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.
The Court engaged in the statutory interpretation to determine whether an active manager who did not accept a formal officer position was covered by 10 Del. C. § 3114(b). The Court focused on the statutory language allowing process of service on an individual who "serves" in the officer's capacity. The Court concluded that the plain meaning extended to a person who performed the duties of an officer, even without formally accepting the position. Despite the defendants' argument that the Statute only referred to formal and former officers, the Court found that it covered the acting officers. Importantly, the Court distinguished between the strict test applied when determining a de facto officer's liability from the analysis used to determine whether the same person can be served with process. The Court cautioned that the determination of whether an individual could be served under the Statute would depend on the particular facts of each case. Here, the fact that the advisor was richly compensated as the only individual performing financial and accounting services for the company supported the proposition that he was an active manager. On the other hand, he never took a formal role at the company and remained a principal of an accounting firm. Accordingly, the Court determined that the record was insufficient to determine whether the advisor was an active officer in this case and allowed jurisdictional discovery to proceed.Share