Fieldcrest Mills, Inc. v. Mohasco Corp.
| Decision Date | 15 December 1977 |
| Docket Number | No. C-75-220-G.,C-75-220-G. |
| Citation | 442 F. Supp. 424 |
| Court | U.S. District Court — Middle District of North Carolina |
| Parties | FIELDCREST MILLS, INC., Plaintiff, v. MOHASCO CORPORATION (formerly Mohasco Industries, Inc.) and Edgar Pickering (Blackburn), Limited, Defendants. |
David M. Moore, II, Greensboro, N. C., and Robert E. Payne, Richmond, Va., for plaintiff.
Thornton Brooks and James T. Williams, Jr., Greensboro, N. C., for defendant Mohasco.
William B. Rector, Jr., Greensboro, N. C., for defendant Pickering.
This case arises out of a sale of textile machinery to the plaintiff, Fieldcrest Mills, Inc. (Fieldcrest), a manufacturer of carpet and other textiles whose principal place of business is in Eden, North Carolina. The defendant Mohasco Corp. (Mohasco) is a New York corporation which holds patents on the textile machinery involved in this case. The defendant Edgar Pickering (Blackburn) Ltd. (Pickering-England) is a British corporation which has been licensed by Mohasco to manufacture and distribute these patented machines. In 1971-72, Fieldcrest entered into contracts with Mohasco and Edgar Pickering, Inc. (Pickering-America) for the licensing, sale, and installation of the textile machinery involved in this case. Pickering-America is a Tennessee corporation which is a subsidiary of Pickering-England.
Fieldcrest seeks recovery of a judgment in personam against both defendants, jointly and severally, claiming false and fraudulent misrepresentations by Mohasco and Pickering-England induced Fieldcrest to purchase these machines. Fieldcrest also charges defendants with unjust enrichment, negligence, breach of implied and express warranties, and acts in violation of N. C. General Statute § 75-1.1 et seq. Subject matter jurisdiction is founded on diversity of citizenship. The amount in controversy exceeds $10,000.00.
Before answering, Pickering-England moved to dismiss the claims against it for lack of personal jurisdiction. Extensive discovery on this issue has been conducted pursuant to several orders of this Court. The matter is now before the Court for decision. For the reasons set out below, Pickering-England's motion is denied.
To resolve the question of personal jurisdiction, the Court must engage in a two step examination. First, the Court must determine if the applicable state law would allow the exercise of jurisdiction over Pickering-England. If the answer to this inquiry is yes, the Court must then determine if the exercise of jurisdiction in this case comports with due process. Bowman v. Curt G. Joa, Inc., 361 F.2d 706 (4th Cir. 1966); United Advertising Agency v. Robb, 391 F.Supp. 626 (M.D.N.C.1975).
Fieldcrest contends that Pickering-England committed various acts which fall within a jurisdictional section of the N. C. Business Corporation Act, N.C.Gen.Stat. § 55-145, and within several subsections of North Carolina's general long-arm statute, N.C.Gen.Stat. § 1-75.4. The Court's task in determining whether there is a North Carolina statute applicable to this case is simplified by the recent holding involving N.C. Gen.Stat. § 1-75.4(1)(d) in Dillon v. Numismatic Funding Corp., 291 N.C. 674, 231 S.E.2d 629 (1977). Section 1-75.4(1)(d) provides for personal jurisdiction over all persons who are "engaged in substantial activity within this State." Fieldcrest contends § 1-75.4(1)(d) is applicable here. In Dillon, the N. C. Supreme Court read this subsection to apply to any defendant who meets the minimum contacts requirement of International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). Accordingly, the question of whether there exists statutory authority for the exercise of jurisdiction over Pickering-England collapses into the question of whether Pickering-England has the minimum contacts with North Carolina necessary to comport with due process. It is unnecessary to decide whether N.C.Gen.Stat. § 55-145 or the other subsections of N.C.Gen.Stat. § 1-75.4 cover the situation presented in this case.
Fieldcrest asserts that personal jurisdiction over Pickering-England would be proper in this Court on either of two theories. The first is that Pickering-England's own contacts with North Carolina are sufficient to establish personal jurisdiction in this state. Second, Fieldcrest contends that the contacts of Pickering-America, which are clearly sufficient for personal jurisdiction over that company, should be attributed to its parent, Pickering-England.
Fieldcrest contends that Pickering-England has sufficient contacts with North Carolina to satisfy due process because of its acts involving the sale of the machinery to Fieldcrest and because of its other solicitation activities in North Carolina. A fuller exploration of the facts of this case is required to evaluate Fieldcrest's contentions.
