North Carolina Business Litigation Report

Court Of Appeals Splits On Personal Jurisdiction Over Corporate Officer

A panel of the Court of Appeals split today on the legal standard for when a corporate officer can be subject to personal jurisdiction based on contacts created through his or her capacity as an officer.

In Saft America, Inc. v. Plainview Batteries, Inc., the Court reversed the trial court's determination that there was jurisdiction over the defendant's president, who had conceded visiting plaintiff's factory in North Carolina.  The Court held that "personal jurisdiction over an individual officer or employee of a corporation may not be predicated merely upon the corporate contacts with the forum."  The majority ruled that all of the president's actions were in his official capacity as a corporate officer, not in his individual capacity, and reversed the trial court's finding of jurisdiction. 

Judge Arrowood dissented, so this issue may be headed for clarification by the North Carolina Supreme Court.  Here is the key quote from the dissent:

"In sum, under North Carolina precedent 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. In particular, 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. On the other hand, personal jurisdiction cannot be based solely on a defendant's employment status as the agent or officer of a company with ties to North Carolina, or on personal connections to North Carolina that fall short of the requisite 'minimum contacts.'"

The Court also held in Saft America that it could find jurisdiction over one of the corporate defendants based on a veil piercing theory.  It found the affidavit of the president of the defendant company asserting that the two companies were independent entities was trumped by unrefuted allegations in the complaint that "(1) defendants violated certain corporate laws and formalities; (2) the individual defendants exercised control over the finances, policies, and business practices of both corporate defendants; and (3) assets were diverted from [one defendant corporation to another, leaving one of those corporations] inadequately capitalized." 

Coincidentally, there was a second case decided the same day involving the issue of personal jurisdiction over a corporate officer, which reached the opposte result from the Saft America case.  In Eaker v. Gower, the Court reversed a finding that there was personal jurisdiction over the president of an out of state educational provider (The Natural Touch School of Massage Therapy, Inc.)  Faced with "dueling affidavits," the Court determined that there was no evidence to contradict that the defendant was a Florida resident, and nothing to establish that she had the necessary minimum contacts with the state to support personal jurisdiction. 

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Mack Sperling
Brooks Pierce, LLP
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