IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

TERRAMAR RETAIL CENTERS, LLC,

 Plaintiff,

 v.

MARION #2-SEAPORT TRUST U/A/D/ 

JUNE 21, 2002

 Defendant.

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C.A. No. 12875-VCL

MEMORANDUM OPINION

Date Submitted: July 18, 2017

Date Decided: August 18, 2017

Kenneth J. Nachbar, Lauren Neal Bennett, Colleen W. Hill, MORRIS, NICHOLS, 

ARSHT & TUNNELL LLP, Wilmington, Delaware; Richard A. Heller, PROCOPIO, 

CORY, HARGREAVES & SAVITCH LLP, San Diego, California; Counsel for 

Terramar Retail Centers, LLC.

Thad J. Bracegirdle, WILKS LUKOFF & BRACEGIRDLE, LLC; Counsel for Marion 

#2-Seaport Trust U/A/D/ June 21, 2002.

LASTER, Vice Chancellor.
1

Defendant Marion #2-Seaport Trust U/A/D June 21, 2002 (the “Trust”) is an 

investment vehicle affiliated with non-party Michael Cohen. The Trust holds a 25% 

member interest in Seaport Village Operating Company, LLC (the “Company”), which is 

a Delaware limited liability company. Cohen negotiated the terms of the underlying 

business deal that was implemented through the formation of the Company. He also 

negotiated the terms of the Company’s operating agreement.

Plaintiff Terramar Retail Centers, LLC (“Terramar”) holds a 75% member interest 

in the Company. Terramar seeks declarations that it (i) properly exercised a buy-out 

provision, (ii) has the power to dissolve the Company and can sell the Company’s 

property and assets in its sole discretion, and (iii) can distribute the proceeds in 

accordance with its interpretation of a waterfall provision in the Company’s operating 

agreement. 

The Trust moved to dismiss the action pursuant to Court of Chancery Rule 

12(b)(2).

1 According to the Trust, a Delaware court cannot exercise personal jurisdiction 

over the Trust for purposes of Terramar’s suit to enforce the operating agreement. 

 

1 The Trust also argued that this dispute was not ripe. On the day before oral 

argument on the motion to dismiss, the Trust submitted a copy of a complaint it filed in 

the Superior Court of the State of California for the County of Los Angeles in which the 

Trust sought declarations that (i) Terramar had not validly exercised the buy-out 

provision, which in turn means that Terramar cannot dissolve the Company and (ii) the 

waterfall provision in the Company’s operating agreement gives the Trust a priority claim 

to the Company’s cash flows and any sales proceeds. See Dkt. 44, Ex. ¶¶ 70-71. The 

Trust’s decision to seek declaratory judgments on these issues in California rendered

moot its contention that Terramar’s suit to obtain comparable declarations in this court 

was not ripe for resolution.
2

The motion to dismiss is denied.

I. FACTUAL BACKGROUND

The facts are drawn from Terramar’s Amended and Supplemental Complaint (the 

“Complaint”) and the documents that the parties submitted in connection with the motion 

to dismiss.2 The court has taken judicial notice of prior proceedings in a related action

between Terramar and a third member of the Company. On a motion to dismiss for lack 

of personal jurisdiction, “the record is construed in the light most favorable to the 

plaintiff.”3

A. Seaport Village

Seaport Village is a specialty shopping center and tourist attraction in San Diego, 

California. The Port of San Diego owns the land on which Seaport Village operates. 

Seaport Village was developed beginning in 1978, when the Taubman family secured a 

forty-year lease on the land. The Taubman family used San Diego Sea Port Village, Ltd.

(“Limited”), a California limited partnership, as its vehicle for entering into the lease and 

developing the property.

To finance the development of Seaport Village, Limited borrowed $40 million 

from The Yasuda Trust & Banking Company, Ltd., a Japanese bank (the “Yasuda 

 

2 See Sprint Nextel Corp. v. iPCS, Inc., 2008 WL 2737409, at *5 (Del. Ch. July 14, 

2008) (noting that on a motion to dismiss for lack of personal jurisdiction “[t]he court 

may consider the pleadings, affidavits, and any discovery of record”).

3

Id.
3

Loan”). In 1998, Limited defaulted on the Yasuda Loan. By this point, Anne Taubman 

had become the principal of Limited. 

Taubman engaged Cohen to help her refinance Limited’s obligations. Cohen is a 

real estate professional who sources capital for real estate transactions.4

With Cohen’s assistance, Taubman formed San Diego Seaport Lending Co., LLC 

(“Lending”), a Delaware limited liability company. Lending borrowed $24 million , then 

used the proceeds to purchase the Yasuda Loan.

As part of the restructuring, Cohen, Limited, Lending, and Taubman entered into a 

consulting agreement. The agreement is complex, but in substance it gave Cohen the 

right to receive cash flows from Limited and Lending that mimicked a 50% interest in 

those entities. Taubman personally guaranteed the payments to Cohen. As the consulting 

agreement specified, Cohen did not receive, and never held, actual member interests in

Limited or Lending. Instead, he became a party to a contract that gave him cash-flow 

rights similar to what he would have received if he owned a 50% equity interest in 

Limited and Lending.

B. The Terramar Transaction

By 2002, Limited needed additional capital. Cohen secured additional capital from 

Terramar, a real estate development company.

5 To implement the recapitalization, Cohen, 

 

4 See Dkt. 31, Ex. D at 19:6-7. 

5 At the time, Terramar was known as GMS Realty. For simplicity, this opinion 

consistently refers to the entity as “Terramar.” 
4

Taubman, and Terramar formed the Company. Terramar received 50% of the member 

interests in the new entity and became its manager. In return, Terramar (i) made a capital 

contribution of $7 million, (ii) guaranteed half of the outstanding balance of Lending’s 

outstanding loan, (iii) took over the management of Seaport Village, and (iv) agreed to 

seek to renew the lease with the Port of San Diego and to attempt to obtain a lease from 

the Port for an adjacent property. 

