Matthew v. Laudamiel, C.A. No. 5957-VCN (Del. Ch. March 20, 2012).  The prior decision by the Delaware Court of Chancery in this matter was highlighted on these pages here. 

Issues Addressed

Whether a final judgment should be entered pursuant to Court of Chancery Rule 54(b) against one co-defendant whose motion to dismiss for lack of personal jurisdiction was granted, while the remainder of the case proceeds against other co-defendants. The Court also addressed an argument that among various Chancery decisions, there is a “majority view” and a “minority view” among members of the Court regarding the interpretation of Rule 12(b)(2) regarding motions to dismiss for lack of personal jurisdiction.

Background

This case involves claims against the members of an LLC that oversaw the dissolution and winding-up of an LLC.  An additional co-defendant was also named as a party based on the civil conspiracy theory of personal jurisdiction.  The Court granted a motion to dismiss previously against that co-defendant, Fläkt Woods, whom the Court determined not to be subject to the personal jurisdiction of the Court.

The plaintiff brought this motion, pursuant to Court of Chancery Rule 54(b), seeking entry of a final judgment “confirming the exit” from the case of Fläkt Woods to allow an  immediate appeal, or in the alternative, asking the Court of Chancery for a certification of an interlocutory appeal, pursuant to Supreme Court Rule 42, of the Order that implemented the opinion dismissing Fläkt Woods.  The theory for asking the Court for a final judgment as it pertained to Fläkt Woods was to avoid the need for the plaintiff to wait for a potentially lengthy period of time until a final disposition against all the other defendants, after trial, before an appeal could be made.  After that waiting period, it might be too late for the plaintiff to sue Fläkt Woods at that time in another jurisdiction if the Delaware Supreme Court upheld the dismissal after appeal.

Legal Analysis

The Court provides a thorough analysis of those situations where it would be appropriate to enter a final judgment against only one co-defendant pursuant to Court of Chancery Rule 54(b), and what standards and reasoning the Court will employ in the analysis of a motion based on Rule 54(b).  A three-part test is applied in the cases construing the federal counterpart to the rule which Delaware finds persuasive because the two rules are substantially identical.  The Court provides a cogent explanation for why it would be a hardship for the plaintiff if a final judgment were not entered now against the co-defendant, Fläkt Woods, in order to allow for an immediate appeal.

Although the grant of the final judgment made the motion for an interlocutory appeal moot, it is noteworthy that the Court still conducted an analysis of the motion for an interlocutory appeal in any event, in part because the Court explained that the plaintiff misconstrued and mischaracterized the trial Court’s original decision.  Thus, the Court conducted an analysis to address the misstatement of the holding of the Court regarding the standard that applied when assessing a motion to dismiss for lack of jurisdiction pursuant to Court of Chancery Rule 12(b)(2).  See generally, separate and unrelated recent Chancery Feeley decision that also addressed a Rule 12(b)(2) motion based on Sections 18-110 and 18-109 of the Delaware LLC statute. 

The misstatement by the plaintiff of the Court’s first decision in this case, linked above – – that this opinion took great pains to correct, was designed to address the third element of Delaware Supreme Court Rule 42 that must be satisfied for an interlocutory appeal. 

Specifically, the plaintiff contended that various decisions of the Court of Chancery involving Rule 12(b)(2) are in conflict regarding the appropriate standard of review applied to motions to dismiss under Court of Chancery Rule 12(b)(2) where the plaintiff, as in this case, “has had an opportunity to take jurisdictional discovery, but no evidentiary hearing was held.” 

According to the plaintiff in his motion, there is a “majority view” and a “minority view” among cases in the Delaware Court of Chancery on this issue involving Rule 12(b)(2).  According to the plaintiff, the majority view maintains that:  “If no evidentiary hearing is held, the plaintiff only needs to make a prima facie showing of personal jurisdiction and the record is construed in the light most favorable to the plaintiff.”  See footnote 41.  

According to the plaintiff, however, a minority of the decisions of the Court of Chancery impose a “more exacting factual standard” when jurisdictional discovery has been taken and require the plaintiff to allege specific facts supporting that position.

Suffice it to say for purposes of this cursory overview of the opinion, that the Court of Chancery (without agreeing that there is either a “majority or a minority standard” on this issue), determined that if there were two different standards, the Court of Chancery in the prior decision in this case linked above did apply the “majority standard” on the issue.  The Court explains its position in the context of the argument of the plaintiff that personal jurisdiction should be imposed based on the civil conspiracy theory of jurisdiction as outlined in the seminal Delaware Supreme Court decision in the case of Istituto Bancario Italiano SpA v. Hunter Engineering Company, Inc., 449 A.2d 210, 225 (Del. 1982).  The Court explained why the prerequisites for that basis of personal jurisdiction were not satisfied.

See generally and compare, very recent Chancery decision in Feeley, which was highlighted on these pages here, by another member of the Court that also addressed a motion to dismiss pursuant to Rule 12(b)(2).