Del. Court Narrows Jurisdiction Over Nonresident Companies

By Michael Greene

April 18 — Georgia auto-parts store operator Genuine Parts Co. cannot be sued in Delaware over asbestos exposure claims that have nothing to do with its activities in the state, a divided Delaware Supreme Court ruled April 18.

In a 4-1 decision, the state high court majority declined to extend its jurisdiction over the company even though it is registered to sell products and services in the state. Nonresident corporations—companies that aren't incorporated in Delaware—such as Genuine Parts don't broadly consent to jurisdiction merely by agreeing to do business in Delaware, the court said.

The ruling overturns part of a decades-old decision—Sternberg v. O'Neil, 550 A.2d 1105—in which the Delaware Supreme Court held that corporations are subject to state jurisdiction by registering to do business and appointing an agent for service of process in the state.

The court said that two U.S. Supreme Court decisions decided after Sternberg represented a “major shift” in personal jurisdiction jurisprudence—Daimler AG v. Bauman, 134 S. Ct. 746, 2014 BL 9151, and Goodyear Dunlop Tires Operations SA v. Brown, 131 S. Ct. 2846, 2011 BL 399774.

“Suffice it to say we no longer live in a time where foreign corporations cannot operate in other 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,” Chief Justice Leo E. Strine Jr. wrote for the majority.

In his dissent, Justice James T. Vaughn Jr. said he agreed with other courts who ruled that Daimler and Goodyear “have no effect upon general jurisdiction that is based upon consent through corporate registration statutes.”

‘Grasping' for Litigation

In the underlying lawsuit, two Georgia residents brought claims for wrongful exposure of asbestos against seven companies, including five Delaware corporations.

Genuine Parts, whose principal place of business is Atlanta and who is registered to do business in Delaware, moved to dismiss the claims for lack of jurisdiction.

In dismissing the claims, the Delaware Supreme Court majority said that nothing in the Delaware registration statutes explicitly state that nonresident corporations consent to personal jurisdiction. Instead, the court found that not subjecting the foreign corporation to Delaware jurisdiction is in accord with the Daimler ruling and “common sense.”

Strine said that Delaware, as the home of a majority of the U.S.'s largest corporations, has a strong interest in avoiding jurisdictional overreach.

“If all of our sister states were to exercise general jurisdiction over our many corporate citizens, who often as a practical matter must operate in all fifty states and worldwide to compete, that would be inefficient and reduce legal certainty for businesses,” the judge wrote. “Human experience shows that ‘grasping' behavior by one, can lead to grasping behavior by everyone, to the collective detriment of the common good.”

To contact the reporter on this story: Michael Greene in Washington at mgreene@bna.com

To contact the editor responsible for this story: Yin Wilczek at ywilczek@bna.com

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