IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
ASSIST STOCK MANAGEMENT L.L.C., )
and ThePageGroup.com, L.L.C.,
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IVEN ROSHEIM,
Defendant.
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OPINION
Date Submitted: January 18,200O
Date Decided: February 3,200O
Kenneth J. Nachbar, Esquire, of MORRIS, NICHOLS, ARSHT &
TUNNELL, Wilmington, Delaware; Attorney for Plaintiffs.
David J. Ferry, Jr., Esquire and Rick S. Miller, Esquire, of FERRY & ,
JOSEPH, P.A., Wilmington, Delaware, Attorneys for Defendant.
LAMB, Vice Chancellor
I.
INTRODUCTION
This is an action for declaratory judgment relating to the ownership
interests and management rights in Assist Integrated Technologies L.L.C.
(“AIT”), a Delaware limited liability company, and in its subsidiary,
ThePageGroup.com, L.L.C. (“TPG”), also a Delaware limited liability
company. The complaint was filed on November 30, 1999. On December 14,
1999, the defendant filed a motion, pursuant to Court of Chancery Rule 12(b), to
dismiss on the basis of, among other matters, lack of personal jurisdiction and
insufficiency of service of process. On January 7, 2000, the plaintiffs amended
the complaint, principally to add or better articulate the allegation that defendant
was presently breaching his fiduciary duties.
This motion requires an inquiry into the scope and constitutionality of 6
Del. C. 5 18-109, Delaware’s implied consent statute for obtaining inpersonam
jurisdiction over managers of Delaware LLCs. Having reviewed the parties’
respective submissions and the applicable case law, I conclude that this court can
exercise personal jurisdiction over the defendant. In short, this dispute hinges
entirely on the rights and obligations allotted (by the controlling contract and,
where the contract is silent, Delaware statutory and common law) to the
managers of AIT and, ultimately, on the managers’ exercise of the rights in
question. When nonresidents agree to serve as directors or managers of
Delaware entities, it is only reasonable that they anticipate that under the
1
circumstances posed in this case, they will be subject to personal jurisdiction in
Delaware courts. However, in light of certain defects in the service of process, I
will quash the present service of process and require that plaintiff re-serve
defendant properly.
II.
A.
FACTUAL BACKGROUND
ASM and Rosheim Form AIT
On March 3, 1999, plaintiff Assist Stock Management L.L.C. (“AS,“),
a Delaware limited liability company with its principal place of business in
Sarasota, Florida, entered into a Limited Liability Company Agreement with
defendant Iven Rosheim to form AIT (the “AIT Agreement”). Rosheim and
ASM made equal initial capital contributions of $100 in exchange for their
respective 50% stakes in AIT. Stephen H. Watkins is the sole member of ASM.
Rosheim lives in Sarasota, Florida and has no contact with Delaware other than
through his involvement in AIT.
B.
The Management and Structure of AIT
The AIT Agreement named Watkins (as designee of ASM) and Rosheim
as the only two members of its Board of Managers. The AIT Agreement made it
impossible for either member to remove the other or its designee from his
position as manager.
2
The two person Board of Managers, which required unanimity of its
members to act, retained broad control over AIT’s affairs.’ The Board could,
however, appoint officers, granting them specific authority by written
delegation. Absent such express delegation, officers would enjoy “such power
and authority as persons holding such titles in a corporation would be expected
to possess by virtue of their office.“2 In the AIT Agreement, the Board of
Managers named Watkins as President and Rosheim as Vice President and
Secretary but did not further specify the scope of the officers’ respective
authority.
Notwithstanding the Board of Managers’s broad authority or any power
delegated to officers or exercisable by a future majority member,3 Section 15 of
the AIT Agreement listed specific transactions that could be approved only by
unanimous agreement of all members. This list included, for example, any
material transaction with a member or manager, dissolution, significant
acquisition, merger, or issuance of interests to and admission of new members.
Although neither member was obliged to make additional capital
contributions, Section 7(b) provides that “[ulpon any additional Capital
Contribution made by any Member, the Membership Interests of the members
’ AIT Agreement, 5 13(a)
* Id. 0 13(d).
