A recent post on this blog addressed the trend of Delaware courts more aggressively asserting personal jurisdiction over out-of-state directors and officers, even when there are no claims for breach of fiduciary duty. Now, Georgia courts are following suit.
Directors and officers of Georgia companies who live in other states can now be sued in their personal capacities in Georgia in connection with their conduct as corporate officers and board of directors.
Background: Georgia’s Treatment of Non-Resident Directors and Officers
This new trend of haling non-resident directors and officers to courts in Georgia is based on an interpretation of Georgia’s long-arm statute.
In Techjet Innovations Corp. v. Benjelloun, a Georgia federal court determined that out-of-state directors and officers are subject to personal jurisdiction in Georgia if the individual is a “primary participant” in the underlying facts of the lawsuit.
In Techjet, the defendant argued that he was not subject to personal jurisdiction in Georgia because he did not have physical presence in the state. The court rejected this argument, holding that the defendant’s contract negotiations and formation of a business relationship with the Georgia-based plaintiff was enough to trigger the “transacted business” clause in Georgia’s long-arm statute. Therefore, the defendant was subject to personal jurisdiction despite the fact he had never set foot in Georgia.
In 2019, another federal court in Georgia applied this interpretation of Georgia’s long-arm statute.
In Baker & Murakami Produce Company, LLLP v. Weng Farms Inc., an officer of an international company was subject to personal jurisdiction in Georgia because of her “primary participation” in the underlying facts of the claim. In Baker & Murakami, Liya Weng, an officer of Weng Farms, moved to set aside a default judgment against her because she failed to file a timely responsive pleading. Ms. Weng argued that she did not file a response because she does not have sufficient contacts with the state to be subject to personal jurisdiction there.
Relying on the Techjet case, the court rejected that argument, finding that Ms. Weng availed herself to personal jurisdiction in Georgia by conducting business in the state as an officer of the defendant company.
As society and commerce become more interconnected and conducting business across state and international boundaries becomes more commonplace, courts are less likely to sympathize with the desire of non-resident officers or directors to be sued in their state of residence.
As always, please let us know how we may be of assistance.
Thank you to Allyson Mancuso, BFV’s 2020 summer associate, for her help in writing this blog post.