Cohen and Taubman received the other 50% of the member interests in the 

Company, which they split 50/50 in accordance with their effective split of the cash-flow 

rights from Limited and Lending. To hold his 25% member interest, Cohen formed the 

Trust. Taubman held her 25% member interest through Limited. 

To govern the business and affairs of the Company and further specify the terms 

of the investment, the Trust, Limited, and Terramar entered into an operating agreement

dated September 1, 2002 (the “Operating Agreement”). The preamble to the Operating

Agreement recited that the members “wish[ed] to form a Delaware limited liability 

company for the purpose and on the terms and conditions set forth herein.”6 The 

Operating Agreement declared that the Company was “formed as a limited liability 

company pursuant to the provisions of the [Delaware Limited Liability Company] Act”

and that its existence “commence[d] upon the filing for record of the Company’s 

Certificate with the Delaware Secretary of State . . . .”7 The Operating Agreement further 

 

6 Dkt 26, Ex. A. at 1.

7

 Id. at 8-9.
5

specified that the Delaware Limited Liability Company Act governs “[t]he rights and 

obligations of the Members and the affairs of the Company . . . .”8

The Operating Agreement named Terramar as the Company’s sole manager with 

“full, exclusive, and complete discretion to manage and control the business affairs of the 

Company . . . .”9 Neither the Trust nor Limited received “any right, power, or authority to 

transact any business in the name of the Company, take part in the day-to-day 

management or the operation or control of the business and affairs of the Company, or act 

for or on behalf of or to bind the Company.”10

Under the Operating Agreement, Cohen received an exclusive right to broker any 

future financing for Seaport Village.11 Terramar received the right to a preferential return 

of 11.5% per year on its capital contribution of $7 million before the Company could 

make any distributions to its members in proportion to their member interests.12 Terramar 

also received a right to request that the other members buy out its member interest at fair 

market value at any time after January 1, 2006 (the “Put Right”). The Operating 

Agreement established a series of procedures to determine fair market value. To put teeth 

into the Put Right, Terramar had the right to dissolve the Company and receive a 

 

8

Id. at 8. 

9

Id. at 19.

10 Id. at 20-21. 

11 Id.

12 Id. at 15. 
6

contractually determined payout if the members did not purchase Terramar’s interest 

within six months (the “Dissolution Right”).13

Terramar insisted upon the Put Right and the Dissolution Right as a condition of 

its investment. During the negotiations, Terramar’s counsel called out the provisions in 

an e-mail to Taubman’s counsel and emphasized that Terramar was “not willing to enter 

into the transaction without a clear exit strategy.”14 The email was forwarded to Cohen.15

C. Disputes Arise.

Over the years, the Company’s members disagreed over various matters. In April 

2012, Limited sued Terramar in the Superior Court of the State of California for the 

County of San Diego seeking the dissolution of the Company. In August 2013, the 

California court held that any claim for dissolution must be brought in Delaware. 

In August 2013, Limited sued Terramar in this court (the “Limited Action”).

Limited alleged that Terramar breached the Operating Agreement by failing to act 

diligently to obtain an extension of the Seaport Village lease and a lease on the adjacent 

property. Limited also alleged that Terramar breached the Operating Agreement by 

providing first-party financing to the Company and wrongfully allocating income to 

Limited. The Trust was not a party to the lawsuit. 

 

13 Id. at 32. 

14 Dkt. 31, Ex. E at 2.

15 Id. at 1.
7

Terramar moved to dismiss Limited’s claims. In February 2014, this court granted 

the motion to dismiss in part. The parties moved forward with discovery on the surviving 

claims. 

D. Terramar Exercises The Put Right.

On December 18, 2015, Terramar exercised the Put Right by giving notice to the 

Trust and Limited that Terramar desired to have its member interests purchased (the 

“Buy-Out Notice”). As required by the Operating Agreement, the Buy-Out Notice 

contained Terramar’s assessment of (i) the Company’s fair market value using a 

contractually defined standard (“Company Fair Market Value”) and (ii) a contractually 

determined purchase price for Terramar’s interests (the “Terramar Purchase Price”). A 

key component of the Terramar Purchase Price was the amount that Terramar would 

receive under the distribution provisions in the Operating Agreement if all of the 

Company’s assets were sold for an amount equal to Company Fair Market Value (the 

“Waterfall Distribution”).

Both the Trust and Limited submitted notices disputing Terramar’s assessment of 

the Company Fair Market Value. The notices in turn triggered a contractual procedure for 

establishing Company Fair Market Value. The parties followed this procedure, which

resulted in a Company Fair Market Value of $57,503,287.00.

The Operating Agreement did not establish any mechanism for resolving other 

disputes over the calculation of the amount of the Terramar Purchase Price. Both Limited 

and the Trust informed Terramar that they believed that Terramar misapplied the 
8

distribution provisions when calculating the Waterfall Distribution for purposes of 

determining the Terramar Purchase Price.

The Operating Agreement provided that once the Terramar Purchase Price has 

been determined, then the other members would have six months to buy out Terramar at 

that price. If Terramar did not receive the Terramar Purchase Price within six months, 

then Terramar would gain the right to cause the dissolution of the Company. The 

Operating Agreement further provided that once Terramar exercised the Dissolution 

Right, then Terramar could sell the property and assets of the Company “on such terms 

and conditions as [Terramar] determined in its sole and absolute discretion,” except for 

sales to controlled affiliates of Terramar, where other contractual restrictions would

apply.16

The Trust, Limited, and Terramar agreed that the six-month period expired on 

November 9, 2016. Terramar did not receive the Terramar Purchase Price within the sixmonth period (or at any time thereafter). 

Terramar contends that it now possesses the right to dissolve the Company and to 

sell its property and assets. The Trust disputes Terramar’s position, contending that 

Terramar misapplied the distribution provisions in the Operating Agreement and hence 

failed to calculate the Terramar Purchase Price correctly. The Trust also has taken the 

position that Terramar only can cause the Company to sell its assets to existing members 

of the Company. 

