Hazout v. Ting, No. 353, 2015 (February 26, 2016)

The Delaware Supreme Court determined that the statutory basis for finding jurisdiction over Delaware directors and officers was more expansive than it has been interpreted to be by Delaware courts for over thirty years. The governing statute at issue in this case, 10 Del. C. § 3114, provides that non-resident officers and directors of Delaware corporations are deemed to have consented to personal jurisdiction in: (1) all civil actions brought in Delaware, by or on behalf, or against a Delaware corporation, in which such director or officer “is a necessary or proper party” or (2) in any action against such director or officer for violation of a duty in such capacity. However, the Court of Chancery determined in 1980 that only subpart (2) was an applicable means of finding jurisdiction, effectively reading the language of subpart (1) out of the statute.

The Court noted that it had never had occasion to consider the precise issue before it, but found that the General Assembly clearly intended there to be two sets of categories in which directors and officers consented to jurisdiction based on the plain language of Section 3114.  The Court also addressed the argument that the “necessary and proper” category of cases was unconstitutionally broad by determining that the threat could be resolved by applying the “minimum contacts” analysis set forth in International Shoe.

Bottom Line: Non-resident directors and officers of Delaware corporations will be subject to personal jurisdiction in actions brought in Delaware where the corporation is properly before the Court and the fiduciaries are alleged to have used their corporate position to commit wrongs on behalf of the company.