In a mobile economy, with company executives and key employees working far afield from their company's homes and interests, the often-tricky business of personal jurisdiction has taken on new layers of complexity. In Shively v. ACI Learning Holdings, LLC, 2025 NCBC 51, the Business Court examined its ability to exercise jurisdiction over an out-of-state company (or 2 or 3) that had entered a severance agreement with a CEO who moved to North Carolina a year before a parting of their ways.
None of the defendants had property in North Carolina, nor were they registered to do business here. But ACI did have five to ten employees here during the time plaintiff Brett Shively continued as CEO after moving from Illinois. Id. ¶¶ 13-14. The dispute had its roots in a July 2024 video call in which ACI's board chair suggested that Shively resign. Negotiations ensued and a severance agreement and release was reached that required a purchase of Shively's equity shares and his availability for consulting and transition services. Shively executed the contract in North Carolina, but no one from ACI traveled here for the negotiations or signing. Id. ¶¶ 15-17, 20-21.
The dispute arose over a failure to purchase Shively's equity shares in ACI, and the defendants moved to dismiss, in part, for lack of personal jurisdiction. One defense group, the Boathouse Defendants, argued the long-arm statute didn't apply to them because they weren't a party to the contract. The ACI Defendants conceded the statute covered them as a signatory. All of the defendants challenged whether they had sufficient contacts with North Carolina to satisfy due process.
Judge Robinson noted that "[t]he object of a signature to a contract is to show assent, but the signing of a contract is not necessarily essential to its validity. Assent may be shown in other ways, such as acts of conduct or silence." Id. ¶ 46 (quoting Burden Pallet Co. v. Ryder Truck Rental, Inc., 49 N.C. App. 286, 289 (1980)). While none of the Boathouse Defendants were signatories, the severance agreement – negotiated by Chong Moua, chair of ACI's board and managing partner of the Boathouse Defendants – implicated the latter in payments to Shively. "As a material term of this Agreement . . . Company and/or Boathouse . . . agrees to buy all of [Shively's] equity interests[.]" If the Boathouse Defendants didn't contest that Moua could act of their behalf, the Court found, "it follows that the Boathouse Defendants inserted this term into the [severance agreement] and, therefore, agreed to assume obligations under [it]." Id. ¶ 47.
All defendants argued they lacked minimum contacts with North Carolina because the severance agreement was "at most a contract that constitutes a single contact with North Carolina that terminates their relationship with a North Carolina resident." Id. ¶ 52. Key to whether that single contract would suffice, the Court noted, was whether it had a "substantial connection with this State." Id. ¶ 54 (quoting Tom Togs, Inc. v. Ben Elias Indus. Corp., 318 N.C. 361, 367 (1989)). Plus, which party initiated the contract is "a critical factor in assessing whether a nonresident defendant has made "purposeful availment of the state." Id. (quoting Banc. of Am. Sec. LLC v. Evergreen Int'l Aviation, Inc., 169 N.C. App. 690, 698 (2005)). Id.
The Court found it a "close case," but found it "critical" that the defendants knew Shively lived in North Carolina and that they contacted him here to initiate the consulting and transition services he was required to provide under the severance agreement. The Court acknowledged that the severance agreement didn't require Shively to perform under the agreement in North Carolina, but "[n]othing . . . suggests that unless the location of the act is dictated by the contract, performance of a contractual obligation in the forum state is an irrelevant unilateral act." Id. ¶¶ 58-59 (quoting Toshiba Glob. Com. Sols. Inc. v. Smart & Final Stores, LLC, 381 N.C. 692, 703 (2022)).
Worth Noting
Small details can matter in a jurisdictional analysis. In assessing whether the Boathouse Defendants had assented to the severance agreement without signature, the Court took note that Moua, Boathouse's managing partner, used his Boathouse email address to request more time to purchase Shively's equity interest in ACI. And it noted that the ask was to "accommodate us," even though "[w]e understand you have your rights and can do as you wish." Id. ¶ 48.
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