800 F.2d 1305 (4th Cir. 1986), 85-2301, Dowless v. Warren-Rupp Houdailles, Inc.

Docket Nº:85-2301.
Citation:800 F.2d 1305
Party Name:Harry DOWLESS, Appellant, v. WARREN-RUPP HOUDAILLES, INC., Appellee, and Houdailles Industries, Inc., Defendant.
Case Date:September 15, 1986
Court:United States Courts of Appeals, Court of Appeals for the Fourth Circuit

Page 1305

800 F.2d 1305 (4th Cir. 1986)

Harry DOWLESS, Appellant,

v.

WARREN-RUPP HOUDAILLES, INC., Appellee,

and

Houdailles Industries, Inc., Defendant.

No. 85-2301.

United States Court of Appeals, Fourth Circuit

September 15, 1986

Argued May 7, 1986.

Page 1306

Larry L. Coats (David E. Bennett, Mills & Coats, P.A., on brief), for appellant.

Stephen A. Hill (Carl A. Rankin, Pearne, Gordon, Sessions, McCoy, Granger & Tilberry, on brief), for appellee.

Before SPROUSE and ERVIN, Circuit Judges, and HAYNSWORTH, Senior Circuit Judge.

ERVIN, Circuit Judge:

This is an appeal by Harry Dowless ("Dowless") from the dismissal of his action against Warren-Rupp Houdailles, Inc. ("Warren-Rupp"). Dowless sought damages from Warren-Rupp for breach of contract; violations of N.C.Gen.Stat. Sec. 75-1.1 (unfair and deceptive business practices) and N.C.Gen.Stat. Sec. 66-155 (misappropriation of a business secret); and common law unfair competition. 1 The district court dismissed Dowless' complaint against Warren-Rupp for lack of personal jurisdiction. Because we find that the requirements of the North Carolina long-arm statute and due process are satisfied, we reverse.

I.

Dowless is domiciled in and a resident of North Carolina. Warren-Rupp is a corporation organized under the laws of Ohio and does not maintain a place of business in North Carolina. Warren-Rupp pumps and other products are sold in North Carolina by a distributor, Southern Pump & Tank Company.

On May 31, 1977, Dowless sent a letter to Warren-Rupp in Ohio stating that he had identified a problem with a Warren-Rupp pump and had designed an improvement. Dowless inquired as to Warren-Rupp's desire to learn of this information. Warren-Rupp's president responded that the company was interested in improvements and suggested that Dowless send his idea to the company for evaluation. The president stated that "if we choose to use it, we would reimburse you with some kind of a flat fee." Jt.App. at 15.

Dowless promptly responded to the Warren-Rupp letter by disclosing the pump's problem and improvement idea. Warren-Rupp's president wrote a letter back rejecting the information. Thereafter, Dowless discovered that the Warren-Rupp pump had been manufactured with his improvement idea. He brought this action, and subsequently, it was dismissed for lack of personal jurisdiction over Warren-Rupp. This appeal followed.

II.

The question of personal jurisdiction must be answered through a two step analysis. The court must determine whether the North Carolina long-arm statute is applicable, and if so, whether the exercise of that statutory power will violate the due process clause of the United States Constitution. See Vishay Intertechnology, Inc. v. Delta International Corp., 696 F.2d 1062, 1064 (4th Cir.1982).

Addressing the first step, we find that N.C.Gen.Stat. Sec. 1-75.4(4)(b) permits in personam

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jurisdiction over Warren-Rupp under the facts of this case. 2 Under Sec. 1-75.4(4)(b), Dowless must claim: (1) "injury to person or property" within North Carolina; (2) arising out of Warren-Rupp's acts outside the state; (3) at or about the time Warren-Rupp's products were being used or consumed within North Carolina in the ordinary course of trade. 3 Dowless has established the existence of jurisdiction by a prima facie showing that these statutory requirements have been met.

First, Dowless' claims of injury are sufficient to meet the local injury requisite. 4 See Vishay, 696 F.2d at 1067 (alleged violation of N.C.Gen.Stat. Sec. 75-1.1--unfair and deceptive business practices--is claim of injury under Sec. 1-75.4(4)); Hankins v. Somers, 39 N.C.App. 617, 251 S.E.2d 640, cert. denied, 297 N.C. 300, 254 S.E.2d 920 (1979) (foreigner's misuse of North Carolinian's business secret constitutes local injury under Sec. 1-75.4(4)); Munchak Corp. v. Riko Enterprises, Inc., 368 F.Supp. 1366 (M.D.N.C.1973) (Sec. 1-75.4 does not exclude intangible injuries; North Carolinian's contract right is a property right and violation thereof causes local injury). 5 Second, this local injury was the result of defendant's actions outside of North Carolina: Warren-Rupp's misappropriation of Dowless' improvement idea occurred in Ohio.

Finally, Dowless has alleged that Warren-Rupp's products were sold and used in North...

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