Opinion ID: 2180498
Heading Depth: 2
Heading Rank: 1

Heading: Applicability of Delaware's Long Arm Statute

Text: In finding that FIIB was subject to personal jurisdiction in this State, the Superior Court relied on 10 Del. C. § 3104(c)(1). This subsection provides: (c) As to a cause of action brought by any person arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any nonresident, or a personal representative, who in person or through an agent: (1) Transacts any business or performs any character of work or service in the State .... [13] The Superior Court reasoned that FIIB transacted business in Delaware when, through its agents, CHCL and Crescent, it entered into the two separate stock purchase agreements with Cirrus. These acts ultimately resulted in Cirrus accepting the Second CHCL SPA and terminating the AeroGlobal LOI, which is this basis of the entire lawsuit. The facts relevant to establish the Superior Court's jurisdiction over FIIB are clear. There is no dispute that CHCL and Crescent were agents of FIIB. Crescent, FIIB's Delaware subsidiary, existed for the sole purpose of securing attractive investment opportunities in the United States on behalf of FIIB. CHCL was formed for the express purpose of facilitating an investment by FIIB in Cirrus. FIIB, through its agents, entered into a stock purchase agreement with Cirrus, a privately held Delaware corporation, to purchase a substantial amount of Cirrus's capital stock. The offers made by Crescent to purchase Cirrus's capital stock, the last of which led to the instant action, were made on behalf of FIIB and involved FIIB funds. [14] Furthermore, the parties expressly agreed that Delaware law governed their agreement. [15] FIIB, through its agents, was also required to approve and adopt and then cause Cirrus to adopt new bylaws [16] and a certificate of incorporation [17] pursuant to Delaware law. FIIB argues that these facts are insufficient to constitute transacting business in Delaware. FIIB relies on Greenly v. Davis, [18] for the position that its mere negotiations to purchase stock in Cirrus through its agents did not amount to a transaction of business in Delaware, especially where the negotiation and consummation of the transaction did not take place in Delaware. In Greenly, this Court found that the trial court correctly concluded that a Pennsylvania resident who allegedly breached a contract to sell a Delaware corporation was not subject to in personam jurisdiction in this State. [19] The plaintiff in Greenly was interested in purchasing two companies from the defendants who contracted for the sale. [20] In Greenly, the defendants were not Delaware residents. [21] The Greenly defendants owned a Pennsylvania corporation and a Delaware corporation. [22] Neither defendant had ever transacted business in Delaware related to the focus of the dispute in the lawsuit. [23] The trial court granted a motion to dismiss based upon factual affidavits which established that the parties negotiated the agreement in Pennsylvania with no actual contact relating to the transaction of sale in Delaware except a part of the negotiations included a proposed sale of stock of a Delaware corporation which does transact business in Delaware. [24] In affirming the trial court's decision, this Court held that the negotiation of a contract for sale of stock by Pennsylvania residents did not amount to a transaction of business in Delaware, even though part of the negotiations included a proposed sale of a Delaware corporation that transacts business in Delaware. [25] We acknowledge that the ownership of a Delaware subsidiary does not, without more, amount to the transaction of business under Delaware's Long Arm Statute. [26] However, as is the case here, the ownership of a Delaware subsidiary may constitute the transaction of business under Delaware's Long Arm Statute where the underlying cause of action arises from the creation and operation of the Delaware subsidiary. [27] This is the case where the foreign corporation created and operated the Delaware subsidiary in a manner that would avail itself of the benefits and protections of the laws of the State of Delaware. In the present case, FIIB created Crescent, its Delaware subsidiary, for the express purpose of facilitating private equity investments in the United States, including Delaware. The acquisition of Cirrus, for example, was the type of transaction contemplated by FIIB when it created and operated Cirrus under the benefits and protections of Delaware law. The totality of the circumstances in this case show that FIIB transacted business in this State within the meaning of Delaware's Long Arm Statute. Moreover, Greenly is distinguishable from the present case before this Court. Here, as compared to Greenly, the parties purposely chose Delaware law to govern the stock purchase agreement and the sale of Cirrus's stock to CHCL was more than a mere possibility. The parties in this case expressly intended that CHCL would purchase a substantial amount of Cirrus's capital stock upon the happening of stated events. This is in contrast to Greenly where there was only a mere possibility of a stock sale. While evidence of physical presence may be helpful in determining a party's intent to transact business and to show the actual transaction of business in this State, we hold that such evidence is not the sine qua non for jurisdiction under Delaware's Long Arm Statute. [28] In this case, the totality of the circumstances show that FIIB engaged in sufficient conduct to constitute transacting business in this State within the meaning of Delaware's Long Arm Statute.