Padron v. Bentley Marine Grp., LLC

IN THE COURT OF APPEALS OF NORTH CAROLINA

No. COA18-537

Filed: 4 December 2018

Mecklenburg County, No. 17 CVS 12148

JOSEPH PADRON, Plaintiff,

BENTLEY MARINE GROUP, LLC, LARRY D. BREHM, KEENAN W. GREEN, and
NOEL WINTER, Defendants.

Appeal by defendant Keenan W. Green from order entered 20 March 2018 by

Judge Hugh B. Lewis in Mecklenburg County Superior Court. Heard in the Court of

Appeals 17 October 2018.

Pinto Coates Kyre & Bowers, PLLC, by Jon Ward and Matthew J. Millisor, for
plaintiff-appellee.

Poyner Spruill LLP, by Karen H. Chapman and John M. Durnovich, for
defendant-appellant Keenan W. Green.

ZACHARY, Judge.

Defendant Keenan W. Green appeals from the trial court’s order denying his

motion to dismiss plaintiff Joseph Padron’s complaint against him for lack of personal

jurisdiction. Defendants Bentley Marine Group, LLC, Larry D. Brehm, and Noel

Winter are not parties to the instant appeal. We conclude that North Carolina lacks

personal jurisdiction over Green in the instant case, and accordingly reverse and

remand for entry of an order granting Green’s motion to dismiss.

Background
PADRON V. BENTLEY MARINE GRP., LLC

Opinion of the Court

Plaintiff filed a complaint on 3 July 2017 against defendants Bentley Marine

Group, Brehm, Winter, and Green for damages resulting from a 4 July 2014 boating

accident that took place in North Carolina wherein “Plaintiff’s left hand was severely

injured and disfigured while using a Bentley Industries 2006 Model 240 Cruise

pontoon boat.” According to the complaint, the Boat was manufactured by Bentley

Industries, LLC, “a defunct limited liability company previously organized under the

laws of South Carolina.” The complaint alleges that the Boat “was a dangerous and

defective product at the time it was manufactured and designed, in that it failed to

take account for an inherently deadly flaw in its design—a so-called ‘pinch point’ that

led to the loss of Plaintiff’s finger.” The complaint further alleges that “Bentley

Industries, LLC failed to provide any adequate warning, instruction, or recall related

to the dangerous and defective manufacture and design of the Boat, although it knew

or should have known of that dangerous and defective condition and had the

opportunity to provide timely and effective warning.”

The complaint alleges that sometime in 2008, about two years after Bentley

Industries manufactured the Boat, “there was some sort of transaction involving

Bentley Industries, LLC and Defendants [Bentley Marine Group, Brehm, Green,

and/or Winter], in which one or more of said Defendants purchased Bentley

Industries, LLC, including both its assets and liabilities.” The complaint alleges that

defendants, “by virtue of purchasing Bentley Industries, LLC, at a time when the

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Opinion of the Court

dangerous and defective nature of the Boat and other similar boats was or should

have been evident, . . . are legally liable for all claims based upon the negligent and

defective manufacture and design of the Boat,” and further, that prior to the date that

plaintiff was injured, defendants were “aware of the negligent and defective

manufacture and design of the Boat . . . , yet none of the Defendants . . . issued any

warning, let alone any proper, adequate, or effective warning, regarding the

dangerous and defective nature of the Boat, despite having the opportunity and

responsibility to do so.”

The complaint seeks to hold Green and his fellow defendants jointly and

severally liable for plaintiff’s injuries. The complaint further alleges that Green

“served as the alter ego of Defendant Bentley Marine Group,” and therefore seeks to

“pierce the corporate veil of Defendant Bentley Marine Group, LLC to reach the

personal assets” of Green.

None of the defendants are residents of North Carolina. The complaint alleges

that Green is a resident of South Carolina and that Bentley Marine Group “is or was

a limited liability company organized under the laws of South Carolina.” Plaintiff’s

complaint nevertheless alleges that Green “is subject to personal jurisdiction in the

State of North Carolina pursuant to N.C. Gen. Stat. 1-75.4(4) (Local Injury; Foreign

Act).” Plaintiff makes similar allegations as to the other defendants.

