Progressive American Insurance Company v. De Pinto

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF NORTH CAROLINA

CHARLOTTE DIVISION

3:21-cv-00006-RJC-DSC

PROGRESSIVE AMERICAN INSURANCE )

COMPANY, )

)

Plaintiff, )

) Order

v. )

)

SAVERIO DE PINTO ET AL., )

)

Defendants. )

)

THIS MATTER comes before the Court on Defendants’ Renewed Motion to Dismiss

Amended Complaint or, Alternatively, to Transfer Venue, (DE 33), and the Magistrate Judge’s

Memorandum and Recommendation (“M&R”), (DE 37). Having fully considered the arguments,

the record, and the applicable authority, the Court will adopt the M&R to the extent the M&R

addressed the merits of a claim and will grant in part and deny in part Defendants’ Renewed

Motion to Dismiss. Specifically, Lisa De Pinto is dismissed and the motion otherwise is denied.

I. BACKGROUND

Defendants object to the M&R’s statement of the background of this case for omitting or

mislabeling pertinent information. (DE 39 at 11). The Court will complete a de novo review of the

facts below.

A. Procedural Background

Plaintiff Progressive American Insurance Company (“Progressive”) filed a Complaint for

declaratory judgement on January 6, 2021 against Saverio De Pinto among others.1 (DE 1). On

1 As well as: Tyler Huynh, Manuel Castaneda, Jason Cartomo, Melvin Oved Banegas-Amaya, and Matthew Jones.

February 3, 2021, Defendants filed a Motion to Dismiss the Complaint or, Alternatively, to

Transfer Venue. (DE 9). The motion became moot after Progressive filed an Amended Complaint

joining Lisa De Pinto and Vito De Pinto as additional defendants. (DE 11, 12). Defendants then

filed a Motion to Dismiss the Amended Complaint or, Alternatively, to Transfer Venue on April

9, 2021. (DE 22). On May 18, 2021, the Magistrate Judge administratively denied the Motion to

Dismiss and ordered the parties to conduct limited jurisdictional discovery on the issue of personal

jurisdiction. (DE 26). After conducting the limited discovery, Defendants filed the now pending

Renewed Motion to Dismiss the Amended Complaint or, Alternatively, to Transfer Venue on

October 7, 2021. (DE 33). After a timely Response and Reply were filed by the parties, the

Magistrate Judge issued an M&R recommending (1) that Lisa De Pinto be dismissed as a party,

(2) that personal jurisdiction is proper over Vito De Pinto, (3) that venue is proper in the Western

District of North Carolina, and (4) that Defendants’ 12(b)(6) claim be denied for Defendants’

failure to address it during briefing of the instant motion.2 (DE 37 at 12). Defendants filed an

objection arguing that (1) Vito is not subject to personal jurisdiction in North Carolina, (2) venue

is improper in the Western District of North Carolina, and (3) the Magistrate Judge erred by failing

to consider Defendants’ 12(b)(6) claim that was incorporated by reference. (DE 39). Defendants

did not object to the M&R’s conclusion that Lisa is not a necessary nor indispensable party. (Id.).

B. Factual Background

On September 12, 2020, a car accident involving defendant Saverio De Pinto occurred on

Woodpark Boulevard in Charlotte, North Carolina. (DE 11 at ¶22, ¶29). Progressive alleges that

2 The 12(b)(6) issue was fully briefed by the parties in regard to Defendants’ Motion to Dismiss the Amended

Complaint or, Alternatively, to Transfer Venue, (DE 22), which was administratively denied by the Magistrate to

allow the Parties to conduct limited jurisdictional discovery. Defendants now pending Renewed Motion to Dismiss

renews the 12(b)(6) claim and incorporates by reference all previous arguments. The M&R did not discuss the merits

of the 12(b)(6) claim.

the accident occurred while Saverio was engaged in illegal street racing. (Id. at ¶30). Defendants

contest this allegation. (DE 23 at 3). At the time of the accident, Saverio was driving a 2019

Chevrolet Camaro that he co-owns with his father, Vito De Pinto. (DE 11 at ¶22; DE 34 at 1).

Saverio’s parents Vito and Lisa De Pinto are the named insureds on a Progressive insurance policy

covering the Camaro. (DE 1, Exhibit 1 at 2). Saverio is listed as an authorized driver on the policy.

