Hanes Companies, Inc. v. Ronson

• Decision Date: 07 June 1988
• Docket Number: C-87-482-WS.,Civ. No. C-87-298-WS
• Citation: 712 F. Supp. 1223
• Parties: HANES COMPANIES, INC., Plaintiff, v. Harold R. RONSON and Ronco Enterprises, Inc., Defendants, and HANES COMPANIES, INC., Plaintiff, v. Harold R. RONSON, Joanne Ronson, Norma R. Koppel, Ronco Enterprises, Inc., Jonor Enterprises, Inc., and Savoy Trading Co., Inc., Defendants.
• Court: U.S. District Court — Middle District of North Carolina

712 F. Supp. 1223

HANES COMPANIES, INC., Plaintiff, v. Harold R. RONSON and Ronco Enterprises, Inc., Defendants, and HANES COMPANIES, INC., Plaintiff, v. Harold R. RONSON, Joanne Ronson, Norma R. Koppel, Ronco Enterprises, Inc., Jonor Enterprises, Inc., and Savoy Trading Co., Inc., Defendants.

Civ. Nos. C-87-298-WS, C-87-482-WS.

United States District Court, M.D. North Carolina, Winston-Salem Division.

June 7, 1988.

Michael E. Ray, Kurt C. Stakeman, Lori E. Privette, Winston-Salem, N.C., for plaintiffs.

Clifford Britt, Daniel R. Taylor, Jr., Winston-Salem, N.C., Lawrence M. Rosenstock, New York City, for defendants.

MEMORANDUM OPINION

BULLOCK, District Judge.

A suit that began with garden variety allegations of fraud and misrepresentation has blossomed into complex litigation presenting questions which are no bed of roses for the court. Several Defendants have raised thorny issues regarding personal jurisdiction, and these cases are further entwined with pending motions to consolidate, to transfer, and to dismiss pursuant to the doctrine of abatement. Guided by the tenets of due process and the illusive goal of a "just, speedy, and inexpensive determination of every action," Fed.R.Civ.P. 1, the court will weed this procedural thicket by denying the motion to dismiss for lack of jurisdiction, granting the motion to consolidate, denying the motion to transfer, and denying the motion to dismiss based on abatement.

FACTS AND PROCEDURAL HISTORY

This litigation grows out of Hanes's purchase of the assets and goodwill of Harold Ronson's business. On August 5, 1986, Hanes and various Defendants executed numerous agreements which may be summarized as follows:

(1) An asset purchase agreement which transferred to Hanes the assets of W. Lowenthal Co., Inc. Lowenthal was wholly owned by Ronson and traded in surplus or waste textile fibers. After the sale of its assets, W. Lowenthal Co., Inc., changed its name to Ronco Enterprises, Inc., and "Lowenthal" became a division of Hanes. This agreement was signed by Ronson and provides that it is governed by North Carolina law;

(2) An asset purchase agreement which transferred to Hanes the assets of W. Lowenthal Export, Inc. ("Export" and "Export Agreement"). Export served as Lowenthal's international sales arm. Its ownership was split between Joanne Ronson and Norma Koppel, Harold Ronson's daughters. After this sale Export changed its name to Jonor Enterprises, Inc. This agreement was signed by Joanne Ronson as president of Export, Norma Koppel as secretary of Export, and by both daughters as the individual shareholders of Export. The Export Agreement also provides that it is governed by North Carolina law;

(3) A lease between Lowenthal and Hanes of a fiber-processing plant owned by Lowenthal and located in Rock Hill, South Carolina;

(4) A lease between Harold Ronson and Hanes of a warehouse owned by Ronson and located beside the plant in Rock Hill, South Carolina;

(5) A non-competition agreement between Hanes, Lowenthal, and Ronson; and

(6) An employment agreement between Hanes and Ronson whereby Ronson would preside over the new Hanes fiber business.

Hanes began this litigation on April 9, 1987, by filing a three-count complaint against Ronson and Ronco in the Superior Court of Forsyth County (Hanes I). Hanes alleged that these two Defendants had committed fraud, misrepresentation, and mutual mistake in the negotiation and execution of the two leases described above. The suit was bottomed on Hanes's contention that Ronson had substantially overstated the total square footage contained in the plant and the warehouse located on the leased property.

The Defendants removed Hanes I to this court based on diversity on May 12, 1987. On June 18, 1987, the Defendants filed the pending motion to transfer to the Rock Hill Division of the United States District Court for South Carolina. On June 19, 1987, they filed their answer to the complaint. This answer generally denied the complaint's allegations and, asserting that the two leases were part of a larger series of transactions, alleged five counterclaims for breach of the leases, breach of the non-competition agreement, and misrepresentation.

Rather than asserting counterclaims in its reply, or moving to amend its complaint, Hanes filed a new complaint in this court on July 24, 1987 (Hanes II). This complaint called the entire series of agreements into question and named as defendants Ronson, Ronco, Joanne Ronson, Norma Koppel, Jonor, and Savoy Trading Co., Inc. In sum, Hanes II alleged that most of these Defendants had breached one or more of the agreements described above and that all of these Defendants had conspired to interfere with Hanes's contracts and also committed unfair trade practices under N.C. Gen.Stat. § 75-1.1. Contemporaneously with this second complaint, Hanes filed a motion to consolidate the two cases it had pending against Ronson and Ronco.

