Gao v. Sinova Specialties, Inc.

Gao v. Sinova Specialties, Inc., 2016 NCBC 102.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
MECKLENBURG COUNTY 16 CVS 6709

JIANXUN “BILL” GAO, individually, )
and derivatively on behalf of Sinova)
Specialties, Inc., )
)
Plaintiff, )
)
v. )
)
SINOVA SPECIALTIES, INC., a )
North Carolina Corporation; )
JOHANNES HECKMANN; )
ORDER AND OPINION ON
YAN “ELLEN” LIU; NEW SHORE, )
DEFENDANT CALDER OVERSEAS’
INC., a North Carolina Corporation; )
MOTION TO DISMISS PURSUANT TO
CALDER OVERSEAS, a British )
RULE 12(b)(2)
Virgin Islands Company, )
)
Defendants, )
)
and )
)
SINOVA SPECIALTIES, INC., a )
North Carolina Corporation, )
)
Nominal Defendant. )
)

1. THIS MATTER is before the Court upon Defendant Calder Overseas’

(“Calder”) Motion to Dismiss pursuant to Rule 12(b)(2) of the North Carolina Rules

of Civil Procedure (“Rule(s)”) (the “Motion) in the above-captioned case. The Court

will address other pending motions in this matter in separate orders.

2. For the reasons stated below, the Court concludes that it does not have

personal jurisdiction over Calder, and thus hereby GRANTS the Motion.

Greenberg Traurig, LLP, by Gabriel Aizenberg, Andrew Enschedé, and
Lucia Marker-Moore, and Brooks, Pierce, McLendon, Humphrey &
Leonard LLP, by Jeffrey E. Oleynik and Jessica Thaller-Moran, for
Plaintiff Jianxun “Bill” Gao.

Higgins & Owens, PLLC, by Sara W. Higgins, appearing specially for
Defendant Calder Overseas.

Robinson, Judge.

I. INTRODUCTION

3. The relevant factual and procedural background of this case is recited in

detail in the Court’s separate Order and Opinion on Defendants’ Motions to Dismiss.

The Motion that is the subject of this Order and Opinion seeks dismissal of all claims

brought in this Court against Calder because the Court lacks personal jurisdiction

over Calder. The Court agrees, and dismisses all claims brought against Calder in

this lawsuit.

II. LEGAL STANDARD

4. The Court’s task in resolving the Motion has been thoroughly summarized

by the North Carolina Court of Appeals:

In order for the courts of this State to exercise jurisdiction over the
person of a nonresident defendant, (1) there must be statutory authority
for the exercise of jurisdiction, and (2) the nonresident defendant must
have sufficient contacts with this State such that the exercise of
jurisdiction does not violate the federal due process clause. The
allegations of the complaint must disclose jurisdiction although the
particulars of jurisdiction need not be alleged. If the exercise of personal
jurisdiction is challenged by a defendant, a trial court may hold an
evidentiary hearing including oral testimony or depositions or may
decide the matter based on affidavits. If the court takes the latter
option, the plaintiff has the initial burden of establishing prima facie
that jurisdiction is proper.

Bruggeman v. Meditrust Acquisition Co., 138 N.C. App. 612, 614–15, 532 S.E.2d 215,

217 (2000).
III. FINDINGS OF FACT

5. Gao has requested that the Court make findings of fact regarding personal

jurisdiction. See id. at 615, 532 S.E.2d at 217 (“Either party may request that the

trial court make findings regarding personal jurisdiction.”). Therefore, the Court

makes the following findings of fact, based on Gao’s Verified Amended Complaint and

the affidavits of Calder, Gao, and Gao’s counsel.

6. Calder is a British Virgin Islands company with its principal place of

business in Tortola, British Virgin Islands. (Am. Compl. ¶ 13; 3rd Liu Aff. ¶ 2.)

Defendant Yan “Ellen” Liu (“Liu”) is the sole shareholder of Calder.

7. Nominal Defendant Sinova Specialties, Inc. (“Sinova US”) is a North

Carolina corporation with its principal place of business in Matthews, North

Carolina. (Am. Compl. ¶ 9.)

8. Calder presently conducts no active business. (3rd Liu Aff. ¶ 3.)

9. Calder has never maintained any facility, office, or other presence in North

Carolina. (3rd Liu Aff. ¶ 4.)

