Court Opinion

ID: 990177
Source: CourtListenerOpinion
Date Created: 2013-07-03 23:17:18.794884+00
Date Added: 2024-06-11T12:39:14.941816
License: Public Domain

UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

ESSENTIAL HOUSING DEVELOPMENT,
INCORPORATED,
Plaintiff-Appellant,
                                                                    No. 95-3105
v.

LANDEV INVESTMENTS, INCORPORATED,
Defendant-Appellee.

Appeal from the United States District Court
for the Eastern District of North Carolina, at Raleigh.
Malcolm J. Howard, District Judge.
(CA-95-461-5-H)

Argued: July 10, 1996

Decided: August 13, 1996

Before WILKINSON, Chief Judge, and HAMILTON and
WILLIAMS, Circuit Judges.

_________________________________________________________________

Reversed and remanded by unpublished opinion. Chief Judge Wilkin-
son wrote the majority opinion, in which Judge Williams joined.
Judge Hamilton wrote a dissenting opinion.

_________________________________________________________________

COUNSEL

ARGUED: B. Gordon Watkins, III, Daniel Russell Taylor, Jr.,
PETREE STOCKTON, L.L.P., Winston-Salem, North Carolina, for
Appellant. Deborah R. J. Shupe, BERRY, ADAMS, QUACKEN-
BUSH & DUNBAR, P.A., Columbia, South Carolina, for Appellee.
ON BRIEF: James A. Merritt, Jr., BERRY, ADAMS, QUACKEN-
BUSH & DUNBAR, P.A., Columbia, South Carolina; A. Todd
Brown, HUNTON & WILLIAMS, Raleigh, North Carolina, for
Appellee.

_________________________________________________________________

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

_________________________________________________________________

OPINION

WILKINSON, Chief Judge:

Appellant, Essential Housing Development ("EHD"), filed this
declaratory judgment action in the Eastern District of North Carolina
to settle a contract dispute. The district court dismissed the case for
lack of personal jurisdiction over appellee, Landev Investments
("Landev"). Because we believe Landev possesses sufficient contacts
with North Carolina to satisfy the state's long-arm statute and the
Constitution, we reverse the judgment of the district court.

I.

EHD is a North Carolina company that develops low and moderate
income housing. Landev is a South Carolina company, owned and
controlled by Thomas Walker at the time of the contracts in question.
The dispute before us involves an agreement between EHD and
Walker (along with his partner Sandman) memorialized in two inter-
dependent contracts. The first of the contracts, the"management
agreement," transferred the management rights in twenty South Caro-
lina housing projects from Walker and Sandman's partnership to a
company with the same shareholders as EHD's predecessor in inter-
est. The second contract, the "consulting agreement," arranged for
monthly payments from EHD's predecessor in interest to Walker-
owned Landev in return for supposed consulting services. The parties
made the consulting agreement effective only upon execution of the
management agreement.

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Some time after signing the contracts, EHD grew concerned that
the agreements violated Department of Agriculture regulations pro-
hibiting payment for the transfer of housing project management
rights. EHD alleges that the consulting agreement was an attempt to
skirt the regulations by disguising illegal payments as consulting fees.
In its view, the payments supposedly made for consulting were actu-
ally for the transfer of management rights. Although it made monthly
payments of $3,185 to Landev, no consulting services were ever ren-
dered. Moreover, a letter from Walker to EHD clarifying the consult-
ing agreement specifically stated that if the transfer of the
management rights did not occur, the consulting agreement would be
void. Walker also candidly wrote that "if there is any reduction in the
number of projects and/or apartment units, . . . then the amount to be
paid for this management business will be reduced."

EHD dismissed its employee who negotiated the contracts, then
filed this declaratory judgment action in North Carolina seeking to
have the consulting agreement declared illegal and void. In response,
Landev made a motion to dismiss the case for lack of personal juris-
diction, arguing that it did not have sufficient contacts in North Caro-
lina to satisfy the state's long-arm statute. The district judge granted
the motion.

II.

According to EHD, Landev has sufficient contacts to warrant the
exercise of personal jurisdiction. We agree. North Carolina's "long
arm statute," N.C. Gen. Stat. § 1-75.4, extends jurisdiction as far as
the Constitution allows. Our analysis must therefore focus on whether
Landev has sufficient contacts with North Carolina so that the exer-
cise of personal jurisdiction would comport with due process.

Due process requirements are satisfied here. This case is controlled
by English & Smith v. Metzger, 901 F.2d 36 (4th Cir. 1990), in which
sufficient contacts were found where the defendant had less connec-
tion with the forum state than Landev has with North Carolina. In
English & Smith, we held that Virginia could properly assert personal
jurisdiction over a California attorney who hired a Virginia attorney
to do legal work. Jurisdiction was based on the fact that the defendant

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"transacted business" in Virginia by contacting the Virginia attorney
and by making several phone calls and mailings into the state.

Landev's contacts with North Carolina are more extensive than
those in English & Smith. Landev has a registered agent in North Car-
olina and had previously conducted business and owned property in
the state. Although Landev protests that its previous business in North
Carolina ceased in 1988, the company maintained its registered agent
and its license to do business in North Carolina.

Further, Landev had contacts related to the very contracts before
us. Negotiations commenced in 1992. Landev's owner, Thomas
Walker, made several phone calls and mailings to and from North
Carolina in negotiating the consulting agreement. EHD alleges, and
the district judge assumed for purposes of his analysis, that Thomas
Walker travelled to North Carolina on at least two occasions to con-
duct "crucial negotiations." These contacts clearly satisfy the require-
ments of due process. As was the case in Burger King Corp. v.
Rudzewicz, 471 U.S. 462, 478-79 (1985), we have before us not sim-
ply a contract with an out-of-state party--which by itself is insuffi-
cient to establish personal jurisdiction--but also numerous
accompanying connections with the forum state.

