Genuine Parts Co. v. Cepec, C.A. No. N15C-02-184 (Del. April 18, 2016) (Strine, C.J.)

In this important decision construing the scope of Delaware’s registration statutes for foreign corporations, the Delaware Supreme Court ruled that such statutes provide a means for service of process, but do not confer general jurisdiction over a foreign corporation.  Relying on Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2846 (2011) and Daimler AG v. Bauman, 134 S. Ct. 746 (2014), the Delaware Supreme Court reversed a Delaware Superior Court decision finding that a Georgia corporation consented to Delaware’s general jurisdiction merely by registering to do business in Delaware as a foreign corporation.

In the Superior Court action, plaintiffs Ralph and Sandra Cepec, residents of Georgia, sued Genuine Parts Company for allegedly exposing Mr. Cepec to asbestos during his employment with Genuine Parts.  Genuine Parts registered to do business in Delaware under 8 Del. C. § 371 and designated an agent for service of process in Delaware under 8 Del. C. § 376.  Genuine Parts’ corporate activities in Delaware were minimal and had no connection to the Cepecs’ claims.  Further, no basis for specific jurisdiction existed.

On June 30, 2015, Genuine Parts moved to dismiss the claims against it for lack of general and specific jurisdiction.  On August 31, 2015, the Superior Court denied Genuine Parts’ motion to dismiss, concluding that Genuine Parts had consented to general jurisdiction in Delaware by complying with §§ 371 and 376.  In so ruling, the Superior Court relied on Sternberg v. O’Neil, 550 A.2d 1105 (Del. 1988), which held in part that a foreign corporation consented to the general jurisdiction of Delaware when it registered to do business here.

On appeal, the Delaware Supreme Court explained that Goodyear and Daimler support the proposition that it is inconsistent with principles of due process to subject a corporation to general jurisdiction in every state in which it does business, absent “affiliations with the State [that] are so ‘continuous and systematic’ as to render [it] essentially at home in the forum State.”  Daimler, 134 S. Ct. at 761 (quoting Goodyear, 131 S. Ct. at 2851).  After Daimler, in most situations where a foreign corporation does not have its principal place of business in Delaware, the state cannot exercise general jurisdiction and must evaluate whether it can exercise specific jurisdiction under Delaware’s long-arm statute, 10 Del. C. § 3104.  According to the Delaware Supreme Court, Sternberg’s broad interpretation of § 376 conflicted with Daimler, and a proper reading of § 376 would permit service of process to be made upon a foreign corporation, but would not constitute consent to general jurisdiction.  The Delaware Supreme Court noted that the Cepecs could not establish a basis for specific jurisdiction under the Delaware long-arm statute or principles of due process, and accordingly reversed the ruling of the Superior Court.

Significantly, the Delaware Supreme Court acknowledged that, although the U.S. District Court for the District of Delaware had recently split on the issue of whether a registration to do business is a constitutionally valid basis for general jurisdiction over a nonresident corporation, the majority of federal courts that have considered the issue have taken the position now adopted.  The Court further noted that if all registered foreign corporations were subject to general jurisdiction in Delaware, they might choose not to conduct any business in the state.  Additionally, a different result might have encouraged other states to assert general jurisdiction over foreign corporations solely on the basis of their registration to do business in the state.

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