IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

IN RE CARVANA CO.

STOCKHOLDERS LITIGATION

)

)

CONSOLIDATED

C.A. No. 2020-0415-KSJM

MEMORANDUM OPINION

Date Submitted: March 14, 2022

Date Decided: August 31, 2022

Christine M. Mackintosh, Rebecca A. Musarra, GRANT & EISENHOFER P.A., 

Wilmington, Delaware; Ned Weinberger, LABATON SUCHAROW LLP, Wilmington, 

Delaware; Jason M. Leviton, Joel A. Fleming, Lauren Godles Milgroom, Amanda R. 

Crawford, BLOCK & LEVITON LLP, Boston, Massachusetts; Domenico Minerva, John 

Vielandi, David MacIsaac, LABATON SUCHAROW LLP, New York, New York;

Counsel for Co-Lead Plaintiffs Anthony Franchi, Construction Industry and Laborers 

Joint Pension Trust for Southern Nevada, St. Paul Electrical Construction Pension Plan, 

St. Paul Electrical Construction Workers Supplemental Pension Plan (2014 Restatement), 

and Retirement Medical Funding Plan for the St. Paul Electrical Workers.

David E. Ross, Adam D. Gold, R. Garrett Rice, ROSS ARONSTAM & MORITZ LLP, 

Wilmington, Delaware; Brian M. Lutz, GIBSON, DUNN & CRUTCHER LLP, San 

Francisco, California; Colin B. Davis, Katie Beaudin, GIBSON, DUNN & CRUTCHER 

LLP, Irvine, California; Counsel for Nominal Defendant Carvana Co.

John L. Reed, Ronald N. Brown, III, Peter H. Kyle, Kelly L. Freund, DLA PIPER LLP 

(US), Wilmington, Delaware; Counsel for Defendants Ernest Garcia III and Ernest 

Garcia II.

McCORMICK, C.
The plaintiff, a stockholder of Carvana Co. (“Carvana” or the “Company”), asserts 

derivative claims challenging a $600 million sale of common stock to handpicked 

participants at a time when the trading price of Carvana’s stock was depressed (the “Direct 

Offering”). The Direct Offering was orchestrated by Carvana’s controller, Ernest Garcia 

II (“Garcia Senior”) and his son, Ernest Garcia III (“Garcia Junior”). The Garcias selected 

investors to participate in the Direct Offering and participated themselves. The public 

stockholders were excluded. 

In a prior decision, the court denied Garcia Junior’s motion to dismiss for failure to 

state a claim and failure to plead demand futility. This decision resolves Garcia Senior’s 

motion to dismiss for lack of personal jurisdiction. 

As the basis for this court’s exercise of personal jurisdiction over Garcia Senior, the 

plaintiff relies on a provision in Carvana’s certificate of incorporation that designates 

Delaware courts as the exclusive forum for litigating claims for breach of fiduciary duties 

against stockholders (the “Forum Provision”). Garcia Senior caused Carvana to adopt the 

Forum Provision by executing a written stockholder consent. The written consent

approved an amendment to the certificate of incorporation to add the Forum Provision. By 

approving the amendment adding the Forum Provision, Garcia Senior implicitly consented 

to this court’s exercise of jurisdiction over him as to claims described in the Forum 

Provision. Accordingly, Garcia Senior’s motion to dismiss for lack of personal jurisdiction 

is denied.
2

I. FACTUAL BACKGROUND

This decision incorporates the Factual Background of the court’s Memorandum 

Opinion dated June 30, 2022,

1

and includes additional facts relevant to the personal 

jurisdiction issues.

The Garcias co-founded Carvana in 2012. They took Carvana public in 2017. 

Garcia Junior has served as Carvana’s President, Chief Executive, and Chairman since 

Carvana’s formation. 

Garcia Senior is permanently barred from membership, employment, or association 

with any NYSE member and holds no official position at Carvana. Garcia Senior has

owned a majority of Carvana’s voting stock since its formation. His voting power derives 

primarily from his ownership of super-voting Class B shares. 

In connection with the initial public offering, Carvana amended and restated its 

certificate of incorporation. Carvana’s stockholders executed a written consent approving 

and adopting the amended and restated certificate of incorporation.2 The amendments 

added Article Twelve containing the Forum Provision. The text of the Forum Provision 

appears below in the Legal Analysis. 

