CEM Corporation v. Personal Chemistry

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
CEM CORPORATION, 
Plaintiff-Appellant,
v.  No. 02-1369
PERSONAL CHEMISTRY, AB,
Defendant-Appellee.

Appeal from the United States District Court
for the Western District of North Carolina, at Charlotte.
Graham C. Mullen, Chief District Judge.
(CA-01-225-3-MU)
Argued: December 3, 2002
Decided: January 15, 2003
Before NIEMEYER, LUTTIG, and MOTZ, Circuit Judges.
Affirmed by unpublished per curiam opinion.
COUNSEL
ARGUED: Albert Peter Allan, SUMMA & ALLAN, P.C., Charlotte,
North Carolina, for Appellant. Grady Michael Barnhill, WOMBLE,
CARLYLE, SANDRIDGE & RICE, P.L.L.C., Charlotte, North Caro-
lina, for Appellee. ON BRIEF: William C. Raper, WOMBLE, CAR-
LYLE, SANDRIDGE & RICE, P.L.L.C., Charlotte, North Carolina,
for Appellee.
2 CEM CORP. v. PERSONAL CHEMISTRY, AB
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
OPINION
PER CURIAM:
In December 2000, CEM Corporation, a North Carolina corpora-
tion, filed suit in Sweden against Personal Chemistry, AB, a Swedish
corporation with its principal place of business in Sweden that has
never registered to do business in North Carolina. CEM alleged that
Personal Chemistry infringed a European patent belonging to CEM.
A month later, several employees of Personal Chemistry and its
United States affiliate traveled to North Carolina to attempt to settle
the Swedish patent infringement action with CEM officials. The two
sides negotiated an "agreement-in-principle," which provided for dis-
missal of the Swedish litigation and a license to Personal Chemistry
for the patent at issue and another European patent in exchange for
a one-time payment of $700,000 by Personal Chemistry to CEM. Per-
sonal Chemistry’s board of directors, however, subsequently refused
to approve the agreement-in-principle.
CEM then filed the present action in North Carolina against Per-
sonal Chemistry, alleging breach of the agreement-in-principle, inten-
tional and negligent misrepresentation, and unfair and deceptive trade
practices. On Personal Chemistry’s motion, the district court dis-
missed the action for lack of personal jurisdiction over Personal
Chemistry. See Fed R. Civ. P. 12(b)(2). CEM now appeals.
Because the district court dismissed the complaint without conduct-
ing an evidentiary hearing, CEM was only required to make a prima
facie showing that personal jurisdiction existed. See Mylan Laborato-
ries, Inc. v. Akzo, N.V., 2 F.3d 56, 60 (4th Cir. 1993). To carry its bur-
den, CEM had to show that (1) the North Carolina long-arm statute
confers personal jurisdiction over Personal Chemistry; and (2) the
exercise of personal jurisdiction over Personal Chemistry "comports
with the requirements of the Due Process Clause of the Fourteenth
Amendment." Id. As the district court noted, because the North Caro-
CEM CORP. v. PERSONAL CHEMISTRY, AB 3
lina long-arm statute extends to the limit permissible under the Due
Process Clause, Vishay Intertechnology, Inc. v. Delta International
Corp., 696 F.2d 1062, 1065 (4th Cir. 1982), CEM simply had to dem-
onstrate that Personal Chemistry had sufficient minimum contacts
with North Carolina to satisfy due process.
The Supreme Court has articulated two tests for determining
whether a defendant’s contacts with a forum suffice to confer per-
sonal jurisdiction over the defendant. If the cause of action does not
arise from or relate to the defendant’s activities in the forum, a plain-
tiff must prove that the defendant’s contacts are "continuous and sys-
tematic" and so support the exercise of general personal jurisdiction
over the defendant. See Helicopteros Nacionales de Colombia v. Hall,
466 U.S. 408, 415-16 (1984). If the cause of action does arise out of
or is related to the defendant’s activities within the forum, the plaintiff
need only prove that a court has specific personal jurisdiction over a
defendant by demonstrating that
(1) the defendant has created a substantial connection to the
forum state by action purposefully directed toward the
forum state or otherwise invoking the benefits and protec-
tions of the laws of the state; and (2) the exercise of jurisdic-
tion based on those minimum contacts would not offend
traditional notions of fair play and substantial justice[.]
