corporate successors after de facto mergers). 8
¶ 26 We decline to recognize mergers as the sole circumstance in which successor
jurisdiction is appropriate. Such a holding would result in the very consequence
described above: Companies could avoid liability for tortious conduct simply by
forming a new, out-of-state company instead of effectuating a merger. Moreover,
where, as here, a company has explicitly assumed certain liabilities or reorganized to
8 Instead, Corteva and New DuPont argue they should be treated as assignees and
point out that “[t]he expectations of a corporate successor and an assignee are different.” See
Ostrem v. Prideco Secure Loan Fund, LP, 841 N.W.2d 882, 895 (Iowa 2014). Citing the Iowa
Supreme Court’s opinion in Ostrem, they argue that unlike a successor, “an assignee . . .
assumes a limited bundle of rights, obligations, and expectations.” Id. Corteva and New
DuPont contend that they assumed only limited assets and corresponding liabilities from Old
DuPont and should thus be treated as assignees. This argument fails, however, because it
ignores the other circumstances in which successor jurisdiction is appropriate—
circumstances that we hold exist here. But even if we were to treat Corteva and New DuPont
as assignees, the “limited bundle of . . . obligations,” id., they assumed include the liabilities
that are the subject of this litigation.
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avoid the very liability for which it is brought to court, requiring a merger or a
corporate continuation to establish successor jurisdiction would serve no additional
purpose.
¶ 27 Recognizing successor liability and jurisdiction in these narrow circumstances
ensures that a company that merely receives assets from another entity does not,
without more, become saddled with all of the transferor’s debts and liabilities. See
Madison Mgmt. Grp., 918 F.2d at 450. But a company may take certain affirmative
steps that justify both the imputation of those liabilities and the exercise of
jurisdiction. Actual and de facto mergers are one such example, in part because the
merging companies know in advance that they will become responsible for each
other’s liabilities, and they thus weigh the associated risks.9 Assuming certain
liabilities or intentionally reorganizing to avoid them similarly requires a party to
weigh the risks at hand and affirmatively decide whether to become legally
responsible for them or, as alleged here, attempt to fraudulently evade them. When
a party has engaged in such conduct, successor jurisdiction is equally appropriate.
9 See, e.g., McAlister v. Am. Ry. Express Co., 179 N.C. at 564 (“Where two corporations
effect a consolidation (or merger), and one of them goes entirely out of existence, and no
arrangements are made respecting its liabilities, the resulting consolidated (or merged),
corporation will, as a general rule, be entitled to all the property and answerable for all the
liabilities of the corporation thus absorbed.” (quoting Atlanta, B. & A.R. Co. v. Atl. Coast Line
R.R. Co., 75 S.E. 468, 470 (1912) (parentheticals added))).
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Thus, like many other courts that have decided this question, we are satisfied that
due process permits jurisdiction to be exercised over out-of-state corporate successors
where there is jurisdiction over the predecessor and North Carolina law would impute
the predecessor’s liability to its successors.
¶ 28 Here, the Business Court found that North Carolina law permits liability to be
imputed to Corteva and New DuPont, thereby creating personal jurisdiction over the
companies, because: (1) the parties expressly agreed to assume Old DuPont’s
liabilities in the April 2019 Separation Agreement and the June 2019 Letter
Agreement; and (2) the State alleged sufficient facts at the motion to dismiss stage to
support the claim that Old DuPont transferred its assets to Corteva and New DuPont
in an attempt to defraud the State in its position as a creditor.
¶ 29 As to the first exception, the Business Court made detailed findings of fact
regarding the meaning of the April 2019 Separation Agreement and the June 2019
Letter Agreement. Key to this analysis, the court pointed to plain contractual
language stating that Corteva and New DuPont expressly assumed Old DuPont’s
PFAS-related liabilities. E.I. du Pont de Nemours, 2021 WL 4127106, at *7, 2021
NCBC 54, ¶ 48. The Business Court found that “[i]t is clear that by execution of the
DowDuPont Separation Agreement and the Letter Agreement, Corteva and New
DuPont assumed certain liabilities related to Old DuPont’s manufacturing of PFAS.”
Id. at *8, 2021 NCBC 54, ¶ 51. The court rejected Corteva and New DuPont’s
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argument that Chemours exclusively assumed all of the PFAS liabilities when it was
spun off as a separate company because “Chemours’ assumption of PFAS liabilities
as a legal matter does not preclude Corteva and New DuPont from assuming those
same PFAS liabilities and [Corteva and New DuPont] do not cite any authority
supporting this position.” Id. at *8, 2021 NCBC 54, ¶ 53. The court also rejected the
argument that Corteva and New DuPont agreed to indemnify each other for PFAS-
related losses but did not assume such liabilities. Id. at *8, 2021 NCBC 54, ¶ 53. The
court found that the relevant term within the Separation Agreement was sufficiently
broad to permit “the interpretation that Corteva and New DuPont not only agreed to
indemnify against certain liabilities but additionally assume the same liabilities.”10
Id. at *8, 2021 NCBC 54, ¶ 53.