The amended and restated certificate of incorporation specifically names the 

Garcias and provides them with benefits that other stockholders do not enjoy. For example, 

1 C.A. No. 2020-0415-KSJM, Docket (“Dkt.”) 92.

2 See Dkt. 78, Co-lead Plaintiffs’ Omnibus Answering Brief in Opposition to Defendants’ 

Motion to Dismiss (“Pl.’s Answering Br.”), Ex. B (Amended and Restated Certificate of 

Incorporation of Carvana Co.).
3

it provides that the Class B shares will be entitled to 10 votes only so long as the Garcias 

hold 25% of the Class A common stock.3 It also provides the Garcias with special rights 

concerning competition and corporate opportunities.4

Because Garcia Senior held a majority of the Company’s voting power at the time, 

his written consent was necessary for the Company to adopt the amended and restated 

certificate of incorporation, including the Forum Provision.

In connection with the initial public offering, the Garcias also executed an exchange 

agreement and an LLC agreement. Both documents contain Delaware-exclusive forum 

provisions.

II. LEGAL ANALYSIS

“When a defendant moves to dismiss a complaint pursuant to Court of Chancery 

Rule 12(b)(2), the plaintiff bears the burden of showing a basis for the court’s exercise of 

jurisdiction over the defendant.”5 “In ruling on a Rule 12(b)(2) motion, the court may 

consider pleadings, affidavits, and any discovery of record.”6 If there is no discovery of 

record or evidentiary hearing, “plaintiffs need only make a prima facie showing of personal 

jurisdiction and ‘the record is construed in the light most favorable to the plaintiff.’”7

3

Id. at 2.

4

Id. at 7–9.

5 Ryan v. Gifford, 935 A.2d 258, 265 (Del. Ch. 2007).

6

Id.

7

Id. (footnote omitted) (quoting Cornerstone Techs., LLC v. Conrad, 2003 WL 1787959, 

at *3 (Del. Ch. Mar. 31, 2003)).
4

Typically, Delaware courts resolve questions of personal jurisdiction using a twostep analysis, determining first whether service of process was authorized by statute, and 

second, whether the defendant had minimum contacts with Delaware sufficient to satisfy 

due process concerns.8 

The requirement that a court have personal jurisdiction, however, is a waivable 

right.9 “A defendant can agree to the court’s exercise of personal jurisdiction.”10 That 

agreement can be express or implied.11 When a party agrees to litigate in a forum, the party 

is considered to have implicitly consented to personal jurisdiction in that forum.

12

 When a 

party has consented to jurisdiction, the court can forego the typical two-step analysis.

13

 

In this case, the plaintiff argues that Garcia Senior consented to the exercise of 

personal jurisdiction by Delaware courts when he caused Carvana to adopt the Forum 

Provision.

8 Matthew v. Fläkt Woods Gp. SA, 56 A.3d 1023, 1027 (Del. 2012) (quoting Int’l Shoe Co. 

v. Washington, 326 U.S. 310, 316 (1945)).

9 Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 n.14 (1985).

10 In re Pilgrim’s Pride Corp. Deriv. Litig., 2019 WL 1224556, at *10 (Del. Ch. Mar. 15, 

2019) (collecting cases).

11 Id. at *11.

12 Id.; Solae, LLC v. Hershey Canada, Inc., 557 F. Supp. 2d 452, 456 (D. Del. 2008) (citing 

Res. Ventures, Inc. v. Res. Mgmt. Int’l, Inc., 42 F. Supp. 2d 423, 431 (D. Del. 1999)). 

13 Neurvana Med., LLC v. Balt USA, LLC, 2019 WL 4464268, at *3 (Del. Ch. Sept. 18, 

2019); R. Franklin Balotti & Jesse A. Finkelstein, Delaware Law of Corporations & 

Business Organizations, §13.4 (3d ed. 2019) (“Consent to personal jurisdiction is 

considered a waiver of any objection on due process grounds and an analysis under 

minimum contacts is considered unnecessary.”).
5

The Forum Provision selects this court as the exclusive forum for certain disputes. 

