October 25, 2021

Volume XI, Number 298

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October 25, 2021

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Business That Files Lawsuit Becomes Subject to North Carolina’s Jurisdiction

Where a business that might otherwise not be subject to the personal jurisdiction of a North Carolina court nonetheless files a lawsuit in North Carolina, the Court can properly exercise jurisdiction over the company to hear all disputes between the parties without violating any due process rights.  Vitaform, Inc. v. Aeroflows, Inc. 2021 NCBC 58 (J. Bledsoe).  As a result, the Business Court had jurisdiction over Plaintiff to hear and decide Defendant’s counterclaims.

Plaintiff, a California corporation, filed a lawsuit against Defendant in the Superior Court for Buncombe County, North Carolina, alleging Defendant stole Plaintiff’s products, product designs and business plans.  After it denied Plaintiff’s allegations in its answer, Defendant sought to amend its answer and assert various counterclaims against Plaintiff arising from the two companies’ relationship.  Plaintiff resisted, contending that the Business Court could not properly exercise jurisdiction over it because it (Plaintiff) did not have sufficient minimum contacts with North Carolina to satisfy due process concerns.  Defendant countered that Plaintiff, by filing the original lawsuit in a North Carolina court, voluntarily subjected itself to the personal jurisdiction of the North Carolina courts.

 The Business Court agreed with Defendant, rejecting Plaintiff’s argument.   Noting a lack of North Carolina decisions squarely on point, the Business Court followed numerous federal court decisions that recognized a party which files a lawsuit necessarily avails itself to the jurisdiction of that state’s courts and, by extension, permits the court to handle all matters between the parties.  This is particularly true, the Business Court noted, where the counterclaims are “related and closely connected” to a plaintiff’s claims, as in this case.  (Opinion, ¶15).  Based upon Plaintiff’s voluntary action of commencing the lawsuit against Defendant in a North Carolina court, the Business Court held its exercise of personal jurisdiction over Plaintiff in regards to Defendants’ counterclaims satisfied due process requirements.            

Based upon this decision, a business that seeks to have its affirmative claims resolved by a North Carolina court should understand that the North Carolina court will likely decide all issues between the parties, especially when all of the issues are related.

Copyright © 2021 Womble Bond Dickinson (US) LLP All Rights Reserved.National Law Review, Volume XI, Number 263
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About this Author

Phil Mohr Bankruptcy and Litigation Attorney Womble Bond Dickinson
Partner

Phil is a trial lawyer. Although he will search for creative legal and business solutions for his clients, his more than two decades of trial experience for both publicly traded and privately held companies in state and federal courts throughout the country have taught him that some cases simply have to be tried to verdict. Representing companies that have both been wronged and accused of wrongdoing, Phil has honed his trial skills in cases involving complex business litigation (including fraudulent transfer and equitable subordination cases in federal bankruptcy court)...

336.721.3577
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