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PADRON V. BENTLEY MARINE GRP., LLC

Opinion of the Court

Green filed a motion to dismiss plaintiff’s complaint against him for lack of

personal jurisdiction, among other grounds. Green attached to his motion to dismiss

an affidavit in which he provided, inter alia, that:

2. I am a citizen and resident of Charleston, South
Carolina where I have resided almost all of my life.

3. I received a copy of the Complaint at my office in
Summerville, South Carolina.

4. I have never been a resident of the State of North
Carolina.

5. I have no ownership interest in any company located
or doing business in North Carolina.

6. I do not have any family members that reside in
North Carolina.

7. I have never personally derived revenue directly
from goods used or consumed or services rendered in North
Carolina.

8. I have never owned, used or possessed rights to any
real or personal property located in North Carolina, nor do
I maintain any banking or other financial accounts in
North Carolina.

9. I am not licensed or registered to do business in
North Carolina.

10. I have never had a personal office or address of any
kind in North Carolina.

11. Prior to the filing of this matter, I have never been
sued or made a general appearance in North Carolina.

12. I do not have a registered agent for service of process

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PADRON V. BENTLEY MARINE GRP., LLC

Opinion of the Court

in North Carolina.

With regard to his involvement with Bentley Marine Group, Green’s affidavit

further provided that “I have never commingled my funds or assets with those of

Bentley Marine Group, LLC” and that “I have never personally co-owned any

financial accounts or assets owned or controlled by Bentley Marine Group, LLC.”

Finally, Green maintained that “[w]ith respect to allegations [in the complaint], I was

not involved in the day-to-day activities or management of Bentley Marine Group,

LLC. The extent of my involvement with Bentley Marine Group, LLC was as a silent

member for a very brief period of time in 2008.”

Plaintiff responded by submitting an affidavit in which he stated that:

1) As this lawsuit reveals, I was injured badly while
using [the] [B]oat in North Carolina.

2) My research of this type of “Bentley” boat shows that
it was a brand that was sold all over the United States,
including in North Carolina.

3) I have confirmed that to this day, boats of the type
in question are available for sale in North Carolina.

4) My personal research also shows that injuries of the
type that happened to me had happened to other people
before it happened to me.

5) When I got on [the] [B]oat in North Carolina, I did
not expect to suffer a terrible injury there that would force
me to have to sue the boat owners. Unfortunately, that is
what happened, and I want my day in court against
whoever is determined to be legally responsible.

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PADRON V. BENTLEY MARINE GRP., LLC

Opinion of the Court

Green’s motion to dismiss was heard before the Honorable Hugh B. Lewis at

the 28 February 2018 session of the Mecklenburg County Superior Court. The trial

court denied Green’s motion to dismiss by order entered 20 March 2018. The trial

court’s order does not contain findings of fact. Defendant Green timely appealed.

On appeal, Green argues that it was error for the trial court to deny his motion

to dismiss in that the record does not reveal the requisite level of contacts with North

Carolina needed in order for North Carolina to exercise personal jurisdiction over

him. We agree.

Grounds for Appellate Review

Despite the trial court’s order being interlocutory, Green nevertheless has a

right of immediate appeal from the denial of his motion to dismiss in that it

constitutes “an adverse ruling as to the jurisdiction of the court over the person.”

Strategic Outsourcing, Inc. v. Stacks, 176 N.C. App. 247, 249, 625 S.E.2d 800, 802

(2006) (quoting N.C. Gen. Stat. § 1-277(b)).

Standard of Review

It is settled that “[t]he determination of whether jurisdiction is statutorily and

constitutionally permissible due to contact with the forum is a question of fact.”

Replacements, Ltd. v. MidweSterling, 133 N.C. App. 139, 140, 515 S.E.2d 46, 48

(1999). “[U]pon a defendant’s motion to dismiss for lack of personal jurisdiction, the

plaintiff bears the burden of making out a prima facie case that jurisdiction exists.”

