In Hazout v. Ting, 2016 Del. LEXIS 103 (Del. Feb. 26, 2016), the Delaware Supreme Court recently provided a new, relatively expansive interpretation of Delaware’s so-called director and officer “consent” statute, 10 Del. C. Section 3114, and in doing so rejected long-standing precedent that applied a narrower interpretation as inconsistent with the statute’s plain meaning.
Section 3114 provides that all directors of Delaware corporations, along with the officers described in Section (b), may be served with process at the office of the corporation’s Delaware registered agent or, if there is none, the secretary of state, in “all civil actions or proceedings brought in this state, by or on behalf of, or against such corporation, in which such director … is a necessary or proper party, or in any action or proceeding against such director, trustee or member for violation of a duty in such capacity.” The language defines the types of legal proceedings for which directors and covered officers are deemed to have consented to Delaware’s exercise of jurisdiction. Beginning with precedent such as Hana Ranch v. Lent, 424 A.2d 28 (Del. Ch. 1980), Delaware courts declined to give independent life to the first part of that formulation: actions “by or on behalf of, or against such corporation, in which such director … is a necessary or proper party,” due to concerns that it could be read to apply in a manner that exceeds the constitutional limits on a state’s exercise of personal jurisdiction over a nonresident. A line of decisions followed Hana Ranch by applying limiting constructions, reasoning that the statute should be applied only where the suit involved issues of compliance with fiduciary duties and statutory obligations under the Delaware General Corporation Law. The result was that the necessary and proper party provision was effectively read out of the statute.