 

16 Dkt. 26., Ex. A at 32.
9

On November 4, 2016, Terramar filed this action against Limited and the Trust. 

Terramar sought a declaration that it was entitled to exercise the Dissolution Right and 

had correctly calculated the Waterfall Distribution. The court subsequently issued a posttrial decision in the Limited Action, which ruled in favor of Terramar on all claims. 

In January 2017, Terramar agreed to purchase Limited’s 25% membership interest 

in the Company, giving Terramar a 75% membership interest. Terramar then dismissed

Limited from this action with prejudice. On February 10, 2017, Terramar filed the 

currently operative complaint. It seeks a declaration that Terramar has the right to 

dissolve the Company, “is entitled to unilaterally sell all of [the Company’s] property and 

assets to a third party in connection with [the Company’s] dissolution,” and “has 

correctly calculated the Waterfall Distribution.”17

II. LEGAL ANALYSIS

The Trust has moved to dismiss the Complaint pursuant to Rule 12(b)(2). 

According to the Trust, a Delaware court cannot exercise personal jurisdiction over the 

Trust for purposes of the claims that Terramar has asserted under the Operating 

Agreement. 

When a defendant moves for dismissal pursuant to Rule 12(b)(2), “[t]he plaintiff 

has the burden to show a basis for the Court’s jurisdiction over the nonresident 

defendant.”18 Unless the parties have conducted jurisdictional discovery and the court has 

 

17 Dkt. 19 ¶ 32.

18 Sprint Nextel, 2008 WL 2737409, at *5 (collecting cases). 
10

held an evidentiary hearing, a plaintiff “need only make a prima facie showing, in the 

allegations of the complaint, of personal jurisdiction and the record is construed in the 

light most favorable to the plaintiff.”19

Determining “whether a Delaware court has jurisdiction over a nonresident 

defendant” requires a two-step analysis.20 In the first step, the court must determine 

whether the plaintiff has identified a legally cognizable basis for asserting jurisdiction 

over the defendant. Typically this involves identifying and meeting the requirements of a 

statute, such as Delaware’s long-arm statute.

21 In the second step, the court must 

determine whether exercising personal jurisdiction over the defendant passes muster 

under the Due Process Clause of the United States Constitution.22 To avoid due process 

problems, “a nonresident defendant must have sufficient ‘minimum contacts with [the 

forum state] such that the maintenance of the suit does not offend traditional notions of 

fair play and substantial justice.’”

23

A. The Long-Arm Statute

Terramar claims that Delaware’s long-arm statute permits this court to exercise 

personal jurisdiction over the Trust for purposes of the claims to enforce the Operating 

 

19 Id.

20 Matthew v. Fläkt Woods Gp. SA, 56 A.3d 1023, 1027 (Del. 2012).

21 Id.

22 Id.

23 Id. (alteration in original) (quoting Int’l Shoe Co. v. Washington, 326 U.S. 310, 

316 (1945) (internal quotations omitted)).
11

Agreement. “Under § 3104(c)(1), a court may exercise personal jurisdiction over a 

nonresident who, ‘in person or through an agent . . . [t]ransacts any business or performs 

any character of work or service in the State . . . .’”

24 Section 3104 is a “single act” 

statute.25 Therefore, a “single transaction is sufficient to confer jurisdiction where the 

claim is based on that transaction.”26 Put another way, a single business transaction in 

Delaware “may supply the jurisdictional basis for suit only with respect to claims which 

have a nexus to the designated conduct.”27

Forming a Delaware entity both requires a filing in Delaware with the Secretary of 

State and necessarily has an effect within Delaware. Not surprisingly, Delaware courts 

have held consistently that forming a Delaware entity constitutes the transaction of 

business within Delaware that is sufficient to establish specific personal jurisdiction 

under Section 3104(c)(1).28 Delaware courts similarly have found that making an entity-

 

24 Id. (alteration in original) (quoting 10 Del. C. § 3104(c)(1)).

25 Eudaily v. Harmon, 420 A.2d 1175, 1180 (Del. 1980).

26 Crescent/Mach I P’rs, L.P. v. Turner, 846 A.2d 963, 978 (Del. Ch. 2000)

(internal quotations omitted).

27 LaNuova D & B, S.p.A v. Bowe Co., 513 A.2d 764, 768 (Del. 1986). 

28 See, e.g., In re Mobilactive Media, LLC, 2013 WL 297950, at *28 (Del. Ch. Jan. 

25, 2013) (finding § 3104(c)(1) satisfied where defendant incorporated Delaware entities 

for the purpose of accomplishing one of the challenged acts); Conn. Gen. Life Ins. Co. v. 

Pinkas, 2011 WL 5222796, at *2 (Del. Ch. Oct. 28, 2011) (explaining that “a single act 

of incorporation, if done as part of a wrongful scheme, will suffice to confer personal 

jurisdiction under § 3104(c)(1)”); EBG Hldgs. LLC v. Vredezicht’s Gravenhage 109 BV, 

2008 WL 4057745, at *6 (Del. Ch. Sept. 2, 2008) (“[T]he incorporation and operation of 

a Delaware subsidiary constitutes the transaction of business under § 3104(c)(1).”). See 

generally Donald J. Wolfe, Jr. & Michael A. Pittenger, Corporate and Commercial 
12

related filing, such as filing a certificate of cancellation, constitutes the transaction of 

business in Delaware that is sufficient to establish specific personal jurisdiction under 

Section 3104(c)(1).29

Because § 3104(c)(1) confers specific, not general, jurisdiction, there must be a 

nexus between the formation of the Delaware entity and the cause of action asserted in 

the lawsuit.30 When determining whether a sufficient nexus exists, the principal factor 

that Delaware courts have examined is the extent of the factual relationship between the 

formation of the Delaware entity and the cause of action. “[I]n suits in which the 

incorporation of a Delaware subsidiary is an integral component of the conduct giving 

rise to the cause of action, the Delaware courts have consistently recognized that a 

nonresident defendant’s incorporation of such subsidiary constitutes sufficient ‘minimum 

 

Practice in the Delaware Court of Chancery § 3.04[c][3], at 3-101 (2012) (collecting 

cases) [hereinafter Wolfe & Pittenger].