(Id.). The policy was purchased and executed in Florida. (DE 23 at 6). Saverio is a resident of

Florida, but currently resides in Mooresville, North Carolina while he attends the NASCAR

Technical Institute. (DE 11 at ¶¶7–8). Both Vito and Lisa De Pinto are citizens and residents of

Florida. (Id. at ¶ 9). Progressive is a multi-state insurer incorporated in Ohio with its principal

place of business in Ohio. (Id. at ¶6).

Progressive filed its Amended Complaint which seeks a declaratory judgement that there

is no coverage available under its policy with the De Pinto’s for claims arising from the accident.

(Id. at ¶2). Progressive’s first claim states that coverage cannot be afforded due to a policy

exclusion, which denies coverage of claims arising from “any pre-arranged or organized racing,

stunting, speed or demolition contest or activity.” (Id. at ¶¶39–79). Progressive’s second claim

states that it is not obligated to provide coverage because the De Pinto’s failed to cooperate with

Progressive’s investigation by denying its request to download electronic data from the Camaro

after the accident. (Id. at ¶¶80–86). According to Progressive, this violates the section of the Policy

that requires persons seeking coverage to cooperate with Progressive “in any matter concerning a

claim or lawsuit” amounting to a breach of contract. (Id. at ¶82).

II. STANDARD OF REVIEW

A. Memorandum and Recommendation

A district court may assign dispositive pretrial matters, including motions to dismiss, to a

magistrate judge for “proposed findings of fact and recommendations.” 28 U.S.C. § 636(b)(1)(A)

& (B). The Federal Magistrate Act provides that a district court “shall make a de novo

determination of those portions of the report or specified proposed findings or recommendations

to which objection is made.” Id. § 636(b)(1)(C); FED. R. CIV. P. 72(b)(3). However, “when

objections to strictly legal issues are raised and no factual issues are challenged, de novo review

of the record may be dispensed with.” Orpiano v. Johnson, 687 F.2d 44, 47 (4th Cir. 1982). De

novo review is also not required “when a party makes general and conclusory objections that do

not direct the court to a specific error in the magistrate’s proposed findings and recommendations.”

Id. Similarly, when no objection is filed, “a district court need not conduct a de novo review, but

instead must ‘only satisfy itself that there is no clear error on the face of the record in order to

accept the recommendation.’” Diamond v. Colonial Life & Acc. Ins. Co., 416 F.3d 310, 315 (4th

Cir. 2005) (quoting FED. R. CIV. P. 72, advisory committee note).

B. Motion to Dismiss under Rule 12(b)(6)

The standard of review for a motion to dismiss under Rule 12(b)(6) for failure to state a

claim is well known. FED. R. CIV. P. 12(b)(6). “A motion to dismiss under Rule 12(b)(6)

‘challenges the legal sufficiency of a complaint,’ including whether it meets the pleading standard

of Rule 8(a)(2). Fannie Mae v. Quicksilver LLC., 155 F. Supp. 3d 535, 542 (M.D.N.C. 2015)

(quoting Francis v. Giacomelli, 588 F.3d 186, 192 (4th Cir. 2009)). A complaint attacked by a

Rule 12(b)(6) motion to dismiss will survive if it contains enough facts “to state a claim to relief

that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Facial

plausibility means allegations that allow the court to draw the reasonable inference that defendant

is liable for the misconduct alleged. Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009). “Threadbare

recitals of the elements of a cause of action, supported by mere conclusory statements, do not

suffice.” Id. at 678.

Federal Rule of Civil Procedure 8(a)(2) requires only “a short and plain statement of the

claim showing that the pleader is entitled to relief.” FED. R. CIV. P. 8(a)(2). Specific facts are not

necessary; the statement need only “give the defendant fair notice of what the ... claim is and the

grounds upon which it rests.” Twombly, 550 U.S. at 555. Additionally, when ruling on

a motion to dismiss, a court must accept as true all of the factual allegations contained in the

complaint. Erickson v. Pardus, 551 U.S. 89, 93–94 (2007). Nonetheless, a court is not bound to

accept as true legal conclusions couched as factual allegations. Papasan v. Allain, 478 U.S. 265,

286 (1986). “Courts cannot weigh the facts or assess the evidence at this stage, but a complaint

entirely devoid of any facts supporting a given claim cannot proceed.” Potomac Conference Corp.

of Seventh-Day Adventists v. Takoma Acad. Alumni Ass'n, Inc., 2 F. Supp. 3d 758, 767–68 (D. Md.

2014). Furthermore, the court “should view the complaint in a light most favorable to the

plaintiff.” Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993).

