Toshiba Global Commerce Solutions, Inc. v. Smart & Final Stores LLC

Decision Date17 June 2022
Docket Number181A21
Citation381 N.C. 692,873 S.E.2d 542
CourtNorth Carolina Supreme Court

Robinson, Bradshaw & Hinson, P.A., by Erik R. Zimmerman, Chapel Hill, Edward F. Hennessey IV, Charlotte, Matthew W. Sawchak, Raleigh, and Benjamin C. DeCelle, Charlotte; and Kenneth B. Hammer, Durham, for plaintiff-appellee.

Ellis & Winters LLP, Raleigh, by Paul K. Sun Jr. and Kelly Margolis Dagger, for defendant-appellant.


¶ 1 In this matter, we must consider whether the trial court erred by denying a nonresident defendant's motion to dismiss for lack of personal jurisdiction. Plaintiff Toshiba Global Commerce Solutions, Inc. (Toshiba) is based in Durham, North Carolina, and brought this action against Smart & Final Stores LLC (Smart & Final) for breach of contract and related claims. Smart & Final, a California company that operated warehouse-style grocery stores in the western United States, contacted Toshiba during its search for a service provider to maintain and repair the point-of-sale equipment that Smart & Final uses at its stores. In March 2019, negotiations between the parties resulted in the Master Maintenance Services Agreement (Services Agreement), in which Toshiba agreed to provide maintenance and repair services for point-of-sale equipment at all Smart & Final stores for three years. According to the complaint, Smart & Final refused to pay overage fees as required by the Services Agreement and terminated the Services Agreement without cause in April 2020. As addressed in more detail herein, on the record before us and claims alleged, the Due Process Clause of the Fourteenth Amendment does not preclude the courts of this State from entering a judgment binding on Smart & Final. Therefore, we conclude that the trial court did not err by denying Smart & Final's motion to dismiss for lack of personal jurisdiction.

I. Personal Jurisdiction

¶ 2 "The Fourteenth Amendment's Due Process Clause limits a state court's power to exercise jurisdiction over a defendant." Ford Motor Co. v. Mont. Eighth Jud. Dist. Ct. , ––– U.S. ––––, 141 S. Ct. 1017, 1024, 209 L.Ed.2d 225 (2021). Specifically, "[t]he Due Process Clause protects an individual's liberty interest in not being subject to the binding judgments of a forum with which he has established no meaningful contacts, ties, or relations." Burger King Corp. v. Rudzewicz , 471 U.S. 462, 471–72, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985) (cleaned up).

¶ 3 As articulated in International Shoe Co. v. Washington , 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945), a defendant who is not subject to general jurisdiction in a forum state or present in the forum state must "have certain minimum contacts with [the forum state] such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice." Id. at 316, 66 S.Ct. 154 (cleaned up). This jurisdiction—known as specific jurisdiction—"exists when the cause of action arises from or is related to defendant's contacts with the forum." Skinner v. Preferred Credit , 361 N.C. 114, 122, 638 S.E.2d 203 (2006). The relationship with the forum "must arise out of contacts that the defendant himself creates with the forum [s]tate." Walden v. Fiore , 571 U.S. 277, 284, 134 S.Ct. 1115, 188 L.Ed.2d 12 (2014) (quoting Burger King , 471 U.S. at 475, 105 S.Ct. 2174 ). While the quality and nature of defendant's activity with the forum state may vary, "it is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum [s]tate, thus invoking the benefits and protections of its laws." Hanson v. Denckla , 357 U.S. 235, 253, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958). Thus, consistent with the foregoing, the Supreme Court of the United States has recognized that jurisdiction exists without offending the Due Process Clause when "the suit was based on a contract which had substantial connection with that [s]tate." McGee v. Int'l Life Ins. Co. , 355 U.S. 220, 223, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957).

II. Analysis

¶ 4 Toshiba initiated this action against Smart & Final in Superior Court, Durham County, North Carolina, alleging breach of the Services Agreement and related claims. Smart & Final moved to dismiss the complaint for lack of personal jurisdiction pursuant to Rule 12(b)(2) of the North Carolina Rules of Civil Procedure. Both parties submitted affidavits and exhibits in support of and opposition to Smart & Final's motion, and a hearing was held, but testimony was not taken at the hearing.

