United States: Delaware Supreme Court Significantly Limits Personal Jurisdiction Of Non-Delaware Corporations

A corporation is no longer deemed to have consented to personal jurisdiction in Delaware solely as a result of registering to do business there. A recent Delaware Supreme Court decision, Genuine Parts Company v. Cepec, makes clear that "[i]n most situations where the foreign corporation does not have its principal place of business in Delaware, that will mean that Delaware cannot exercise general jurisdiction over the foreign corporation."

The Delaware Supreme Court recently held, in Genuine Parts Company v. Cepec,1 that non-Delaware corporations are no longer deemed to have consented to personal jurisdiction in Delaware solely by reason of registering to do business in the state.

The defendant at issue in the decision, Genuine Parts, "never had a corporate office in Delaware, does not conduct its board or shareholder meetings in [Delaware], . . . does not have any officers [t]here," and, "[a]ccording to Genuine Parts, fewer than 1% of its employees work in Delaware, fewer than 1% of its auto-parts stores are [t]here, and less than 1% of its revenue comes from [Delaware]."2 Despite its very limited connection to Delaware, the trial court held "that Genuine Parts had consented to general jurisdiction in Delaware merely by complying with § 376," which requires foreign corporations to appoint a registered agent in Delaware to accept service of process.3 In concluding that it had personal jurisdiction over Genuine Parts, the trial court did not conduct any due process analysis, because it was following the Delaware Supreme Court's prior decision in Sternberg v. O'Neil,4 which "interpreted § 376 as conferring general jurisdiction over a registered foreign corporation via express consent."5

Chief Justice Strine, writing for the majority of the Delaware Supreme Court, acknowledged "Sternberg's holding that a foreign corporation expressly consents to general jurisdiction by agreeing to have its designated in-state agent accept service of process has been the law in Delaware since the late 1980s."6 However, the Chief Justice explained that two United States Supreme Court decisions subsequent to Sternberg "cast doubt on the idea that a state could require a foreign corporation—as a mere price of doing any business in a state in our fifty-state republic—to be subject to its general jurisdiction for any claim, however unrelated to its activities in the forum state."7

In the first decision, Goodyear Dunlop Tires Operations, S.A. v. Brown,8 "the U.S. Supreme Court explained that '[a] court may assert general jurisdiction over foreign . . . corporations . . . when their affiliations with the State are so 'continuous and systematic' as to render them essentially at home in the forum State.'"9 Subsequently, in Daimler AG v. Bauman,10 the United States Supreme Court followed Goodyear's logic, and "confirmed that 'only a limited set of affiliations with a forum will render a defendant amendable to all-purpose jurisdiction there."11 Chief Justice Strine emphasized that the Supreme Court's analysis in Daimler focused on whether "the corporation's operations are 'so substantial and of such a nature as to render the corporation at home in that State.'"12

The majority of the Delaware Supreme Court also discussed public policy implications of its decision, stating "we no longer live in a time where foreign corporations cannot operate in states unless they somehow become a resident; nor do we live in a time when states have no effective bases to hold foreign corporations accountable for their activities within their borders."13 Consistent with this policy, the majority held that, in most situations, Delaware courts will not have general jurisdiction over a non-Delaware corporation unless the foreign corporation has its principal place of business in Delaware.14

One of the five Delaware Supreme Court justices dissented.15 Justice Vaughn's less than two-page dissenting opinion can be summarized as follows: "It may be that the United States Supreme Court will go in the same direction as the Majority. But we won't know until it gets there. I would not divest the trial courts of this state of significant jurisdiction unless I was sure I was right, and I am not sure the Majority is right."16

The Genuine Parts decision follows two recent decisions from the Delaware Supreme Court addressing its jurisdictional jurisprudence, Maria Elena Martinez v. E.I. du Pont de Nemours & Co., Inc.,17 and, more recently, Marc Hazout v. Tsang Mun Ting.18 In Maria Elena, the Delaware Supreme Court "conclude[d], based on the evolution of [Delaware] case law and insights gleaned from experience, that some prior decisions gave inadequate weight to the discretionary power of the trial courts to recognize . . . the importance of the right of all parties (not only plaintiffs) to have important, uncertain questions of law decided by the courts whose law is at stake."19 One justice dissented, asserting critically that the purported "tension" identified by the majority is "non-existent," and that the majority contorted well-settled Delaware law to support the position that questions of Delaware business law should be decided in Delaware.20

