Court Opinion

ID: 8205770
Source: CourtListenerOpinion
Date Created: 2022-09-12 18:02:42.176885+00
Date Added: 2024-06-11T16:41:08.576439
License: Public Domain

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

IN RE P3 HEALTH GROUP                  )      Consol. C.A. No. 2021-0518-JTL
HOLDINGS, LLC                          )

                                    OPINION

                          Date Submitted: July 13, 2022
                         Date Decided: September 12, 2022

Bruce E. Jameson, Corinne Elise Amato, Eric J. Juray, Elizabeth Wang, PRICKETT,
JONES & ELLIOTT, P.A., Wilmington, Delaware; Craig Carpenito, Richard H. Walker,
Samuel C. Cortina, KING & SPALDING LLP, New York, New York; Counsel for
Hudson Vegas Investment SPV, LLC.

William M. Lafferty, Kevin M. Coen, Ryan D. Stottmann, Sara Toscano, MORRIS,
NICHOLS, ARSHT & TUNNELL LLP, Wilmington, Delaware; Counsel for Jessica
Puathasnanon and P3 Health Group Holdings, LLC.

Kevin R. Shannon, Christopher N. Kelly, Daniel M. Rusk IV, POTTER ANDERSON &
CORROON LLP, Wilmington, Delaware; Counsel for Chicago Pacific Founders Fund,
L.P., CPF P3 Splitter, LLC, Greg Kazarian, Larry Leisure, Mary Tolan, and Sameer
Mathur.

Elena C. Norman, Paul J. Loughman Lakshmi A. Muthu, Alberto E. Chávez, YOUNG
CONAWAY STARGATT & TAYLOR LLP, Wilmington, Delaware; Counsel for Sherif
W. Abdou, Amir Bacchus, Gary Garrett, Lorie Glisson, Taylor Leavitt, and Tom Price.

LASTER, V.C.
       Jessica Puathasnanon served as the general counsel and chief legal officer of P3

Health Group Holdings, LLC, a Delaware limited liability company (“P3” or the

“Company”). In this action, Hudson Vegas Investment SPV, LLC (“Hudson”) has sued

various defendants, including Puathasnanon. Hudson asserts that Puathasnanon breached

the fiduciary duties she owed to the Company and its members in her capacity as an

officer of the Company.

       Puathasnanon contends that the court cannot exercise personal jurisdiction over

her. She has moved for dismissal under Rule 12(b)(2).

       A proper exercise of personal jurisdiction requires a valid means of serving the

defendant, and the resulting exercise of jurisdiction must provide the defendant with the

protections afforded by minimum standards of due process. Hudson argues that a valid

means of service exists under the implied consent provision in the Delaware Limited

Liability Company Act (the “LLC Act”), 6 Del. C. § 18-109(a), which establishes a

mechanism for serving process on a manager of a limited liability company (“LLC”).

Hudson argues that as a senior officer of a Delaware LLC who voluntarily assumed that

role, Puathasnanon implicitly consented to jurisdiction in the Delaware courts and has

sufficient contacts with Delaware to satisfy due process.

       Section 18-109(a) classifies two categories of persons as managers. First, there are

persons whom the governing LLC agreement formally names as managers (a “formal

manager”). Second, there are persons who “participate[] materially in the management of

the limited liability company,” id., regardless of whether the governing LLC agreement
formally names them as managers (an “acting manager”).

       Puathasnanon was not a formal manager, but the pleading-stage record supports a

reasonable inference that she was an acting manager. Under the plain language of the

material participation requirement, a person qualifies as an acting manager if the person

participates in the management of the entity in a significant way. The complaint supports

a reasonable inference that by acting as the general counsel and chief legal officer of the

Company, Puathasnanon participated materially in the management of the Company.

       The exercise of personal jurisdiction over Puathasnanon comports with minimum

standards of due process. Individuals who take positions as senior officers of Delaware

entities do so with the understanding that personal jurisdiction exists in the Delaware

courts to adjudicate disputes over compliance with their contractual or fiduciary

obligations. For Delaware corporations, the consent-to-jurisdiction statute names the

chief legal officer explicitly as a senior officer who consents to personal jurisdiction in

Delaware. 10 Del. C. § 3114. An LLC is a primarily contractual entity whose internal

governance can take many forms. The LLC Act therefore does not frame its consent-to-

jurisdiction statute in terms of standard positions or titles. It rather speaks in terms of

formal managers and acting managers. That usage is encompassing, not limiting. Just as

the corporate consent-to-jurisdiction statute reaches C-suite executives, including the

chief legal officer, the LLC Act’s consent-to-jurisdiction statute reaches C-suite

executives, including the chief legal officer.

