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Civil Practice – Personal Jurisdiction – Banks & Banking – Real Property – Mortgages – Closing Attorneys

RBC Bank v. Hedesh (Lawyers Weekly No. 11-02-1052, 10 pp.) (Terrence W. Boyle, J.) E.D.N.C.

Holding: Where the defendant South Carolina attorneys’ only connections to North Carolina are the location of the plaintiff-lender and the residence of two out of 15 real estate purchasers, North Carolina lacks personal jurisdiction over the South Carolina attorneys.

This matter is transferred to the District of South Carolina.

Background

The plaintiff-bank alleges that defendant Hedesh, a South Carolina attorney, allowed Malia McCaffrey, an agent for defendant Chicago Title Insurance Co., to write checks drawn on his real estate trust account, to prepare title abstracts, to prepare HUD-1’s, to collect borrower contributions and payoff information, and to reconcile and audit his real estate trust account, all without supervision. RBC alleges that McCaffrey participated in a mortgage fraud scheme and that Hedesh’s lack of supervision permitted her to skim millions of dollars in loan proceeds for her own benefit and for the benefit of her co-conspirators.

All the mortgages were on properties in South Carolina. Two of the 15 buyers at issue were N.C. residents, as is the plaintiff-bank.

Defendant Gwin, another South Carolina attorney, closed one of the allegedly fraudulent loans.

Minimum Contacts

Defendant Hedesh is a resident of South Carolina, licensed to practice law in that state. His law firm is a limited liability company organized and existing under the laws of South Carolina. All of the closings at issue were conducted in South Carolina.

Aside from the location of plaintiff’s office, only two contacts connect this action to North Carolina: (1) two buyers, who were N.C. residents, reached out to Hedesh after being referred by a South Carolina mortgage company and (2) Chicago Title’s agent, McCaffrey, returned some loan packages to plaintiff at its Rocky Mount address.

Defendant Gwin is a resident of South Carolina. His law firm is a South Carolina limited liability company with its principal place of business in Myrtle Beach, S.C. All of the conduct that purportedly gave rise to claims by plaintiff and Chicago Title occurred in South Carolina.

Neither Gwin nor his firm owns or operates any property or office in North Carolina, and no employees reside in North Carolina. They do not conduct business in North Carolina. Only the location of plaintiff’s office and sending the loan package to that office connects this action to North Carolina.

Even though the defendant-attorneys corresponded with plaintiff’s representatives in North Carolina, these defendants did not purposefully avail themselves of the privilege of doing business here. The paperwork sent to the Hedesh and Gwin defendants did not include a forum-selection clause, was labeled “Master Closing Instructions – Multistate”, and referred to North Carolina only insofar as it was the location of plaintiff’s offices.

The mere existence of closing instructions sent by plaintiff to the Hedesh and Gwin defendants is insufficient to establish personal jurisdiction over them in North Carolina.

Even if this court were to hold that minimum contacts with North Carolina existed, requiring defendants to litigate this case in North Carolina does not comport with fair play and substantial justice.

Furthermore, North Carolina does not have an interest in deciding the negligence of South Carolina attorneys who performed closings in South Carolina for South Carolina properties, pursuant to South Carolina law. On the other hand, South Carolina has a significant interest in adjudicating such matters.

This matter is transferred to the District of South Carolina.


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