Jurisdiction limits shield out-of-state contractor from South Carolina suit

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The 4th U.S. Circuit Court of Appeals affirmed a federal trial court’s dismissal of third-party claims against an out-of-state contractor, holding that the allegations failed to establish personal jurisdiction in South Carolina.

The appeal arose from a dispute connected to a state-funded hurricane recovery program in Florida, where the defendant served as general contractor but maintained no offices, employees, property, or business operations in South Carolina. The plaintiffs argued that jurisdiction existed because financing arrangements tied to the project were governed by South Carolina law and included forum-selection provisions favoring that state, but the defendant was not a party to those agreements.

Applying the prima facie standard used when no evidentiary hearing is held, the U.S. District Court for the District of South Carolina concluded it lacked both general and specific jurisdiction, and the 4th Circuit agreed. On appeal, the plaintiffs did not contest the absence of general jurisdiction, leaving the court to focus on whether the defendant had purposefully availed itself of the forum through South Carolina–directed conduct.

The plaintiffs relied on a funds control agreement governing disbursement of project proceeds, asserting that references to the defendant’s role in approving payments created sufficient contacts. The court rejected that argument, emphasizing that the defendant was not a signatory and that unilateral actions by third parties cannot supply the minimum contacts required by due process.

The plaintiffs also invoked a conspiracy theory of jurisdiction, seeking to impute another party’s South Carolina contacts to the defendant. While the 4th Circuit has recognized that doctrine in limited circumstances, it requires particularized allegations plausibly showing both a conspiracy and the defendant’s knowing participation.

The court found the allegations conclusory and equally consistent with routine, arm’s-length business dealings. Finally, the court held that the trial court did not abuse its discretion in denying jurisdictional discovery or declining to rely on a disputed affidavit. Because the plaintiffs failed to make a prima facie showing of personal jurisdiction, dismissal was proper.

The 16 page opinion is Mobilization Funding LLC v. Stokes, Lawyers Weekly No. 001-214-26.