       Puathasnanon has suggested that despite her significant titles, she did not

participate materially in the management of the Company. When arguing for her

                                                 2
dismissal from this action, she claims to have functioned as a ministerial drone. It seems

doubtful that Puathasnanon would make a similar claim on her resume or in an annual

self-evaluation, but she has made it in this case.

       At the pleading stage, the customary roles and responsibilities associated with

Puathasnanon’s titles provide a sufficient basis for the assertion of personal jurisdiction.

In addition, the operative complaint supports an inference that Puathasnanon acted in a

manner consistent with her roles and participated significantly in the management of the

Company.

       At a minimum, Hudson would be entitled to jurisdictional discovery to explore the

extent of Puathasnanon’s material participation. In some cases, it may make sense to have

a separate phase of jurisdictional discovery to investigate a defendant’s contacts with the

forum state. Here, there is no need for a separate phase of jurisdictional discovery,

because the existence of personal jurisdiction turns on Puathasnanon’s involvement with

the transaction at the heart of the case. Jurisdictional discovery therefore will overlap

substantially with merits discovery.

       The complaint accordingly supports a reasonable inference that personal

jurisdiction exists over Puathasnanon. Her motion under Rule 12(b)(2) is denied.

                          I.      FACTUAL BACKGROUND

       The facts are drawn from the plaintiff’s complaint and the documents it

incorporates by reference. At this stage of the proceedings, the complaint’s allegations

                                              3
are assumed to be true, and the plaintiff receives the benefit of all reasonable inferences.1

A.     The Company

       Before the events challenged in this litigation, P3 was a population health

management company with operations in Nevada, Arizona, Florida, and Oregon. The

Company sought to offer cost-effective long-term care for patient-members. It was a

privately held entity controlled by the Chicago Pacific Founders Fund, L.P. (“Chicago

Pacific”), a private equity fund.2

       The Company’s limited liability company agreement (the “LLC Agreement”)

created a manager-managed governance structure with a board of up to eleven managers

(the “Board”). The LLC Agreement empowered the Board to manage the business and

affairs of the Company, stating:

       [T]he Board shall conduct, direct and exercise full control over all activities
       of the Company (including all decisions relating to the issuance of
       additional Equity Securities and the voting and sale of, and the exercise of

       1
         Citations to exhibits (“Ex. —”) refer to documents attached to the amended
complaint. Citations in the form “AC ¶ —” refer to allegations in Hudson’s amended
complaint. Citations in the form “PX __” refer to exhibits from Hudson’s previous
motion for a preliminary injunction. Citations in the form “DX __” refer to exhibits from
defendants’ opposition to the motion for a preliminary injunction. Citations in the form of
“Tr. __” refer to the transcript from oral argument on the motion to stay and motions to
dismiss.
       2
          Chicago Pacific also held interest in the Company through two related entities,
CPF P3 Splitter, LLC and Chicago Pacific Founders, LLC. See Dkt. 100 at 4 n.9. CPF P3
Splitter, LLC and Chicago Pacific Founders, LLC served primarily to help effectuate the
proposed transactions involved in this litigation. See PX 126 at ‘117–26. The distinctions
among the entities are immaterial to this decision, which for simplicity refers to Chicago
Pacific.

                                              4
           other rights with respect to, the equity securities of its Subsidiaries), and (ii)
           the Board shall have the sole power to bind or take any action on behalf of
           the Company, or to exercise any rights and powers (including, without
           limitation, the rights and powers to take certain actions, give or withhold
           certain consents or approvals, or make certain determinations, opinions,
           judgments or other decisions) granted to the Company under this
           Agreement or any other agreement, instrument, or other document to which
           the Company is a party.

    Ex. 1 § 5.1(a)(i).

           The LLC Agreement allocated the rights to appoint members of the Board as

    follows:

•      Chicago Pacific had the right to designate five managers (the “Chicago Pacific
       Managers”).

•      Leavitt Equity Partners (“Leavitt”) had the right to designate one manager.

•      Hudson had the right to designate two managers (the “Hudson Managers”).

