Munchak Corporation v. Riko Enterprises, Inc.

• Decision Date: 21 December 1973
• Docket Number: No. C-194-G-73.,C-194-G-73.
• Citation: 368 F. Supp. 1366
• Court: U.S. District Court — Middle District of North Carolina
• Parties: The MUNCHAK CORPORATION and RDG Corporation d/b/a the Carolina Cougars, a joint venture, Plaintiffs, v. RIKO ENTERPRISES, INC., Defendant.

368 F. Supp. 1366

The MUNCHAK CORPORATION and RDG Corporation d/b/a the Carolina Cougars, a joint venture, Plaintiffs, v. RIKO ENTERPRISES, INC., Defendant.

No. C-194-G-73.

United States District Court, M. D. North Carolina, Greensboro Division.

December 21, 1973.

COPYRIGHT MATERIAL OMITTED

William Zuckerman, Greensboro, N. C., for plaintiffs.

L. P. McLendon, Jr., Greensboro, N. C., for defendant.

MEMORANDUM

GORDON, Chief Judge.

This case is here on defendant's (Riko Enterprises, Inc., hereafter Riko) motion to dismiss an action brought by plaintiff (The Munchak Corporation and RDG Corporation, d/b/a The Carolina Cougars, hereafter the Cougars), for alleged tortious interference with contractual relations. The defendant, a Pennsylvania corporation, makes its motion pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure alleging lack of in personam jurisdiction over the defendant. A brief statement of the history of this and related litigation will help define and clarify the specific issues now to be decided. The written memoranda of the litigants in this action have been helpful to this end.

In 1969, the predecessors in interest to the plaintiff entered into a contract with William John Cunningham whereby Cunningham obligated himself to perform services as a professional basketball player for the Carolina Cougars. Cunningham failed to honor this contract, and plaintiff thereafter filed suit in federal court to enjoin Cunningham from performing as a professional basketball player for any team other than the Cougars and, on July 26, 1972, pursuant to the direction of the United States Courts of Appeals, Fourth Circuit, an injunctive order to this effect was entered. In November, 1972, following this order, the defendant filed suit against the Carolina Cougars, the plaintiff herein, and William Cunningham, in the Court of Common Pleas, Philadelphia County, Pennsylvania. In that action, defendant alleges breach of contract as against Cummingham, and tortious interference with contractual relationships as against the Cougars. The Cougars removed this case to the United States District Court for the Eastern District of Pennsylvania, but the action was remanded to the state court, where it is now pending. Finally, in June, 1973, the plaintiff Cougars brought the instant action. The plaintiff seeks to recover damages suffered as a result of defendant's alleged wrongful interference with plaintiff's contractual relations with Cunningham, and additionally, to obtain an order enjoining the action pending in the Pennsylvania state court. As earlier noted, the defendant now moves to dismiss the instant action for lack of personal jurisdiction. Subject matter jurisdiction, not here challenged, is founded on diversity of citizenship.

When in personam jurisdiction is contested in diversity cases, the court must undertake a two-part inquiry. First, it must be determined if the applicable state law would allow the exercise of in personam jurisdiction over the party in question; second, assuming the answer of the first inquiry to be yes, the court must determine if the exercise of jurisdiction as authorized by state law comports with due process concepts embodied in the Fourteenth Amendment to the United States Constitution. See Bowman v. Curt G. Joa, Inc., 361 F.2d 706 (4th Cir. 1966); Johnston v. Time, Inc., 321 F.Supp. 837 (M.D.N.C.1970). Controlling as to both inquiries in this case are the extent of the activities of the defendant which have caused it to come into contact with North Carolina and to invoke the protection and benefits of its laws. These activities have been much discussed in the pleadings and memoranda heretofore filed by the litigants and in the oral arguments on defendant's motion to dismiss. Although there is some dispute as to certain factual matters, the major disagreement between the parties concerns the legal effect of these activities.

Plaintiff contends that defendant controlled the defense of the earlier action brought in this Court by plaintiff against Cunningham, including the payment of costs. Although defendant denies that it "controlled" the litigation, there is no dispute as to the defendant's participation in that action on Cunningham's behalf. In either event, presence in a state solely to participate in litigation is not, by itself, sufficient connection with that state to make a person amenable to the state's jurisdiction. See Dragor Shipping Corp. v. Union Tank Car Company, 361 F.2d 42 (9th Cir. 1966). Moreover, to so hold might conflict with traditional immunity principles designed to further the orderly administration of justice. See generally Vol. 4 Wright and Miller, Federal Practice and Procedure, Section 1076.