Lesnick v. Hollingsworth & Vose Co., 35 F.3d 939, 945-46 (4th Cir.
1994).
The district court dismissed CEM’s complaint, finding that it failed
to make the requisite showing of sufficient contacts to support either
general or specific personal jurisdiction over Personal Chemistry.
Although CEM apparently disagrees with both holdings, on appeal it
only proffers arguments challenging the district court’s refusal to
exercise specific personal jurisdiction.1
1
Perhaps CEM does not mount an appellate challenge to the district
court’s finding of no general personal jurisdiction because it recognizes
that such an argument would be fruitless. The requirement that a plaintiff
seeking to establish general personal jurisdiction must demonstrate that
a defendant had "continuous and systematic contacts" with the forum
state, Helicopteros, 466 U.S. at 415-16, mandates a showing "signifi-
cantly higher" than that necessary for specific personal jurisdiction. See
ESAB Group Inc. v. Centricut Inc. 126 F.3d 617, 623 (4th Cir. 1997).
4 CEM CORP. v. PERSONAL CHEMISTRY, AB
CEM first contends that Personal Chemistry’s "contract with
CEM," i.e. the agreement-in-principle that emerged out of the settle-
ment negotiations, in and of itself "subject[s] [Personal Chemistry] to
specific personal jurisdiction in North Carolina." Brief of Appellant
at 16. CEM argues that Personal Chemistry’s provisional acceptance
of the agreement-in-principle and subsequent asserted breach of and
disregard for that agreement, which form the basis of the present
action, subject it to specific personal jurisdiction in North Carolina.
Assuming, arguendo, that the agreement-in-principle constitutes a
binding contract (a point that Personal Chemistry has consistently
refused to concede), the Supreme Court has nonetheless expressly
considered and rejected such an argument, explaining that "[i]f the
question is whether an individual’s contract with an out-of-state party
alone can automatically establish sufficient minimum contacts in the
other party’s home forum, we believe the answer clearly is that it can-
not." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 478 (1985)
(emphasis in original).
CEM fares no better with its argument that the district court could
exercise specific personal jurisdiction over Personal Chemistry
because, in the agreement-in-principle, Personal Chemistry assertedly
undertook "continuing obligations for the life of the patents." Brief of
Appellant at 24. This argument is premised on the licensing agree-
ments for two European patents that constituted part of the
agreement-in-principle. As the district court noted, however, these
licensing agreements required an up-front, lump-sum payment of roy-
alties rather than continuing or periodic royalty payments. Thus,
under the licensing agreements, Personal Chemistry had no "continu-
ing duty to pay royalties or to offer an accounting of products sold
incident to a royalty calculation." Accordingly, the licensing agree-
ments (like the agreement-in-principle itself) had no ongoing connec-
tion to North Carolina.
Nor can CEM prevail on its contention that Personal Chemistry
purposefully directed other activities toward North Carolina in a way
sufficient to establish specific personal jurisdiction. CEM maintains
that such "purposefully directed" activities include (1) Personal
Chemistry’s actions in negotiating, provisionally agreeing to, and then
reneging on the agreement-in-principle; (2) Personal Chemistry’s
CEM CORP. v. PERSONAL CHEMISTRY, AB 5
sales of its product to another company in North Carolina; (3) a
seminar given in North Carolina; (4) advertisements on its website
combichem.net; (5) participation in trade shows directed, in part, at
North Carolina companies; and (6) full page advertisements in vari-
ous national trade publications.
All of these activities, except for the first group, have nothing to
do with the dispute at issue in this case and thus are irrelevant in any
consideration of specific personal jurisdiction. Nevertheless, CEM
maintains that because these contacts involve technology and prod-
ucts that are based in part on the patents at issue in the licensing
agreements, which in turn constituted part of the agreement-in-
principle, these additional contacts somehow provide a basis for spe-
cific personal jurisdiction. This argument fails. The dispute in this
case is not a patent infringement action, but an action for breach of
an agreement-in-principle to settle a patent infringement action (and
alleged misrepresentations involving settlement discussions). Thus, it
is the contacts surrounding the proposed settlement and agreement-in-
principle, not contacts involving the sale or advertising of a product,
which may be tangentially related to one of the patents at issue in the
Swedish patent infringement action, that must be the basis for specific
personal jurisdiction in this case. See RAR, Inc. v. Turner Diesel, Ltd.,
107 F.3d 1272, 1277-78 (7th Cir. 1997) (stating that additional unre-
lated contacts cannot be aggregated for purposes of specific personal
jurisdiction and holding that in breach of contract cases only the deal-
ings between the parties with respect to the contract are relevant to
minimum contacts analysis); Vetrotex Certainteed Corp. v. Consoli-
dated Fiber Glass Prods. Co., 75 F.3d 147, 153 (3d Cir. 1996) (hold-
ing that in a breach of contract case it is only the "dealings between
the parties in regard to the disputed contract" that are relevant to
minimum contacts analysis (emphasis in original)); Barone v. Rich
Brothers Interstate Display Fireworks Co., 25 F.3d 610, 615, n.5 (8th
Cir. 1994) (finding that additional unrelated contact was irrelevant to
question of specific personal jurisdiction).