It states:

Unless this Corporation consents in writing to the selection of 

an alternative forum, the Court of Chancery of the State of 

Delaware (or, if the Court of Chancery does not have 

jurisdiction, the United States District Court for the District of 

Delaware) shall, to the fullest extent permitted by law, be the 

sole and exclusive forum for (i) any derivative action or 

proceeding brought on behalf of the Corporation, (ii) any 

action asserting a claim of breach of a fiduciary duty owed by 

any director, officer, employee or stockholder of the 

Corporation to the Corporation or the Corporation’s 

stockholders, (iii) any action asserting a claim arising pursuant 

to any provision of the DGCL or as to which the DGCL confers 

jurisdiction on the Court of Chancery of the State of Delaware, 

the Certificate of Incorporation or the Bylaws or (iv) any action 

asserting a claim governed by the internal affairs doctrine. As 

used in this Certificate of Incorporation, the term “Claim” 

means the actions, proceedings or claims referred to in clauses 

(i) through (iv) on this Section 1.14

The Forum Provision clearly applies to this litigation. Among other things, the 

plaintiff asserts a claim of breach of a fiduciary duty owed by “a stockholder of the 

14 Pl.’s Answering Br., Ex. B, at 14. A court may take judicial notice of the contents of a 

certificate of incorporation in deciding a motion to dismiss under Rule 12(b)(6). See In re 

Wheelabrator Techs. Inc. S'holders Litig., 1992 WL 212595, at *12 (Del. Ch. Sept. 1, 1992)

(“The Court is not barred from taking judicial notice of a Delaware corporation’s certificate 

of incorporation simply because the procedural setting is a motion to dismiss under Rule 

12(b)(6).”). The sources the court can consider on a Rule 12(b)(2) motion are even broader 

than those that can be considered on a 12(b)(6) motion. See Sample v. Morgan, 935 A.2d 

1046, 1055 (Del. Ch. 2007) (“In considering a motion to dismiss for lack of personal 

jurisdiction under Court of Chancery Rule 12(b)(2), I am not limited to the pleadings.”). It 

follows that the court can take judicial notice of a certificate of incorporation on a Rule 

12(b)(2) motion.
6

Corporation to the Corporation.” Accordingly, the plaintiff was obligated to file his claims

in this court. 

In Garcia Senior’s view, the Forum Provision binds the plaintiff but not him. As 

Garcia Senior points out, nothing about the Forum Provision expressly provides that 

stockholders, such as Garcia Senior himself, consent to this court’s exercise of personal 

jurisdiction for claims described in the provision. The plaintiff, however, does not argue 

that Garcia Senior expressly consented. Rather, the plaintiff relies on a theory of implicit 

consent. 

In support of his implicit-consent theory, the plaintiff draws heavily on this court’s 

analysis in In re Pilgrim’s Pride Corporation Derivative Litigation.

15

 There, stockholders 

of Pilgrim’s Pride brought derivative claims against the company’s controlling 

stockholder, JBS S.A. Pilgrim’s Pride was a Delaware corporation and JBS was an entity 

organized under the laws of Brazil. The plaintiffs sued JBS for breaching its fiduciary 

duties as a controller by causing Pilgrim’s Pride to buy one of JBS’s other subsidiaries.

JBS moved to dismiss the complaint for lack of personal jurisdiction.16 

As the sole basis for this court’s exercise of personal jurisdiction over JBS, the 

plaintiffs argued that the controller implicitly consented to the court’s exercise of personal 

jurisdiction when its representatives on the company’s board adopted a forum-selection 

bylaw. Vice Chancellor Laster agreed with the plaintiffs’ arguments, citing a number of 

15 2019 WL 1224556 (Del. Ch. Mar. 15, 2019).

