COA: No Minimum Contacts Where Defendant's Only Contacts Were Attempts to Resolve the Matter

Yesterday the COA held that, due in part to NC's public policy favoring settlement, minimum contacts have not been established where Plaintiff's first and only contacts with the State were attempts to resolve the case before a Conplaint was filed. The case is Smith Architectural Metals v. American Railing Systems.

Smith Architectural Metals contracted with American Railing Systems, a Pennsylvania company, to supply it with railing materials. American Railing then subcontracted with First Line, also a Pennsylvania corporation, to apply a “powder coating” to the railings. First Line then returned the railings to American Railing who then shipped the finished product to Smith Metals in North Carolina. Within three months the railing coating flaked and fell off.

The COA held that trial court did not have jurisdiction over First Line because it did not have sufficient minimum contacts with North Carolina. After it found out about the flaking railing coating, First Line sent emails, faxes, and checks to reimburse Smith Metals for the coating, before the Complaint in this matter was filed. These attempts to fix the situation were its first contacts it had with North Carolina. None of these activities indicate that First Line purposefully availed itself of the “benefits and protections” of the laws of North Carolina sufficient to establish personal jurisdiction over it. In fact, the COA noted,First Line’s sole purpose for these contacts was to attempt to resolve the problem without resort to litigation, and it would “offend traditional notions of fair play and substantial justice" to penalize First Line for doing so.

The COA reached this conclusion in part based on NC's public policy of encouraging settlement, and it concluded that there are no "meaningful distinction between offers to correct a problem pursuant to cooperative negotiations before the filing of a complaint and offers to settle once a lawsuit has begun."