More recently, in Marc Hazout, the Delaware Supreme Court affirmed the trial court's ruling that it had personal jurisdiction over an officer of a Delaware corporation pursuant to Delaware's officer consent statute, 10 Del. C. § 3114(b), holding that, although the plaintiff asserted tort claims (opposed to corporate law claims), because "all claims against [the officer] arise out of actions taken in his official capacity, and they include using his authority as a [corporate] fiduciary . . . there is no rational argument that the terms of § 3114(b) are not satisfied."21

The recent decisions in Maria Elena, Marc Hazout, and Genuine Products signal that the Delaware Supreme Court is increasingly refining its jurisdictional jurisprudence and, with its most recent decision Genuine Products, significantly limiting the application of personal jurisdiction over non-Delaware corporations.

Footnotes

1. 2016 WL 1569077 (Del. Apr. 18, 2016).

2. Id. at *3.

3. Id. Delaware General Corporation Law ("DGCL") Section 371 requires foreign corporations to register to do business in Delaware, and DGCL Section 376 requires the designation of a registered agent for service of process. Neither statute, however, explicitly states that compliance with the registration requirement results in a consent to personal jurisdiction. Most states' registration statutes are similar. Pennsylvania's registration statute and long-arm statute, on the other hand, explicitly state that registration constitutes a waiver of any challenge to personal jurisdiction within the state.

4. 550 A.2d 1105 (Del. 1988).

5. Genuine Parts, 2016 WL 1569077 at *6.

6. Id.

7. Id.

8. 131 S. Ct. 2846 (2011).

9. Genuine Parts, 2016 WL 1569077 at *8 (quoting Goodyear, 131 S. Ct at 2851).

10. 134 S. Ct. 746 (2014).

11. Genuine Parts, 2016 WL 1569077 at *8 (quoting Daimler, 134 S. Ct. at 760).

12. Id. at *9 (quoting Daimler, 134 S. Ct. at 761 n.19) (emphasis in original). Chief Justice Strine explained that the United States Supreme Court's rulings in Goodyear and Daimler "made clear that it is inconsistent with principles of due process for a corporation to be subject to general jurisdiction in every place it does business." Id. at *10. See also id. at *18 ("In light of the U.S. Supreme Court's clarification of the due-process limits on general jurisdiction in Goodyear and Daimler, we read our state's registration statutes as providing a means for service of process and not as conferring general jurisdiction.").

13. Id. at *10.

14. Id. at *1 ("In most situations where the foreign corporation does not have its principal place of business in Delaware, that will mean that Delaware cannot exercise general jurisdiction over the foreign corporation.").

15. 2016 WL 1569077, at *18 (Del. Apr. 18, 2016) (Vaughn, J., dissenting).

16. Id. Justice Vaughn emphasized that only one month before the majority opinion, "a circuit judge of the Federal Circuit wrote a concurring opinion mentioned by the Majority that 'Daimler did not overrule the line of Supreme Court authority establishing that a corporation may consent to jurisdiction over its person by choosing to comply with the state's registration statute.'" See id. (quoting Acorda Therapeutics Inc. v. Mylan Pharm. Inc., 2016 WL 1077048, at *10 (Fed. Cir. Mar. 18, 2016)).

17. 86 A.3d 1102 (Del. 2014).

18. 2016 WL 748490 (Del. Feb. 26, 2016).

19. 86 A.3d at 1111.

20. Maria Elena Martinez v. E.I. du Pont de Nemours & Co., Inc., 86 A.3d 1113, 1113-16 (Del. 2014) (stating critically that the majority "opinion is unlike any in recent history," "is a cause for concern," "cites to cases that have nothing to do with forum non conveniens," "rewrites decades of precedent," and "strains to recast the trial court's decision, and the law, in order to make the point that other jurisdictions should not interfere with the Delaware corporate franchise") (Berger, J., dissenting). See also id. at 21-23 ("[T]he majority . . . address[es] its real concern – the Delaware corporate franchise. The majority rewrites decades of precedent, saying that it must resolve 'tension' in the existing law. But there was no tension in this Court until now.").

21. 2016 WL 748490 at *2.

This article is presented for informational purposes only and is not intended to constitute legal advice.

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