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Civil Practice – Personal Jurisdiction – Franchise Contract – Insufficient Contacts

Protocol, LLC v. Henderson (Lawyers Weekly No. 14-03-0473, 37 pp.) (William Osteen Jr., J.) 1:12-cv-00460; M.D.N.C.

Holding: This court does not have personal jurisdiction over a Texas franchisee, who developed a relationship with the plaintiff-franchisor while plaintiff was located in Minnesota. The Texas franchisee only expanded his relationship with plaintiff because plaintiff, after moving to North Carolina, reached out to the Texas defendant.

The court grants defendant’s motion to dismiss for lack of personal jurisdiction.

With respect to the factors set out in Consulting Engineers Corp. v. Geometric Ltd., 561 F.3d 273 (4th Cir. 2009), the court makes the following findings.

First, defendant lives in Texas and maintained routes in Texas, Louisiana, Mississippi, Florida, Georgia, and Alabama. He has never serviced vending machines in North Carolina, nor has he ever maintained offices or agents in North Carolina.

Second, although he is receiving payments from an N.C. company, Hygeia Marketing Corp., defendant does not own any property in North Carolina.

Third, defendant did not reach into North Carolina to solicit or initiate any of the agreements at issue in this case; instead, defendant agreed to continue and expand a long-term business relationship with plaintiff after plaintiff had relocated to North Carolina, but plaintiff proposed each expansion and there was little, if any, negotiation as to each expansion.

Fourth, in general, defendant’s business activities occurred outside of North Carolina.

Fifth, the parties have never agreed that North Carolina law would govern any dispute arising from their relationship or that North Carolina is the required forum for any dispute. In fact, the franchise agreement and, by incorporation, the 2007 Operation Agreement and its Addenda require that any dispute arising between the parties be litigated in Minnesota.

Sixth, the only in-person contact between defendant and plaintiff’s representatives in North Carolina were the occasional conferences plaintiff hosted for the individuals with whom it worked.

Seventh, the parties’ communications about the business relationship were limited to communications between defendant and Douglas Lang, plaintiff’s president, which included some number of emails and a handful of phone calls each year. The record is unclear concerning the nature of those communications. Furthermore, there is no evidence that defendant ever negotiated the terms of any agreement with plaintiff.

Eighth, apart from submitting quarterly revenue reports to North Carolina via plaintiff’s online forms, mailing checks for fees and commissions to plaintiff’s Greensboro office, and sending purchase orders to plaintiff, defendant’s performance of contractual duties occurred outside of North Carolina.

In sum, defendant’s contacts with North Carolina fail to reach the “purposeful availment” threshold.

Dismissed without prejudice.

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