The Defendants in Hanes II responded by filing a pair of motions to dismiss. The first of these motions seeks to dismiss Hanes II in its entirety based on the doctrine of abatement. Alternatively, Defendants Joanne Ronson, Norma Koppel, and Savoy Trading have filed a Rule 12(b)(2) motion to dismiss for lack of personal jurisdiction. Ms. Ronson and Ms. Koppel filed affidavits in support of the latter motion, and Hanes has filed responses to interrogatories and portions of Mr. Ronson's deposition. The court also has before it the two asset purchase agreements, the leases and other contracts, an affidavit from Harold Ronson, and an affidavit from Donald H. Bernstein, an officer from Hanes. The court will address the jurisdictional issues first.

DISCUSSION

I. Personal Jurisdiction

A. Joanne Ronson and Norma Koppel

In this diversity case the court must perform a two-step analysis to determine whether personal jurisdiction exists. The first consideration is whether North Carolina statutes permit the exercise of longarm jurisdiction over the Defendants. If so, the court must then determine whether the exercise of that jurisdiction comports with due process. Vishay Intertechnology, Inc. v. Delta International Corp., 696 F.2d 1062, 1064 (4th Cir.1982).

Hanes seeks jurisdiction under N.C.Gen. Stat. § 1-75.4(1)(d), which grants jurisdiction "in any action ... against any party who when service of process is made ... is engaged in substantial activity within this State." Relying on Dillon v. Numismatic Funding Corp., 291 N.C. 674, 231 S.E.2d 629 (1977), Hanes argues that this statutory long-arm jurisdiction is co-extensive with the limits of due process; thus the court need only consider the latter of the two inquiries. The Defendants respond that such a reading makes the remainder of the long-arm statute superfluous.

Although the court agrees with the Defendants' logic, the court cannot ignore the State Supreme Court's construction of the statute. "By the enactment of G.S. § 1-75.4(1)(d) ... the General Assembly intended to make available to the North Carolina courts the full jurisdictional powers permissible under federal due process." Dillon, 291 N.C. at 676, 231 S.E.2d 629. The Dillon court summarily held this section applicable to the defendant and proceeded directly to the constitutional issue. Id. Thus, when a plaintiff relies on Section 1-75.4(1)(d), the question of statutory authorization "collapses into the question of whether the defendant has the minimum contacts with North Carolina necessary to meet the requirements of due process." Gemini Enterprises, Inc. v. WFMY Television Corp., 470 F.Supp. 559, 564 (M.D.N. C.1979); accord Waller v. Butkovich, 584 F.Supp. 909, 926 (M.D.N.C.1984); Western Steer-Mom `N' Pop's, Inc. v. FMT Investments, Inc., 578 F.Supp. 260, 264 (W.D.N. C.1984); Fieldcrest Mills, Inc. v. Mohasco Corp., 442 F.Supp. 424, 426 (M.D.N.C. 1977); J.M. Thompson Co. v. Doral Mfg. Co., Inc., 72 N.C.App. 419, 424, 324 S.E.2d 909, 913, disc. rev. denied, 313 N.C. 602, 330 S.E.2d 611 (1985).¹

Turning to the issue of due process, the constitutional touchstone is whether the non-resident Defendants have established "certain minimum contacts with the forum state such that maintenance of the suit does not offend `traditional notions of fair play and substantial justice.'" International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 342, 85 L.Ed. 278 1940). "Minimum contacts" means that "the defendant's conduct and connection with the forum state are such that he should reasonably anticipate being haled into court there." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 567, 62 L.Ed.2d 490 (1980). A single act or contract which creates a "substantial connection" to a forum can support jurisdiction, McGee v. International Life Ins. Co., 355 U.S. 220, 223, 78 S.Ct. 199, 201, 2 L.Ed.2d 223 (1957), but occasional acts which create only an "attenuated" connection do not. World-Wide Volkswagen, 444 U.S. at 299, 100 S.Ct. at 568. Whether phrased in terms of a "fair warning," Shaffer v. Heitner, 433 U.S. 186, 218, 97 S.Ct. 2569, 2587, 53 L.Ed.2d 683 (1977) (Stevens, J., concurring), or "foreseeability," Volkswagen, 444 U.S. at 297, 100 S.Ct. at 567, in each case the defendant must perform some act by which he "purposefully avails himself of conducting activities within the forum State, thus invoking the benefits and protections of its laws." Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1239, 2 L.Ed.2d 1283 (1958).

In giving further content to these broad principles the court is guided by the analysis employed in Burger King Corp. v. Rudzewicz, 471 U.S. 462, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985). Like the present case, Burger King involved a resident corporation seeking specific jurisdiction over a nonresident individual based on a single contract.² In deciding that jurisdiction was proper, the Burger King Court engaged in yet...