3 Under 5 14(b), any member who obtained a majority share of AIT’s membership
interests could act by written consent in lieu of a meeting of members.
3
shall be adjusted accordingly. ” Through June 1999, ASM provided $53,000 of
additional capital to AIT. One aspect of the present dispute is whether, in light
of ASM’s additional contributions, its interest in AIT was properly adjusted to
99.81%, leaving Rosheim with only the remaining 0.19% interest.4 According
to plaintiffs, as president of AIT and the sole member of ASM (the alleged
majority member of AIT), Watkins had the power to control AIT on all matters
not covered in Section 15’s unanimous consent provision. Rosheim contends
that he remains a 50% owner.
C.
TPG’s Formation and Search for Financing
On May 3, 1999, AIT executed a Limited Liability Company Agreement
creating plaintiff TPG (the “TPG Agreement”). Pursuant to Article V of the
TPG Agreement, AIT, as TPG’s sole member,5 controlled the affairs of TPG,
except to the extent that it delegated authority to others. Watkins was thus
appointed president of TPG and given specific authority to “execute for [TPG]
any contracts or other instruments which [AIT] has authorized to be executed. “6
4 The alleged recalculation is as follows: ASM’s total invested capital of $53,100 would
represent 99.81% of AIT’s total capitalization of $53,200.
’ Certain documents relating to TPG’s equity ownership stated ASM’s and Rosheim’s
specific percentages of TPG’s equity while later documents refer only to AIT’s interest. This
discrepancy will be relevant to the merits of the dispute, but has no bearing at this stage.
6 Although not relevant to the present dispute, defendant contends that he was appointed
as TPG’s Chief Technology Officer.
4
Shortly after its inception, TPG issued additional membership interests in
exchange for several million dollars from outside investors. According to
plaintiffs, “[elach new member was admitted to TPG with the consent of all
members of TPG, and each new member’s admission was reflected in the
records of TPG. “7 The complaint also alleges that Rosheim had knowledge of
and consented to the admission of each new member. Certain of these new
investors were appointed as officers of TPG.
D.
The Dispute
In the fall of 1999, the relationship between Rosheim and Watkins
deteriorated. Watkins told Rosheim that his services were no longer needed. On
November 15, 1999, Rosheim sent a letter to Watkins, asserting that Rosheim
was a 50% owner of AIT, that AIT was the 100% owner of TPG, and that AIT
could not admit new members to TPG without Rosheim’s consent, which had not
been provided.g
Rosheim’s assertions have cast doubt as to the validity of the newly issued
TPG membership interests. lo The discord within AIT’s two-member Board is
7 Compl. 119.
’ As stated above, AIT’s argument is that in light of its $53,000 in contributions to
AIT, compared with Rosheim’s $100 initial deposit, Rosheim’s ownership in AIT has dwindled
to below 1%
9 Actually, Rosheim concedes that he consented to admission of at least one investor,
but contends that he was not consulted with regard to subsequent admissions.
lo A lawsuit has been filed by one of the new investors against Rosheim (but not naming
AIT or ASM as defendants) seeking a declaration as to the validity of the issued TPG interests.
5
also inhibiting TPG’s efforts to obtain additional financing and to conduct a
public offering of its stock.
It is not entirely clear whether Rosheim claimed that his consent was
needed in his capacity as an alleged 50% owner of AIT or in his capacity as a
manager of AIT. Section 15 of the AIT Agreement (requiring unanimous
member approval of certain transactions) does not on its face apply to the
admission of new members to any subsidiary of AIT.” Thus, Rosheim’s
position appears to rest on an understanding of the scope and nature of his power
as a manager of AIT, as those powers are delineated in the AIT Agreement and,
where the Agreement is silent, by Delaware statutory and common law.
In summary, this case presents two disputes, one relating to the ownership
interests of AIT and one relating to Rosheim’s right, as a manager ofAZT,12 to
provide or withhold consent to the admission of additional members into TPG.
In arguing this motion, defendant stated that the claims are intertwined so that, if
the court can assert personal jurisdiction over Rosheim to hear the consent
dispute, it can also hear the ownership dispute.
” This statement is an initial observation and in no way limits Rosheim’s ability to
argue that, in fact, Section 15 does protect a right to consent by all members.