C. Motion to Dismiss Under Rule 12(b)(2)

“When personal jurisdiction is properly challenged under Rule 12(b)(2), the jurisdictional

question is to be resolved by the judge, with the burden on the plaintiff ultimately to prove grounds

for jurisdiction by a preponderance of the evidence.” Carefirst of Md., Inc. v. Carefirst Pregnancy

Ctrs., Inc., 334 F.3d 390, 396 (4th Cir. 2003). However, when “the district court decides

jurisdiction on the motion papers alone, the plaintiff need only make a prima facie showing of a

sufficient jurisdictional basis to prevail.” Perdue Foods LLC v. BRF S.A., 814 F.3d 185, 188 (4th

Cir. 2016). “When determining whether a plaintiff has made the requisite prima facie showing, the

court must take the allegations and available evidence relating to personal jurisdiction in the light

most favorable to the plaintiff.” Grayson v. Anderson, 816 F.3d 262, 268 (4th Cir. 2016).

III. DISCUSSION

A. Venue is Proper in the Western District of North Carolina and Transfer is not

Warranted

Venue is governed by 28 U.S.C. §1391, which states in relevant part: “A civil action may

be brought in a judicial district in which a substantial part of the events or omissions giving rise to

the claim occurred.” 28 U.S.C. § 1391(b)(2). The M&R found that venue was proper in the

Western District of North Carolina. Defendants object to this finding, arguing that venue is

improper because this case is one of contractual interpretation, rather than a factual based inquiry.

Consequently, under §1391(b)(2), Defendants argue that the operative “events” that give rise to

Progressive’s claim are narrowly confined to those that pertain to the issuance of the insurance

policy, which took place in the Middle District of Florida. (DE 23 at 12). Therefore, Defendants

contend that venue is improper in the Western District of North Carolina where the accident

occurred. (Id.).

Progressive’s claim is not one of pure contractual interpretation as there is no dispute that

the policy excludes coverage for street racing. Instead, the main dispute is over the facts,

particularly whether the accident occurred during an illegal street race in Charlotte, North Carolina.

(DE 11). All the insurance claims that Defendants have made seeking coverage under the policy

for medical payments, vehicle damage, and personal property damage stem from one event:

Saverio De Pinto’s car accident in Charlotte, North Carolina. (DE 35 at 13). Progressive’s claim

that the De Pinto’s breached the policy by failing to comply with its investigation, too, stems from

this event. (DE 1). Progressive’s liability under this insurance policy depends on disputed facts

that occurred in this District, not on contract interpretation. Therefore, venue is proper in the

Western District.

Defendants also object to the M&R’s conclusion that transferring venue to the Middle

District of Florida is unwarranted. Specifically, Defendants argue that even if venue is proper in

the Western District of North Carolina, convenience favors transfer to the Middle District of

Florida because the witnesses and evidence relevant to the issuance of the policy are located there.

(DE 23 at 12). Under 28 U.S.C. §1404(a), a district court may transfer a civil action to any other

district where it may have been brought “for the convenience of parties and witnesses” and “in the

interest of justice.” The question of transfer for convenience is committed to the discretion of the

district court. See Stewart Organization, Inc. v. Rioch Corp., 487 U.S. 22, 29 (1988). The district

court must weigh private factors that “bear solely on the parties’ private ordering of their affairs”

with “public interest factors of systemic integrity and fairness.” Id. at 30. Based on this guidance

by the Supreme Court, district courts evaluate eleven factors to decide whether the matter should

be transferred:

(1) The plaintiff’s initial choice of forum; (2) the residence of the parties; (3) the

relative ease of access of proof; (4) the availability of compulsory process for

attendance of witnesses and the costs of obtaining attendance of willing witnesses;

(5) the possibility of a view; (6) the enforceability of a judgement, if obtained; (7)

the relative advantages and obstacles to a fair trial; (8) other practical problems that

make a trial easy, expeditious, and inexpensive; (9) the administrative difficulties

of court congestion; (10) the interest in having localized controversies settled at

home and the appropriateness in having the trial of a diversity case in a forum that

is at home with the state law that must govern the action; and (11) the avoidance of

unnecessary problems with conflict of laws.

Scholl v. Sagon RV Supercenter, LLC, 249 F.R.D. 230, 239 (W.D.N.C. 2008); see also Jim

Crockett Promotions, Inc. v. Action Media Group, Inc., 751 F. Supp. 93, 96 (W.D.N.C. 1990).

