Many readers of this blog know that officers and directors of Delaware corporations as well as managers of LLCs, and those who play similar roles in other alternative entities, are subject to personal jurisdiction in Delaware courts based on what are referred to as “implied consent statutes”. In sum, these statutes provide that when one serves as an officer, director or manager of a Delaware entity, one is thus deemed to consent to personal jurisdiction of the Delaware courts. If one does not want to be subject to the jurisdiction of the Delaware courts, one should decline such a managerial position with a Delaware entity.
Now comes the most recent academic challenge to the conventional wisdom and the doctrinal underpinnings of Delaware’s implied consent statutes. The article is entitled:
Jurisdiction over Corporate Officers and the Incoherence of Implied Consent, by Professor Verity Winship, Assistant Professor of Law at the University of Illinois College of Law.
The abstract provides as follows:
Corporate officers of most large corporations in the United States have little contact with the state of incorporation — usually Delaware — beyond the bare fact of being a corporate officer. Jurisdiction in that state’s courts thus depends on whether the position alone provides constitutionally significant minimum contacts with the state. This article argues that implied consent is an incoherent basis for personal jurisdiction over corporate officers, and is the first to identify and analyze Delaware’s widespread use of implied consent statutes for corporate and non-corporate business entities. Not only is consent ultimately irrelevant, but jurisdiction over non-resident corporate officers based only on their corporate position is of uneasy constitutionality. This article evaluates a solution to this problem: a movement from implied to express consent.
The article also contributes to two current debates in corporate law. Courts and commentators have recently turned their attention to corporate officers, but they have ignored a necessary first step in the analysis, which this article provides. Without personal jurisdiction over officers, state courts cannot even begin to develop the law about their duties or protections. Moreover, the article fills a gap in the debate over how Delaware can keep its corporate law cases in its courts. It argues that implied consent statutes are designed to ensure that Delaware business law is adjudicated in Delaware, and that the constitutional due process limits analyzed here are an important obstacle to Delaware’s attempts to bundle its corporate law and forum.