16 Id. at *1.
7

case-specific factors as prima facie evidence that the controller implicitly consented to this 

court’s exercise of personal jurisdiction. The following passage contains the meat of the 

Vice Chancellor’s analysis:

In this case, the facts alleged in the complaint support a finding 

of implicit consent. The Board adopted the Forum-Selection 

Bylaw on the same day that the Committee gave its final 

approval for the Acquisition. It is reasonable to infer that the 

Board adopted the Forum-Selection Bylaw intending that it 

would apply to any Delaware law claims that a stockholder 

plaintiff might bring challenging the Acquisition. The ForumSelection Bylaw selects the Delaware Court of Chancery as the 

sole and exclusive forum for “any action asserting a claim of 

breach of fiduciary duty owed by any . . . stockholder of the 

Corporation to the Corporation or the Corporation's 

stockholders.” Parent, as the controlling stockholder and 

counterparty in the Acquisition, was the obvious stockholder 

defendant in any action asserting a claim for breach of 

fiduciary action. Through its power to select the Parent 

Directors, Parent designated six of the nine members of the 

Board. Five of those six were executive officers of Parent or 

its controlled subsidiaries. Parent also controlled a supermajority of the Company's voting power. If it did not like the 

Forum-Selection Bylaw, it could amend it using that authority. 

In my view, under these facts, Parent consented implicitly to 

the existence of personal jurisdiction in Delaware when its 

representatives on the Board participated in the vote to adopt 

the Forum-Selection Bylaw. This is a case governed by 

Delaware law in which the State of Delaware has a substantial 

interest. As the Board necessarily recognized when it adopted 

the Forum-Selection Bylaw, a case of this nature should be 

heard in a Delaware court. That includes the dimension of this 

case that relates to Parent’s involvement as the self-interested 

controller.17

17 Id. at *13 (citations omitted).
8

Breaking it down, the factors identified by the Vice Chancellor as evidence of JBS’s 

implicit consent fall into two categories.

The first category of factors suggested that the intent of the forum selection 

provision was to funnel claims for breach of fiduciary duty against the controller into the 

Delaware courts. This intent was evident from the provision’s language, which covered 

actionsfor breach of fiduciary duties owed by “any stockholder of the corporation.”

18

 Only 

controlling stockholders owe fiduciary obligations under Delaware law.

19

 Thus, JBS was 

the “obvious stockholder defendant” in any action brought under that bylaw.

20

 This intent 

was also inferred by the timing of the board’s adoption of the provision, which came on 

the same day that a board committee approved the challenged acquisition. 

The second category of factors tied the forum-selection bylaw to JBS specifically.

Toward this end, the Vice Chancellor focused on JBS’sinfluence over the process by which 

the provision was adopted. The provision was adopted through a bylaw amendment 

effected by a vote of the board, so JBS was not involved directly in its adoption. The Vice 

Chancellor noted, however, that JBS appointed six of the nine members of Pilgrim’s 

Pride’s board, and five of those six members were executives of JBS or a JBS subsidiary. 

Thus, a majority of the board was beholden to JBS. Moreover, the Vice Chancellor 

18 Id. at *12 (emphasis added).

19 Ivanhoe P’rs v. Newmont Min. Corp., 535 A.2d 1334, 1344 (Del. 1987) (“Under 

Delaware Law a shareholder owes a fiduciary duty only if it owns a majority interest in or 

exercises control over the business affairs of the corporation.”).

20 Pilgrim’s Pride, 2019 WL 1224556, at *13. 
9

observed that JBS “controlled a super-majority of the Company’s voting power. If it did 

not like the Forum-Selection Bylaw, it could amend it using that authority.”21

Because this court’s authority to exercise personal jurisdiction based on a forum

selection clause is rooted in the defendant’s consent, this second category of factors was 

critical to the court’s analysis. That is, if JBS lacked any ability to direct or reverse the 

result of the board’s process, then JBS could not be said to have implicitly consented to 

that result.

In this case, the intent in adopting the Forum Provision is as clear as that in Pilgrim’s 

Pride. The language of the Forum Provision captures claims for “breach of a fiduciary 

duty owed by any . . . stockholder[.]”22 Again, only controlling stockholders of Delaware 

corporations owe fiduciary obligations. Garcia Senior has held hard control over Carvana 

since the Forum Provision was adopted, making him the obvious stockholder to whom this 

language would apply. 

More importantly, Garcia Senior’s involvement in adopting the provision was more 

direct than in Pilgrim’s Pride. The Forum Provision appears in an amendment to the 

certificate of incorporation, which was approved by written consent of the Carvana 

stockholders. At that time, and at all relevant times, Garcia Senior held a majority of 

Carvana’s voting power. Thus, Garcia Senior’s approval of the amended certificate of 

21 Pilgrim’s Pride, 2019 WL 1224556, at *13. 

22 Id. at *12; Pl.’s Answering Br., Ex. B at 14.
10

incorporation, including the Forum Provision, was a necessary and direct cause of its 

adoption.