Courts should make both a quantitative and a qualitative analysis of these factors. See McDevitt &

Street Co. v. Fidelity and Deposit Co., 737 F. Supp. 351, 354 (W.D.N.C.1990). Defendants have

“the burden of persuasion and must show (1) more than a bare balance of convenience in [its] favor

and (2) that a transfer does more than merely shift the inconvenience.” Datasouth Computer Corp.

v. Three Dimensional Tech. Inc., 719 F. Supp. 446, 451 (W.D.N.C. 1989).

Here, an analysis of the factors shows that transfer is not warranted in the “interest of

justice.”

Plaintiff’s Initial Choice of Forum: Plaintiff’s choice of forum is given considerable

weight, and “unless the balance is strongly in favor of the defendant, the plaintiff’s choice of forum

should rarely be disturbed.” Collins v. Straight, Inc., 748 F.2d 916, 921 (4th Cir.1984) (quoting

Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508 (1946)). It is “black letter law” that “plaintiff’s choice

of a proper forum is a paramount consideration in any determination of a transfer request, and that

choice . . . should not be lightly disturbed.” Phillips v. S. Gumpert Co., Inc., 627 F. Supp. 725,

726–27 (W.D.N.C.1986) (citations omitted); Piper Aircraft Co. v. Reyno, 454 U.S. 235, 255–56

(1981). This factor strongly supports venue in this district.

Residence of the Parties: Saverio3 and all other Defendants involved in the accident

currently live and/or reside in North Carolina. (DE 11 at ¶¶7–16). Aside from Lisa, who is not a

necessary party, Vito is the only Defendant that does not reside in North Carolina. (Id.).

Progressive has its headquarters and principal place of business in Ohio. (Id.). Most individuals

involved in this litigation reside in North Carolina; this factor strongly supports venue in this

district.

Relative Ease of Access of Proof: Plaintiff has claimed that all relevant witnesses and

evidence to the car accident are in this district. (DE 24 at 19). Defendants claim that the relevant

witnesses are the corporate employees from Progressive who were involved with the negotiation

and execution of the insurance contract. (DE 39 at 9). As previously described, the crux of this

case is resolving disputed facts, not interpreting a contract. Therefore, North Carolina is the

3 While Saverio is a Florida citizen, he currently lives in North Carolina while he attends school here.

location with the easiest access to proof and witnesses surrounding the accident. This factor

supports venue in this district.

Availability of Compulsory Process for Attendance of Witnesses and the Costs of

Obtaining Attendance of Willing Witnesses: Most witnesses are in the Western District of North

Carolina. Only Vito, and if it is necessary, a corporate employee from Progressive, would incur

travel expenses as witnesses. This factor supports venue in this district.

Possibility of a jury view: A jury view of the scene of the accident is only practicable in

North Carolina. This factor supports venue in this district.

Other practical problems that make trial easy, expeditious, and inexpensive: As stated

above, most witnesses will not have to travel for trial. This factor supports venue in this district.

Appropriateness in having the trial of a diversity case in a forum that is at home with

the state law that must govern the action: “A federal court exercising diversity jurisdiction is

obliged to apply the substantive law of the state in which it sits, including the state’s choice-of-

law rules.” Volvo Const. Equipment North America, Inc. v. CLM, 386 F.3d 581, 599-600 (4th Cir.

2004); see Erie R.R. Co. v. Tompkins, 304 U.S. 64, 79 (1938); Klaxton Co. v. Stentor Elec. Mfg.

Co., Inc., 313 U.S. 487 (1941) (forum state’s choice-of-law rules are substantive). According to

North Carolina choice-of-law rules, “the interpretation of a contract is governed by the law of the

place where the contract was made.” Tanglewood Land Co., Inc. v. Byrd, 299 N.C. 260, 262

(1980). The De Pinto’s insurance policy was executed in Florida; therefore, Florida law will

govern the interpretation of the policy. This factor supports venue in the Middle District of Florida.

Remaining Factors: The remaining factors – enforceability of a judgement, relative

advantages and obstacles to a fair trial, interest in having localized controversies settled at home,

administrative difficulties of court congestion, and avoidance of unnecessary conflict of laws – are

all neutral.

Having considered these factors individually and cumulatively, transfer of venue is

disfavored in both quantity and quality. Moreover, Defendants’ two cited cases, one from the

Western District4 and one from the Middle District5 of North Carolina, that allegedly support venue

transfer are distinguishable from the present case. (DE 39 at 7).