A second contact with North Carolina by the defendant set forth as a basis for finding jurisdiction over the defendant is the defendant's practice of sending basketball scouts into North Carolina to observe and report on college basketball players. These scouts are without authority to recruit or even negotiate with local college players and, in fact, are prevented from doing so by the National Basketball Association bylaws. Apparently the scouts are free to inquire of the college player whether or not he would be interested in playing in the N. B.A., but further discussions toward this end are prohibited.

The plaintiff also sets forth the fact that National Basketball Association games, including those in which the Philadelphia 76ers (owned and operated by the defendant) participate, are televised in the State of North Carolina. This television exposure results from a contract between the N.B.A. and the television network. The defendant is not a party to this contract, except perhaps as a third party beneficiary, nor has defendant contracted with any North Carolina television station in this regard. Nevertheless, the plaintiff contends that the additional revenue accruing to the defendant through the television exposure in North Carolina is a "contact" with this state which is sufficient to justify the exercise of jurisdiction over the defendant.

Finally, although not specifically enumerated as a "contact" with North Carolina, the plaintiff contends that the tort which defendant is alleged to have committed, provides a sufficient basis for exercising jurisdiction in this case.

North Carolina Statutory Jurisdiction

Plaintiff first sets forth N.C. General Statute § 55-145(a)(4) as a state law basis for the exercise of personal jurisdiction. This provision provides:

"§ 55-145. Jurisdiction over foreign corporations not transacting business in this State. — (a) Every foreign corporation shall be subject to suit in this State, by a resident of this State or by a person having a usual place of business in this State, whether or not such foreign corporation is transacting or has transacted business in this State, and whether or not it is engaged exclusively in interstate or foreign commerce, on any cause of action arising as follows:

"(1) Out of any contract made in this State or to be performed in this State; or

"(2) Out of any business solicited in this State by mail or otherwise if the corporation has repeatedly so solicited business, whether the orders or offers relating thereto were accepted within or without the State; or

"(3) Out of the production, manufacture, or distribution of goods by such corporation with the reasonable expectation that those goods are to be used or consumed in this State and are so used or consumed, regardless of how or where the goods were produced, manufactured, marketed, or sold or whether or not through the medium of independent contractors or dealers; or

"(4) Out of tortious conduct in this State, whether arising out of repeated activity or single acts, and whether arising out of misfeasance or nonfeasance."

The only question which must be resolved under this section is whether or not a tortious act was committed in North Carolina; there is no contention that any other provision would apply. If the answer is in the affirmative, there is a statutory basis in state law for the exercise of in personam jurisdiction.

Plaintiff correctly states that in North Carolina, "The place of a wrong is in the state where the last event takes place which is necessary to render the actor liable for an alleged tort." Farmer v. Ferris, 260 N.C. 619, 133 S.E.2d 492, 498 (1963). Plaintiff further cites language in Ferris which indicates that the last event may be the consequence of the tortious conduct, i. e., the damage. Farmer v. Ferris, supra, at 498. Since in the case at bar the last essential element of the tortious conduct here involved is the sustaining of damages by the plaintiff, and since such damages were sustained by the Cougars in North Carolina, plaintiff contends that the tortious conduct involved in this case occurred in North Carolina, thereby supporting jurisdiction under G.S. § 55-145(a)(4).

Even assuming as correct the plaintiff's contention that the occurrence of harm constitutes the last event of tortious conduct where actual damage is an essential element of a tort so as to establish the situs of the tort, surely the occurrence of damages cannot be construed to be an activity or act by the defendant as set forth in the statute. Under the clear wording of the relevant portion of this statute, the defendant must have engaged in "tortious conduct" in North Carolina for this provision to apply. The further language with respect to "repeated activity or single acts" further indicates that the defendant must have committed some act in this State, whether it be one of misfeasance or nonfeasance. The occurrence of damages is a result of defendant's improper conduct. It is defendant's conduct which is the focus of the language in this section of the statute, not the result of that conduct. See Marshville Rendering Corp. v. Gas Heat Eng. Corp., 10 N.C.App. 39, 177 S.E.2d 907 (1970). This is important because G.S. § 55-145...