10. Calder has never shipped any items of commerce into North Carolina. (3rd

Liu Aff. ¶ 5.)

11. Calder does not have a website. (3rd Liu Aff. ¶ 7.)

12. Calder has never had any representatives or employees located in North

Carolina. (3rd Liu Aff. ¶ 8.)

13. There is no evidence that anyone associated with Calder has ever been to

North Carolina to carry out any business of Calder.
14. Calder’s sole shareholder, Liu, is also a shareholder of Sinova US. (Am.

Compl. ¶ 27; 3rd Liu Aff. ¶ 2.)

15. Calder is a defendant in this action based on its role in a series of allegedly

wrongful transactions in 2012 (the “Calder Transactions”). (See Am. Compl. ¶¶ 123–

126.) Gao alleges in the Amended Complaint that the Calder Transactions occurred

as follows. First, Sinova US sold chemical compounds that Gao developed for Sinova

US to Sinova US customers in the United States. Next, Sinova US transferred a

portion of the customer payments to a related company, Sinova Chemicals Limited,

f/k/a Sinomax Solutions Co., Limited (“Sinova HK”). Next, Liu caused Sinova HK to

transfer these payments, totaling at least $4,300,000 to Calder. Finally, Calder

transferred the funds to Sinova (Beijing) Catalyst Technology Co., Ltd., a/k/a

Sinomax Specialties Inc. (Beijing) (“Sinova Beijing” and, collectively with Sinova US

and Sinova HK, the “Sinova Companies”) in New York. (Am. Compl. ¶¶ 123–25.)

16. The funds involved in the Calder Transactions, however, were not

generated from Sinova US sales, but from sales by Sinomax Solutions Co. Ltd.

(“SMBJ”) a company unaffiliated with any of the Sinova Companies, and in which

none of the parties in this action have an ownership interest. (Am. 4th Liu Aff. ¶¶ 1–

2.) Sinova US and Sinova HK assisted SMBJ with collections from customers in the

United States. (1st Liu Aff. ¶¶ 11–12.)

17. The Calder Transactions actually functioned as follows: In 2012, Shell

Chemicals paid Sinova US for products it purchased from SMBJ, and other customers

paid Sinova HK for products purchased for SMBJ. (Am. 4th Aff. ¶¶ 3, 6, 8.) These
customer payments were then transferred by Sinova US and Sinova HK to SMBJ,

sometimes through Calder or other intermediaries. (Am. 4th Liu Aff. ¶¶ 3, 6, 8.) The

record before the Court, however, contains no evidence that Sinova US ever

transferred funds directly to Calder.

18. The record reflects that one payment of $396,000 was transferred from

Sinova US to Sinova HK, and then from Sinova HK to Calder. None of these funds,

however, were transferred directly from Sinova US to Calder. (4th Liu Aff. ¶ 3.)

19. There is no evidence that Calder ever received funds from a North Carolina

bank account.

20. On November 8, 2016, during a break at a hearing in this matter in

Greensboro, North Carolina, Gao’s counsel informed Calder’s counsel that Gao’s

counsel intended to serve an Alias and Pluries Summons and a copy of the Amended

Complaint on Calder by handing it directly to Liu. (Oleynik Aff. ¶ 4.) Counsel for

Liu agreed to accept the Summons and Amended Complaint, and Gao’s counsel

handed those pleadings to her. (Oleynik Aff. ¶ 4.)

IV. CONCLUSIONS OF LAW

21. As an initial matter, the Court is mindful that courts in this state should

liberally construe North Carolina’s long-arm statute in favor of finding personal

jurisdiction. Speedway Motorsports Int’l Ltd. v. Bronwen Energy Trading, Ltd., 209

N.C. App. 474, 488, 707 S.E.2d 385, 394 (2011). “If, however, ‘there is no evidence to

support an essential finding of fact,’ no jurisdiction exists.” Id. (quoting Spivey v.

Porter, 65 N.C. App. 818, 819, 310 S.E.2d 369, 370 (1984)).
22. The Court must first determine whether North Carolina’s long-arm statute

permits the exercise of personal jurisdiction. Filmar Racing, Inc. v. Stewart, 141 N.C.

App. 668, 671, 541 S.E.2d 733, 736 (2001). Gao argues that the Court has personal

jurisdiction over Calder under N.C. Gen. Stat. §§ 1-75.4(4) and (5).