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Opinion of the Court

Bauer v. Douglas Aquatics, Inc., 207 N.C. App. 65, 68, 698 S.E.2d 757, 761 (2010). If

the defendant “supplements [his] motion with affidavits or other supporting evidence,

the allegations of the plaintiff’s complaint can no longer be taken as true or

controlling and plaintiff cannot rest on the allegations of the complaint[.]” Wyatt v.

Walt Disney World, Co., 151 N.C. App. 158, 163, 565 S.E.2d 705, 708 (2002) (citation

and quotation marks omitted). Instead, the plaintiff “must respond by affidavit or

otherwise setting forth specific facts showing that the court has jurisdiction.” Id.

(citation and quotation marks omitted).

In the instant case, the trial court’s order does not contain findings of fact, nor

did either party request the same. “In such a situation it is presumed that the trial

court found facts sufficient to support [its] order,” State ex rel. Cooper v. Ridgeway

Brands Mfg., LLC, 188 N.C. App. 302, 306, 655 S.E.2d 446, 449 (2008), “and our role

on appeal is to review the record for competent evidence to support these presumed

findings.” Stetser v. TAP Pharm. Prods., 162 N.C. App. 518, 520, 591 S.E.2d 572, 574

(2004); see also N.C. Gen. Stat. § 1A-1, Rule 52(a)(2) (2017).

Discussion

The analysis of “whether a non-resident defendant is subject to personal

jurisdiction of North Carolina’s courts” is two-pronged. Robbins v. Ingham, 179 N.C.

App. 764, 768, 635 S.E.2d 610, 614 (2006), appeal dismissed and disc. review denied,

361 N.C. 221, 642 S.E.2d 448 (2007). “First, there must be a basis for jurisdiction

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Opinion of the Court

under the North Carolina long-arm statute, and second, jurisdiction over the

defendant must comport with the constitutional standards of due process.” Id.; N.C.

Gen. Stat. § 1-75.4 (2017). Nevertheless, “our long-arm statute was intended to make

available to North Carolina courts the full jurisdictional powers permissible under

due process.” Robbins, 179 N.C. App. at 770, 635 S.E.2d at 615 (citing Dillon v.

Numismatic Funding Corp., 291 N.C. 674, 676, 231 S.E.2d 629, 630 (1977)).

Accordingly, because the “statutory authorization for personal jurisdiction is

coextensive with federal due process, the critical inquiry in determining whether

North Carolina may assert in personam jurisdiction over a defendant is whether the

assertion comports with due process.” J.M. Thompson Co. v. Doral Mfg. Co., 72 N.C.

App. 419, 424, 324 S.E.2d 909, 913 (1985).

As our Supreme Court has stated, in order for the exercise of personal

jurisdiction over a non-resident defendant to comply with due process, “there must

exist certain minimum contacts between the non-resident defendant and the forum

such that the maintenance of the suit does not offend traditional notions of fair play

and substantial justice.” Tom Togs, Inc., v. Ben Elias Indus. Corp., 318 N.C. 361, 365,

348 S.E.2d 782, 786 (1986). The minimum contacts test requires “some act by which

the defendant purposefully avail[ed] himself of the privilege of conducting activities

within the forum state, thus invoking the benefits and protections of its laws.” Id.

“Whether minimum contacts are present is determined by ascertaining what is fair

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Opinion of the Court

and reasonable under the circumstances, not by using a mechanical formula.”

Robbins, 179 N.C. App. at 770, 635 S.E.2d at 615.

In light of these standards, although the order does not contain findings of fact,

we may nevertheless presume that the trial court found that North Carolina could

appropriately exercise personal jurisdiction over Green (1) because the provisions of

North Carolina’s long-arm statute had been satisfied, and (2) because Green had the

requisite minimum contacts with North Carolina to satisfy the demands of due

process. Green’s primary contention on appeal pertains to the latter finding: that

“endorsing the exercise of personal jurisdiction” based on the record in this case

“would eviscerate fundamental due-process protections.” That is, as an out-of-state

resident, Green maintains that he cannot “be hauled into court in North Carolina for

a product-liability lawsuit against an out-of-state company simply because of his

brief, passive investment in that company more than a decade ago.”

In response, plaintiff first argues that Bentley Marine Group’s involvement in

the stream of commerce in North Carolina, through its sale of boats in this State, is

sufficient to confer personal jurisdiction not only over Bentley Marine Group, but also

Green. Plaintiff’s argument on this point is misplaced.