I2 AIT’s counsel conceded that under the AIT Agreement, even if Rosheim’s pecuniary
interest is reduced to less than 1% , he cannot be removed from his position as one of two
managers.
6
III.
A.
ANALYSIS
The Parties’ Contentions
Plaintiffs contend that Watkins (as president of AIT) or ASM (the alleged
majority owner of AIT) could approve TPG’s issuance of membership interests
without Rosheim’s (the Board’s) consent and that Rosheim’s erroneous assertion
of a contrary power is harming both entities. Alternatively, plaintiffs contend
that Rosheim, in fact, gave such consent in his managerial capacity.
After reviewing defendant’s opening brief on this motion, plaintiffs, in
order “to avoid any possible doubt about the nature of these claims,” amended
their complaint to expressly allege breaches of fiduciary duty.13 Plaintiffs claim
that Rosheim is actively breaching his fiduciary duties and misusing his position
as a manager of AIT by his assertion that he either never provided consent or
was withdrawing consent. This amounts to a breach, it is claimed, because
Rosheim is thereby acting disloyally and threatening substantial injury to the
business of AIT and TPG.
In his opening brief, Rosheim claims that plaintiffs’ initial contentions
related only to a contractual dispute over the terms of the AIT Agreement and,
I3 Rosheim’s November 15, 1999 letter, according to plaintiffs, also included an offer
by Rosheim to withdraw his claims in exchange for substantial cash payments and a 15 %
interest in TPG. This fact is only pertinent to the present matter because it serves as one basis
for plaintiffs claim that Rosheim is using his position as a manager of AIT to further his
personal financial interests.
thus, do not provide a basis for the exercise of personal jurisdiction over
Rosheim in his capacity as a manager. In his reply brief, Rosheim further
argues that plaintiffs’ later alleged fiduciary duty claim was illogical and
ineffective, amounting to little more that a complaint about positions taken by
him after his termination by Watkins. In the absence of a claim actually alleging
that he breached a fiduciary duty, Rosheim reiterates his position that the narrow
issue of contract interpretation does not provide the basis for asserting in
personam jurisdiction.
I conclude that this court has jurisdiction over the defendant under either
of plaintiffs’ theories.
B.
The Jurisdictional Inquiry
In In re USACafes, L. P. Litigation, Chancellor Allen recognized that
determining whether a director or manager is subject to the jurisdiction of this
court requires a “ determination of the constitutionality of requiring [him] to
defend that claim . . . and a determination whether a statute of this state
authorizes assertion of such power.“14 The first question is one of minimum
contacts’5 and the second of statutory construction. It is the plaintiffs’ burden to
establish that the exercise of in personam jurisdiction is lawfuL1’
I4 Del. Ch., 600 A.2d 43, 50 (1991).
I5 See World-Wide Volkswagen Corp. v. Woodson, 444 U.S. at 286 (1980).
I6 Id., 600 A.2d at 47.
8
The parties agree that Rosheim has no contact with Delaware beyond his
involvement as founder and manager of AIT and that those contacts do not
support the assertion of long-arm jurisdiction over him in this case. Thus, the
only basis for obtaining jurisdiction over Rosheim is the “implied consent”
statute, 6 Del C. $18-109, which provides in part:
A manager . . . of a limited liability company may be served with
process . . . in all civil actions or proceedings brought in the State
of Delaware involving or relating to the business of the limited
liability company or a violation by the manager . . . of a duty to
the limited liability company, or any member of the limited liability
company . . . . A manager’s . . . serving as such constitutes such
person’s consent to the appointment of the registered agent of the
limited liability company . . . as such person’s agent upon whom
service of process may be made . . . .I7
The language of this statute, of course, suggests the exercise of
jurisdiction over Rosheim in an action properly alleging a breach of fiduciary
duty in his managerial capacity. l8 The more difficult question is whether, and if
so, in what circumstances it permits the exercise of jurisdiction in the other
disputes involving or relating to the business of AIT.
I7 9 18-109 (bolding added).