In CTS Corp., there were no disputed facts pertaining to the groundwater contamination

(which occurred in North Carolina) that gave rise to CTS’s claim for coverage under its general

liability and catastrophe insurance policies; the only controversy was over the interpretation of the

policies. See CTS Corp., 356 F. Supp. 2d at 586–88 (“At issue is the meaning of the pollution

exclusion clause in these contracts which excluded from coverage damages arising out of the

discharge of pollutants.”). As there was no factual dispute, the court reasoned that transfer from

North Carolina to Indiana was proper because the witnesses to the negotiation and execution of

the insurance contract, between an Illinois based insurance company and Indiana based insured,

were located in Indiana. Id. at 589. Here, the parties disagree as to whether Saverio was engaged

in illegal street racing when he was involved in the car accident – a core fact upon which

Progressive’s liability depends. See supra 2-3. The parties do not disagree on the contractual

language. Therefore, relevant evidence and witnesses for this factual determination are here, in

North Carolina, which supports venue in this forum.

Similarly, the second case that Defendants cite, Future Van Lines, is not analogous to the

present facts. First, in Future, the case turned on contract interpretation; here, the case turns on

4 Am. Motorists Ins. Co. v. CTS Corp., 356 F. Supp. 2d 583 (W.D.N.C. 2005) (J., Thornburg).

5 Progressive Cas. Ins. Co. v. Future Van Lines, LLC., 1:20-CV-960, 2021 WL 4413319, at *4 (M.D.N.C. Sept. 27,

2021) (J., Biggs).

factual determinations. See 2021 WL 4413319, at *2 (“Progressive’s declaratory judgment action

is one of contract interpretation and will turn on the meaning of certain policy provisions—not on

the details of the North Carolina accident.”). Second, in Future, none of the parties resided in North

Carolina; here, the six defendants who were injured in the accident currently live and/or reside in

North Carolina. See 2021 WL 4413319, at *2; (DE 11 at ¶7-¶16). Third, the plaintiff in Future

could not demonstrate that questions of fact would be resolved by North Carolina witnesses or

evidence; here, Progressive has at least alleged that pertinent witnesses to the accident reside in

North Carolina. See 2021 WL 4413319 at *3; (DE 24 at 19). Future, therefore, is not synonymous

to the present case and does not support transferring venue to the Middle District of Florida.

Accordingly, after examining the facts of the case, analyzing the transfer factors, and

reviewing relevant case law, the Court concludes that the interests of justice and convenience

warrant denying Defendants’ Motion to Transfer Venue under §1404(a).

B. Plaintiff Properly Stated a Claim for Declaratory Relief

Defendants moved to dismiss Progressive’s Amended Complaint pursuant to FED. R. CIV.

P. 12(b)(6), arguing that Progressive failed to state a proper claim for declaratory relief by failing

to allege any ambiguity over the interpretation of the policy. (DE 23 at 10–11). According to

Progressive, declaratory judgment actions can turn on disputed facts and do not require contractual

ambiguities. (DE 24 at 13). The M&R failed to address Defendants’ renewed 12(b)(6) motion so

the Court will decide the issue in the first instance.

A federal court properly exercises jurisdiction over a claim for declaratory judgement

“when three essentials are met: (1) the complaint alleges an ‘actual controversy’ between the

parties ‘of sufficient immediacy and reality to warrant issuance of a declaratory judgement;’ (2)

the court possesses an independent basis for jurisdiction over the parties (e.g., federal question or

diversity jurisdiction); and (3) the court does not abuse its discretion in its exercise of jurisdiction.”

Volvo, 386 F.3d at 592 (quoting 28 U.S.C. § 2201).

An “actual controversy” within the meaning of Article III may exist when “a plaintiff seeks

declaratory relief in order to avoid the accrual of potential damages for past actions.” Volvo, 386

F.3d at 593 (holding that an actual controversy existed because the plaintiff could reasonably

expect multiplicity of litigation and liability for ongoing damages). The controversy remains

justiciable if it turns on a question of fact as the Supreme Court has found declaratory relief proper

when it turns on disputed facts. See Aetna Life Ins. Co. of Hartford, Conn. v. Haworth, 300 U.S.

