Posts in Delaware Limited Liability Company Act

Chancery Declines to Find Personal Jurisdiction Over LLC Officers

CelestialRX Investments, LLC v. Krivulka, C.A. No. 11733-VCG (Del. Ch. Mar. 27, 2019).

Section 109 of the Delaware Limited Liability Company Act is an “implied consent” statute. It provides for personal jurisdiction in Delaware over (i) “managers” named in the governing LLC agreement, and (ii) persons who otherwise “participate materially” in the LLC’s management.  6 Del. C. § 18-109(a).  This recent decision is notable for holding that, based on the allegations, certain officers who performed important tasks for the LLC did not “participate materially” in its management for Section 109 purposes.  The Court pointed to precedent holding that “material participation” for Section 109 purposes requires actual control or a decision making role.  Here, one defendant was alleged to be a former manager who retained a “vice chairman” title and engaged a financial advisor on the LLC’s behalf.  The other defendant at-issue served as the company’s President and CEO and had important day-to-day responsibilities.  Such allegations fell short, however, in the circumstances alleged, where the plaintiffs’ complaint and arguments emphasized that, another defendant, who was designated as the “manager” in the governing LLC agreement, exercised “absolute control and discretion” and acted as “emperor, supreme leader and dictator for life.”  The Court reasoned such contentions precluded a finding that the two officers possessed decision making authority of their own.  Accordingly, they were not subject to personal jurisdiction under Section 109.