29 See Matthew, 56 A.3d at 1027-28 (“Filing a certificate of cancellation is the 

transaction of business in Delaware within the meaning of § 3014(c)(1).”); Sample v. 

Morgan, 935 A.2d 1046, 1057 (Del. Ch. 2007) (Strine, V.C.) (same); see also Lake 

Treasure Hldgs., Ltd. v. Foundry Hill GP LLC, 2013 WL 6184066, at *3 (Del. Ch. Nov. 

21, 2013) (“The filing of a UCC financing statement can be sufficient under § 3104(c)(1) 

because Delaware’s long arm statute is a single-act statute.”).

30 See LaNuova, 513 A.2d at 768 (explaining that the “single act” provisions of 

Section 3104 “supply the jurisdictional basis for suit only with respect to claims which 

have a nexus to the designated conduct”). Compare Lake Treasure, 2013 WL 6184066, at 

*3 (finding sufficient nexus between claims and filing of UCC financing statement in 

Delaware) with Solae, LLC v. Hershey Can., Inc., 557 F. Supp. 2d 452, 459–60 (D. Del. 

2008) (finding filing of UCC financing statement insufficient under § 3104(c)(1) where 

plaintiff did not assert any nexus between that act and the conduct giving rise to plaintiffs 

claim), and Sanitec Indus., Inc. v. Sanitec Worldwide, Ltd., 376 F. Supp. 2d 571, 574 (D. 

Del. 2005) (same).
13

contacts’ with Delaware.”31 This court has held that a cause of action is sufficiently 

related to the entity’s formation if the formation “set in motion a series of events which 

form the basis for the cause of action before the court.”32 Delaware courts have 

interpreted the relatedness requirement broadly when the underlying claims involve the 

internal affairs of a Delaware entity.33 This is because “the creation of a legal entity 

creates a forum state public interest in the governance of that entity.”34

 

31 Wolfe & Pittenger, § 3.04[c][3], at 3-100. See, e.g., Hamilton P’rs L.P. v. 

Englard, 11 A.3d 1180, 1196 (Del. Ch. 2010) (finding that specific personal jurisdiction 

existed over defendant to consider claims for breach of fiduciary duty by defendant 

arising out of a settlement where the parties agreed to create a Delaware entity to hold the 

intellectual property assets that formed part of the settlement); Cairns v. Gelmon, 1998 

WL 276226, at *3 (Del. Ch. May 21, 1998) (finding that specific jurisdiction over the 

defendant existed to consider a claim for breach of a joint venture agreement where the 

defendant participated in the formation of the joint venture).

32 Microsoft Corp. v. Vadem, Ltd., 2012 WL 1564155, at *7 (Del. Ch. Apr. 27, 

2012) (internal quotations omitted). 

33 Compare In re Gen. Motors (Hughes) S’holder Litig., 2005 WL 1089021, at *23 

(Del. Ch. May 4, 2005) (holding that the court could exercise personal jurisdiction over a 

foreign corporation for a claim of aiding and abetting a breach of fiduciary duty by 

directors of Delaware corporations; emphasizing that Delaware’s interest “in ensuring 

that board of directors of Delaware corporations fulfill their fiduciary duties . . . would be 

undermined if entities that allegedly aid and abet breaches of fiduciary duties of 

Delaware corporations could not be held accountable in Delaware courts”) with Mobile 

Diagnostic Gp. Hldgs, LLC v. Suer, 972 A.2d 799, 808-09 (Del. Ch. 2009) 

(distinguishing Hughes and declining to exercise jurisdiction for breach of contract claim 

because “Delaware’s strong interest in providing a forum for claims involving the 

internal affairs of domestic corporations is not implicated in this case”). 

34 In re USACafes, L.P. Litig., 600 A.2d 43, 51 (Del. Ch. 1991) (Allen, C.); see 

also Sternberg v. O’Neil, 550 A.2d 1105, 1125 (Del. 1988) (“Delaware has more than an 

interest in providing a sure forum for . . . litigation involving the internal affairs of its 

domestic corporations. Delaware has an obligation to provide such a forum.”) (internal 

citations and footnote omitted).
14

The leading case addressing the relationship between the formation of a Delaware 

entity and a claim for breach of contract is Papendick v. Bosch.

35 Bosch, a German 

limited liability company, entered into a contract with Papendick that called for Bosch to 

pay a finder’s fee if Bosch successfully acquired Borg-Warner Corporation. Bosch 

subsequently entered into a transaction to acquire Borg-Warner and formed a Delaware 

corporation as the acquisition vehicle. After Bosch refused to pay the finder’s fee, 

Papendick sued for breach of contract in the Delaware Superior Court. Bosch moved to 

dismiss for lack of personal jurisdiction, and the Superior Court granted the motion.36

The Superior Court found that Bosch’s “sole contact with Delaware is the ownership of 

stock in [the subsidiary] after utilizing the incorporation laws of this state.”

37 Applying 

the United States Supreme Court’s then-recent decision in Shaffer v. Heitner,

38 the 

Superior Court concluded that this contact was insufficient to support personal 

jurisdiction over Bosch for purposes of a claim for breach of the finder’s fee agreement. 

The Delaware Supreme Court reversed. The high court explained that, unlike in 

Shaffer, Bosch’s contacts with Delaware were not limited to “mere ownership of stock 

having its situs in Delaware.”

39 Rather, Bosch created a Delaware corporation “as an 

 

35 410 A.2d 148 (Del. 1979), cert denied, 446 U.S. 909 (1980). 

36 Papendick v. Robert Bosch G/m/b/h, 389 A.2d 1315, 1318 (Del. Super. 1978), 

rev’d, 410 A.2d 148 (Del. 1979). 

37 Id. 

38 433 U.S. 186 (1977).