227, 242 (1937) (“That the dispute turns upon questions of fact does not withdraw it, as the

respondent seems to contend, from judicial cognizance. The legal consequences flow from the

facts and it is the province of the courts to ascertain and find the facts in order to determine the

legal consequences. That is everyday practice.”). Cases cited by Defendants in Florida also

confirm this.6 See, e.g., Daytona Beach Riverhouse, Inc. v. Chubb Custom Ins. Co., No. 6:13-CV-

1461-ORL-22GJK, 2014 WL 12611320, at *3 (M.D. Fla. Mar. 20, 2014) (“A court may issue a

declaratory judgment under the Declaratory Judgment Act based on a dispute that turns on a

question of fact.”) (citing Aetna, 300 U.S. at 242); State Farm Mut. Auto. Ins. Co. v. Physicians

Inj. Care Ctr., Inc., No. 6:06-CV-1757-ORL-GJK, 2008 WL 11338611, at *4 (M.D. Fla. Apr. 1,

2008) (denying motion to dismiss where the moving party argued that declaratory judgment

actions involving contracts require an ambiguity to proceed).

6 The only case cited by Defendants which supports the contention that an ambiguity is required was a report and

recommendation (“R&R) that appears to misinterpret existing case law as well as the declaratory judgment act. Young

v. Lexington Ins. Co., No. 18-62468-CIV, 2018 WL 7572240, at *2 (S.D. Fla. Dec. 6, 2018), report and

recommendation adopted, No. 18-62468-CIV, 2019 WL 1112274 (S.D. Fla. Jan. 9, 2019). Tellingly, no objections

were filed to the R&R, and the final order adopting the R&R failed to discuss any substantive issues.

Here, Progressive initiated the action after the De Pinto’s sought coverage under the policy

for medical payments, damage to the Camaro, and liability to others. (DE 11 at ¶ 40–41). Upon

information and belief, Progressive alleges that five other defendants who were injured in the

accident will pursue similar claims against the De Pinto’s and Progressive, and that the De Pinto’s

will seek indemnification from Progressive. (DE 11 at ¶¶72–74). Although this controversy

depends on a factual determination of whether Saverio was engaged in street racing at the time of

the accident, it is still appropriate for judicial determination. This controversy is not hypothetical

or abstract in character; therefore, this Court finds that this case presents an “actual controversy”

within the meaning of 28 U.S.C. § 2201.

The second prong under Volvo is also satisfied because this Court possesses federal subject

matter jurisdiction over the parties under 28 U.S.C. § 1332. (DE 11 at ¶21). The third prong of

Volvo is satisfied because a court does not abuse its discretion in exercising jurisdiction over a

controversy where a judgment “will serve a useful purpose in clarifying and settling the legal

relations in issues” while respecting principles of efficiency by comprehensively disposing of the

litigation. Aetna, 300 U.S. at 325; see also Colorado River Water Conservation Dist. v. United

States, 424 U.S. 800, 817 (1976). Progressive alleges facts that, taken as true and viewed in the

light most favorable to them, are facially plausible, allowing the court to draw the reasonable

inference that Defendants were engaged in an illegal street race at the time of the accident and are

not qualified for coverage under the policy. (DE 11). Therefore, this Court finds that Progressive

has properly stated a claim for declaratory relief and denies Defendants’ motion to dismiss the

complaint under Rule 12(b)(6).

C. Vito is Subject to Personal Jurisdiction in North Carolina

Defendants’ allege that the exercise of jurisdiction over Vito in the Western District of

North Carolina is improper (1) on a statutory basis and (2) under a minimum contacts analysis.

i. N.C. GEN. STAT. § 1-75.4(10) Provides a Valid Statutory Basis for this

Court to Exercise Personal Jurisdiction Over Vito

In their Memorandum in Support of their Motion to Dismiss Plaintiff’s Amended

Complaint (DE 23), Defendants claim that the two statutes (N.C. GEN. STAT. § 1-105 and N.C.

GEN. STAT. § 20-71.1) Progressive cited in its Amended Complaint as a basis for statutory personal

jurisdiction do not extend to Defendant Vito. The Parties also addressed North Carolina’s long-

arm statute (N.C. GEN. STAT. § 1-75.4) in their briefing. (Id. at 8). The M&R did not engage in an

analysis of § 1-105 or § 20-71.1; rather, it held that North Carolina’s long arm statute, specifically

§ 1-75.4(10), provides a sufficient basis for this Court to exercise personal jurisdiction over Vito.

(DE 37 at 6). Defendants generally object to the M&R’s analysis of § 1-75.4 as a basis for personal

jurisdiction and specifically contend that if it does apply to Count I it does not apply to Vito under

Count II of the Amended Complaint because the Defendants submitted their objection to

participate in Progressive’s investigation from Florida, precluding it from being joined in the same

action under N.C. GEN. STAT. § 1-75.5. (DE 39 at 5).