23. N.C. Gen. Stat. § 1-75.4(4) provides, in relevant part, that jurisdiction over

a defendant is proper

in any action claiming injury to person or property within this State
arising out of an act or omission outside this State by the defendant,
provided in addition that at or about the time of the injury . . .
[s]olicitation or services activities were carried on within this State by
or on behalf of the defendant.

N.C. Gen. Stat. § 1-75.4(4)(a). Thus, under this subsection, Gao must establish: (1)

“an action claiming injury to a North Carolina person or property”; (2) “that the

alleged injury arose from activities by [Calder] outside of North Carolina”; and (3)

that [Calder] was engaging in solicitation or services within North Carolina at or

about the time of the injury.” Speedway Motorsports, 209 N.C. App. at 488, 707

S.E.2d at 394 (internal quotation marks and citation omitted).

24. The Court concludes that Gao has presented sufficient evidence to show the

existence of the first two factors. Although the current record evidence tends to show

that the funds Sinova US alleges Calder misappropriated were not actually Sinova

US funds at all, but rather SMBJ funds, this action, and specifically the claims

brought against Calder, claims injury to Sinova US, a North Carolina corporation.

See Barclays Leasing, Inc. v. Nat’l Bus. Sys., Inc., 750 F. Supp. 184, 188 (W.D.N.C.

1990) (“[T]he statute is satisfied if the plaintiff merely claims an injury occurred, not
that the plaintiff has actually proven the injury.”). In addition, Gao alleges Sinova

US suffered injury as a result of Calder’s conduct outside of North Carolina.

25. The Court cannot conclude, however, that Gao has brought forth evidence

to satisfy the third element of section 1-75.4(4)(a). N.C. Gen. Stat. § 1-75.2 defines

“solicitation” as “a request or appeal of any kind, direct or indirect, by oral, written,

visual, electronic, or other communication, whether or not the communication

originates from outside the State.” N.C. Gen. Stat. § 1-75.2(5). Gao contends that

Calder solicited Sinova US within North Carolina via telephone, email, and wire. Gao

relies on Peltier v. Mathis, No. 1:14cv133, 2016 U.S. Dist. LEXIS 108403 (W.D.N.C.

June 23, 2016), report and recommendation adopted sub nom., No. 1:15-cv-00133-

MOC-DLH, 2016 U.S. Dist. LEXIS 108402 (W.D.N.C. Aug. 16, 2016).

26. In Peltier, defendants, citizens and residents of states other than North

Carolina, solicited plaintiff via letters and phone calls to sign an arbitration

agreement whereby plaintiff agreed to submit a previously filed claim to arbitration

before Judge Gregory Mathis in a televised arbitration-based court show.

Specifically, one defendant sent plaintiff a letter via FedEx at his North Carolina

address soliciting him to arbitrate the previously filed claim. Additionally, after

plaintiff ignored the letter, that defendant began calling plaintiff and leaving him

voicemails in an attempt to solicit his participation. The court held that such

evidence of solicitation was sufficient to satisfy the requirements of N.C. Gen. Stat. §

1-75.4(4)(a). Peltier, 2016 U.S. Dist. LEXIS 108403, at *12.
27. Gao attempts to analogize the evidence in Peltier to the evidence of record

here. The Court notes initially that, although the court in Peltier concluded that

personal jurisdiction was proper, the court nonetheless dismissed the action based on

improper venue. In addition, contrary to Gao’s assertions, the Court finds no evidence

that Calder solicited an arrangement with Sinova US to engage in the Calder

Transactions. In Peltier, there was clear evidence that individual defendants had

solicited plaintiff via letters and telephone. Here, there is no such evidence.

28. There is no evidence of e-mails, letters, telephone calls, or any other

communications from Calder to Sinova US that could be considered solicitations.

There is no evidence that any funds from Sinova US in North Carolian were ever

transferred directly to Calder. Without more, the Court cannot conclude that Gao

has prima facie established jurisdiction under N.C. Gen. Stat. § 1-75.4(4)(a).

29. Gao also argues that the Court has jurisdiction over Calder pursuant to

N.C. Gen. Stat. § 1-75.4(5), which permits jurisdiction “[i]n any action which . . .

