Beem U.S. Limited-Liability Ltd. v. Grax Consulting LLC
| Decision Date | 28 February 2020 |
| Docket Number | No. 360A18,360A18 |
| Citation | 838 S.E.2d 158,373 N.C. 297 |
| Parties | BEEM USA LIMITED-LIABILITY LIMITED PARTNERSHIP and Stephen Stark v. GRAX CONSULTING LLC |
| Court | North Carolina Supreme Court |
Williams Mullen, Raleigh, by Camden R. Webb and Lauren E. Fussell, for plaintiffs-appellants.
No brief for defendant-appellee Grax Consulting, LLC.
In this case, we consider the question of whether a nonresident company’s contacts with North Carolina were sufficient to permit the exercise of personal jurisdiction over it in the courts of our state. Because we conclude that the exercise of personal jurisdiction over defendant does not trigger due process concerns, we reverse the orders of the Business Court and remand for further proceedings.
The complaint in this action alleges the following facts: Grax Consulting LLC (Grax) is a limited liability company organized and existing under the laws of the State of South Carolina with its principal place of business in Fort Mill, South Carolina. Stephen Stark is a resident of Chapel Hill, North Carolina. On or about 22 February 2015, Grax and Stark signed an agreement to form Beem USA, Limited-Liability Limited Partnership (Beem), an entity created under the laws of the State of Nevada for the purpose of providing information technology services.
On 1 January 2016, Stark and Grax executed a "First Amended and Restated Limited-Liability Limited Partnership Agreement" (the partnership agreement) that set forth the rights, duties, and obligations of the parties and established that the partnership would terminate on 31 December 2016, unless terminated sooner pursuant to the provisions of the partnership agreement.
Grax, acting through its owner Mason Shane Boyd, was named the general partner and an initial limited partner of Beem, possessing a ten percent ownership interest in the partnership. Stark, individually, was named an initial limited partner with a ninety percent ownership interest in Beem. Stark and Grax were the only limited partners of Beem during its existence.
The partnership agreement provided, in part, that in the event the general partner took action, or failed to take action, so as to cause material, adverse consequences to Beem and the act or omission was fraudulent, in bad faith, or in breach of the general partner’s fiduciary duty, the limited partner or partners holding a majority of the ownership interests in Beem could remove the general partner and elect a new one.
Throughout the short lifespan of Beem, Grax and Stark would frequently collaborate on matters relating to the partnership. Boyd traveled to North Carolina on three separate occasions to meet with Stark to discuss the business of Beem and, on at least one of those occasions, to meet with Beem’s banker. These meetings occurred on 28 September 2015, 26 August 2016, 27 August 2016, and 9 November 2016.
In addition, in February 2015, Boyd—acting on behalf of Grax—drove to Charlotte to open a bank account for Beem at Bank of America. Using this account, Grax would regularly deposit checks received by Beem and initiate wire transfers on behalf of the partnership. Over the course of 2016, while living in North Carolina, Stark received approximately fifteen e-mails, fifteen text messages, and seven phone calls per month from Grax relating to the partnership. Grax also mailed Stark financial records, tax documents, and other correspondence relating to Beem.
On or about 5 December 2016, Stark removed Grax as the general partner of Beem pursuant to the terms of the partnership agreement and assumed the role himself. Grax was given notice of its removal as general partner by means of both electronic communication and a letter sent to its principal place of business.
The partnership agreement expressly stated that no limited partner, unless also serving as general partner, was permitted to act on behalf of or bind Beem. Nevertheless, despite its removal as general partner, Grax—through Boyd—continued to act on Beem’s behalf. Specifically, Grax (1) continued to bill and charge Beem for services that Grax purportedly provided for Beem after its removal as general partner; (2) changed the online bank account access information for Beem’s Bank of America partnership account and prevented Stark, the new general partner, from accessing the account; (3) acquired a cashier’s check for $3,500 from the Bank of America account without Stark’s permission; and (4) filed tax documents with the Internal Revenue Service on behalf of Beem. Furthermore, Grax repeatedly failed to provide Stark with Beem’s financial, accounting, banking, tax, and other records, despite requests from Stark for this information.
Following the partnership’s dissolution on 31 December 2016, Stark attempted to wind up the business affairs of Beem but was unable to do so due to Grax’s failure to provide Stark with the partnership’s business records. Stark was also precluded from filing accurate and complete tax documents on behalf of the partnership for 2016 because Grax withheld necessary information.
On 28 December 2017, Stark, on behalf of himself and Beem (collectively, plaintiffs), filed a complaint in Superior Court, Orange County, asserting claims against Grax for breach of contract and breach of fiduciary duty. The breach of contract claim was based on plaintiffs’ allegation that Grax acted on behalf of Beem following its removal as general partner on 5 December 2016 despite lacking the authority to do so and in violation of the partnership agreement. The breach of fiduciary duty claim was premised on plaintiffs’ assertion that Grax engaged in misconduct as the general partner of Beem and breached its duty of care to the partnership—namely, that Grax failed to adequately maintain financial statements of the partnership from July 2016 until the date of Grax’s removal as general partner and refused to relinquish to plaintiffs those statements that existed upon its removal as general partner.
