Posts in Personal Jurisdiction

Chancery Holds that LLC Agreement Did Not Confer Jurisdiction Over Contract and Tort Claims

Ramco Asset Mgmt. LLC v. USA Rare Earth, LLC, C.A. No. 2022-0665-SG (Del. Ch. Oct. 20, 2023)
Plaintiffs brought claims alleging improper dilution of their equity interests when transferring their holdings in an Australian rare-earth mining company to a Delaware limited liability company. Their claims included breach of fiduciary duty, fraud, breach of contract, and conspiracy. All five defendants moved to dismiss for failure to state a claim and on forum non conveniens grounds, and four of the five moved to dismiss for lack of personal jurisdiction. More ›

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Chancery Finds Delaware’s Officer Consent Statute Extends Beyond “Formal Officers” to De Facto or Acting Officers

Harris v Harris, C.A. No. 2019-0736-JTL (Del. Ch. January 19, 2023)
Delaware's Officer Consent Statute provides for service of process on anyone who "accepts election or appointment as an officer of a corporation…or who after such date serves in such capacity." In this case, Vice Chancellor J. Travis Laster addressed an issue of first impression and found that the Statute can be used to serve process on a person who performs the duties of an officer regardless of the person's formal title or acceptance of the position. This decision allows plaintiffs to engage in jurisdictional discovery to determine whether the company's advisor acted as its de facto officer. More ›

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Chancery Rules That Moving Situs of Trust to Delaware Supports Personal Jurisdiction Under the State’s Long-Arm Statute

Harris v. Harris, C.A. No. 2019-0736-JTL (Del. Ch. Jan. 12, 2023)
Three children filed suit against their mother and her associates, alleging they had seized control of a family-owned corporation and engaged in self-dealing, including via self-serving withdrawals from a family trust. Plaintiffs asserted claims for breaches of fiduciary duty, aiding and abetting those breaches, breach of a trust agreement, and tortious interference with the trust agreement. The general counsel of the company moved to dismiss the tortious interference claim against him, including for lack of personal jurisdiction. More ›

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Chancery Finds Personal Jurisdiction Under Conspiracy Theory of Jurisdiction Based on Trust Domestication

Harris v. Harris, C.A. No. 2019-0736-JTL (Del. Ch. Jan. 16, 2023)
Under the conspiracy theory of personal jurisdiction, when defendants conspire to engage in tortious activities, the Delaware-directed acts of one co-conspirator can be attributed to the other conspirators for the purpose of establishing personal jurisdiction under Delaware’s Long-Arm Statute.  Here, the plaintiffs alleged that the defendants acted in concert to support the domestication of a trust (specifically, a GRAT) in Delaware for purposes of a larger tortious scheme.  Based on these allegations, the Court of Chancery found there was sufficient support to support personal jurisdiction under the conspiracy theory, or minimally to allow for jurisdictional discovery.  But the Court also concluded that the discovery was unnecessary because there was evidence of spoliation, which allowed for a pleadings stage inference that the defendants were engaged in a conspiracy sufficient to support personal jurisdiction.

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Chancery Finds Buzzfeed and Others Not Bound by Arbitration Provisions in Employment Agreements

Buzzfeed v. Anderson, C.A. No. 2022-0357-MTZ (Del. Ch. Oct. 28, 2022)
In 2021, Buzzfeed engaged in a SPAC transaction wherein its stock was converted into stock in Buzzfeed’s post-SPAC corporate form. An IPO followed. In connection with the IPO, former employees of the pre-transaction Buzzfeed (“Old Buzzfeed”) who had received shares in the post-transaction Buzzfeed (“New Buzzfeed”), filed mass arbitrations against New Buzzfeed, certain officers and directors, and the IPO transfer agent. These former employees and New Buzzfeed shareholders alleged that, because a different class of stock was offered in the IPO than the class of stock that they held, they were unable to participate in the IPO, suffering $9 million in damages. In response, New Buzzfeed, certain officers and directors, and the IPO transfer agent sued in the Court of Chancery seeking: (1) to enjoin the arbitrations, (2) a declaration that they were not bound by arbitration provisions in employment agreements entered into with Old Buzzfeed, and (3) a declaration that the former employees were obligated to comply with a forum selection clause in New Buzzfeed’s charter and bring their claims in the Court of Chancery. The plaintiffs moved for summary judgment on their claims; the former employees moved to dismiss the complaint for lack of subject matter and personal jurisdiction. More ›

