Recent Delaware Supreme Court Opinion Limits General Personal Jurisdiction for Foreign Corporation

By John Young, Jr.

Defendants challenging general personal jurisdiction, which is purportedly based on a foreign corporation's registration to do business within a state, have been provided an important tool with the Delaware Supreme Court's recent decision in Genuine Parts Co. v. Cepec, et al. (No: 528, 2015 decided April 18, 2016).

The U.S. Supreme Court has held general personal jurisdiction exists in a forum state, when a foreign corporation's "continuous corporate operations within a state [are] so substantial and of such a nature as to justify suit against it on causes of action arising from dealings entirely distinct from those activities." International Shoe Company v. Washington, 326 U.S. 310 (1945). Then, in Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915 (2011), the Supreme Court explained that the proper jurisdictional inquiry focuses on whether a foreign corporation's "affiliations with the state are so 'continuous and systematic' as to render [it] essentially at home in the forum State."

Most recently, the U.S. Supreme Court in Daimler AG v. Bauman, 134 S.Ct. 746 (2014), examined a general jurisdiction claim against Daimler based on the business its subsidiary conducted in the forum state. The U.S. Supreme Court concluded no personal jurisdiction existed for Daimler under the California long-arm statute, and also rejected the argument that Daimler was subject to the California court's general jurisdiction based on the contacts of its subsidiary with the state. The Supreme Court concluded that neither Daimler, nor MBUSA, were incorporated in California and neither entity had its principal place of business there. Therefore, defendant's affiliation with the forum state was not so "continuous and systematic" as to render the defendant essentially "at home" in the forum state. The Supreme Court rejected the defendant's subsidiary's relationship and actions as establishing personal jurisdiction for defendant Daimler.

In April, 2016, the Delaware Supreme Court in Genuine Parts, a court with national influence because of its impact on corporate law, examined whether that state's statutory requirement for foreign corporations to register to do business and to agree to the appointment of a registered agent to receive service of process, constituted a sufficient basis upon which general jurisdiction could be based under Goodyear and Daimler. The Delaware Supreme Court in Genuine Parts reviewed a holding by the court below that the defendant foreign corporation had consented to Delaware's general jurisdiction merely by registering to do business in Delaware. The Delaware Supreme Court overruled its longstanding decision in Sternberg v. O'Neil, 550 A.2d 1105 (1988), when the court held that such a reading of the Delaware's foreign corporation registration statutes was inconsistent with the U.S. Supreme Court's decisions in Daimler and Goodyear. The Delaware Supreme Court concluded:

"After Daimler, we hold that Delaware's registration statutes must be read as a requirement that a foreign corporation must appoint a registered agent to accept service of process, but not as a broad consent to personal jurisdiction in any cause of action, however unrelated to the foreign corporation's activities in Delaware. Rather, any use of the service of process provision for registered foreign corporations must involve an exercise of personal jurisdiction consistent with the Due Process Clause of the Fourteenth Amendment."

The Delaware Supreme Court held that the defendant foreign corporation did not have its principal place of business in Delaware, nor was there any plausible factual basis on which Delaware was essentially its "home." The "consent to jurisdiction" argument based on registration of a foreign corporation within a state was rejected.

This "consent to jurisdiction" argument has arisen in a number of states, as a means of circumventing the U.S. Supreme Court's decisions. This Delaware decision provides an influential resource supporting arguments challenging "consent to jurisdiction" as the basis for personal jurisdiction over a defendant foreign corporation.

John Young, Jr. is a member of the firm's Financial Services & Class Action Litigation practice groups. John works from the firm's St. Louis office. For more information please contact Mr. Young or your usual Stinson Leonard Street contact.

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