North Carolina Lawyers Weekly
Speedway Motorsports v. Bronwen Energy. (Lawyers Weekly No. 11-07-0150, 28 pp.) (Martha A. Geer, J.) Appealed from Mecklenburg County Superior Court (Albert Diaz, J.) N.C.App. Click here for the full text of the opinion.
Holding: A foreign company and a North Carolina-based company entered into a contract (a demand guarantee) that incorporated by reference an exhibit featuring a forum-selection clause. Where the “incorporation by reference” clause was intended simply to identify the contracts that were the subject of the demand guarantee being issued by the foreign company for the N.C. company, the foreign company did not consent to personal jurisdiction in North Carolina.
North Carolina’s long-arm statute cannot be used to assert personal jurisdiction over a defendant that was not engaging in the solicitation of services in North Carolina as that phrase is defined under G.S. § 1-75.4(4)(a).
We reverse the trial court’s denial of the foreign company’s motion to dismiss for lack of personal jurisdiction.
Facts
Plaintiff opened an account with defendant BNP Paribas Suisse SA. Plaintiff used its BNPP Suisse account to service contracts pursuant to which plaintiff agreed to guarantee lines of credit issued to finance petroleum purchases by other parties during 2007.
Defendants Swift Aviation, Swift Air and Swift Transportation were negotiating a long-term supply contract with Kuwait Petroleum Corporation pursuant to which Swift would purchase petroleum products from KPC. But KPC would not enter into a long-term agreement until Swift had proven its ability to successfully execute shorter-term spot contracts.
Following the advice of defendant BNP Paribas France SA, Swift engaged defendants Bronwen Energy Trading and Bronwen Energy Trading UK to assist Swift in executing the spot contracts with KPC.
Plaintiff agreed to provide Bronwen with the financial assistance needed to obtain letters of credit for the purchase of the oil under the spot contracts.
Bronwen and plaintiff entered into an agreement relating to the delivery of 80,000 metric tons of Jet A-1. Plaintiff agreed to provide BNPP France with a guarantee of $12.75 million to allow Bronwen to secure from BNPP France one or more letters of credit to effectuate the purchase of the Jet A-1 from KPC.
Plaintiff and Bronwen also agreed that the funded amount guaranteed would be maintained in plaintiff’s BNPP Suisse account.
The first oil contract also provided that any litigation arising therefrom would be heard in Mecklenburg County and that Bronwen irrevocably consented to the personal jurisdiction of courts there.
Plaintiff executed a guarantee to BNPP France. BNPP France rejected as insufficient plaintiff’s guarantee and requested that plaintiff instead issue instructions to BNPP Suisse to deliver a first demand guarantee to BNPP France.
Plaintiff sent instructions (first instructions) to BNPP Suisse to issue a first demand guarantee of $11.75 million in favor of BNPP France with respect to the fulfillment of the first oil contract.
After plaintiff sent the first instructions to BNPP Suisse, plaintiff and Bronwen entered into an amended oil contract which reduced to $11.75 million the amount guaranteed by plaintiff to BNPP France for Bronwen’s benefit.
BNPP Suisse acknowledged receipt of the first instructions, but it informed plaintiff that it needed a request with the actual wording of the guarantee BNPP Suisse was to issue to BNPP France, as opposed to the more general wording of the first instructions. The last line of the first demand guarantee stated, “This guarantee is subject to Swiss Law, place of jurisdiction is Geneva.”
Plaintiff emailed BNPP Suisse a revised version of the first demand guarantee. The revised version was substantially similar to BNPP Suisse’s draft. It confirmed that plaintiff agreed to be responsible for Bronwen’s repayment of the $11.75 million credit issued to KPC, pursuant to the amended oil contract, and it included the Geneva forum selection clause.
Plaintiff’s president signed the document after adding the following sentence: “All claims are to be sent to my attention at [his e-mail address], and by fax to [a Charlotte fax number].”
BNPP Suisse issued a first demand guarantee to BNPP France by which BNPP Suisse promised that it would be responsible for Bronwen’s repayment of the letters of credit to BNPP France.
Subsequently Bronwen and plaintiff entered into a second oil contract under which plaintiff agreed to provide a first demand guarantee to BNPP France for an additional $4 million to allow Bronwen to secure letters of credit to effectuate the purchase of 68,000 metric tons of Gasoil. The second contract also contained a forum selection clause in favor of courts in Mecklenburg County.
Plaintiff sent BNPP Suisse a second set of instructions directing BNPP Suisse to increase the amount of the first demand guarantee in favor of BNPP France by $4 million, bringing the total amount to $15.75 million.
Two weeks later, Bronwen and plaintiff entered into a third contract, under which plaintiff agreed to provide a first demand guarantee to BNPP France in the amount of $12 million to allow Bronwen to secure letters of credit to effectuate the purchase of three shipments of 65,000 metric tons of Gasoil each. The third contract contained the forum selection clause.
Plaintiff sent BNPP Suisse a third set of instructions directing BNPP Suisse to reduce the amount of the first demand guarantee to $12 million.
A fourth set of instructions was sent by plaintiff to BNPP Suisse a week later, reiterating the $12 million amount of the first demand guarantee and providing that the guarantee would cover all current business plaintiff had with Bronwen pursuant to separate agreements.