A federal district court may only assert personal jurisdiction over a nonresident defendant

when it is (1) “authorized by the long-arm statute of the forum state” and if it (2) “comport[s] with

Fourteenth Amendment due process requirements.” Christian Sci. Bd. Of Dirs. Of First Church of

Christ, Scientist v. Nolan, 259 F.3d 209, 215 (4th Cir. 2001). North Carolina’s long arm statute is

“construed to extend jurisdiction over nonresident defendants to the full extent permitted by the

Due Process Clause.” Id. (citing Century Data Systems, Inc. v. McDonald, 109 N.C. App. 425, 428

S.E.2d 190, 191 (1993)). The North Carolina long-arm statute authorizes a court to exercise

personal jurisdiction over a nonresident defendant: “in any action which arises out of a contract of

Insurance … made anywhere between the plaintiff … and the defendant” when “the event out of

which the claim arose occurred within this State, regardless of where the plaintiff resided.” N.C.

GEN. STAT. § 1-75.4(10)(b). Section 1-75.5 governs joinder of claims, and states that if “any action

[is] brought in reliance upon jurisdictional grounds stated in subdivisions (2) to (10) of G.S. 1-

75.4,” any additional action to be joined must have an independent basis for personal jurisdiction

under N.C. GEN. STAT. § 1-75.4.

Progressive’s claims arise from the Defendants’ request for coverage under a contract for

insurance that was issued to Defendants in Florida. (DE 11); (DE 23 at 6). However, because this

claim is highly dependent on the facts and not solely concerned with an issue of contractual

interpretation, it is proper to characterize the “event out of which the claim arose” as the accident

that occurred on Woodpark Blvd., Charlotte NC.7 (DE 11 at ¶1). This is true for both Counts in

Progressive’s Amended Complaint. For Count II, even though Defendants’ allege that the breach

of contract occurred when Defendants’ attorney submitted an objection to comply with

Progressive’s investigation from Florida, it is improper to rely on the location of where an attorney

filed an objection for § 1-75.4(10) purposes lest the Court incentivize parties to circumvent

jurisdiction by retaining an attorney in a different jurisdiction. (DE 43 at 5). The “event” out of

which the declaratory action on the contractual claim arose should be properly understood as the

car accident – the genesis of this dispute. Therefore, Vito is subject to jurisdiction in North Carolina

under N.C. GEN. STAT. § 1-75.4(10) for both Counts of Progressive’s Complaint. However, as

Progressive failed to plead this statute, the Court will grant Progressive leave to amend its

complaint to correctly plead § 1-75.4(10) as the statutory basis for personal jurisdiction over the

nonresident Defendant.

7 The Court declines to presume that the Defendants would not be subject to § 1-75.4(10) under these facts. See

generally Columbus Life Ins. Co. v. Wells Fargo Bank, N.A., No. 21-CVS-0052, 2021 WL 4024568, at *11 (N.C.

Super. Sept. 2, 2021); Wells Fargo Bank, N.A. v. Affiliated FM Ins. Co., 193 N.C. App. 35, 49 n.2 (2008); Cameron-

Brown Co. v. Daves, 83 N.C. App. 28, 284 (1986).

ii. Vito has Sufficient Minimum Contacts in North Carolina

After concluding that the exercise of jurisdiction over the Defendants was authorized by

the long-arm statute of the state, the M&R concluded that Vito has sufficient minimum contacts

with North Carolina, satisfying the test for specific jurisdiction. (DE 37 at 8). Defendants object

and argue that the M&R failed to demonstrate how Progressive’s claim arose from Vito’s contacts

with the forum.

There are two varieties of personal jurisdiction, general and specific. General jurisdiction

requires “substantial” or “continuous and systematic” contacts or activities in the forum state and

is not at issue in the instant case. Helicopterous Nacionales de Columbia, S.A. v. Hall, 466 U.S.