I8 Indeed, if the complaint is read as validly alleging a breach of fiduciary duty against
Rosheim in his capacity as a manager of AIT, there is little question that $ 18-109 will subject
him to the jurisdiction of this court for purpose of litigating that claim. While I am inclined to
view the allegations of plaintiffs’ amended complaint as potentially stating a claim for breach of
fiduciary duty, I do not rest my decision on that basis alone. Rather, as discussed infra, I
conclude that Rosheim is properly subject to the jurisdiction of this court because plaintiffs’
“contract” based dispute concerns the “rights, duties and obligations” of Rosheim and Watkins
as managers of AIT - issues that are inextricably bound up in Delaware law and as to which
Delaware has a strong interest in providing a forum for resolution. See Armstrong v.
Pomerance, Del. Supr., 423 A.2d 174 (1980); Hana Ranch, Inc. v. Lent, Del. Ch., 424 A.2d
28 (1980).
9
If one interprets the bolded language above broadly, the mere fact that
Rosheim is a manager of AIT and that the suit involves or relates to the business
of AIT would provide a basis for asserting jurisdiction. Somewhat analogously,
the literal wording of 10 Del. C. Q 3114, the consent statute applying to
corporate directors, assumes consent to all actions involving the corporation in
which the director is a “necessary or proper party.“” In Ham Ranch, Inc. v.
Lent,20 however, this court recognized that a literal reading of this clause of 5
3 114 would violate “traditional notions of fair play and substantial justice,” as
defined by the United States Supreme Court in International Shoe Co. v.
Washington,” and its progeny.
In Hana Ranch, Chancellor Marvel noted that $3 114 was drafted in
response to Shaffer v. Heitner,22 which held that Delaware’s sequestration statute
violated due process. 23 The Chancellor then stated that “it is the rights, duties,
and obligations which have to do with service as a director of a Delaware
corporation which make a director subject to personal service in Delaware” and
I9 5 3114 is substantially similar to 0 18-109. In light of the dearth of cases construing
3 18-109, I will look to the cases construing 0 3114, recognizing that the different choice of
words in 0 18-109 may warrant a different analysis.
*’ Del. Ch., 424 A.2d 28 (1980).
a 326 U.S. 310 (1945).
22 433 U.S. 186 (1977).
23 Hana Ranch, 424 A.2d at 30.
10
not simply that the defendant is both a director and a “proper party” to that
case.24
After commenting on the Delaware Supreme Court’s opinion in
Armstrong v. Pomerance,25 which stated that Delaware’s interest in actively
overseeing the conduct of directors of Delaware corporations is significant and
substantial, Chancellor Marvel endorsed “a construction of 10 Del. C. 5 3114
which limits its application only to those actions directed against a director of a
Delaware corporation for acts on his part performed only in his capacity as a
director. “X The complaint at issue in that case stated “no cause of action . . .
against the non-resident director defendant in his capacity as director,“” but
rather challenged conduct taken as a stockholder. Chancellor Marvel thus
determined it unconstitutional to use 0 3 114 as a basis for asserting in personam
jurisdiction over the defendant.
Chancellor Allen closely examined the holding of Hana Ranch in In re
USACafess.28 After elaborating on the constitutional framework established by
24 The language of the first clause of 93114 differs from the first clause of $18-109 in
that, instead of requiring that the claim relate to the business of the corporation, $3114 requires
that the defendant be a director and be a “proper party” to the claim involving the corporation.
25 Del. Supr., 423 A.2d 174 (1980).
26 Hana Ranch, 424 A.2d at 30.
” 424 A.2d at 31 (emphasis added).
28 600 A.2d at 50-53.
11
the U.S. Supreme Court’s relevant decisions,29 the Chancellor noted that
Delaware “has a strong interest in the effective administration of the law
governing corporations and limited partnerships organized under its laws.““’
Stating that a rule providing for personal jurisdiction only in claims for breach of
fiduciary duty to the corporation of which defendants are directors is too
imprecise, Chancellor Allen stated that the constitution required “a specific
judgment concerning fairness considering all of the particular circumstances. “31
As such, Chancellor Allen took a “realistic evaluation of the relationship the
individual defendants . . . have established with Delaware,” concluding that in
the circumstances, the exercise of personal jurisdiction would not offend
traditional notions of fairness.32
The Chancellor then conducted the second aspect of the inquiry, i.e.,
whether 6 3114 permitted service of process on the directors for the asserted
claims. Chancellor Allen commented as follows:
Because the first clause of Section 31 1433 so plainly is susceptible
to unconstitutional application, this court in Hana Ranch construed
the word “or” to mean “and,” in effect reading this clause out of
the statute. An alternative approach might have been to give the
29 Id. at 50-52 (citing, inter alia, international Shoe, 326 U.S. 310; World-Wide
Volkswagen, 444 U.S. 286; Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985)).
