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The Delaware Supreme Court Limits the Reach of Jurisdiction Over Foreign Corporations

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The Delaware Supreme Court recently issued an important opinion overruling its long-standing decision in Sternberg v. O’Neil, 550 A. 2d 1105 (1988) and holding that the Delaware registration statute does not provide a basis for asserting general personal jurisdiction over foreign corporations in Delaware. Genuine Parts Co. v. Cepec, No. 528, 2015 (Apr. 18, 2016). The Court held that a foreign corporation’s compliance with Delaware statutes requiring registration with the State and appointment of a Delaware registered agent prior to conducting business within Delaware does not alone subject the foreign entity to general jurisdiction in Delaware’s courts. Instead, in the absence of some more express consent to jurisdiction in Delaware, foreign corporations generally are only subject to suit in Delaware if Delaware is their principal place of business or where specific jurisdiction can be established. The Court’s holding was premised on what it described as “a major shift in our nation’s personal jurisdiction jurisprudence” as reflected in the U.S. Supreme Court’s decisions in Goodyear and Daimler. Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2846 (2011); Daimler AG v. Bauman, 134 S. Ct. 746 (2014). All states have registration statutes, so if this decision is followed by the highest courts of other states, it will significantly limit the number of jurisdictions in which litigation can be filed against corporations. The decision also increases the importance of forum-selection clauses, through which entities can designate specific jurisdictions for the resolution of their disputes. 

Copyright © Morris, Nichols, Arsht & Tunnell LLP. These materials have been prepared solely for informational and educational purposes, do not create an attorney-client relationship with the author(s) or Morris, Nichols, Arsht & Tunnell LLP, and should not be used as a substitute for legal counseling in specific situations. These materials reflect only the personal views of the author(s) and are not necessarily the views of Morris, Nichols, Arsht & Tunnell LLP or its clients.

 

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