408, 414 n. 9 (1984). Specific jurisdiction exists when a court exercises personal jurisdiction over

a defendant in a suit arising out of or related to the defendant’s contacts with the forum. Id. at 414

n. 8. The Fourth Circuit has “synthesized the requirements of the Due Process Clause for asserting

specific jurisdiction into a three-part test ... (1) the extent to which the defendant purposefully

availed itself of the privilege of conducting activities in the State; (2) whether the plaintiffs’ claims

arise out of those activities directed at the State; and (3) whether the exercise of personal

jurisdiction would be constitutionally reasonable.” New Wellington Fin. Corp. v. Flagship Resort

Dev. Corp., 416 F.3d 290, 294–95 (4th Cir. 2005) (citing Mitrano v. Hawes, 377 F.3d 402, 407

(4th Cir. 2004); ALS Scan, Inc. v. Digital Serv. Consultants, Inc., 293 F.3d 707, 712 (4th Cir.

2002)). “This relationship between the defendant and the forum must be ‘such that he should

reasonably anticipate being haled into court there.’” World-Wide Volkswagen Corp. v. Woodson,

444 U.S. 286, 297 (1980).

Vito allowed his son to drive the Camaro, that he owned and insured, to North Carolina to

be driven continuously in North Carolina while Saverio attended school at the NASCAR Technical

Institute. (DE 11). The Fourth Circuit has held that these circumstances alone are sufficient to

establish specific jurisdiction over a nonresident defendant. See Davis v. St. Paul-Mercury Indem.

Co., 294 F.2d 641, 648 (4th Cir. 1961) (holding that “ownership of property, particularly that

which is capable of inflicting serious injury, may fairly be coupled with an obligation upon the

owner to stand suit where the property is or has been taken with his consent.”). In Davis, a Texas

resident purchased a car to be used by her son while he was stationed as a marine at Camp Lejeune,

North Carolina. See 294 F.2d at 643. The insurance policy covering the vehicle covered anyone

who drove it with the permission of the named insured. See id. Her son allowed a fellow marine

to drive the vehicle, which led to the death of a North Carolina resident. See id. The Fourth Circuit

upheld jurisdiction over the Texas resident even though she was never present in the state and was

not driving the vehicle at the time of the accident; it was enough that she allowed her son, and

whoever he gave permission, to drive and operate the vehicle in the forum for the state to exercise

personal jurisdiction over her. See id. at 648.

Vito also executed leases and paid for rent in North Carolina on behalf of his son, with the

knowledge that the Camaro would be parked at his son’s residence in North Carolina when not in

use. And, after the accident, the Camaro was towed and stored in North Carolina. North Carolina

is also where Progressive requested to inspect the Camaro. Vito thus purposefully availed himself

to the forum and it was foreseeable that should an accident with the Camaro occur in North

Carolina, he could be hauled to court in North Carolina. Progressive’s claim arises out of this

activity, condoned by Vito. Therefore, the exercise of personal jurisdiction over Vito is proper.

iii. Lisa De Pinto is Not an Indispensable Party

No Party objected to the M&R’s conclusion that Lisa De Pinto is not an indispensable

party. (DE 37 at 3-4; DE 39). Under Rule 72(b) of the Federal Rules of Civil Procedure, a district

court judge shall make a de novo determination of any portion of an M&R to which specific written

objection has been made. A party’s failure to make a timely objection is accepted as an agreement

with the conclusions of the Magistrate Judge. See Thomas v. Arn, 474 U.S. 140, 149–50 (1985).

No objection to the M&R’s finding that Lisa De Pinto is not an indispensable party having been

filed, and the time for doing so having passed, the parties have waived their right to de novo review

of this issue covered in the M&R. Nevertheless, this Court has conducted a full review of the issue

and, having done so, hereby finds that the recommendation of the Magistrate Judge is, in all

respects, in accordance with the law and should be approved.

IV. CONCLUSION

IT IS, THEREFORE, ORDERED that:

1. The M&R, (DE 37), is ADOPTED to the extent it addressed the merits of a claim.

Specifically, the M&R is ADOPTED as to all issues except for the denial of

Defendants’ 12(b)(6) claim for failure to address the claim during briefing of the

instant motion;

2. Defendants’ Renewed Motion to Dismiss the Amended Complaint or,

Alternatively, to Transfer Venue, (DE 33), is GRANTED in part and DENIED in

part. Specifically, Lisa De Pinto is DISMISSED, and the motion otherwise is

DENIED.

3. The Court GRANTS Plaintiff thirty (30) days leave from the issuance of this Order

to amend the Amended Complaint to correctly plead N.C. GEN. STAT. § 1-75.4(10)

as the statutory basis for personal jurisdiction over the nonresident Defendant.

SO ORDERED.

Signed: July 3, 2022

Robert J. Conrad, Jr. ae,

United States District Judge Moe

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