As an added factor, it is reasonable to infer that Garcia Senior read the amendment 

to the certificate of incorporation before executing a written consent approving it; as 

discussed above, the amended and restated certificate of incorporation expressly provides 

the Garcias with benefits other stockholders do not enjoy. Moreover, the Garcias executed 

an exchange agreement and an LLC agreement in connection with the IPO, both of which 

require any claims to be brought in Delaware courts.

23

 The logical inference is that Garcia 

Senior “necessarily recognized” the State of Delaware’s “substantial interest” in resolving 

these Delaware law claims when he caused Carvana to adopt the Forum Provision.24

It is true, as Garcia Senior argues, that Pilgrim’s Pride is distinguishable in one—

albeit minor—way. There, the forum selection bylaw was adopted on the same day that a 

board committee recommended the transaction at issue in the litigation. From this timing, 

one can infer that the board intended that stockholder claims challenging that transaction 

specifically be subject to the forum selection bylaw. In this case, nothing suggests that 

Garcia Senior had the Direct Offering in mind when he caused Carvana to adopt the Forum 

Provision, as Carvana adopted the Forum Provision three years before its board approved 

the Direct Offering.

23 Dkt. 66, Verified Amended Derivative and Class Action Complaint ¶¶ 186–87.

24 Pilgrim’s Pride, 2019 WL 1224556, at *13.
11

This distinction is inconsequential. Garcia Senior did not need to foresee the 

specific transaction that would give rise to the claims against him for the Forum Provision 

to evidence his implicit consent. Consider the purpose of forum selection provisions in 

corporate charters and bylaws. Expressly permitted by Section 115 of the Delaware 

General Corporation Law,

25 those provisions are intended to corral internal affairs cases so 

they can be heard in the Delaware courts.26 Boilermakers Local 154 Retirement Fund v. 

Chevron Corp. is the common law predecessor to § 115.

27 Boilermakers specifically 

identified reasons why defendants would want to include forum selection provisions in 

governing documents.

28

 In upholding a board-adopted Delaware forum selection bylaw, 

then-Chancellor Strine noted the benefits of “channeling internal affairs cases into the 

courts of the state of incorporation,” which included “bring[ing] order to what the boards 

of [the defendant corporations] say they perceive to be a chaotic filing of duplicate and 

25 8 Del. C. § 115 (“The certificate of incorporation or the bylaws may require . . . that any 

or all internal corporate claims shall be brought solely and exclusively in any or all of the 

courts in this State.”).

26 See generally Andrew Holt, Protecting Delaware Corporate Law: Section 115 and Its 

Underlying Ramifications, 5 Am. U. Bus. L. Rev. 209, 219 (2016) (“Exclusive forum 

selection clauses were supposed to cure the plague that is multi-jurisdictional litigation 

on Delaware corporations and their officers and directors.”); Verity Winship, Shareholder 

Litigation by Contract, 96 B.U. L. Rev. 485 (2016) (“Faced with multiforum litigation, 

courts, defense counsel, and commentators began to call for a way to consolidate the 

litigation in the court of the state of incorporation, often Delaware. One way to do this was 

for corporations to adopt an exclusive forum selection clause in their charter or bylaws.”).

27 See, e.g., Salzberg v. Sciabacucchi, 227 A.3d 102, 117 (Del. 2020) (“The 2015 

amendments were intended, in part, to codify Boilermakers.”).

28 Boilermakers Loc. 154 Ret. Fund v. Chevron Corp., 73 A.3d 934, 952 (Del. Ch. 2013).
12

inefficient derivative and corporate suits against the directors and the corporations.”29 It is 

fair to infer that Garcia Senior knew of the purpose of forum selection provisions when he 

caused Carvana to adopt one. At a minimum, his agents (such as the counsel planning the 

IPO) knew about them, and their knowledge can be imputed to Garcia Senior. 

