Northside Community Bank v. Friedman, C.A. No. 8405-VCG (Del. Ch. Nov. 20, 2013).

Issue Addressed:  Whether the Court could impose personal jurisdiction over Illinois residents who created Delaware entities as part of an alleged scheme to fraudulently transfer assets beyond the reach of creditors.

Brief Overview:

This opinion is noteworthy for its discussion of an elaborate scheme, which required an extensive chart to keep track of the multiple layers of entities, that were used in an attempt to avoid the impact of a personal guarantee on a loan.  The Court found that there was a basis for personal jurisdiction based on the conspiracy theory of jurisdiction.  In particular, this opinion is noteworthy because it finds, consistent with prior Delaware decisions, that the formation of a Delaware entity in connection with a wrongful conspiracy, constitutes the transaction of the business within Delaware for purposes of imposing personal jurisdiction pursuant to Section 3104(c)(1) of Title 10 of the Delaware Code.  See also Microsoft Corp. v. Amphus, Inc., 2013 WL 5899003, at *9 (Del. Ch. Oct. 31, 2013).

The Court also noted that for purposes of a motion to dismiss for lack of jurisdiction under Court of Chancery Rule 12(b)(2), information in briefs and in oral argument can be used as part of the Court’s analysis.  In addition, the Court observed that because there was a count based on DGCL Section 225, which is a claim “in rem,” the jurisdictional issues did not apply to that claim.