In December, 1970, Pickering-England and Mohasco concluded a license agreement by which Pickering-England acquired worldwide rights to manufacture and sell carpet tufting and dyeing machines (hereinafter referred to as the Crawford machinery), on which Mohasco held patents. Shortly after Pickering-England secured the right to manufacture and sell these machines, it began promoting the machinery and soliciting sales.
On or about February 16, 1971, Pickering-England sent Fieldcrest a letter and brochure promoting the Crawford machinery. The letter suggested that the recipient contact "our Vice President Overseas . . Max M. Beasley" in Chattanooga, Tennessee. At the time of Pickering-England's solicitation, Pickering-America was not yet in existence. On April 14, 1971, a month prior to the incorporation of Pickering-America, Beasley wrote Fieldcrest enclosing a price quotation and specifications for the Crawford machinery. Pickering-England had prepared the specification sheet in England, on its own letterhead.
In May, 1971, Pickering-America was incorporated in the State of Tennessee as a ninety-five per cent owned subsidiary of Pickering-England. Max M. Beasley was named president of the company. Edgar Pickering became chairman of the board of directors. Frank Farley was named vice president of Pickering-America. Pickering, Beasley, and Farley constituted the entire board of Pickering-America. At the time, Pickering and Farley were, respectively, managing director and deputy chairman of Pickering-England.
With the incorporation of Pickering-America, the facts of this case become muddied. Fieldcrest and Pickering-England strongly contest each other's description of subsequent events and the official identities of the actors in those events. Pickering-England asserts that the additional contacts Fieldcrest claims the British corporation had with North Carolina were actually attributable to individuals who were acting as officials and employees of Pickering-America and another Pickering-England subsidiary, Pickering Locstitch, Ltd. Fieldcrest, on the other hand, contends that these individuals were acting as agents and employees of Pickering-England. The Court accepts the plaintiff's version of the disputed facts for purposes of deciding this motion. No opinion on the complete accuracy of the plaintiff's allegations is expressed.
The following is an abbreviated summary of Fieldcrest's factual contentions which the Court has extracted from the plaintiff's lengthy submissions in opposition to the defendant's motion:
1. Fieldcrest contends that officers and employees of Pickering-England actively engaged in soliciting and negotiating the contract for the Crawford machines. These negotiations included a visit to North Carolina in August 1971, by Edgar Pickering, as chief executive officer of Pickering-England, to persuade Fieldcrest to purchase the machinery. During the installation of the Crawford machines, Pickering-England employees were in almost daily communication with Pickering-America regarding the installation and at times were present at the installation site in North Carolina.
2. Fieldcrest also contends that Pickering-England, in addition to its contacts with Fieldcrest, has over a period of years solicited sales from other North Carolina manufacturers. Specifically, during 1971, Beasley procured, as agent for Pickering-England, a contract with Burlington Industries, Inc. of North Carolina. This contract was subsequently cancelled. Again in 1972, Pickering-England solicited sales from Burlington Industries in Greensboro, North Carolina, on three occasions. From 1972 to 1976, Pickering-England had occasional contacts, including a personal visit by Edgar Pickering and Frank Farley, with Cannon Mills of Kannapolis, North Carolina. These contacts resulted in a contract in 1976 to place a "locstitch" machine in one of Cannon's North Carolina plants. This contract was concluded with another Pickering-England subsidiary, Pickering-Locstitch, Ltd.
3. In addition, Fieldcrest contends that over the last five years, Pickering-England has promoted sales of textile machinery by advertising in magazines that circulated among North Carolina textile manufacturers.
In McCoy Lumber Industries, Inc. v. Niedermeyer-Martin Co., 356 F.Supp. 1221 (M.D.N.C.1973), this Court adopted the general principles set forth by Justice (then Judge) Blackmun in Aftanase v. Economy Baler Co., 343 F.2d 187 (8th Cir. 1965) as criteria for analyzing whether minimum contacts are present. There criteria include:
"Three primary factors, namely, the quantity of the contacts, the nature and quality of the contacts, and the source and connection of the cause of action with those contacts . . . and two others, interest of the forum state and convenience . . .." 343 F.2d at 197.
The quantity of contacts which Pickering-England had with North Carolina, while not overwhelming, is substantial when the plaintiff's version of the facts is adopted. Since 1971, high officials in Pickering-England have communicated with...
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