Civil Practice – Personal Jurisdiction – Minimum Contacts – Apparent Agency – First Impression – Pool Construction – Franchise

Bauer v. Douglas Aquatics, Inc. (Lawyers Weekly No. 10-07-0856, 21 pp.) (Cheri Beasley, J.) Appealed from Mecklenburg County Superior Court. (Jesse B. Caldwell, J.) N.C. App.

Holding: Even though defendants’ franchise agreement explicitly stated that the North Carolina franchisee was not the Virginia franchisor’s agent, since (1) the plaintiff-customer was not privy to the franchise agreement, (2) the franchisee represented itself to plaintiff as part of the franchisor, and (3) the franchisor’s website described the franchisee as part of the franchisor, the franchisee was the franchisor’s apparent agent. It does not offend due process for N.C. courts to exercise personal jurisdiction over the Va. franchisor.

We affirm the trial court’s denial of the franchisor’s motion to dismiss for lack of personal jurisdiction.

The franchisor disputes only the presence of federal due process requirements in challenging the court’s exercise of personal jurisdiction.

Plaintiff’s verified complaint was made on personal knowledge, set forth facts that would be admissible in evidence and showed that plaintiff was competent to testify to the matters stated in the complaint. Therefore, the trial court correctly treated the complaint as an affidavit.

Apparent Agency

The trial court concluded that the franchisor’s website specifically targets N.C. residents, that the franchisor solicited within N.C. for business, and that the franchisor was to perform service or provide materials in N.C.

Other courts have held that the contacts within the forum of a party’s agent, partner or joint venturer may, in appropriate circumstances, be attributed to the party for purposes of establishing jurisdiction. However, this court has only cursorily addressed agency in the personal jurisdiction context. In Wyatt v. Walt Disney World Co., 151 N.C. App. 158, 565 S.E.2d 705 (2002), we held, “Actions of an independent contractor are not attributable to the party hiring it, and thus do not, without more, establish jurisdiction,” citing Miller v. Piedmont Steam Co., 137 N.C. App. 520, 528 S.E.2d 923 (2000), for the proposition that “no agency relationship between franchiser and independent contractor/franchisee [was created] where franchiser did not have any control over franchisee’s day to day operations.” The actions of an independent contractor by themselves are not sufficient to subject a nonresident corporation to the jurisdiction of a forum.

Still, that case made no distinction between actual and apparent agency, as Wyatt appeared to be addressing the absence only of actual agency in concluding that specific personal jurisdiction could not be exercised. Other courts, however, have concluded that personal jurisdiction may be based on contacts made by authorized agents under standard agency principles, including apparent agency. Where G.S. § 1-75.2(3) permits the exercise of jurisdiction over a party who is “legally responsible” for certain acts, even if it did not commit them, we conclude that North Carolina’s jurisdiction over the franchisor may be premised on either actual or apparent agency.

None of the trial court’s findings demonstrate a sufficient measure of control between the franchisor and the franchisee to support the conclusion that an actual agency relationship exists between the two defendants. Plaintiff cannot rely on his unverified allegation that “upon information and belief, [the franchisor] has control over [the franchisee’s] day-to-day operations and management,” where the conclusory statement was rebutted by the franchisor’s affidavit and plaintiff failed to respond with specific facts substantiating his claim. The lack of findings and competent evidence regarding control leads us to conclude that plaintiff has failed to prove that an actual agency relationship existed between the defendants.

Nevertheless, the trial court’s findings are sufficient to support the conclusion that the franchisor held the franchisee out as its apparent agent to N.C. citizens through affirmative representations on its website.

The trial court found that the franchisor, on its website, described franchisee DA Charlotte as one of franchisor Douglas Aquatics, Inc.’s locations that provides pool-construction needs in the Charlotte area and that the franchisor’s affidavit rebutted neither the allegations of apparent agency nor that its website specifically targeted N.C. citizens.

The franchise agreement specifically prohibits the franchisee from representing itself as the franchisor’s agent or engaging in any activity which would purport to bind the franchisor; however, plaintiff was never privy to the franchise agreement defining the relationship between defendants. Instead, plaintiff had only the words and conduct of defendants upon which to rely in determining whether to enter the pool-construction contract.

It was the franchisor’s statement on its website, as alleged in plaintiff’s verified complaint and uncontroverted by the franchisor’s affidavit, that “[the franchisee] is one of five [of the franchisor’s] locations throughout Virginia and North Carolina and that [the franchisor] opened its fifth location in Charlotte, North Carolina in 2005 trading as Douglas Aquatics Charlotte” that constituted words or conduct representing or permitting it to be represented that the franchisee is the franchisor’s agent.

Where there is no evidence that the franchisor did not have knowledge of the information disseminated on its own website, the statements at issue can easily be construed as a manifestation by the franchisor to citizens in the Charlotte area that the franchisee was its agent.

The franchisor’s website held the franchisee out as another one of its locations and thereby corroborated the in-person representations made to plaintiff by the franchisee’s manager that his business had been in the pool-construction industry for over 30 years.

Additionally, even if the franchisee acted unilaterally in drafting the contract, the pool-construction agreement provided that the franchisor would perform the basic construction. Although this contract provision, in and of itself, would not have supported a reasonable belief that the defendants were the same entity, the franchisor’s representations on its website justified plaintiff’s belief in the agency intimated by the franchisee, and his reliance thereon in entering the construction contract was consistent with ordinary care and prudence.

The elements of apparent agency are met, and the franchisor can be considered legally responsible for the acts of its apparent agent, the franchisee, for purposes of personal jurisdiction. As such, the acts of the franchisee committed on the franchisor’s behalf during negotiations and execution of the construction contract, which both took place in Charlotte with the plaintiff-N.C. resident for services to be provided in this state, clearly constitute minimum contacts with the N.C. forum.

Where the franchisor’s conduct and connection with North Carolina were such that it should reasonably have anticipated being haled into court in this state, and where North Carolina has a manifest interest in providing the plaintiff a convenient forum for redressing injuries inflicted by defendant, an out-of-state merchant, maintenance of the suit here does not offend traditional notions of fair play and substantial justice. Therefore, we affirm the trial court’s order denying the franchisor’s motion to dismiss for lack of personal jurisdiction.

Affirmed.