Supreme Court Finds Personal Jurisdiction Against Foreign Corporation's CEO Based On His Corporate Contacts With NC
On Friday the NC Supreme Court issued a per curiam decision on personal jurisdiction. The Court reversed a Court of Appeals (COA) decision that rejected personal jurisdiction against a foreign corporation's CEO. The Supreme Court adopted the dissenting opinion of (former) COA Judge Arrowood. The case is Saft America, Inc. v. Plainview Batteries, Inc.
We previously wrote about this case here when the COA decision issued. We refer you to that post's discussion of the issue on which the COA panel was unanimous: its holding that personal jurisdiction lies over a foreign corporate parent based on veil-piercing allegations.
Where the COA split was on whether personal jurisdiction exists over a foreign corporation's CEO, and we discuss that issue below.
Saft is a NC manufacturer. Defendant Plainview is a NY corp which had a business relationship with Saft, purchasing millions of dollars of goods from Saft pursuant to contracts between them. The relationship broke down after a dispute over payments. Saft sued Plainview. But Saft also sued Bernie Erde, an officer of Plainview and owner of 49% of Plainview's stock (the "CEO"). And Saft also sued another NY corp, Energex, which apparently owned a stake in Plainview, and which had overlapping management and ownership with Plainview. Both the CEO and the parent moved to dismiss for lack of personal jurisdiction.
With respect to the CEO, Saft alleged that it dealt with the CEO as Plainview's representative and that the CEO had visited N.C. in connection with their business relationship, for purposes of touring Saft's facility and negotiating a contract. The CEO submitted an affidavit admitting he had visited Saft's factory in N.C. in his role as a corporate officer of Plainview, but he contended that any dealings he had with Saft were solely in his capacity as an officer of Plainview. The trial court found he was subject to personal jurisdiction.
After finding personal jurisdiction against the parent based on veil-piercing allegations, the COA majority held there was no personal jurisdiction over the CEO. From the principle that personal jurisdiction over an individual officer of a corporation may not (consistent with due process) be predicated upon the corporation's contacts with the forum, the majority reasoned that contacts undertaken by an officer in his official capacity on behalf of the corporation can't establish personal jurisdiction over the officer. The majority distinguished earlier cases that had found jurisdiction against corporate officers, holding that those cases involved acts taken by the officers in their individual capacities (e.g., signing personal guarantees or a promissory note in their individual capacities). Because Saft failed to allege any act against the CEO that was committed in his individual capacity, the majority held that he was not subject to personal jurisdiction.
Judge Arrowood dissented. He didn't disagree with the proposition that personal jurisdiction over an officer can't be based merely on the corporation's contacts. But he disagreed that acts taken by an individual as an officer and principal shareholder of a corporation don't count. In his view, the precedents "did not hold either that (1) personal jurisdiction over a defendant may only be based on the contacts he has with the state in the course of his private life; or, conversely, that (2) in assessing personal jurisdiction we may not 'count' a defendant's contacts if they were made as part of his employment." "Indeed," he contended, "relevant precedent consistently interprets the requirement that a defendant act in his 'individual capacity' to mean only that he must personally have minimum contacts with North Carolina, and not that these contacts must arise from his 'personal life.'" As Judge Arrowood read the case law, "the determination of whether personal jurisdiction is properly exercised over a defendant does not exclude consideration of defendant's actions merely because they were undertaken in the course of his employment. The corporate actions of a defendant who is also an officer and principal shareholder of a corporation are imputed to him for purposes of deciding the issue of personal jurisdiction." Judge Arrowood relied heavily on this statement from a 30-yr-old Supreme Court case holding that where the "defendant is a principal shareholder of the corporation and conducts business in North Carolina as principal agent for the corporation, then his corporate acts may be attributed to him for the purpose of determining whether the courts of this State may assert personal jurisdiction over him." United Buying Group, Inc. v. Coleman, 251 S.E.2d 610, 614 (N.C. 1979).
On Friday the Supreme Court agreed with Judge Arrowood, so now the case will go forward against Plainview's CEO (and Plainview's parent, Energex).
We previously wrote about this case here when the COA decision issued. We refer you to that post's discussion of the issue on which the COA panel was unanimous: its holding that personal jurisdiction lies over a foreign corporate parent based on veil-piercing allegations.
Where the COA split was on whether personal jurisdiction exists over a foreign corporation's CEO, and we discuss that issue below.
Saft is a NC manufacturer. Defendant Plainview is a NY corp which had a business relationship with Saft, purchasing millions of dollars of goods from Saft pursuant to contracts between them. The relationship broke down after a dispute over payments. Saft sued Plainview. But Saft also sued Bernie Erde, an officer of Plainview and owner of 49% of Plainview's stock (the "CEO"). And Saft also sued another NY corp, Energex, which apparently owned a stake in Plainview, and which had overlapping management and ownership with Plainview. Both the CEO and the parent moved to dismiss for lack of personal jurisdiction.
With respect to the CEO, Saft alleged that it dealt with the CEO as Plainview's representative and that the CEO had visited N.C. in connection with their business relationship, for purposes of touring Saft's facility and negotiating a contract. The CEO submitted an affidavit admitting he had visited Saft's factory in N.C. in his role as a corporate officer of Plainview, but he contended that any dealings he had with Saft were solely in his capacity as an officer of Plainview. The trial court found he was subject to personal jurisdiction.
After finding personal jurisdiction against the parent based on veil-piercing allegations, the COA majority held there was no personal jurisdiction over the CEO. From the principle that personal jurisdiction over an individual officer of a corporation may not (consistent with due process) be predicated upon the corporation's contacts with the forum, the majority reasoned that contacts undertaken by an officer in his official capacity on behalf of the corporation can't establish personal jurisdiction over the officer. The majority distinguished earlier cases that had found jurisdiction against corporate officers, holding that those cases involved acts taken by the officers in their individual capacities (e.g., signing personal guarantees or a promissory note in their individual capacities). Because Saft failed to allege any act against the CEO that was committed in his individual capacity, the majority held that he was not subject to personal jurisdiction.
Judge Arrowood dissented. He didn't disagree with the proposition that personal jurisdiction over an officer can't be based merely on the corporation's contacts. But he disagreed that acts taken by an individual as an officer and principal shareholder of a corporation don't count. In his view, the precedents "did not hold either that (1) personal jurisdiction over a defendant may only be based on the contacts he has with the state in the course of his private life; or, conversely, that (2) in assessing personal jurisdiction we may not 'count' a defendant's contacts if they were made as part of his employment." "Indeed," he contended, "relevant precedent consistently interprets the requirement that a defendant act in his 'individual capacity' to mean only that he must personally have minimum contacts with North Carolina, and not that these contacts must arise from his 'personal life.'" As Judge Arrowood read the case law, "the determination of whether personal jurisdiction is properly exercised over a defendant does not exclude consideration of defendant's actions merely because they were undertaken in the course of his employment. The corporate actions of a defendant who is also an officer and principal shareholder of a corporation are imputed to him for purposes of deciding the issue of personal jurisdiction." Judge Arrowood relied heavily on this statement from a 30-yr-old Supreme Court case holding that where the "defendant is a principal shareholder of the corporation and conducts business in North Carolina as principal agent for the corporation, then his corporate acts may be attributed to him for the purpose of determining whether the courts of this State may assert personal jurisdiction over him." United Buying Group, Inc. v. Coleman, 251 S.E.2d 610, 614 (N.C. 1979).
On Friday the Supreme Court agreed with Judge Arrowood, so now the case will go forward against Plainview's CEO (and Plainview's parent, Energex).
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