3o Id. at 51 (citing Armstrong v. Pomerance, Del. Supr., 423 A.2d 174, 177 (1980).
3’ Id. at 52.
” Id.
33 As stated, the first clause of 0 3 114, read literally, provides for jurisdiction in cases
involving the corporation in which the director is “a proper party.”
12
legislature’s word its ordinary meaning, but to protect against
unconstitutional use of the statute on a case-by-case basis employing the test of the International Shoe line of cases to do so.
The doctrine of stare decisis however, removes that as a possible
course at this date.34
Despite hinting that, if analyzed in a vacuum, asserting jurisdiction under
the first clause of 5 3114 may have been proper, Chancellor Allen decided that
the case at hand fit into the second clause (resting on claims of fiduciary
breaches) thus warranting the exercise of jurisdiction in any event. Although the
case law under 0 3114 is informative in construing $ 18-109, I note that stare
decisis does not necessarily remove “as a possible course” my ability to read the
first clause of Q 18-109 as an independently viable basis for asserting jurisdiction
over managers of limited liability companies.
I am concerned both with a different statute and one that is differently
worded. Most importantly, the wording of the first clause of 5 18-109 does not
include the “necessary or proper party” language found in 5 3 114 that caused the
clear concern that the statute may have been overbroad. Admittedly, the
“involving or relating to” language found in 8 18-109 can, too, be susceptible to
too broad an application. I believe, however, that “[plrotection against
34 I re
n
LJSACafes, A.2d at 53 (citations omitted).
600
35 Compare 0 3114 with §18-109.
13
unconstitutional application of [the] statute[] could be provided on a case-by-case
basis by applying the minimum-contacts analysis mandated by due process.“36
C.
The Nature of this Dispute Allows the Court to Exercise Personal
Jurisdiction Over Rosheim Regardless of Whether He Is Alleged to Be
Breaching His Fiduciary Duties
In light of the foregoing, I will make “a realistic evaluation of the
relationship” that Rosheim has established with Delaware to determine whether it
is “keeping with traditional notions of fair play and substantial justice” to require
him to defend this dispute in this court. 37 As I see it, the preliminary questions
posed by this dispute are as follows: Is AIT’s decision to allow TPG to admit
new members one for AIT’s Board of Managers to decide? Can the president of
AIT make this decision? Can a majority member of AIT compel this decision?
Did Rosheim, in fact, consent? The questions posed run to the core of the
governing structure created for AIT, a Delaware LLC.
The two managers of AIT cannot agree on an interpretation of their
respective rights and obligations. If the managers cannot resolve the matter,
AIT’s business, relying exclusively on TPG and TPG’s ability to obtain
financing, may be seriously affected. Moreover, the AIT Agreement does not
explicitly state whether AIT’s consent must be by an act of the Board of
36 Donald J. Wolfe & Michael A. Pittenger, Corporate and Commercial Practice in the
Delaware Court of Chancery 5 3-5(a)(2)(v), 149 (1998).
37 In re USACafes, 600 A.2d at 52.
14
Managers or by one of its officers. As such, because the parties will have to
look to Delaware statutory and case law regarding the allocation of managerial
power, this action is “inextricably bound up” in Delaware law.
The bulk of the case law relying on Hana Ranch’s view of the substantial
interest defined in Armstrong assumes that the state’s interest is only in
redressing injuries allegedly caused by fiduciary misconduct. As I see it, the
failure of co-managers to agree as to the scope of their respective rights and
obligations in their capacity as managers (or their exercise or performance of
those rights and obligations) is also a matter of substantial interest to this state.
The controlling agreement relies on Delaware law to delineate those rights and
obligations, and the state has a compelling interest in the resolution of
disagreements about them.