¶ 5 In this context, when the parties have submitted affidavits and exhibits but no evidentiary hearing is held, the trial court must determine the weight and sufficiency of the evidence before it. See N.C.G.S. § 1A-1, Rule 43(e) (2021); Banc of Am. Sec. LLC v. Evergreen Int'l Aviation, Inc. , 169 N.C. App. 690, 694, 611 S.E.2d 179 (2005). However, pursuant to Rule 52(a)(2) of the North Carolina Rules of Civil Procedure, the trial court need not make specific findings of fact in support of its order unless requested by a party. N.C.G.S. § 1A-1, Rule 52(a)(2) (2021). If in deciding the motion the trial court makes findings of fact, they are conclusive on appeal when unchallenged or supported by competent evidence even when there is a conflict in the evidence. See, e.g. , Morse v. Curtis , 276 N.C. 371, 378, 172 S.E.2d 495 (1970) ("We recognize the often-repeated rule that findings of fact by a trial judge are conclusive when supported by competent evidence, even when there is [a] conflict in the evidence, but an exception to a finding of fact not supported by competent evidence must be sustained."); Fungaroli v. Fungaroli , 51 N.C. App. 363, 367, 276 S.E.2d 521 (1981) (applying this rule to the Court of Appeals’ review of a trial court's order denying a motion to dismiss for lack of personal jurisdiction).

¶ 6 In this matter, the trial court found facts and ultimately determined that the Services Agreement had "a substantial connection with North Carolina."1 Although Smart & Final makes arguments concerning the competency of evidence supporting some portions of the trial court's findings, Smart & Final has not challenged the following findings of fact2 :

4. Based in Durham, North Carolina, Toshiba makes and sells point-of-sale products used by retailers—for example, scanners, monitors, and related checkout devices. It also offers support services for its products and those made by others.
5. Smart & Final is a California company that operates a chain of warehouse-style grocery stores in the western United States. Until recently, one of its subsidiaries operated restaurant supply and wholesale food stores in the same region.
6. In late 2017, Smart & Final began searching for a service provider to maintain and repair point-of-sale equipment at its stores. One of the vendors it contacted was Toshiba. The parties promptly signed a nondisclosure agreement, notable only because it lists Toshiba's North Carolina address at the top. Over the next few months, Toshiba sent pitch materials and a formal proposal for a mix of products and services. Toshiba touted its technology (hardware and software), national presence (a fleet of technician vans coupled with a network of stocking locations to house inventory), and support infrastructure (a central repair depot and an "expert staff of trained personnel ... at our corporate HQ" in North Carolina). Ultimately, though, Smart & Final went with a different vendor.
7. Evidently, that relationship didn't work out, and soon Smart & Final was looking for a new vendor. It reached out to Toshiba a second time and requested another proposal. Most of the negotiations took place via e-mail and telephone between Smart & Final representatives in California and Toshiba representatives in California and Texas. There was also at least one in-person meeting at Smart & Final's California headquarters.
8. This time, the negotiations were fruitful, producing a services agreement in March 2019. In a nutshell, Toshiba agreed to provide maintenance and repair services for point-of-sale equipment at all Smart & Final stores for three years. Smart & Final could renew the agreement for additional one-year terms with written notice to Toshiba's North Carolina headquarters. A choice-of-law provision states that New York law governs the agreement.
9. Smart & Final selected two service options: "On-Site Repair" and "Advanced Exchange Plus." On-Site Repair means just what it says: a Toshiba technician would travel to a given store and try to repair defective equipment on site. Advanced Exchange Plus, on the other hand, is a replacement service. This option calls for the technician to replace the defective part with a working unit taken from inventory called seed stock. Although Smart & Final could have chosen to own and maintain the seed stock itself, it shifted that burden to Toshiba. Toshiba also took responsibility for installing replacement parts and for "the return of the [defective] Product back to [its] depot."
10. Both service options are geared toward addressing problems as they arise. Determined "to operate [its] stores without interruption," Smart & Final put a premium on speed. The agreement specifies response times and performance goals typically based on same-day or next-day service. Along with making its technicians available seven days a week, Toshiba agreed to "provide an infrastructure and support structure to meet" its obligations.
11. These requirements are reflected in the price. Attachment A details the prices for repair and replacement services for dozens of products, based in part on estimates of the amount of seed stock needed, the expected response time, and the number of anticipated service calls. It also states various pricing assumptions, including that Toshiba would own the seed stock and "image/configure units during the receive

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