[r]elates to goods, documents of title, or other things of value shipped from this State

by the plaintiff to the defendant on his order or direction . . . .” N.C. Gen. Stat. §

1.75.4(5)(d). Although wire transfers constitutes a “thing of value” under the statute,

see Baker v. Lanier Marine Liquidators, Inc., 187 N.C. App. 711, 714, 654 S.E.2d 41,

44 (2007), there is simply no evidence of any wire transfer from Sinova US to Calder.

30. Even if North Carolina’s long-arm statute permitted the exercise of

personal jurisdiction over Calder, such exercise of jurisdiction would not comport with

the due process clause of the Fourteenth Amendment of the United States
Constitution. See Filmar Racing, 141 N.C. App. at 671, 541 S.E.2d at 736. The Court

of Appeals has set out the Court’s inquiry in this regard as follows:

The Due Process Clause of the Fourteenth Amendment operates as a
limitation on the power of a state to exercise in personam jurisdiction
over a non-resident defendant. In determining whether the exercise of
personal jurisdiction comports with due process, the crucial inquiry is
whether the defendant has certain minimum contacts with [the forum
state] such that the maintenance of the suit does not offend traditional
notions of fair play and substantial justice. To generate minimum
contacts, the defendant must have acted in such a way so as to
purposefully avail itself of the privilege of conducting activities within
the forum state, thus invoking the benefits and protections of the laws
of North Carolina. Moreover, the relationship between the defendant
and the state must be such that the defendant should reasonably
anticipate being haled into a North Carolina court.

Id. at 671–72, 541 S.E.2d at 736–37. In determining the existence of minimum

contacts, the Court considers the following factors: “(1) the quantity of the contacts,

(2) the nature and quality of the contacts, (3) the source and connection of the cause

of action to the contacts, (4) the interest of the forum state, and (5) convenience of the

parties.” Id. at 672, 541 S.E.2d at 737.

31. Here, the Court finds that Calder’s contacts, or lack thereof, with North

Carolina are insufficient to permit the Court’s proper exercise of personal jurisdiction

over Calder. Calder has never shipped any items of commerce into North Carolina.

Calder has never had any representatives or employees conducting business in North

Carolina. There is no evidence that Calder ever received funds directly from Sinova

US or any other North Carolina bank account. The only possible contact Calder has

with the state of North Carolina is one transaction where funds from Sinova US were

transferred from Sinova US’s bank account in North Carolina to Sinova Hong Kong,
and then to Calder. The Court concludes that such an attenuated connection with

the state is insufficient to invoke jurisdiction here.

32. Finally, Gao argues that jurisdiction was established over Calder at the

November 8, 2016 hearing when Gao’s counsel informed Calder’s counsel that Gao’s

counsel intended to serve an Alias and Pluries Summons and a copy of the Amended

Complaint on Calder by handing it directly to Liu, and counsel for Liu agreeing to

accept the Summons and Amended Complaint and Gao’s counsel handing those

pleadings to her. The Court disagrees.

33. “Where a foreign corporation does not do business in the State of North

Carolina, has no property here, has not domesticated, and maintains no process agent

here, personal service on its president or director while within the State on personal

business is not service on the corporation.” 24 Strong’s N.C. Index 4th Process and

Service § 111 (2016); see also Langley v. Planters Tobacco Warehouse, Inc., 215 N.C.

237, 238–39, 1 S.E.2d 558, 559 (1939) (“[T]he mere fact that an officer of a corporation

may temporarily be in the state . . . , if not there for the purpose of transacting the

business for the corporation, . . . affords no basis for acquiring jurisdiction or escaping

the denial of due process under the 14th Amendment which would result from

decreeing against the corporation upon a service had upon such an officer under such

circumstances.”). Liu is a defendant in this matter; there is nothing to suggest that

Liu was at the hearing in North Carolina on November 8 in her capacity as an officer

of Calder. Calder has, to this point, appeared only specially to move to dismiss Gao’s
claims against it for lack of personal jurisdiction. The Court concludes that such facts

cannot constitute personal jurisdiction over Calder.

V. CONCLUSION

34. For the foregoing reasons, the Court hereby GRANTS the Motion and

DISMISSES all claims brought in this action against Calder for lack of personal

jurisdiction.

SO ORDERED, this the 21st day of December, 2016.

/s/ Michael L. Robinson
Michael L. Robinson
Special Superior Court Judge
for Complex Business Cases