By November 2007, BNPP France determined that losses related to the oil contracts exceeded $17 million. It therefore notified Bronwen and plaintiff that BNPP France believed it had a right to draw on plaintiff’s account to cover its losses. Plaintiff disputed this claim, insisting that Bronwen’s debt was not related to the purchase price of oil under the pertinent oil contracts.
Plaintiff announced that it was terminating the first demand guarantee. Despite its protest, BNPP Suisse paid BNPP France $12 million and debited plaintiff’s account for that amount.
Plaintiff filed a complaint asserting claims for breach of contract against Bronwen and Swift, wrongful honor against BNPP Suisse, fraud and negligent misrepresentation against BNPP France, breach of demand guarantee and conversion against BNPP Suisse and BNPP France, equitable subrogation to BNPP France’s claims against Bronwen and Swift, and unfair and deceptive trade practices against all defendants.
BNPP Suisse moved to dismiss plaintiff’s claims against BNPP Suisse for lack of personal jurisdiction pursuant to Rule 12(b)(2). The business court denied the motion. BNPP Suisse appealed.
Consent to Jurisdiction
BNPP Suisse contends that the trial court erred in denying its motion to dismiss for lack of personal jurisdiction.
Determining whether a court can exercise personal jurisdiction over a nonresident defendant necessitates the implementation of a two-step inquiry: (1) Does an N.C. statute authorize the court to entertain an action against that defendant? (2) If so, does the defendant have sufficient minimum contacts with the state so that considering the action does not conflict with traditional notions of fair play and substantial justice?
The burden is on the plaintiff to establish that some ground exists for the exercise of personal jurisdiction over the defendant.
When reviewing a decision regarding personal jurisdiction, this court considers only whether the findings of fact by the trial court are supported by competent evidence in the record; if so, this court must affirm the order of the trial court.
Plaintiff contended that BNPP Suisse consented to personal jurisdiction in the contracts which were exhibits that were incorporated into the instructions it sent BNPP Suisse.
If a document incorporates a second document by reference, it effectively makes that second document part of the first without taking the time and space to set out the second document word for word. A question still remains, however, as to what the parties intended when they incorporated the second document.
We do not believe that plaintiff’s interpretation of the incorporation by reference of the oil contracts is reasonable. The instructions do not incorporate the terms of the oil contracts; instead, the instructions refer to the oil contracts as separate agreements that are generally incorporated.
Plaintiff’s proposed construction of the incorporation by reference language as making the terms of the underlying oil contracts binding on BNPP Suisse is not consistent with the instructions’ characterization of those contracts as separate agreements. Nor is it consistent with the fundamental independence principle governing letter of credit transactions.
The plain language of the instructions indicates that the purpose of the incorporation by reference of the oil contracts is to specifically identify what contracts were being guaranteed by plaintiff without having to set out the details of those contracts.
We do not believe that the instructions can be reasonably construed to make the forum-selection clause in the underlying contracts binding on BNPP Suisse.
The trial court could not have properly concluded as a basis for its denial of the motion to dismiss, that BNPP Suisse had consented to personal jurisdiction in North Carolina.
Minimum Contacts Test
Next we consider whether the evidence would permit a finding that personal jurisdiction over BNPP Suisse exists under North Carolina’s long-arm statute and that BNPP Suisse has sufficient minimum contacts with North Carolina to satisfy the requirements of due process.
Deciding a motion to dismiss based on N.C. R. Civ. P. 12(b)(2) involves two steps: Jurisdiction over the action must first be authorized by G.S. § 1-75.4. Second, if the long-arm statute permits consideration of the action, exercise of jurisdiction must not violate the due process clause of the Fourteenth Amendment to the U.S. Constitution.
Plaintiff contends that BNPP Suisse is subject to jurisdiction here under G.S. § 1-75.4(4)(a), under which a plaintiff must show 1) an action claiming injury to a North Carolina person or property; 2) the alleged injury arose from activities by the defendant outside of North Carolina; and 3) the defendant was engaging in solicitation or services within North Carolina at or about the time of the injury.
The key question here is whether, as a matter of law, the evidence of BNPP Suisse’s conduct constitutes “solicitation” under G.S. § 1-75.4(4)(a).
The evidence showed that plaintiff contacted BNPP Suisse first. Plaintiff fails to explain how BNPP Suisse’s response to an email from an existing customer to effectuate a business transaction between the customer and a third party, BNPP France, amounts to solicitation of plaintiff’s business. Plaintiff’s transaction with BNPP Suisse was the result not of any solicitation by BNPP Suisse; rather, it was the consequence of provisions in the oil contracts.
While BNPP France advertised in North Carolina, there is no evidence that BNPP Suisse – a wholly separate corporate entity – ever did. Plaintiff has produced no authority that would subject a subsidiary to personal jurisdiction based on the similarity of its name to its parent company (BNPP France).
We cannot impute the actions of BNPP France to BNPP Suisse for purposes of personal jurisdiction without proof that the banks are part of the same whole and were not acting independently.
We conclude that none of the evidence cited by plaintiff constitutes solicitation for purposes of bringing BNPP Suisse within G.S. § 1-75.4(4)(a).
We need not address due process, since we conclude that that the court lacks jurisdiction based on the long-arm statute alone.
We hold that the trial court erred in concluding that it had personal jurisdiction over BNPP Suisse and, therefore, reverse.