As to Personal Chemistry’s actions surrounding the agreement-in-
principle, they do involve the dispute at issue here and so arguably
could provide a basis for specific personal jurisdiction. However,
none of these activities indicate that Personal Chemistry "purpose-
fully avail[ed]" itself of the "benefits and protections" of the laws of
6 CEM CORP. v. PERSONAL CHEMISTRY, AB
North Carolina sufficient to establish personal jurisdiction over it. See
Hanson v. Denckla, 357 U.S. 235, 253 (1958). Personal Chemistry
merely sent its representatives on a single visit to North Carolina for
the sole purpose of discussing settlement of a patent infringement
action filed against it in Sweden, involving a European patent, and
alleged infringing conduct occurring in Sweden. After this single
meeting, Personal Chemistry’s outside counsel had a few telephone
conversations with CEM representatives regarding settlement and, by
facsimile, sent them drafts of the agreement-in-principle and informed
them that Personal Chemistry’s Board ultimately rejected its terms.
Taken together, these contacts do not constitute purposeful acts
directed by Personal Chemistry to the State of North Carolina suffi-
cient to establish personal jurisdiction over Personal Chemistry in
North Carolina. One visit to the state, accompanied by a few tele-
phone calls and faxes to settle litigation initiated against it in Sweden,
would not put Personal Chemistry on notice that it "should reasonably
anticipate being haled into court" in North Carolina. See World Wide
Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980). Indeed, the
only reason Personal Chemistry initiated any of these contacts with
North Carolina was to attempt to settle a suit filed against it by a
North Carolina corporation in Sweden. It would be very odd to permit
a plaintiff to obtain personal jurisdiction over a defendant on the basis
of the defendant’s attempts to settle litigation begun by the plaintiff
on the defendant’s home turf, presumably because the plaintiff could
not obtain personal jurisdiction over the defendant on the plaintiff’s
own turf in the original action.2 In any event, these contacts clearly
do not provide a basis for asserting personal jurisdiction over Personal
Chemistry in North Carolina. Compare Diamond Healthcare of Ohio,
2
We note that even if CEM had made a sufficient showing to support
specific personal jurisdiction, exercise of such jurisdiction over Personal
Chemistry would likely offend traditional notions of fair play and sub-
stantial justice. See Asahi Metal Industry Co. Ltd. v. Superior Court of
California, 480 U.S. 102, 115-16 (1987). Such concerns take on height-
ened importance when, as here, the issue involves an exercise of personal
jurisdiction over non-U.S. corporations. See id. at 114 ("The unique bur-
dens placed upon one who must defend oneself in a foreign legal system
should have significant weight in assessing the reasonableness of stretch-
ing the long arm of personal jurisdiction over national borders.").
CEM CORP. v. PERSONAL CHEMISTRY, AB 7
Inc. v. Humility of Mary Health Partners, 229 F.3d 448, 451-52 (4th
Cir. 2000) (refusing to extend personal jurisdiction in Virginia over
foreign defendant, even though defendant contracted with Virginia
corporation after telephone calls, letters and faxes to Virginia,
because "bulk of services" not performed in Virginia); Ellicott Mach.
Corp. v. John Holland Party Ltd., 995 F.2d 474, 478-79 (4th Cir.
1993) (finding contacts with Maryland "insubstantial," although con-
tract made in Maryland, after purposeful initiation by the foreign
defendant and several weeks of negotiations involving letters, faxes,
and telephone calls to Maryland).
For all of these reasons, the judgment of the district court is
AFFIRMED.