836 N.W.2d 415
N.D.2013Background
- Solid Comfort (ND) supplied hotel furniture to Hatchett Hospitality (TN); Hatchett failed to pay remaining balances on multiple orders totaling about $110,000–$125,000.
- Glen Hatchett (TN) is owner/president of Hatchett Hospitality; he sent a 2012 letter admitting financial distress, claiming a personal secured interest in Hatchett Hospitality assets, and proposing a vendor-subordination plan.
- Solid Comfort sued Hatchett Hospitality for breach of contract and conversion, and sought to pierce the corporate veil to reach Glen Hatchett, Nu Horizon (TN LLC), and Hospitality Depot (FL LLC).
- The district court entered judgment against Hatchett Hospitality and dismissed Glen Hatchett, Nu Horizon, and Hospitality Depot for lack of personal jurisdiction after relying on affidavits and exhibits.
- On appeal, the North Dakota Supreme Court considered whether Solid Comfort made a prima facie showing that piercing the corporate veil would permit exercise of personal jurisdiction over the nonresident individuals/entities; court reviewed pleadings/affidavits in plaintiff’s favor.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether North Dakota courts may exercise personal jurisdiction over nonresidents by attributing a corporation’s contacts to alter egos via piercing the corporate veil | Solid Comfort: Lakota and alter-ego doctrine allow attributing Hatchett Hospitality’s contacts to Glen Hatchett, Nu Horizon, and Hospitality Depot; presented evidence of shared management, transfers of business, common addresses, and self-dealing | Appellees: No North Dakota contacts; Solid Comfort failed to make a prima facie showing of veil-piercing factors (insufficient capitalization, siphoning, failure of formalities, insolvency, etc.) | Reversed district court: viewing facts favorably to Solid Comfort, plaintiff made a prima facie showing to pierce the veil and establish personal jurisdiction; remanded for further proceedings on veil-piercing liability and jurisdictional facts. |
| Whether appellate court should supplement the record with debtor’s bankruptcy filings and schedule | Solid Comfort: Bankruptcy filings are relevant and should be judicially noticed/supplemented | Appellees: Opposed supplementation; materials were not before district court | Denied: Court refused to supplement the appellate record with bankruptcy petition/schedules because they were not considered by the district court; directed parties to notify district court on remand if automatic stay issues arise. |
Key Cases Cited
- Lakota Girl Scout Council, Inc. v. Havey Fund-Raising Mgmt., Inc., 519 F.2d 634 (8th Cir. 1975) (piercing corporate veil to attribute corporation’s contacts to dominant shareholder for personal jurisdiction)
- Epps v. Stewart Info. Servs. Corp., 327 F.3d 642 (8th Cir. 2003) (alter-ego contacts may support personal jurisdiction over nonresident entities)
- In re North Dakota Injury Asbestos Litig. No. 1, 737 F. Supp. 1087 (D.N.D. 1990) (federal cases exercising jurisdiction via veil-piercing/alter-ego doctrines)