39 Papendick, 410 A.2d at 151.
15

integral part of its total transaction with [Borg-Warner] to which the plaintiff’s instant 

cause of action relates.”40 The Supreme Court held that under those circumstances, Bosch

had “purposefully avail[ed] itself of the benefits and protections of the laws of the State 

of Delaware for financial gain in activities related to the cause of action.”41

Consequently, a Delaware court could exercise specific personal jurisdiction over Bosch 

for purposes of Papendick’s contractual claim for his finder’s fee.

Following Papendick, courts in Delaware have held that a sufficient nexus exists 

between the formation of an entity and claims to enforce the constitutive documents of 

that entity.42 Papendick showed that specific jurisdiction to enforce a contract exists 

 

40 Id. at 152. 

41 Id.

42 See Shamrock Hldgs. of Cal., Inc. v. Arenson, 421 F. Supp. 2d 800, 804 (D. Del. 

2006) (finding that specific personal jurisdiction over defendants existed to consider a 

claim for a declaratory judgment that the plaintiffs had not breached the operating 

agreements governing two LLCs where the plaintiffs and the defendants were members 

of LLCs and had “agreed to the formation and funding of [the entities] for the purpose of 

implementing their mutually agreed objective of developing a home-building business”; 

holding that the plaintiffs’ causes of action “arise from, and relate to, the incorporation 

and formation” of the Delaware entities); Gelmon, 1998 WL 276226, at *3 (finding that 

specific jurisdiction over defendant existed to consider a claim for breach of a joint 

venture agreement where the parties formed the entity to carry out their joint venture and 

the plaintiff contended that the defendant had failed to comply with governance 

provisions in the agreement); see also Cornerstone Techs., LLC v. Conrad, 2003 WL 

1787959, at *10 n.32 (Del. Ch. Mar. 31, 2003) (Strine, V.C.) (observing in dicta that 

exercising jurisdiction under Papendick for claims to enforce an entity’s constitutive 

documents is consistent with “the [Delaware] Supreme Court’s command that the longarm statute be construed liberally”); cf. Pinkas, 2011 WL 5222796, at *2 (“But merely 

participating in the formation of a Delaware entity, without more, does not create a basis 

for jurisdiction in Delaware. Instead, the formation must be an integral component of the 
16

where the formation of a Delaware entity is “part of [a] total transaction . . . to which the 

plaintiff’s . . . cause of action relates.”43 In Papendick, the contract and the formation of 

the Delaware entity were separate parts of the total transaction, yet the formation of a 

Delaware entity provided a sufficient basis to exercise personal jurisdiction over the 

contractual counterparty for purposes of enforcing the contract. When the contract in 

question is the constitutive document governing the Delaware entity itself, the 

relationship is significantly closer. Indeed, it is as close as it can be. Moreover, a claim to 

enforce the entity’s constitutive document necessarily implicates the special interest that 

a sovereign has in adjudicating cases involving the internal affairs of entities created 

under its laws.

Under Papendick and its progeny, a nexus exists between the formation of the 

Company and Terramar’s claims to enforce the Operating Agreement that is sufficient to 

permit this court to exercise specific personal jurisdiction over the Trust. The Operating 

Agreement is the constitutive document that governs the Company. The business deal 

that Terramar seeks to enforce was embodied in the Operating Agreement and 

implemented through the creation of the Company. Forming the Company was the act 

that gave “legal life to [the Operating Agreement] as a legally viable contract.”44 Creating 

 

total transaction to which plaintiff[’]s cause of action relates.”) (internal quotations 

omitted).

43 Papendick, 410 A.2d at 152. 

44 Conrad, 2003 WL 1787959, at *10 n.32. 
17

the Company was necessary both to complete the transaction and to give effect to the 

contract that Terramar seeks to enforce. The formation of the Company thus “set in 

motion a series of events which form the basis for the cause of action before the court.”45

A second factor that courts have considered is the degree of involvement that the 

defendant had in the formation of the entity. Section 3104(c)(1) only permits the assertion 

of personal jurisdiction over a party who “in person or through an agent . . . [t]ransacts 

any business or performs any character of work or service in the State . . . .”

46 As a 

defendant’s involvement in the underlying transaction and the formation of the Delaware 

entity becomes more attenuated, it becomes more difficult to hold that the defendant 

transacted business in the state. This court has declined to exercise personal jurisdiction 

over defendants who were not meaningfully involved in structuring the underlying 

transaction or negotiating the terms of the deal.47

At this procedural stage, the record supports a reasonable inference that the Trust, 

through Cohen, played a meaningful role in forming the Company and negotiating the 

Operating Agreement. Cohen brokered the deal. He had an existing and ongoing 

professional relationship with Taubman and Limited. He possessed contractual rights to 

 

45 Microsoft, 2012 WL 1564155, at *7 (internal quotations omitted). 

46 10 Del. C. § 3104(c)(1).

47 See, e.g., Suer, 972 A.2d at 808 (declining to exercise jurisdiction over a 

defendant who had only a “limited involvement in negotiating and structuring the 

transaction”); EBG Hldgs., 2008 WL 4057745, at *7 (declining to exercise personal 

jurisdiction and emphasizing that the defendant did not “participate[] in the formation [of 

the entity] in a meaningful fashion”). 
18

cash flows from Limited and Lending that resembled equity rights in the entities. As part 

of the Terramar Transaction, he received an equity interest in the Company. He also 

bargained for a unique economic benefit in the form of an exclusive right to broker future 

financings for Seaport Village. In related litigation in California, Terramar’s lawyer 

testified that “[m]ost of the conversations about deal terms and the transaction structure 

and such were had with Mr. Cohen.”48 Taubman similarly recalled that “Cohen was the 

one that was negotiating the deal.”49

In effort to defeat the foregoing analysis, the Trust argues that the formation of a 

Delaware entity must be “part of a wrongful scheme” before a court can exercise personal 

jurisdiction under Papendick. There are Delaware cases that speak in these terms, but 

they involved cases where the claim that the plaintiff sought to assert involved wrongful 

conduct, such as a claim for fraud or for breach of fiduciary duty.50 The exercise of 

specific personal jurisdiction requires a nexus between the forum-directed conduct and 

the claim being asserted. Whether a sufficient nexus exists necessarily depends on the 

nature of the claim. If the claim turns on a wrongful conduct or scheme, then the 

formation of the Delaware entity must relate to the wrongful conduct or scheme before it 

can support the exercise of specific personal jurisdiction. But where, as in Papendick and 

this case, the underlying claim is for breach of a contract, wrongfulness is not required. 