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Chancery Applies Implied Consent to Service Provision of Delaware LLC Act to Individual Without Any Formal Role at the LLC

In Re P3 Health Grp. Hldgs., LLC, Consol. C.A. No. 2021-0518-JTL (Del. Ch. Oct. 26, 2022)
The implied consent provision of Section 18-109 of Delaware’s LLC Act provides that “managers” of Delaware LLCs consent to the service of process in Delaware. The statute defines “managers” as both (1) those formally designated as managers, and (2) those who “participate [] materially” in management. Disputes over whether an individual not falling in the first category falls in the second often focus on individuals with some formal role at the LLC.  As this decision illustrates, however, an individual without any formal role at the LLC, but who otherwise participates materially in the LLC’s management, may also be found to be a manager, and thus have consented to service and jurisdiction in Delaware. Facts relevant to the Court of Chancery’s finding of an adequately alleged acting management, in this case, included the defendant’s direction of the company’s managers, control of the company’s advisors, involvement in legal decisions, and access to information.

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Chancery Finds Personal Jurisdiction Over Individual Who Formed Delaware Entities in Connection with a Challenged Merger Transaction

In Re P3 Health Grp. Hldgs., LLC, Consol. C.A. No. 2021-0518-JTL (Del. Ch. Oct. 14, 2022)
The Court of Chancery rejected an individual defendant’s challenge to Delaware’s assertion of personal jurisdiction over him. Although the defendant portrayed himself as merely a shareholder of Delaware entities (which is not in itself a basis for personal jurisdiction), the Court found that he had transacted business in the state for purposes of Delaware’s Long Arm Statute because he also formed two entities as part of a planned merger. It did not offend due process to require the individual to defend litigation related to the merger in Delaware because there was a nexus between his contacts and the claims and because he should have reasonably anticipated that Delaware would exercise jurisdiction over him in litigation arising from the merger.

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Chancery Applies Implied Consent to Service Provision of Delaware LLC Act to LLC’s General Counsel and Chief Legal Officer

In re P3 Health Group Holdings, LLC, Consol. C.A. No. 2021-0518-JTL (Del. Ch. Sept. 12, 2022)
The plaintiff, a large unit holder in a Delaware LLC, sued several defendants, including the general counsel and chief legal officer of the LLC, for allegedly breaching her fiduciary duties to the LLC and its members for her role in facilitating a challenged de-SPAC merger. The implied consent provision of Section 18-109 of Delaware’s LLC Act provides that “managers” of Delaware LLCs consent to the service of process in Delaware. The statute defines “managers” as both (1) those formally designated as managers, and (2) those who “participate [] materially” in management. Defendant moved to dismiss for lack of personal jurisdiction arguing that Section 18-109 did not apply to her in her role as an officer of the LLC because (1) she was not a designated manager, and (2) she was not acting in a managerial capacity. Plaintiff argued that because the defendant voluntarily assumed the role of a senior officer of the LLC and because, as alleged in the complaint, she acted in a significant managerial capacity with respect to the LLC, the implied consent provision did, in fact, apply. The Court of Chancery agreed with the plaintiff and its decision provides a thorough discussion of the acting manager prong of Section 18-109. The Court reasoned that, at the pleading stage, the customary responsibilities of a general counsel and chief legal officer provided a basis for asserting personal jurisdiction. The specific allegations, in this case, supported a reasonable inference that the defendant acted in a significant managerial capacity in connection with the challenged conduct. 

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Chancery Holds That Controlling Stockholder Approving Exclusive Forum Selection Clause In Charter Amendment Impliedly Consented To Personal Jurisdiction

In Re Carvana Co. S’holders Litig., C.A. No. 2020-0415-KSJM (Del. Ch. Aug. 31, 2022)
In Delaware, parties may waive the requirement of personal jurisdiction either expressly or impliedly. The Court of Chancery applied this waiver principle in In re Pilgrim’s Corporations Derivative Litigation (2019), finding that a controlling stockholder impliedly consented to personal jurisdiction when his Board appointees approved a bylaw selecting the Court of Chancery as the exclusive jurisdiction for certain stockholder disputes. This decision extends and applies Pilgrim’s ruling to a controlling stockholder who personally voted to approve a charter amendment that granted exclusive jurisdiction in the Court of Chancery. More ›

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Non-Resident Asset Managers Found Not To Be “Acting Managers” Subject To Personal Jurisdiction Under Delaware LLC Act

