Business Court examines personal jurisdiction over restoration company CEO
Hurricane Florence made landfall near Wrightsville Beach, North Carolina on September 14, 2018, and its slow-moving chaos brought more than 30 inches of rain to some localities along with fierce winds. It left in its wake an estimated $24 billion in damages, and a multi-state footprint of clean-up and reconstruction work that stretched contractors thin and brought official warnings about those who prey upon storm victims.
JCG & Associates, LLC, et al. v. Disaster America USA, LLC, 2019 NCBC 78, 2019 WL 7018939 (N.C. Super. Ct. Dec. 19, 2019) focused on a challenge to personal jurisdiction against the backdrop of allegations of fraud and uncompleted repair work. It is representative of the litigations over construction disasters that often follow the natural ones. See Order and Opinion.
- A corporate officer’s “minimum contacts” with North Carolina can be an aggregation of his official, and individual capacity, acts.
- The Court accepts that “minimum contacts” may well require a claim-by-claim analysis to determine specific jurisdiction, but a defendant seeking to avoid personal jurisdiction on that ground should argue specifically for it on brief.
Plaintiffs James and Patricia Bonica and MIP 1, LLC owned properties on Bald Head Island that suffered significant wind and water damage. They were approached by defendant Jason Husk, and executed contracts for repair work with Disaster Services under which it would perform repair work approved by the insurance carriers. Jason Husk’s father, defendant Donald Husk, signed the contracts. Id. ¶¶ 5, 7-8.
The Bonicas and MIP 1 gave notice to terminate within six months, and each had similar laments: Disaster Services (i) had no general contractor’s license at execution and fraudulently indicated it did via plaintiff JCG, and (ii) hadn’t done any restoration work. Id. ¶ 9. Donald Husk responded to the purported terminations by sending an unpaid invoice to MIP 1’s counsel and threatening a lien on its property for non-payment, and informing the Bonicas’ counsel that their personal property would be retained pending full payment. Id. ¶ 10.
Plaintiffs filed suit, characterizing Donald Husk’s responses to the plaintiffs as unfair debt collection practices, and also alleging fraud, constructive fraud, Chapter 75 violations, racketeering, and negligence. JCG, which alleged Disaster America had falsely represented it in the contracts as a general contractor on the work, lodged similar claims. Id. ¶ 11.
Donald Husk moved to dismiss for lack of personal jurisdiction. While he signed the contracts and hired a company to pack and store the homeowners’ personal property, in an affidavit he denied drafting the contracts, making any representations to the Bonicas or MIP 1, or traveling to North Carolina for any purpose related to the contracts. Id. ¶ 8.
The Court’s consideration of Husk’s motion to dismiss focused on the traditional due process analysis of whether he had sufficient “minimum contacts” with North Carolina to pass a “specific” jurisdiction test. Husk’s primary argument was that as Disaster America’s CEO he only had contacts with North Carolina in his official capacity that were insufficient to hail him into a North Carolina court in his individual capacity. Id. ¶ 14.
The Court agreed that Husk’s corporate officer role was not enough, alone, to subject him to suit in a North Carolina court. Nor, though, did the Court believe that “insulate[d]” him from suit as an individual. Id. ¶ 15. Rather, the Court said that a defendant’s aggregated official and individual capacity contacts, together, formed the appropriate jurisdictional standard:
Put simply, ‘a corporate officer’s contacts with North Carolina – whether established in his individual capacity or in his capacity as an officer or agent of his company – count for purposes of determining whether that particular individual has sufficient minimum contacts with North Carolina.’”
Id. (citing Insight Health Corp. v. Marquis Diagnostic Imaging of N.C., LLC, 2015 WL 263515, at * 7 (N.C. Super. Ct. Jan. 21, 2015).
Husk’s terse volleys back at the plaintiffs’ purported contract terminations were his undoing for jurisdictional purposes. The Court found that these acts “directed to North Carolina” were sufficient contacts at least for the unfair debt collection claims because Husk knew when he sent them that the contracts he signed were invalid because Disaster America did not have a general contractor’s license. 2019 NCBC 78, ¶ 16. The Court issue-spotted that Husk might well have asserted that specific jurisdiction should be decided on a claim-by-claim basis, thus broaching the possibility that plaintiffs’ remaining claims might fail a “minimum contacts” analysis. However, because Husk did not advocate for that more nuanced jurisdictional analysis as to the remaining claims, the Court said that it “need not and does not” reach the issue. Id. ¶ 18. The Court exercised its discretion to keep Husk around for a determination of whether Disaster America’s recovery work was a storm all to itself.
Brad Risinger is a partner in the Raleigh office of Fox Rothschild LLP.