 

48 Dkt. 31, Ex. C at 18:3-5.

49 Dkt. 31, Ex. B. at 97:7-12. 

50 See, e.g., Pinkas, 2011 WL 5222796, at *2; Gelmon, 1998 WL 276226, at *3. 
19

The determinative question instead is the relationship between the contract and the 

formation of the entity, i.e. whether the formation of the Delaware entity was an “integral 

part” of the contractual relationship that the plaintiff seeks to enforce.

51 Here, it clearly 

was: the Company and its operating agreement are inextricably linked. 

The Trust next cites more pertinent precedents in which this court has declined to 

exercise specific personal jurisdiction under Papendick for claims asserting a breach of 

an entity’s constitutive documents. Those cases are distinguishable. In Connecticut 

General Life Insurance Company v. Pinkas,

52 the plaintiffs argued that the third-party 

defendants improperly attempted to substitute themselves as managers of the funds in 

which the plaintiffs invested. The court held that it could not exercise personal 

jurisdiction over the third-party defendants under Papendick because “the bases of the 

claims asserted . . . do not relate to the formation of [the entity] in any direct way; in fact, 

they only relate to [the entity’s] formation in the most attenuated way possible – that [the 

entity] must have existed in order for [the third party defendants] to have damaged it in 

the way alleged.”53 Unlike the Trust, the third-party defendants had not signed the funds’

operating agreements, were not members of the funds, and had not negotiated the terms 

of their governing documents. 

 

51 Papendick, 410 A.2d at 152. 

52 2011 WL 5222796 (Del. Ch. Oct. 28, 2011). 

53 Id. at *2. 
20

The Trust also cites Kahuku Holdings, LLC v. MNA Kahuku, LLC.

54 The plaintiff 

owned a 92% member interest in a Delaware limited liability company and was the 

entity’s sole manager under an operating agreement that contained a provision mandating 

arbitration of all disputes in Hawaii. Notwithstanding the arbitration provision, the 

plaintiff sued the defendant in the Court of Chancery. The defendant moved to dismiss in 

favor of arbitration and alternatively contested personal jurisdiction, arguing that this 

court lacked jurisdiction over a passive minority member who owned an 8% non-voting 

interest. The court enforced the arbitration provision, and the decision primarily 

concerned that issue.55 The court noted that given its holding on arbitrability, it did not 

need to reach the question of personal jurisdiction.56 For the sake of completeness, 

however, the court observed that the plaintiff would have “a stiff grade to claim” because 

of the minority investor’s minimal role in the formation of the entity and lack of contacts 

with Delaware. On the latter point, the court observed that although the minority investor 

participated in the formation of a Delaware LLC and negotiated the terms of the 

operating agreement, “it did so only as a small, minority member with no voting rights, 

and further specifically contracted for an arbitration provision that both adopted arbitral 

rules that set disputes over arbitrability in a Hawaiian court and expressly named Hawaii 

 

54 2014 WL 4699618 (Del. Ch. Sept. 15, 2014).

55 Id. at *3-5.

56 Id. at *5.
21

as the venue for settling disputes over arbitrability.”57 The court suggested that even if the 

minority member’s participation in the formation of a Delaware LLC satisfied the longarm statute, it would raise due process issues to hale the minority member “into a 

Delaware court six time zones to the east.”58 Rather than foreclosing the exercise of 

specific personal jurisdiction based on a member’s participation in forming a Delaware 

LLC and negotiating its operating agreement, Kahuku’s dictum recognizes its feasibility, 

subject to the constraints of due process.

The Trust relies most heavily on Fisk Ventures, LLC v. Segal,

59 where the entity at 

issue was a Delaware limited liability company named Genitrix LLC. It had three classes 

of member interests—A, B, and C—with each class held by multiple investors. Andrew 

Segal, the founder, President, and CEO of Genitrix, held a majority of the Class A 

interests. H. Fisk Johnson, a significant investor in Genitrix, held a majority of the Class 

B interests, some directly and others through Fisk Ventures, another entity that Johnson 

controlled.60 By the time of the dispute, Genitrix had run out of money, and the board of 

managers was deadlocked.

The litigation in Delaware began when Fisk Ventures petitioned to dissolve 

Genitrix. Segal responded by filing third-party claims against Johnson and his appointees 

 

57 Id. at *6.

58 Id.

59 2008 WL 1961156 (Del. Ch. May 7, 2008). 

60 Id. at *2-3.
22

on the board of managers. Segal contended that Johnson and his appointees breached 

Genitrix’s operating agreement because they “refused to accede to Segal’s proposals with 

respect to research, financing, and other matters.”61 He further alleged that Johnson’s 

appointees breached the operating agreement when they removed him as CEO. He also 

asserted claims for breach of the implied covenant of good faith and fair dealing, breach 

of fiduciary duty, and tortious interference with contract, all of which were predicated on 

the purported breaches of the operating agreement. Johnson and the other counterclaimdefendants moved to dismiss the claims under Rule 12(b)(6) for failure to state a claim 

upon which relief could be granted. Johnson also moved to dismiss the claims against 

him under Rule 12(b)(2) for lack of personal jurisdiction.

Segal’s claims were plainly specious, and the court dismissed all of them under 

Rule 12(b)(6). The court observed that Genitrix’s operating agreement “[i]n no way . . . 

obligate[s] one class to acquiesce to the wishes over the other simply because the other 

believes its approach is superior or in the best interests of the Company.”62 Segal’s claim 

that he was improperly terminated as CEO was similarly meritless. The LLC agreement

stated that Segal’s employment agreement would control over any contrary provisions in 

the LLC agreement, and the board of managers complied with Segal’s employment 

agreement when they removed him. 