To be sure, there will exist sufficient minimum contacts to permit a forum state

to exercise personal jurisdiction over a corporation where that corporation has “

‘deliver[ed] its products into the stream of commerce with the expectation that they

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Opinion of the Court

will be purchased by consumers in the forum State.’ ” Tart v. Prescott’s Pharm., Inc.,

118 N.C. App. 516, 521-22, 456 S.E.2d 121, 126 (1995) (quoting World-Wide

Volkswagen Corp. v. Woodson, 444 U.S. 286, 298, 62 L. Ed. 2d 490, 502 (1980)).

However, the fact that a court may properly exercise personal jurisdiction over a

corporation under a “stream of commerce” analysis does not establish that a court

may properly exercise personal jurisdiction over the corporation’s individual

shareholders. Id. Instead, the minimum contacts analysis must “focus[] on the

actions of the non-resident defendant over whom jurisdiction is asserted, and not on

the unilateral actions of some other entity.” Centura Bank v. Pee Dee Express, Inc.,

119 N.C. App. 210, 213, 458 S.E.2d 15, 18 (1995).

If an individual shareholder “conducts business in North Carolina as principal

agent for the corporation, then his corporate acts may be attributed to him for the

purpose of determining whether the courts of this State may assert personal

jurisdiction over him.” United Buying Grp., Inc. v. Coleman, 296 N.C. 510, 515, 251

S.E.2d 610, 614 (1979). Absent sufficient individual contacts with the forum state,

however, “personal jurisdiction over an individual officer or employee of a corporation

may not be predicated merely upon the corporate contacts with the forum.” Robbins,

179 N.C. App. at 771, 635 S.E.2d at 615. Nor may the requisite level of minimum

contacts sufficient to confer personal jurisdiction be established based solely upon an

individual’s status as a shareholder. See Saft Am., Inc. v. Plainview Batteries, Inc.,

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Opinion of the Court

189 N.C. App. 579, 595, 659 S.E.2d 39, 50 (2008) (Arrowood, J., dissenting), rev’d for

the reasons stated in the dissent, 363 N.C. 5, 673 S.E.2d 864 (2009); see also J.M.

Thompson Co., 72 N.C. App. at 427, 324 S.E.2d at 915 (“If, by merely acquiring . . .

an economic interest in a foreign corporation, a person became responsible for every

obligation incurred by that corporation, and subject to suit in whatever state the

corporation happened to be located or incorporated, a negative impact on corporate

investing and mergers would result. We find no justification in logic or law for

discouraging investments in this fashion.”).

Here, it is well established that Green’s investment in Bentley Marine Group

does not, on its own, constitute “some act by which” Green purposefully availed

himself “of the privilege of conducting activities within [North Carolina], thus

invoking the benefits and protections of [our] laws.” Carswell Distrib. Co. v. U.S.A.’s

Wild Thing, 122 N.C. App. 105, 107, 468 S.E.2d 566, 568 (1996). And while Bentley

Marine Group would indeed be subject to personal jurisdiction under a stream of

commerce analysis, the record is otherwise devoid of any act by Green that would

subject him to the same.

For instance, the record does not suggest that after investing in Bentley

Marine Group, Green personally participated in the marketing, sale, design,

manufacture, or recall of its boats. Nor does plaintiff’s affidavit contradict Green’s

assertions that he was “not involved in the day-to-day activities or management of

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Opinion of the Court

Bentley Marine Group,” or that his involvement was limited to that of “a silent

member for a very brief period of time in 2008.” E.g., Rauch v. Urgent Care Pharm.,

178 N.C. App. 510, 518, 632 S.E.2d 211, 217-18 (2006). Instead, the record reveals

that Green has never been a North Carolina resident, nor has he ever owned real or

personal property in North Carolina. E.g., id. Quite plainly, plaintiff has proffered

no evidence to suggest that Green’s contacts with North Carolina consist of anything

beyond mere investments in a company that manufactures boats which were or can

be purchased here. E.g., Robbins, 179 N.C. App. at 771, 635 S.E.2d at 615.