Dlayal Holdings, Inc. v. Gracey, C.A. 2020-1070-LWW (Del. Ch. Dec. 27, 2021)
Under 6 Del. C. § 18-109(a), serving as the manager of a Delaware LLC constitutes consent to be served through the company’s registered agent for all Delaware proceedings “involving or relating to the [company’s] business ... or a violation by the manager ... of a duty” to the company or its members. By its terms, the statute applies not only to formal managers identified in the company’s governing documents but also to acting managers – that is, persons who “participate[] materially in the management” of the company. This case clarifies what constitutes material participation under § 18-109(a). More ›

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Chancery Finds Lack of Personal Jurisdiction Over Delaware Corporate Officers Based on Due Process Considerations

In re Bam International, LLC v. The MSBA Group Inc., C.A. No. 2021-0181-SG (Del. Ch. Dec. 14, 2021)
Two officers of a Delaware corporation were sued for alleged tortious interference with an escrow agreement between the Delaware corporation employing the officers and the plaintiff (another Delaware corporation). The plaintiff also brought a breach of contract claims against the Delaware corporation and other entity defendants. The two officers moved to dismiss for lack of personal jurisdiction arguing that, other than their status as officers of a Delaware corporation, they had no relationship with Delaware. The officers further noted that they were not signatories to the contract at issue, which, in any event, was only connected to Delaware by choice of law and forum clauses. Plaintiff contended that the officer defendants, as fiduciaries of a Delaware entity, had implicitly consented to jurisdiction pursuant to 10 Del. C. § 3114(b). More ›

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Superior Court Rejects Insurers’ Motions to Dismiss Coverage Dispute Based upon Ripeness and Lack of Personal Jurisdiction

Energy Transfer Equity, L.P. v. Twin City Fire Insurance Co., et al., C.A. No. N19C-11-009 EMD CCLD (Del. Super. Ct. Sept. 25, 2020)

Energy Transfer Equity, L.P. v. Twin City Fire Insurance Co., et al., C.A. No. N19C-11-009 EMD CCLD (Del. Super. Ct. Sept. 28, 2020) 

Plaintiffs-Insureds sought declaratory relief and damages for Defendants-Insurers anticipatory breach of directors’ and officers’ insurance policies. Defendant Twin City Fire Insurance Co. issued the primary policy, and the remaining Defendants issued excess coverage policies. Plaintiffs specifically sought insurance coverage related to litigation in the Court of Chancery (“Dieckman Action”), in which trial had occurred but no decision had been issued. More ›

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Chancery Rejects Conspiracy Jurisdiction Over Foreign Defendant

Lacey v. Mota-Velasco, C.A. No. 2019-312-SG (Del. Ch. Oct. 6, 2020)

Under Istituto Bancario, a foreign defendant alleged to be part of a conspiracy may be subject to personal jurisdiction in Delaware, but only if the plaintiff alleges, among other requirements, and consistent with the Delaware long-arm statute and due process, an act in Delaware in furtherance of the conspiracy. Conspiracy jurisdiction is not an independent basis of jurisdiction but rather provides a framework by which the Delaware courts evaluate whether there are sufficient minimum contacts to justify the exercise of personal jurisdiction.  More ›

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Chancery Declines to Apply Status Quo Order to Prevent Sale of Litigant’s Personal Interest in Indirect Foreign Subsidiary of Delaware LLC

Carlos Eduardo Lorefice Lynch v. R. Angel Gonzalez Gonzalez, C.A. No. 2019-0356-MTZ (Del. Ch. June 22, 2020)

In this control dispute, the Delaware Court of Chancery denied a motion to amend a status quo order, finding that the proposed amendment would require the Court to enforce orders beyond its jurisdictional purview.  More ›

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Court Finds LLC Manager Consent Statute Authorizes Personal Jurisdiction for Tort Claims Related to the Company, Not Just Alleged Breaches of Managers’ Duties; However, Court Dismisses Investor Defendants with Insufficient Delaware Contacts

CLP Toxicology, Inc. v. Casla Bio Holdings LLC, C.A. 2018-0783-PRW (Del. Ch. Jun. 29, 2020) & NC18C-10-332 PRW CCLD (Del. Super. Jun. 29, 2020)

In both the corporation and LLC contexts, Delaware law employs consent statutes, which authorize personal jurisdiction over officers and directors of corporations and over managers (in name or in fact) of LLCs. Despite broad language in such statutes, courts traditionally interpreted the statutes to apply to only claims related to breaches of fiduciary or statutory duties. As demonstrated here, however, the modern trend is to interpret consent statutes to apply to a broader range of claims related to the entity. More ›

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