 

61 Id. at *9. 

62 Id. 
23

The court separately held that it could not exercise personal jurisdiction over 

Johnson. According to Segal, Johnson had “insisted that Genitrix be formed under 

Delaware law before he would invest in the Company.”63 In a single sentence, the court 

rejected the contention that any nexus existed between Segal’s claims and the formation

of Genitrix: “Indeed, Dr. Johnson caused Genitrix to become a Delaware LLC and 

demanded that its governing contracts utilize Delaware law, but Segal’s claims against 

Johnson have nothing to do with the formation of the Company.”64 The court therefore 

concluded that while “Johnson does have some limited contacts with Delaware . . . 

Segal’s claims against Johnson do not arise from and have no nexus with those limited 

contacts.”65 The opinion did not discuss Papendick. It focused instead on cases standing 

for the settled propositions that ownership of equity in a Delaware corporation or 

purchasing shares in a Delaware corporation, without more, are not sufficient to support 

personal jurisdiction over the owner or purchaser of the shares.

66

In my view, Fisk’s brisk treatment does not establish a rule of law that a claim to 

enforce a limited liability company’s operating agreement lacks a sufficient nexus to the 

 

63 Id. at *3.

64 Id. at *7. 

65 Id.

66 See id. at *7 & n.20 (“Mere ownership of a Delaware company does not 

constitute a sufficient basis for personal jurisdiction.” (citing Turner, 846 A.2d at 975 

(“[O]wnership of a Delaware corporation is not, without more, a sufficient contact on 

which to base personal jurisdiction.”), and Abajian v. Kennedy, 1992 WL 8794, at *10 

(Del. Ch. Jan. 17, 1992) (Allen, C.) (“Merely purchasing stock in a Delaware corporation 

does not supply the requisite contacts necessary for jurisdiction in a case of this kind.”)).
24

entity’s formation to support personal jurisdiction under Papendick, particularly when the 

party against whom the claim is asserted participated in the formation of the entity and 

the negotiation of the operating agreement. The court’s assessment of the personal 

jurisdiction issue appears to have been influenced by Segal’s scattershot presentation of 

multiple arguments, which the court characterized as an effort “to throw every 

conceivable contact Johnson has had with Delaware at the wall of personal jurisdiction” 

in the hope that something would stick.67 The court’s summary approach to the 

jurisdictional analysis also was likely influenced by the speciousness of Segal’s

underlying claims. In any event, because the court found that Segal failed to state a claim 

upon which relief could be granted, the jurisdictional ruling was dictum.

68

In this case, Terramar’s claims under the Operating Agreement implicate core 

issues discussed by the parties when negotiating the underlying transaction that gave rise 

to the Company’s formation. Through Cohen, the Trust consciously chose to incorporate 

the Company as a Delaware entity and to embody core deal terms in the Company’s 

governing documents, including terms that implicated the internal affairs of the 

Company. This was a transaction of business in Delaware for purposes of Delaware’s 

 

67 Id. at *7; see also id. at *7-8 (analyzing additional theories under 8 Del. C. § 18-

109).

68 See Brown v. United Water Del., Inc., 3 A.3d 272, 276-77 (Del. 2010) (defining 

dictum as statements that “would have no effect on the outcome of the case”); Crown 

EMAK P’rs, LLC v. Kurz, 992 A.2d 377, 398 (Del. 2010) (declaring part of the lower 

court’s ruling to be “obiter dictum and without precedential effect” where that issue did 

not need to be decided in light of other rulings in the case).
25

long-arm statute, and Terramar’s claims bear a sufficient nexus to this transaction of 

business to warrant the exercise of personal jurisdiction.

B. Due Process 

Having determined that a legal basis exists for exercising personal jurisdiction 

over the Trust under Section 3104(c)(1), this decision must evaluate whether doing so 

comports with due process. “The focus of this inquiry is whether [the defendant] engaged 

in sufficient minimum contacts with Delaware to require it to defend itself in the courts 

of this State consistent with the traditional notions of fair play and justice.”69 “Once it has 

been decided that a defendant purposefully established minimum contacts with the forum 

State, these contacts must be considered in light of other factors to determine whether the 

assertion of personal jurisdiction would comport with fair play and substantial justice.”70

Relevant factors include “the forum State’s interest in adjudicating the dispute; the 

plaintiff’s interest in obtaining convenient and effective relief . . .; [and] the interstate 

judicial system’s interest in obtaining the most efficient resolution of controversies . . . 

.”71

 

69 AeroGlobal Capital Mgmt., LLC v. Cirrus Indus., Inc., 871 A.2d 428, 440 (Del. 

2005) (internal quotations omitted). 

70 Sternberg, 550 A.2d at 1122 (citing Burger King Corp. v. Rudzewicz, 471 U.S. 

462, 477 (1985)). 

71 Istituto Bancario Italiano SpA v. Hunter Eng’g Co., 449 A.2d 210, 220 (Del. 

1982) (citations omitted) (quoting World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 

286, 292 (1980)).
26

Since Papendick, Delaware courts have consistently held that meaningful 

participation in the formation of the Delaware entity constitutes sufficient minimum 

contacts to satisfy due process.72 “There is a controlling distinction . . . between the 

ownership of [equity] acquired by purchase or grant . . . and ownership arising from the 

purposeful utilization of the benefits and protections of the Delaware [entity statute] in 

activities related to the underlying cause of action . . . .”73

In this case, the Trust was not merely a passive minority investor who acquired 

and owned equity in a Delaware entity. Through Cohen, the Trust participated in 

negotiating the deal that resulted in the formation of the Company and participated in 

negotiating the Operating Agreement itself. By doing so, the Trust “purposefully 

avail[ed] itself of the benefits and protections of the laws of the State of Delaware for 

financial gain in activities related to the cause of action.”74 “Having engaged in conduct 

that involved the formation of a Delaware entity, [the Trust] should have reasonably 

anticipated that [its] actions might result in the forum state exercising personal 

jurisdiction over [it] in order to adjudicate disputes arising from those actions.”75

 

72 See, e.g. Mobilactive Media, 2013 WL 297950, at *29; Hughes, 2005 WL 

1089021, at *23; see also AeroGlobal, 871 A.2d at 440 (“We find the teachings from this 

Court’s opinion in Papendick instructive.”). 