¶ 30 On appeal, Corteva and New DuPont argue that the language of these
Agreements is merely “the starting point of the analysis,” and the Business Court
10 Section 1.1(144) of the April 2019 Separation Agreement defines “Indemnifiable
Loss” and “Indemnifiable Losses” as:
any and all Damages, losses, deficiencies, Liabilities,
obligations, penalties, judgments, settlements, claims,
payments, fines, interest, costs, and expenses (including the
costs and expenses of any and all Actions and demands,
assessments, judgments, settlements, and compromises relating
thereto and the reasonable costs and expenses of attorneys’,
accountants’, consultants’ and other professionals’ fees and
expenses incurred in the investigation or defense thereof or the
enforcement of rights hereunder).
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should have gone on to “evaluate whether those assumptions of liability were such
that Corteva and New DuPont reasonably could have expected to be subject to
jurisdiction in North Carolina.” They contend that the answer to this question is no,
in part because, through those Agreements, “Corteva, New DuPont, and Dow were
allocating liabilities amongst themselves against the backdrop of Historic DuPont’s
previous divestiture of its PFAS business to Chemours.” Corteva and New DuPont do
not, however, respond to the Business Court’s decision that Chemours’ assumption of
the PFAS liabilities did not preclude them from assuming these liabilities as well.
Furthermore, nothing in the record suggests that Chemours validly assumed all
PFAS-related liabilities to the exclusion of all parties that would otherwise be liable.
Corteva and New DuPont’s assertion on this point is therefore unconvincing.
¶ 31 Corteva and New DuPont also argue that assuming liability through the
Agreements was insufficient to put them on notice that they may be subject to
jurisdiction in North Carolina because those liability provisions pertain to Old
DuPont’s operations broadly, without specifying where they would be liable. This
argument, too, is unavailing. A company cannot expressly assume liabilities from its
predecessor, fail to limit those liabilities geographically, and then disclaim liability
based on the notion that it did not expect to be brought to court in a particular forum.
Such a holding would nullify the relevant provisions entirely because the lack of
geographic specificity would mean that there is no jurisdiction in which Corteva and
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New DuPont expected to be held liable. Moreover, to reiterate what we have already
explained, when companies undergo complicated transactions like that between Old
DuPont, Corteva, and New DuPont, they conduct extensive due diligence, and the
new parties either are aware of, or should be aware of, the liabilities they might
acquire. Old DuPont’s PFAS liabilities were no secret—before the corporate
reorganization, it had already paid millions in well-publicized fines and settlements.
Corteva and New DuPont had ample notice then that they might become liable in any
venue where Old DuPont acquired PFAS liability.
¶ 32 In sum, the Business Court’s interpretation of the plain language of the
Agreements is well supported, and we uphold its finding that Corteva and New
DuPont expressly assumed Old DuPont’s PFAS liabilities, including those liabilities
arising in North Carolina.
¶ 33 The Business Court also found that Old DuPont’s PFAS liabilities could be
imputed to its successors because the State sufficiently alleged that Old DuPont
fraudulently engaged in the reorganization transactions that created Corteva and
New DuPont to prevent the State and other creditors from holding the company liable
to the full extent. The State alleged that “these transactions have resulted in (1) Old
DuPont having a negative net worth; (2) Chemours being undercapitalized and
unable to satisfy Old DuPont’s PFAS liabilities; and (3) the transfer of valuable assets
from Old DuPont to Corteva and New DuPont for far less consideration than those
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assets were worth.” Id. at *9, 2021 NCBC 54, ¶ 57. Relying on the same evidence that
was before the Business Court, this Court finds that the complaint alleged sufficient
facts from which to conclude that Old DuPont engaged in a corporate reorganization
to defraud its creditors. For example, the State alleges that, as part of its plan to
insulate its assets, Old DuPont spun off Chemours, its wholly owned subsidiary. As
part of the spinoff, Chemours agreed to accept all of Old DuPont’s PFAS liabilities,
transferred to Old DuPont approximately $3.4 billion as a cash dividend, and issued
promissory notes with a principal amount of $507 million. The State then alleges
that, knowing Chemours would be unable to satisfy the full extent of its PFAS
liabilities, Old DuPont proceeded with the series of transactions that eventually
created New DuPont, Corteva and New Dow. After the corporate reorganization was
complete, the value of Old DuPont’s tangible assets had decreased by $20.85 billion.
As the State points out, this loss came at a time when Old DuPont knew it faced
potentially billions of dollars in liability.