In light of my reading of the case law, I conclude that this court can
properly exercise in personam jurisdiction over Rosheim to adjudicate the matter
because: (1) the allegations against Rosheim focus centrally on his “rights, duties
and obligations”38 as a manager of a Delaware LLC; (2) the resolution of this
matter is “inextricably bound up in Delaware law;“3g and (3) Delaware has a
strong interest in providing a forum for disputes relating to the ability of
managers of an LLC formed under its law to properly discharge their respective
38 Hana Ranch, 424 A.2d at 30.
3g Armstrong v. Pomerance, Del. Supr., 423 A.2d 174 (1980).
15
managerial functions.40 When he became a manager of a Delaware limited
liability company, Rosheim impliedly consented to being sued in a Delaware
court to adjudicate disputes so inherently intertwined with that fiduciary position.
Further, because Rosheim agreed in the course of litigating this motion that if
jurisdiction is proper to resolve the consent dispute, this court could also hear the
ownership dispute, and because the ownership question is related in some respect
to the consent matter,41 I will hear that claim as well.
D.
Defects in the Service of Process
Defendant alleges that dismissal is warranted because the plaintiffs failed
to properly comply with the service of process required by $18-109(b).
Specifically, the statute indicates that service is accomplished by serving the
registered agent of the company.42 “ In addition, the Prothonotary or the Register
in Chancery . . . shall, within 7 days . . . [mail] copies of the process . . .
addressed to such manager . . . at his address last known to the party desiring to
make such service. ‘r43 Conceding that service was provided the registered agent,
defendant argues that plaintiffs failed to provide the Register with Rosheim’s
“address last known to” plaintiffs.
4o Of course, as discussed, supra, I also find it appropriate to exercise jurisdiction over
Rosheim in connection with the alleged breach of fiduciary duty.
4’ See Manchester v. Naragansett Capital, Inc., Del. Ch., C.A. No. 10822, mem. op.
at 17-18, Chandler, V.C. (Oct. 18, 1989).
‘* 8 18-109(b).
43 Id.
16
Rosheim lived on a boat docked in Sarasota, Florida. Plaintiffs alleged
that, prior to filing this action, they learned that Rosheim had moved off his
boat. Plaintiffs’ counsel represented during oral argument that his clients
determined that no forwarding address had been supplied to the post office.
Rather than undertaking an exercise in futility, plaintiffs sent a copy of the
process to Burton L. Raimi, Esquire, Rosheim’s attorney with regard to certain
matters relating to AIT. Raimi immediately responded, stating that he had no
authority to accept process for Rosheim. At that point, plaintiffs contacted
Rosheim on his cell phone. “At Rosheim’s request, copies of the complaint and
other relevant pleadings were sent to him by express mail at the post office box
that he gave as his address.“43 Plaintiff argues that his efforts complied with the
letter and the purpose of the statute.
Defendant acknowledges that he received actual notice of the lawsuit. He
explains, however, that under applicable precedent, strict compliance with the
statute is required and plaintiffs’ failure to send notice to defendant’s last known
address results in a defect in service of process, warranting dismissal.44
It is certainly true that plaintiff did not send notice to defendant’s last
known address, as required by the statute. I also note that 5 18-109, like Q
43 Pl. Am. Br.at 13.
44 Defendant cites Purnell Dodman, Del. Super., 297 A.2d 391, 395 (1972); Griffin
v.
v. Granger, Del. Supr., 306 A.2d 725, 727 (1973); Casson v. Matt Slap Subaru, Inc., Del.
Super., 1988 Lexis 249 at *4, Martin, J. (Nov. 23, 1988).
17
3114, is a consent statute, providing that when a nonresident accepts a position
as a manager of a Delaware LLC, that nonresident consents that service upon his
statutory agent will amount to in personam jurisdiction over him for any claims
covered by the statute. Service was properly effected upon Rosheim’s registered
agent. Further, Rosheim requested copies of documents relating to the lawsuit
when he was contacted by cell phone and actually received them.