As a matter of policy, the functioning of a forum provision would be dramatically 

undermined if the law required transaction-specific consent to support personal jurisdiction

over a defendant. Garcia Senior cites no case in support of such a rule. Such a rule would 

enable a controller to put stockholder plaintiffs in a no-win scenario: the forum provision 

would force stockholders to sue in a particular court, yet the controller could claim not to 

be subject to jurisdiction there. 

Summing it up, Garcia Senior executed a written stockholder consent causing the 

Company to adopt a requirement that any stockholder suing him for breach of fiduciary 

duties file suit in this court. By taking that action, Garcia Senior consented implicitly to 

this court’s exercise of personal jurisdiction over him in connection with stockholder 

claims that he breached his fiduciary obligations.

Garcia Senior urges a different outcome based on “Delaware precedent [holding]

that purchasing or owning shares of stock in a Delaware corporation, standing alone, is not 

enough to enable a Delaware court to exercise personal jurisdiction over a non-consenting 

party, even in cases of sole ownership.”30 Garcia Senior correctly observes that it is “settled 

29 Id.

30 Pilgrim’s Pride, 2019 WL 1224556, at *14. 
13

federal law that ownership of stock in a Delaware corporation is insufficient to satisfy due 

process requirements.”

31

 Even “complete ownership of a Delaware subsidiary standing 

alone is insufficient to confer personal jurisdiction.”

32

This line of authorities is not implicated here. This is not a case of mere stock 

ownership constituting consent to jurisdiction. This is a case where the controller caused 

the Company to adopt a provision requiring that any plaintiff suing a stockholder for breach 

of fiduciary duty do so in this court. The plaintiff simply seeks to enforce that requirement. 

Garcia Senior also cites to a portion of Pilgrim’s Pride where the Vice Chancellor

limited his holdings to the facts of that case and identified differing fact patterns that might 

raise distinguishable concerns.

33

 The Vice Chancellor expressly left open the question of 

“whether a Delaware court could assert jurisdiction over a stockholder based solely on a 

board-adopted forum-selection provision if the stockholder had no other ties to this state.”34

He also declined to “consider whether a Delaware court could assert jurisdiction over a 

controller based solely on a board-adopted forum-selection provision if the controller had 

31 Dkt. 74, Opening Brief in Support of Defendants Ernest Garcia III and Ernest Garcia II’s 

Motion to Dismiss (“Defs.’ Opening Br.”) at 16; see, e.g., Monsanto Co. v. Syngenta Seeds, 

Inc., 443 F. Supp. 2d 636, 647 (D. Del. 2006) (noting that “such a limited activity” is 

insufficient to establish personal jurisdiction). 

32 Defs.’ Opening Br. at 16; see Outokumpu Eng’g Enters., Inc. v. Kvaerner Enviropower, 

Inc., 685 A.2d 724, 731 (“Mere ownership of a Delaware subsidiary will not support the 

minimum contacts’ requirement of due process.”).

33 Pilgrim’s Pride, 2019 WL 1224556, at *15 (“This holding is limited to the facts of this 

case.”).

34 Id.
14

a less substantial presence on the corporation's board, or if the controller only was alleged 

to wield effective control rather than possessing hard, mathematical control.”

35

 

The limiting language of Pilgrim’s Pride does not affect the outcome of this 

decision. The fact that Pilgrim’s Pride did not reach those issues does not foreshadow how 

they would turn out. Nor are any of the open questions present in this case. The Pilgrim’s 

Pride court identified two situations in which the controller had less involvement in the 

adoption of the forum provision and less ability to remove it. In those settings, the 

inference for implicit consent is weaker. In this setting, the basis for inferring consent is 

stronger. In Pilgrim’s Pride, the controller inferably acted through director appointees and 

accepted the bylaw by not removing it. Here, Garcia Senior approved it by executing a 

written consent. Garcia Senior’s direct involvement in the Forum Provision’s adoption 

makes this a stronger case for implicit consent, not a weaker one. 

III. CONCLUSION

For the foregoing reasons, Garcia Senior’s motion to dismiss for lack of personal 

jurisdiction is denied. For the same reasons set forth in the June 30, 2022 Memorandum 

Opinion, Garcia Senior’s motion to dismiss under Rule 12(b)(6) and Rule 23.1 are also 

denied.

35 Id.