- State and national business lobbying groups are urging the North Carolina Supreme Court to overturn a lower court ruling allowing an out-of-state company with no business in the state to be sued in state court.
- A defendant in the case has argued that the North Carolina Court of Appeals' ruling in the case "fundamentally transforms" rules regarding which companies can be sued in North Carolina.
- The high court issued a Jan. 9 order granting a temporary stay in the case.
The US Chamber of Commerce and NC Chamber are asking the state Supreme Court to overturn a lower court ruling that could open the door for more lawsuits against businesses in North Carolina.
A defendant in the case has warned that a December ruling “fundamentally transforms” rules surrounding which companies can be sued in this state’s courts.
Now the US Chamber, NC Chamber, and the General Aviation Manufacturers Association have filed a friend-of-the-court brief in the case called PDII v. Sky Aircraft Maintenance. The US Chamber describes itself as the “world’s largest business federation,” representing 300,000 members and “the interests of more than 3 million companies and professional organizations of every size.” The NC Chamber is the state’s “leading business advocacy organization,” according to its court filing.
“The opinion below upset decades of jurisdictional certainty,” the business groups’ lawyers wrote in the brief filed Wednesday. “It will likely increase costs for companies and consumers across the nation while jeopardizing North Carolina’s reputation for promoting business and maintaining a stable legal climate.”
“Other potential effects include unduly burdening our courts, damaging commerce in the state, and reducing state revenue from business registration and investment,” the groups warned.
The North Carolina Supreme Court issued a Jan. 9 order without comment granting a temporary stay in the case.
One defendant, Textron, had requested the stay two days earlier. Textron raised concerns about the North Carolina Court of Appeals’ latest ruling in the legal dispute.
Based in Rhode Island, Textron objects to being sued in a North Carolina court over a 2024 incident that took place in Arkansas. An aircraft runway accident injured two people and rendered the plane a “total loss.”
Textron is registered to do business in this state but “does not actually conduct business in North Carolina,” according to a court filing.
The company filed a motion to have the North Carolina lawsuit dismissed. A trial judge rejected that motion. A unanimous three-judge Appeals Court panel upheld the trial judge’s ruling on Dec. 3.
“The Court of Appeals’ decision fundamentally transforms North Carolina’s law of personal jurisdiction,” Textron’s lawyers wrote. “For the first time, any corporation registered to do business in this state may be sued here by any plaintiff, on any claim, arising anywhere in the world. A Virginia resident injured in Texas can sue in North Carolina. A California business dispute can be litigated in Wake County. The only prerequisite is that the defendant, perhaps decades ago, filed the routine paperwork required to lawfully conduct business here.”
“This is not an incremental development; it’s a sea change,” the court filing continued. “For decades, personal jurisdiction doctrine has asked whether a defendant’s contacts with the forum state justify requiring it to defend a lawsuit there. General jurisdiction — the power to hear any claim against a defendant — has been reserved for forums where a corporation is ‘at home’: its state of incorporation and principal place of business.”
“North Carolina has never been home to Textron, a Delaware corporation headquartered in Rhode Island, and conducting no business in North Carolina,” the company’s lawyers wrote. “Before the decision below, Textron could not have been sued here on claims arising from events in Arkansas, involving an aircraft that Textron did not manufacture.”
Textron accused the state Appeals Court of adopting a “consent-by-registration” theory of jurisdiction. “Under this theory, when a foreign corporation registers to do business in North Carolina, it consents to be sued here on any claim whatsoever,” according to the court filing. “Registration, a ministerial act, becomes a blanket waiver of constitutional protections.”
The US Supreme Court’s 2023 decision in Mallory v. Norfolk Southern Railway Company dealt with similar issues. But that case dealt with Pennsylvania’s “unique statutory scheme, which expressly provides that registration constitutes consent to ‘general personal jurisdiction,’” according to Textron’s filing. “No other state has such a statute, including North Carolina.”
“The Court of Appeals extended Mallory to North Carolina — even while acknowledging that North Carolina’s statutes contain no express consent language,” the court filing added. “This places North Carolina among a tiny handful of jurisdictions to embrace consent-by-registration, at odds with the overwhelming weight of authority from other states.”
“The stakes could hardly be higher,” Textron’s lawyers argued. “The decision affects every foreign corporation and limited liability company registered in North Carolina — thousands of businesses that registered in reliance on settled jurisdictional expectations. It exposes them to litigation with no connection to this state, brought by plaintiffs from anywhere in the country, over conduct occurring entirely elsewhere.”
“It transforms North Carolina into a magnet for forum-shopping and burdens its courts with disputes that have nothing to do with this state or its citizens,” the court filing continued. “And by deterring businesses from registering here — or encouraging them to withdraw — it threatens North Carolina’s economic competitiveness with neighboring states that have rejected this theory.”
North Carolina-based PDII owned the jet involved in the 2024 Arkansas accident. As the pilot attempted to take off, controls were unresponsive. Aborting the takeoff, the plane ran out of runway and ended up running off the runway. During the incident, “one or more elevator cables in the Airplane’s tail snapped during takeoff,” according to the Appeals Court opinion.
PDII sued Sky Aircraft Maintenance and its employee, Steve Trent, in North Carolina state court. The suit also targeted Textron and a separate Kansas-based company, Textron Aviation. “Textron and Textron Aviation do not share employees, offices, accounts, or business operations,” Textron’s lawyers wrote.
Textron “has no physical presence in the state: it has no offices, facilities, bank accounts, or employees here,” according to the state Supreme Court filing. “Unlike Textron Aviation, Textron doesn’t make or sell aircraft or components, so it did not make or sell the component that PDII complains about.”
“Textron doesn’t market aircraft products or services in the state or to its residents,” the filing continued. “Textron doesn’t have any contracts requiring performance in North Carolina. Textron didn’t have any interactions with Sky Aircraft or Trent, the other defendants. Nor does Textron have continuing or systemic contacts with the state.”
The Appeals Court rejected Textron’s arguments.
“North Carolina’s Long Arm Statute provides that state courts will have personal jurisdiction ‘[i]n any action, whether the claim arises within or without this State, in which a claim is asserted against a party who when service of process is made upon such party … [i]s a domestic corporation,’” Judge Julee Flood wrote last month. “Thus, because N.C.G.S. § 55-15-05(b) states that a registered foreign corporation ‘has the same but no greater rights and has the same but no greater privileges as, and is subject to the same duties, restrictions, penalties, and liabilities now or later imposed on, a domestic corporation of like character[,]’ we conclude a registered foreign corporation may sue or be sued to the same extent as a domestic corporation and is subject to personal jurisdiction.”
“[W]e hold a foreign corporation that obtains a certificate of authority consents to general personal jurisdiction in North Carolina; therefore, we affirm the trial court’s order denying Defendant’s motion to dismiss,” Flood explained.