•      Each of the Company’s co-founders had the right to designate a manager.

•      The holders of the Company’s remaining voting power had the power to elect one
       manager.

    Chicago Pacific and Leavitt jointly held all of the Company’s Class A Units, and the LLC

    Agreement designated their managers as the “Class A Managers.” Ex. 1 § 5.2(a)(ii).

    Hudson alleges that Chicago Pacific and Leavitt worked together to control a majority of

    the Board and to exercise control over the Company. That is a reasonable inference to

    draw at this stage.

           The LLC Agreement granted the Board the power to delegate authority to officers.

    Section 5.4 of the LLC Agreement stated:

           The Board may (but need not), from time to time, designate and appoint
           one or more persons as an Officer of the Company. … Any Officers so

                                                   5
       designated shall have only such authority and perform only such duties as
       the Board may, from time to time, delegate to them. The Board may assign
       titles to particular Officers and, unless the Board otherwise decides, if the
       title is one commonly used for officers of a business corporation formed
       (e.g., chief executive officer, president, chief operating officer, chief
       financial officer), the assignment of such title shall constitute the delegation
       to such Officer of the authority and duties that are normally associated with
       that office . . .

Id. § 5.4.

       Through this arrangement, the LLC Agreement created a governance structure in

which the role of the Company’s officers closely resembled the officers of a corporation.

The LLC Agreement emphasized the parallel by stating explicitly that the officers owed

fiduciary duties to the Company and its members that were of “the type owed by the

officers of a corporation to such corporation and its stockholders under the laws of the

State of Delaware.” Id. § 5.6(d).

B.     The Original Deal Structure

       In August 2020, the Company began exploring ways to access the public market.

Dkt. 100 at 9. On September 1, several members of the Board participated in a Zoom

meeting on that subject. PX 8 at ‘152. The meeting materials listed a potential

combination with another Chicago Pacific portfolio company as one of the options. Id. at

‘155

       On November 1, 2020, the Company’s co-founders and one of the Chicago Pacific

Managers met with Greg Wasson, the president and co-founder of Wasson Enterprise, his

family office. PX 10. At the meeting, the Company’s representatives discussed the

benefits of going public by merging with a special purpose acquisition company

                                              6
(“SPAC”). See PXs 11–12. One possibility was for Wasson to create a SPAC, use it to

raise public capital through an initial public offering, and then engage in a merger with

the Company.

       By late November 2020, the Company’s representatives and Wasson were

discussing a potential three-way merger involving a SPAC, the Company, and another

portfolio company controlled by Chicago Pacific (the “Original Deal Structure”). AC ¶

32. Chicago Pacific and Wasson thoroughly analyzed the potential transaction, including

detailed financial models for the combined company. AC ¶ 36. They also discussed an

optimal timeline for the transaction. Id. By December, the parties were ready to move

forward with the Original Deal Structure. Id. ¶ 32.

       Because the Original Deal Structure contemplated a transaction between the

Company and another Chicago Pacific portfolio company, the transaction required

Hudson’s approval. Among other things, the LLC Agreement provided as follows:

       Without the approval of [Hudson], the Company will not, and will not
       permit any Subsidiary to . . . enter into any transaction or series of related
       transactions (including a Sale of the Company) with any CPF Member or
       Affiliate of any CPF Member, including without limitation compensation or
       equity arrangements with any members of the Board or principals,
       employees or operating partners of any CPF Member or any Affiliate of a
       CPF Member[.]

Ex. 1 § 6.9(c) (the “Affiliated Transaction Provision”). The other portfolio company

qualified as an “Affiliate of any CPF Member,” so the Original Deal Structure required

Hudson’s consent.

       In early January 2021, the Chicago Pacific Managers proposed a transaction to the

Board that contemplated the Original Deal Structure. Around the same time, Wasson

                                             7
formed a SPAC called Foresight Acquisition Corp. (“Foresight”). PX 19 at 2. Foresight

filed its Registration Statement on Form S-1 with the SEC, and its shares began trading

publicly on NASDAQ under the ticker symbol “FORE.” Id. at 12.

       Hudson did not like the economics that the Original Deal Structure contemplated.

Shortly after the Chicago Pacific Managers proposed the Original Deal Structure, Hudson

exercised its contractual veto under the Affiliated Transaction Provision.

