Delaware Business Litigation Report

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. 

The Lacey decision illustrates that the mere act of filing a corporate instrument in Delaware will not suffice to establish a jurisdiction-conferring contact under the conspiracy theory if that filing does not advance the alleged conspiracy. Here, the foreign defendant had no contacts in Delaware. The sole act plaintiff alleged to have occurred in Delaware was that the foreign defendant used its control over a Delaware entity to cause the Delaware entity to enact and file a charter amendment that required certain conflicted transactions between the Company and its controller to be approved by a committee of independent directors. The gravamen of the plaintiff’s complaint was that the defendant directors failed to comply with that provision in the amended charter. The filing of the charter amendment, according to the Court could not have been an act in furtherance of a conspiracy. The provision was an impediment to the alleged harm and it was a breach of the provision that caused the harm. For that reason, the Court granted the foreign defendant’s motion to dismiss for lack of personal jurisdiction.

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