Filing claims NC case ‘fundamentally transforms’ business lawsuits

A Rhode Island-based company is asking North Carolina’s highest court to block a lower court ruling that “fundamentally transforms” state law regarding lawsuits filed against businesses.

The company, Textron, faces a lawsuit in North Carolina courts based on a 2024 airplane runway accident in Arkansas that injured two people and rendered the aircraft 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 Wednesday at the North Carolina Supreme Court.

The company filed a motion to have the North Carolina case dismissed. A trial judge rejected that motion. A unanimous three-judge panel of the North Carolina Court of Appeals upheld the trial judge’s ruling on Dec. 3.

Now Textron is asking the state Supreme Court to intervene. Wednesday’s court filing seeks a temporary stay, an order blocking the Appeals Court’s decision, and the Supreme Court’s review of the case.

“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 North Carolina 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. “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.

“Filing claims NC case ‘fundamentally transforms’ business lawsuits” was originally published on www.carolinajournal.com.