I note that if I dismiss the case on this basis, plaintiff will merely reinstate
the suit, sending process to Rosheim’s new address. In cases such as this one,
“courts have broad discretion to dismiss the action or to retain the case but quash
the service that has been made on defendant.“45 Because “there is a reasonable
prospect that plaintiff ultimately will be able to serve defendant properly,“46 I
will maintain the action, quash the technically defective service, and instruct
plaintiff to re-serve defendant. Naturally, defendant’s time to answer will run
from the date of proper service.
E.
Forum Non Conveniens
Finally, defendant argues that in light of the overwhelming hardship and
inconvenience of litigating this matter in Delaware, this court should dismiss this
case on forum non conveniens grounds. “The dismissal of an action on the basis
45 Charles A. Wright and Arthur B. Miller, Wright & Miller, Federal Practice and
Procedure: Civil 2d 0 1354, 288 (1990).
46 Id. at 289.
18
of the vorum non conveniens] doctrine, and the ultimate defeat of the plaintiff’s
choice of forum, may occur only in the rare case in which the combination and
weight of the factors to be considered balance overwhelmingly in favor of the
defendant. “‘I Here, defendant fails to carry this very high burden.
A forum non conveniens analysis requires the court to consider: (1) the
ease of access of proof; (2) the availability of compulsory process for witnesses;
(3) the possibility of a view of the premises; (4) whether the controversy is
dependent upon the application of Delaware law which the courts of this state
more properly should decide that those of another jurisdiction; (5) the pendency
or nonpendency of a similar action or actions in another jurisdiction; and (6) all
other practical considerations which would make the trial easy, expeditious and
Defendant argues that the evidence and witnesses are in Florida.
Depositions will require employment of “the cumbersome and expensive
commission process” to issue trial and deposition subpoenas and witnesses will
have to travel to Delaware or attorneys will have to travel to Florida. On the
other hand, the evidence consists primarily of documents.4g Further, defendant
47 Kolber v. Holyoke Shares, Inc., Del. Supr., 213 A.2d 444, 447 (1965) (emphasis
added).
48 Taylor v. LSI Logic Corp., Del. Supr., 689 A.2d 1196, 1198-99 (1997).
4g See Asten v. Wangner, Del. Ch., C.A. No. 15617, letter op. at 4, Steele, V.C. (Oct.
3, 1997) (“Modern methods of information transfer render concerns about transmission of
documents virtually irrelevant.“)
I9
has not identified a single non-party witness and the court has compulsory
process over all parties. Neither of the first two factors helps defendant.
Defendant concedes that the view of the premises is irrelevant to the
analysis. Despite defendant’s argument that this case turns entirely on questions
of contract law, he does not argue that another jurisdiction’s law applies. While
another court could construe Delaware law, this factor does not weigh in
defendant’s favor. The fact that no first-filed suit involving the same parties is
pending in another jurisdiction weighs heavily against defendant. Plainly, it is
not enough for defendant simply to assert that he is considering the filing of a
suit in Florida raising tort and breach of contract claims. None of the next three
factors help defendant.
The final factor presents a mixed analysis. In defendant’s favor is the
lesser burden and expense that may be avoided by trying the suit in Florida.
There is admittedly added cost for all witnesses and parties because they all
reside in Florida. Plaintiffs’ assertion that they will agree to take all depositions
in Florida is of little help because Delaware attorneys may have to appear to take
and defend those depositions and the trial will, of course, be conducted in
Delaware. On the other hand, when managers of an entity cannot agree on the
scope of their respective powers and that disagreement threatens the entity’s
continued viability, each party has a significant interest in resolving the matter as
soon as possible. The action in this court is subject to an expedited schedule,
20
with the trial to take place on March 1, 2000. There can be no assurance that
another court will resolve these critical matters quickly. All in all, defendant has
not carried his difficult burden of showing that this is the rare case in which
dismissing the action is warranted on forum non conveniens grounds.
IV.
CONCLUSION
For the foregoing reasons, defendant’s motion to dismiss on the basis of a
lack of personal jurisdiction, failure to properly serve process andforum non
conveniens is DENIED. As described above, however, plaintiffs’ original
service of process is QUASHED. In light of the expedited schedule, plaintiffs
are further instructed to re-serve defendant in accordance with the requirements
10 Del. C. 8 18-109(b) within five (5) days from entry of this Opinion.
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