Delaware Supreme Court Clarifies Reach of Personal Jurisdiction Over Nonresident Directors and Officers of Delaware Corporations Under 10 Del. C. § 3114

The Delaware Supreme Court, in Marc Hazout v. Tsang Mun Ting, No. 353, 2015 (Feb. 26, 2016) (Strine, C.J.), held that the reach of personal jurisdiction under 10 Del. C. § 3114 over nonresident officers and directors of Delaware corporations, contrary to Court of Chancery precedent, is not limited to claims by stockholders against such officers and directors for breach of fiduciary duty. Rather, under the plain language of the statute, a nonresident officer or director of a Delaware corporation, by virtue of accepting and holding office, has consented to personal jurisdiction in Delaware, subject to the requirements of due process, in two classes of cases: (i) “all civil actions or proceedings brought in this State, by or on behalf of, or against such corporation, in which such officer [or director] is a necessary or proper party”; or (ii) “any action or proceeding against such officer [or director] in violation of a duty in such capacity.”

Applying this principle, the Court found that there was personal jurisdiction in Delaware over Marc Hazout, a nonresident Canadian officer (and director) of co-defendant Delaware corporation Silver Dragon Resources, Inc. with respect to claims for Mr. Hazout’s alleged tortious conduct as an officer of Silver Dragon relating to a capital infusion into, and change of control of, Silver Dragon, pursuant to a series of agreements governed by Delaware law, one of which further providing that any dispute over it was to be litigated in Delaware. In addition to satisfying § 3114 as an action against Silver Dragon, in which Mr. Hazout is a proper party, the Court found that, under the circumstances outlined above, the exercise of personal jurisdiction over Mr. Hazout did not “offend traditional notions of fair play and substantial justice” under International Shoe and its progeny.

While the Hazout decision can be reduced on one level to a straightforward application of the plain language of 10 Del. C. § 3114, it is notable as the Delaware Supreme Court’s first pronouncement clarifying the scope of personal jurisdiction under the statute over nonresident officers and directors of Delaware corporations outside the context of the traditional stockholder breach of fiduciary duty claim and to cases, depending on the facts and due process considerations, in which the officer or director faces arms-length commercial claims that arise out of the exercise of his or her corporate powers.