In the complaint, plaintiffs sought an injunction, in part, directing Grax to turn over the documents and information necessary for plaintiffs to wind up the affairs of Beem and file tax documents on behalf of both Beem and Stark. The case was designated a mandatory complex business case pursuant to N.C.G.S. § 7A-45.4(a) and was assigned to the Honorable Michael L. Robinson, Special Superior Court Judge for Complex Business Cases.
After repeated failed attempts to personally serve Boyd, who was the registered agent for Grax, service of process was eventually effected on 3 February 2018. Plaintiffs filed a motion for entry of default on 6 March 2018 based on Grax’s failure to file a responsive pleading to plaintiffs’ complaint. On 23 April 2018, a default was entered against Grax. Plaintiffs subsequently filed a motion for default judgment on 10 May 2018.
N.C.G.S. § 1-75.11 provides, in relevant part, that before a trial court can enter a judgment against a defendant who fails to appear, it "shall require proof by affidavit or other evidence ... of the existence of any fact not shown by verified complaint which is needed to establish grounds for personal jurisdiction over the defendant." See N.C.G.S. § 1-75.11(1) (2017). In an effort to comply with the statute, plaintiffs filed an affidavit from Stark on 10 August 2018 that listed Grax’s contacts with North Carolina.
On 13 August 2018, the Business Court issued an order denying plaintiffs’ motion for default judgment based on its finding that plaintiffs had failed to satisfy their burden of proving that the court possessed personal jurisdiction over Grax. As an initial matter, the court found that Stark’s affidavit was improper because it lacked "any vow of truthfulness on penalty of perjury." Moreover, the court further determined that the information contained in the affidavit was insufficient to satisfy N.C.G.S. § 1-75.11. In support of its ruling, the Business Court stated the following:
Plaintiffs’ claims arise out of Grax’s conduct after he was removed as the general partner on December 5, 2016. Thus, Grax’s contacts with North Carolina prior to this date do not create a basis for exercising specific jurisdiction over Grax. ... The record shows that the only contacts Grax had with North Carolina from which Plaintiffs’ claims arise are two letters from Grax addressed to Stark at his North Carolina address. These two letters do not amount to sufficient minimum contacts with North Carolina to support the exercise of personal jurisdiction over Grax.
On 22 August 2018, plaintiffs filed a document captioned "Plaintiffs’ Motion for Reconsideration and for Amended and Additional Findings of Fact" along with a properly sworn version of Stark’s previously filed affidavit and a new affidavit that provided additional information about Grax’s contacts with North Carolina. The Business Court entered an order on 4 September 2018 containing additional findings but once again denying plaintiffs’ motion.
The court ruled that plaintiffs’ breach of fiduciary duty claim did not "ar[ise] out of Grax’s conduct in traveling to North Carolina to open Beem’s bank account or depositing checks in or initiating wire transfers from North Carolina bank branches." Similarly, the court found that the "breach of fiduciary duty does not appear to have arisen from Grax’s trips to North Carolina to discuss Beem’s business with Stark or his phone calls, e-mails, and text messages to Stark in North Carolina." The Business Court concluded that "Plaintiffs’ breach of fiduciary duty claim is premised on Grax’s failures to maintain proper records beginning in July 2016—and nothing in the record reflects how such a breach arose out of any conduct directed at the forum state of North Carolina." Pursuant to N.C.G.S. § 7A-27(a)(2), plaintiffs gave notice of appeal from the Business Court’s 13 August 2018 and 4 September 2018 orders.
The sole question for review in this appeal is whether Grax had sufficient minimum...
To continue reading
Request your trial
-
Mucha v. Wagner
...of a forum with which he has established no meaningful contacts, ties, or relations.’ " Beem USA Ltd.-Liab. Ltd. P'ship v. Grax Consulting LLC , 373 N.C. 297, 302, 838 S.E.2d 158 (2020) (cleaned up) (quoting Burger King Corp. v. Rudzewicz , 471 U.S. 462, 471–72, 105 S.Ct. 2174, 85 L.Ed.2d 5......
-
Button v. Level Four Orthotics & Prosthetics, Inc.
...whether our courts can exercise personal jurisdiction over a non-resident defendant. Beem USA Ltd.-Liab. Ltd. P'ship v. Grax Consulting LLC , 373 N.C. 297, 302, 838 S.E.2d 158, 161 (2020). First, personal jurisdiction must be permitted by North Carolina's long-arm statute which allows a cou......
-
State ex rel. Stein v. E. I. Du Pont De Nemours & Co.
...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, 838 S.E.2d 158 (2020). "First, jurisdiction over the defendant must be authorized by N.C.G.S. § 1-75.4 —North Carolina's long-a......
-
Troublefield v. AutoMoney, Inc.
...Court sufficient for establishing minimum contacts: general and specific jurisdiction. Beem USA Limited-Liability Ltd. P'ship v. Grax Consulting, LLC , 373 N.C. 297, 303, 838 S.E.2d 158, 162 (2020). "General jurisdiction is applicable in cases where the defendant's affiliations with the Sta......