¶ 34 These examples support the State’s theory that Old DuPont engaged in the
corporate reorganization to fraudulently deprive its creditors of judicial recourse. The
State’s allegations are extensive, and we hold that they are sufficient to support the
Business Court’s conclusion that, at this stage of the proceedings, the State has
adequately pleaded that Corteva and New DuPont acted fraudulently. Thus, there is
a second, independent ground upon which to hold the successors liable for Old
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DuPont’s debts and liabilities and therefore, to find jurisdiction over Corteva and
New DuPont in this state.11
B. Calder Jurisdiction
¶ 35 The State asserts an alternative ground for jurisdiction under the U.S.
Supreme Court’s decision in Calder v. Jones. In Calder, the Court held that it may be
appropriate for a court to exercise jurisdiction over a defendant who commits
“intentional, and allegedly tortious, actions” outside the forum that “were expressly
aimed at” the forum. 465 U.S. at 789. Calder involved an allegedly libelous story that
was written and edited in Florida about events that occurred in California and
concerned a California resident. Id. at 784–86. The story’s sources were from
California and the alleged harm was suffered in California. Id. In holding that the
authors of the story could be sued in California, the Supreme Court opined that it
was foreseeable that the effects of the story would be felt in California, and that “[a]n
11 Courts in other jurisdictions presiding over litigation related to Old DuPont’s use of
PFAS have reached similar conclusions. See, e.g., State of New Hampshire v. 3M Company,
No. 216-2019-CV-0045 (Sup. Ct., Merrimack Co. July 8, 2021) (unpublished) (holding that
New Hampshire law permits imputation of a predecessor corporation’s contacts to establish
successor jurisdiction and finding that the State made a prima facie showing that jurisdiction
existed over Corteva and New DuPont based on (1) their express assumption of Old DuPont’s
PFAS liabilities; and (2) their fraudulent efforts to help Old DuPont evade liability); State of
Ohio ex rel. DeWine v. E.I. du Pont de Nemours and Co., No. 180T32 (Ct. Common Pleas,
Wash. Co. Aug. 4, 2021) (unpublished) (denying Corteva and New DuPont’s motion to dismiss
for lack of jurisdiction and granting the State’s cross-motion regarding their assumption of
Old DuPont’s liabilities); Suez Water New Jersey, Inc. v. E.I. DuPont de Nemours, et al., No.
2:20-CV-19906 (D.N.J. Oct. 14, 2021) (“If Corteva and New DuPont expressly assumed some
PFAS-related liability from Old DuPont’s activities in New Jersey, this would provide
minimum contacts with the forum state sufficient to support personal jurisdiction.”).
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individual injured in California need not go to Florida to seek redress from persons
who, though remaining in Florida, knowingly cause the injury in California. Id. at
790.
¶ 36 The Business Court declined to decide whether jurisdiction here was proper
under Calder because it found that personal jurisdiction could be established through
the imputation analysis alone. Still, the State argues that this Court should
determine whether Calder applies because, if so, the Business Court could exercise
direct jurisdiction over the defendants for all fraud claims without needing to revisit
the imputation analysis to determine whether personal jurisdiction exists after the
pleadings stage. We conclude that determining whether Calder jurisdiction exists is
unnecessary under these circumstances. Our rulings here establish that North
Carolina courts have personal jurisdiction over Corteva and New DuPont. Even if,
after the motion to dismiss stage, the Business Court determines that Corteva and
New DuPont did not attempt to defraud creditors for purposes of the third Budd Tire
exception for imputing liability, jurisdiction is conclusively established under Budd
Tire’s other relevant exception—that Corteva and New DuPont expressly assumed
Old Dupont’s PFAS-related liabilities. The parties do not dispute that Old DuPont is
subject to specific jurisdiction in North Carolina based on its PFAS-related liabilities.
Thus, the Business Court has jurisdiction over Corteva and New DuPont for all of the
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State’s claims arising out of and related to Old DuPont’s PFAS-related activities in
North Carolina.
III. Conclusion
¶ 37 We follow the “great weight of persuasive authority,” Madison Mgmt. Grp., 918
F.2d at 454, and hold that the Due Process Clause permits a predecessor’s liabilities
to be imputed to its corporate successors to establish personal jurisdiction even where
the successor itself has no direct contact with the forum state. Successor liability
comports with both due process and North Carolina law at least where (1) a party
assumes another entity’s debts or liabilities through an express or implied
agreement; (2) the transfer constitutes an actual or de facto merger of corporations;
(3) a transfer of assets occurred for the purpose of defrauding the corporation’s
creditors; or (4) the purchasing corporation is a continuation of the selling corporation
because it has the same shareholders, directors, and officers.
¶ 38 Because personal jurisdiction can be established through the imputation
analysis for all of the State’s claims arising out of or related to Old DuPont’s PFAS-
related activities in North Carolina, we need not determine whether Calder would
permit the Business Court to exercise direct jurisdiction.
¶ 39 Accordingly, we affirm the decision of the Business Court denying Corteva and
New DuPont's motion to dismiss under Rule 12(b)(2) of the North Carolina Rules of
Civil Procedure and remand this case to that court for additional proceedings not
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inconsistent with this opinion.
AFFIRMED.