Newsome et al v. Lawson et al

Filing 35

MEMORANDUM ORDER Granting 15 MOTION For Leave to Conduct Jurisdictional Discovery and Extension of Briefing Schedule (see Memorandum Order for further details). Signed by Judge Richard G. Andrews on 12/11/2014. (nms) (Main Document 35 replaced on 12/11/2014) (nms).

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

P. DAVID NEWSOME, JR., LIQUIDATING
TRUSTEE OF MAHALO ENERGY (USA),
INC.,
Plaintiff;
Civil Action No. 14-842-RGA

v.
JEFF G. LAWSON, et al.,
Defendants.

MEMORANDUM ORDER
Before the Court is Plaintiffs Motion for Leave to Conduct Jurisdictional Discovery and
Extension of the Briefing Schedule, filed on September 5, 2014. (D.I. 15). The parties fully
briefed the matter (D.1. 16, 22, 27), appeared for oral argument on October 27, 2014 (D.1. 30),
and provided supplemental briefing following oral argument. (D.1. 31-33). IT IS HEREBY
ORDERED that Plaintiffs Motion is GRANTED.

"Although the plaintiff bears the burden of demonstrating facts that support personal
jurisdiction, courts are to assist the plaintiff by allowing jurisdictional discovery unless the
plaintiffs claim is 'clearly frivolous."' Toys "R" Us, Inc. v. Step Two, S.A., 318 F.3d 446, 456
(3d Cir. 2003) (internal citations omitted). "If a plaintiff presents factual allegations that
suggest with reasonable particularity the possible existence of the requisite contacts between [the
defendant] and the forum state, the plaintiffs right to conduct jurisdictional discovery should be

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sustained." Id (internal quotation marks and citations omitted). "Where the plaintiff has made

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this required threshold showing, courts within this Circuit have sustained the right to conduct
discovery before the district court dismisses for lack of personal jurisdiction." Id.
Under Section 3114(b), any nonresident:
[W]ho after January 1, 2004, accepts election or appointment as an
officer of a corporation organized under the laws of this State, or
who after such date serves in such capacity . . . shall, by such
acceptance or by such service, be deemed thereby to have consented
to [service of process] ... in any action or proceeding against such
officer for violation of a duty in such capacity ....
10 Del. C. § 3114(b). 1 For purposes of this section, the word "officer" is defined as:
[A]n officer of the corporation who (i) is or was the president, chief
executive officer, chief operating officer, chief financial officer,
chief legal officer, controller, treasurer or chief accounting officer
of the corporation at any time during the course of conduct alleged
in the action or proceeding to be wrongful, (ii) is or was identified
in the corporation's public filings with the United States Securities
and Exchange Commission because such person is or was 1 of the
most highly compensated executive officers of the corporation at
any time during the course of conduct alleged in the action or
proceeding to be wrongful, or (iii) has, by written agreement with
the corporation, consented to be identified as an officer for purposes
of this section.

Id. Additionally, a nonresident is subject to the jurisdiction of Delaware courts where the
person "[t]ransacts any business or performs any character of work or service in the State," or
"[c]auses tortious injury in the State by an act or omission in this State." 10 Del. C. §
3104(c)(l) & (3). 2 Delaware courts have "repeatedly recognized" that "[t]he involvement of a

1 The briefing on the meaning of§ 3l14(b) is cursory, and, in particular, I doubt that the language "who after such
date serves in such capacity" is meant to include individuals not elected or appointed to serve as an officer of a
corporation. The obvious intent of that clause is to include those elected or appointed before January 1, 2004, who
continue to serve after January 1, 2004. Plaintiff, who relies on this language in support of his personal jurisdiction
argument, has not produced a case that says otherwise.
2 These statutes confer specific jurisdiction. See Boone v. 0 Partek Ab, 724 A.2d 1150, 1155 (Del. Super. Ct.
1997), a.ffd, 707 A.2d 765 (Del. 1998) ("Sections 3104(c)(1 ), (c)(2) and ( c)(3) have been deemed to be specific
jurisdiction provisions."). "Specific jurisdiction is at issue when the plaintiffs claims arise out of acts or omissions
that take place in Delaware. In this circumstance, jurisdiction is based on the relationship between the forum and
the controversy." Id. (internal citations omitted).

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defendant in arranging, either directly or through an agent ... for the filing of a corporate
instrument in Delaware that facilitated transactions under challenge in litigation" is "sufficient to
constitute the transaction of business under § 3104(c)( 1). " Sample v. Morgan, 93 5 A.2d 1046,
1057 (Del. Ch. 2007). "When a Delaware corporation is financially injured by faithless conduct
of its directors, the corporation is injured in its legal home, this State, for purposes of§
3104(c)(3)." Id.
Plaintiff has alleged sufficient facts to suggest the existence of minimum contacts
between Defendants, Grant A. MacKenzie and Jeff G. Lawson, and the state of Delaware. First,
Plaintiff alleges that MacKenzie served as corporate secretary and de facto chief legal officer for
Mahalo Energy (USA), Inc. ("Mahalo USA"), a Delaware corporation. (D.I. 31 at 1-2).
Plaintiff argues that Section 3114(b) applies to both appointed officers and those "serving in such
capacity," and thus covers MacKenzie's de facto position. (D.I. 30 at 7:1-5). 3 Second,
Plaintiff alleges that Defendants transacted business in the state, within the meaning of Section
3104(c)(l), by filing Mahalo USA's certificate of incorporation in Delaware. (D.I. 31at2).
Plaintiff also alleges that the present action arises out of Defendants' role in Mahalo USA' s
incorporation. (Id.). Third, Plaintiff alleges that Defendants are subject to jurisdiction under
Section 3104(c)(3) because they caused tortious injury in Delaware by breaching their fiduciary
duties as attorneys for Mahalo USA. (Id. at 3). Fourth, and finally, Plaintiff alleges that
Defendants aided and abetted the officers and directors of Mahalo USA in their breaches of
fiduciary duty, and are subject to conspiracy theory jurisdiction. (Id. at 4). Thus, Plaintiff has
alleged sufficient facts to establish that Plaintiffs claim for the Court's personal jurisdiction over

3 I am dubious about this argument as applied to the de facto chief legal officer, and I do not understand Plaintiff to
argue that "corporate secretary" confers any sort of jurisdiction. But see D.I. 31 at 1-2. "Corporate secretary" is
not a position listed under the definition of "officer" in § 3 l 14(b).

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Defendants is not "clearly frivolous." See generally Sample, 935 A.2d 1046. It may be that
Plaintiff cannot sustain his burden of showing personal jurisdiction, but I am going to give him
an opportunity to try. Therefore, Plaintiffs Motion is granted.
IT IS HEREBY ORDERED that Plaintiffs Motion for Leave to Conduct Jurisdictional

Discovery and Extension of the Briefing Schedule is GRANTED. Plaintiff shall be afforded
sixty ( 60) days from the date of this Order to conduct jurisdictional discovery. By no later than
March 6, 2015, Defendants may elect to renew their previously filed motion to dismiss and
briefing (DJ. 11, 12, 13) as it was, file a new motion and briefing, or answer the complaint. If
either of the first two options is pursued, subsequent briefing shall comply with the Local Rules.

Entered this

~of

December, 2014.

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