Despite the multiple contacts it had with North Carolina, Landev
also maintains that the suit should be thrown out of that state because
the consulting agreement was signed in South Carolina and subject to
South Carolina law. However, the management agreement, which was
necessary to effectuate the consulting agreement, was signed in North
Carolina by Sandman, a North Carolina resident. The record belies
Landev's assertion that the two agreements were entirely separate.
The consulting agreement was contingent on the successful transfer
of management rights in the management agreement. Walker's letter
describing his understanding of the consulting agreement stated that
"if there is any reduction in the number of projects and/or apartment
units, . . . then the amount to be paid for this management business
will be reduced." The two contracts were clearly related, and we must
therefore consider the entire transaction. Both with regard to the con-
sulting contract alone and with regard to the whole transaction,
Landev had more than the necessary minimum contacts with North

                    4
Carolina to subject it to personal jurisdiction in a North Carolina fed-
eral court.

III.

For the foregoing reasons, we reverse the judgment of the district
court and remand this case for further proceedings.

REVERSED AND REMANDED

HAMILTON, Circuit Judge, dissenting:

Because I cannot agree with the majority's conclusion that Landev
Investments had sufficient "minimum contacts" with North Carolina
to confer personal jurisdiction, I respectfully dissent.

It is well settled that a court may not exercise personal jurisdiction
over a non-resident defendant unless the non-resident defendant has
sufficient "minimum contacts" with the forum state. International
Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). In its most author-
itative discussion of personal jurisdiction in contract cases, Burger
King Corp. v. Rudzewicz, 471 U.S. 462 (1985), the Supreme Court
explained:

          If the question is whether an individual's contract with an
          out-of-state party alone can automatically establish suffi-
          cient minimum contacts in the other party's home forum, we
          believe the answer clearly is that it cannot. The Court long
          ago rejected the notion that personal jurisdiction might turn
          on mechanical tests, or on conceptualistic theories of the
          place of contracting or of performance. Instead, we have
          emphasized the need for a highly realistic approach that rec-
          ognizes that a contract is ordinarily but an intermediate step
          serving to tie up prior business negotiations with future con-
          sequences which themselves are the real object of the busi-
          ness transaction. It is these factors--prior negotiations and
          contemplated future consequences, along with the terms of
          the contract and the parties' actual course of dealing--that
          must be evaluated in determining whether the defendant

                    5
          purposefully established minimum contacts within the
          forum.

Id. at 478-79 (internal quotation marks and citations omitted). The
Court in Burger King also stated "that there [must] be some act by
which the defendant purposefully avail[ed] itself of the privilege of
conducting activities within the forum State, thus invoking the bene-
fits and protections of its laws." Id. at 475 (internal quotation marks
and citations omitted).

Applying this test, the district court, after noting that: (1) Landev
Investments is a South Carolina corporation; (2) the consulting ser-
vices were to be performed in South Carolina; (3) South Carolina law
governed the consulting agreement; and (4) Landev Investments had
not done business in North Carolina since at least 1988, concluded:

          Although the number of visits defendant's agents made to
          North Carolina and what took place during those visits is
          disputed by the parties, the court finds that even if crucial
          negotiations did take place in North Carolina, this is not
          determinative for purposes of jurisdiction. The fact remains
          that the disputed contract was to be performed in South Car-
          olina, by a South Carolina corporation, and according to
          South Carolina law. The defendant never attempted to enter
          the North Carolina market; instead, it was the plaintiff who
          sought to enter the South Carolina market. It therefore
          appears that the plaintiff more purposefully availed itself of
          the privilege of conducting activities in South Carolina than
          did the defendant in North Carolina. Consequently, the court
          finds that the plaintiff has failed to articulate sufficient acts
          committed by the defendant such that this court could exer-
          cise jurisdiction over the defendant without violating the due
          process clause of the Fourteenth Amendment.

(J.A. 42-43) (footnote omitted).

I agree with the district court's conclusion. There is nothing in the
record to support the majority's conclusion that Landev Investments
availed itself of the privilege of conducting business in North
Carolina--performance of the consulting agreement was to be in

                    6
South Carolina by Landev Investments, a South Carolina corporation,
and the consulting agreement was governed by South Carolina law.
In addition, the consulting agreement--the very subject of this
litigation--was signed in South Carolina. All the evidence in this case
suggests that Landev Investments was not availing itself of the privi-
lege of conducting activities in North Carolina, but rather South Caro-
lina.

Furthermore, the majority's reliance on English & Smith is mis-
placed. Importantly, in that case, all of the Virginia attorney's work
was performed in the forum state. In essence, English & Smith
involved a joint venture involving legal representation. That joint ven-
ture contemplated that some of the legal work for the client would be
performed in the forum state, and the California attorney directly ben-
efited from all of the work performed by the Virginia attorney. Thus,
when a non-resident defendant enters a joint venture with a resident
and some of the work is to be performed in the forum state by the res-
ident and the work performed by the resident directly benefits the
non-resident, it is unquestionable that the non-resident defendant has
availed itself of the privilege of conducting business in the forum
state.

In this case, the evidence is not of comparable quality. Landev
Investments was not seeking to have any work performed in North
Carolina and was not trying to enter the North Carolina market. The
consulting agreement was signed in South Carolina, was to be per-
formed in South Carolina, and was governed by South Carolina law.
In short, the district court correctly concluded that it did not have per-
sonal jurisdiction over Landev Investments. Because the majority
concludes otherwise, I respectfully dissent.

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