73 Papendick, 410 A.2d at 152. 

74 Id.

75 Hamilton P’rs, 11 A.3d at 1198-99 (internal quotations and alterations omitted). 
27

The other relevant factors also countenance in favor of jurisdiction. Delaware has 

a significant interest in adjudicating disputes implicating the internal affairs of Delaware 

entities.76 Moreover, Terramar’s claims in this case relate to its right under the Operating 

Agreement to dissolve the Company. Dissolution both implicates the internal affairs of a 

Delaware entity and is an inherently Delaware-centric act which requires the filing of a 

certificate of cancellation with the Delaware Secretary of State.77 Having granted 

Terramar the Dissolution Right, “it is difficult to conceive how it would shock the 

conscience to require the [Trust] to defend a lawsuit in Delaware.”78

Similarly, Terramar’s “interest in obtaining convenient and effective relief” and 

judicial economy both weigh in favor of exercising jurisdiction.

79 A court in California, 

the most obvious alternative forum, has already held that any claim to dissolve the 

Company must be brought in Delaware. Absent jurisdiction over the Trust, Terramar

might have sought to determine its rights under the Operating Agreement through an in 

 

76 See Morgan, 935 A.2d at 1064 (“Delaware, as a chartering state, has an 

important interest in regulating the internal affairs of its corporations.”); USACafes, 600 

A.2d at 51 (“[W]hen a person has purposefully acted to create a relationship, even of 

some minimal kind, with the forum state, then ‘the forum state’s interest in adjudicating 

the dispute’ should be given weight . . . .”) (quoting World-Wide Volkswagen, 444 U.S. at 

292).

77 See 6 Del. C. § 18-203 (“A certificate of cancellation shall be filed in the office 

of the Secretary of State to accomplish the cancellation of a certificate of formation . . . 

.”); In re Carlisle Etcetera LLC, 114 A.3d 592, 601-06 (Del. Ch. 2015) (explaining the 

sovereign’s particular interest in dissolving entities that it has formed).

78 Morgan, 935 A.2d at 1064.

79 Istituto, 449 A.2d at 220 (quoting World Wide Volkswagen, 444 U.S. at 292).
28

rem dissolution proceeding,80 but this too would have resulted in litigation in this court. 

Additionally, this court is familiar with the parties and the underlying facts through its 

adjudication of the Limited Action. Litigating Terramar’s claims in this court therefore 

will provide the parties a just and speedy resolution.

The only due process consideration that gives me pause is the passage of time 

between the Trust’s Delaware contacts and this litigation. Federal courts are “deeply split 

about the issue of the timing of minimum contacts in specific jurisdiction cases.”

81

Delaware law provides little guidance on the subject. The Delaware Supreme Court has

 

80 See In Re Rehabilitation of Nat’l Heritage Life Ins. Co., 656 A.2d 252, 260 

(Del. Ch. 1994) (Allen, C.) (“A dissolution proceeding is an in rem action; those who 

have claims against the corporation can have those claimed corporate obligations affected 

in the domestic rehabilitation or dissolution, upon notice and opportunity to be heard, 

whether or not they are subject to in personam jurisdiction in the state where the 

dissolution or rehabilitation is taking place.”). 

81 Todd David Peterson, The Timing of Minimum Contacts, 79 Geo. Wash. L. Rev. 

101, 132 (2010). Compare Pecoraro v. Sky Ranch for Boys, Inc., 340 F.3d 558, 562 (8th 

Cir. 2003) (“[M]inimum contacts must exist either at the time the cause of action arose, 

the time the suit is filed, or within a reasonable period of time immediately prior to the 

filing of the lawsuit.”) with Mellon Bank (East) PSFS, Nat’l Ass’n v. Farino, 960 F.2d 

1217, 1223 (3d Cir. 1992) (“The requisite contacts, however, may be supplied by the

terms of the agreement, the place and character of prior negotiations, contemplated future 

consequences, or the course of dealings between the parties.”), Steel v. United States, 813 

F.2d 1545, 1549 (9th Cir. 1987) (“[T]he determination of amenability to suit takes place 

at the time of the relevant contacts . . . [T]he fair warning given [a defendant] by his 

contacts with [a state] does not expire simply because of his lack of later contacts with 

the state.”), and McMullen v. European Adoption Consultants, Inc., 109 F. Supp. 2d 417, 

420 (W.D. Pa. 2000) (“The absence of a bright-line rule establishing a temporal 

framework for the minimum contacts analysis strongly reinforces the fact-specific, caseby-case nature of all jurisdictional analysis.”). The United States Supreme Court “has 

never directly addressed the issue of the timing of minimum contacts in any of its 

personal jurisdiction decisions.” Peterson, supra, at 104. 
29

emphasized, however, that a defendant “who has purposefully directed its activities at a 

forum . . . must present a compelling case that the presence of some other considerations 

would render jurisdiction unreasonable.”82 While another set of facts might give rise to a 

compelling case based on the passage of time, this case does not. The Trust contemplated 

a long-term relationship with the Company when the parties formed it. That relationship 

included the possibility that Terramar would exercise its Put Right and Dissolution Right 

years later. The Trust cannot complain now that it could not have anticipated being haled 

into a Delaware court. On the facts of this case, exercising personal jurisdiction over the 

Trust comports with due process.

III. CONCLUSION

Under Delaware’s long-arm statute, this court can exercise specific personal 

jurisdiction over the Trust for purposes of adjudicating Terramar’s claims under the 

Operating Agreement. The exercise of specific personal jurisdiction comports with due 

process. The Trust’s motion to dismiss is denied.

 

82 Sternberg, 550 A.2d at 1122 (quoting Burger King, 471 U.S. at 477).