Nevertheless, plaintiff also argues that because Green “served as the alter-ego”

of Bentley Marine Group, and because North Carolina has personal jurisdiction over

Bentley Marine Group, Green is likewise subject to personal jurisdiction in North

Carolina under a veil-piercing analysis. Plaintiff’s arguments on this point are also

misplaced.

“Piercing the corporate veil . . . allows a plaintiff to impose legal liability for a

corporation’s obligations, or for torts committed by the corporation, upon some other

. . . individual that controls and dominates a corporation” to such an extent that the

corporation exists as “a mere instrumentality or alter ego” of that individual. Green

v. Freeman, 367 N.C. 136, 145, 749 S.E.2d 262, 270 (2013) (emphasis omitted). “The

doctrine of piercing the corporate veil is not a theory of liability. Rather, it provides

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Opinion of the Court

an avenue to pursue legal claims against corporate officers or directors who would

otherwise be shielded by the corporate form.” Id. at 146, 749 S.E.2d at 271.

Plaintiff relies on veil piercing to assert personal jurisdiction over Green on the

theory that “if the corporate form of a liable entity is disregarded, and an individual

defendant is identified as the alter ego thereof, []he will be held liable for claims

against the corporation.” This assertion is indeed true. However, it does not

necessarily follow that the individual defendant could be held liable in a North

Carolina court. Plaintiff confuses veil piercing with personal jurisdiction. Cf.

Ridgeway Brands Mfg., LLC, 188 N.C. App. at 306, 655 S.E.2d at 449 (“[P]laintiff

cites no authority for its proposition that if an out-of-state corporation is the alter ego

of a North Carolina corporation, then the courts of North Carolina have personal

jurisdiction over the out-of-state corporation.”).

By way of contrast, in Tart v. Prescott’s Pharmacies—one of the primary cases

upon which plaintiff relies—personal jurisdiction was properly exercised over the

individual defendants because they had specifically orchestrated the advertising and

sale in North Carolina of their principal corporation’s weight-loss drugs that injured

the plaintiff. 118 N.C. App. at 522, 456 S.E.2d at 126. In fact, the individual

defendants were the “principal officers and directors” of the corporation and had been

federally charged, in their individual capacities, for their fraudulent representations

concerning the weight-loss drugs. Id. at 521, 518, 456 S.E.2d at 125, 123. It was

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Opinion of the Court

these specific contacts that conferred personal jurisdiction upon the defendants, not

the status of the individual defendants as “alter egos” of the corporation.

In any event, in the instant case, plaintiff’s complaint contains but one

allegation to support Green’s status as an alter ego:

21. Upon information and belief, . . . [Defendant Green]
served as the alter ego of Defendant Bentley Marine
Group[.]

The record is devoid of any pertinent facts tending to establish Green’s control over

Bentley Marine Group beyond this single conclusory allegation. In response to

Green’s motion to dismiss and accompanying affidavit, the only additional evidence

that plaintiff introduced was his own affidavit, which makes no mention of Green

whatsoever. Accordingly, we conclude that the pleadings and affidavits fall short of

constituting competent evidence that Green operated as the alter ego of Bentley

Marine Group for purposes of establishing personal jurisdiction. See Ridgeway

Brands Mfg., LLC, 188 N.C. App. at 306, 655 S.E.2d at 449 (“We hold that plaintiff’s

conclusory allegation in the Second Amended Complaint is insufficient to establish

that Trevally is the alter ego of Ridgeway for purposes of determining whether the

courts of North Carolina have jurisdiction over Trevally.”). Thus, the trial court’s

order cannot be sustained on this ground.

Conclusion

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Opinion of the Court

In sum, because the record reveals that Green’s only contact with North

Carolina was Green’s status as an investor in a corporation that may be subject to

personal jurisdiction in North Carolina, the evidence is insufficient to establish the

level of minimum contacts that due process demands for the proper exercise of

personal jurisdiction over an individual. Accordingly, the trial court’s order denying

Green’s motion to dismiss for lack of personal jurisdiction must be reversed as a

matter of law.

REVERSED.

Judges CALABRIA and TYSON concur.

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