C.     The New Deal Structure

       After Hudson exercised its veto, Chicago Pacific, the Company’s officers, and

Foresight began exploring an alternative transaction that would not trigger the Affiliated

Transaction Provision. They decided to pursue a merger that only would involve the

Company and Foresight (the “New Deal Structure”). The New Deal Structure would not

involve the other Chicago Pacific portfolio company, thereby avoiding the obvious

trigger for the Affiliated Transaction Provision. But Chicago Pacific, the Company’s

officers, and Foresight had not given up on their goal of combining the Company with the

other portfolio company. They merely envisioned taking that step down the road, in a

follow-on transaction, after the dust had settled from the merger between Foresight and

the Company.

       As the Company’s general counsel and chief legal officer, Puathasnanon

participated significantly in these events. Over the following months, she provided advice

to the Board, and she reviewed and assisted in the preparation of materials for the Board.

She was responsible for documenting the actions that the Board took by preparing and

circulating minutes for the Board’s meetings. She also assisted in preparing and

                                             8
commenting on the disclosures that the Company provided to its investors in connection

with the transaction.

       For example, during March 2021, Foresight and Chicago Pacific negotiated a

letter of intent. See AC ¶ 43. On March 25, Puathasnanon circulated the proposed letter of

intent to the Board and provided an update regarding the negotiations. PX 83. She

advised the Board that Foresight was prepared to sign the letter of intent, and she asked

the members of the Board to authorize the Company’s officers to sign as well. AC ¶¶ 43–

44. The Board gave its approval by the end of the day. AC ¶ 48.

       The letter of intent implied a post-transaction entity valuation of $3.3 billion. AC ¶

49. It also contemplated a transaction in which the governing agreements of the post-

transaction entity would not provide Hudson with the rights and protections that Hudson

enjoyed under the LLC Agreement.

       After seeing the proposed letter of intent, the Hudson Managers objected to the

transaction. Puathasnanon then worked with Latham & Watkins LLP (“Latham”), the

Company’s outside counsel, on a response to Hudson’s concerns. Puathasnanon

instructed Latham to remove language in the draft letter that referred to the proposed

transaction as a “capital raise” because it “could be used against us.” PX 103. She also

sought Latham’s advice on the extent of information that the Company needed to provide

to the Hudson Managers, with the goal of giving them only what was strictly necessary.

See AC ¶ 48; PX 109–10. Over the ensuing weeks, the Hudson Managers remained in the

dark as the transaction process advanced. See AC ¶¶ 32, 45, 48. It was not until May

2021 that Puathasnanon began to recommend sharing more information with the Board.

                                             9
On May 6, she advised a subset of the Chicago Pacific Managers that “we should start

providing the full Board with detailed information about the transaction so that when it

comes time for a formal vote . . . everyone is well-informed and able to vote

accordingly.” PX 123. According to the complaint, that did not happen. See AC ¶¶ 76–

81.

       Because of the lack of information flowing to the Board, the Hudson Managers did

not learn about important transactional developments in real time. For example, Chicago

Pacific and Foresight contemplated using a standard de-SPAC transaction structure. One

component of that structure involves raising additional capital through a private

investment in public equity (“PIPE”) transaction. Chicago Pacific and Foresight

originally contemplated raising $500 million through the PIPE. In April 2021, however,

the SPAC market declined, and the anticipated proceeds from the PIPE fell to $208

million. AC ¶¶ 31, 67. Chicago Pacific and Foresight continued moving forward,

notwithstanding the funding concerns, and without informing the Board.

       A similar event took place in early May 2021, when Foresight reduced the value it

ascribed to the post-transaction entity to $2.3 billion. The new mark reflected a decline of

approximately $1 billion—or more than a third—from the valuation of $3.3 billion that

formed the basis for the letter of intent. AC ¶ 71. Chicago Pacific and the Company’s

officers moved forward at the lower valuation without discussing it with the full Board.

D.     The Board Approves The Merger.

       On Thursday, May 20, 2021, Puathasnanon emailed the full Board in anticipation

of two meetings at which the Board would receive information about the transaction

                                            10
between the Company and Foresight (the “Merger”). The first meeting would take place

the next day, on Friday, May 21. The second meeting would take place two days after

that, on Sunday, May 23. Id. ¶ 77.

       Puathasnanon’s email attached an executive summary describing the Merger, a

deck explaining the steps involved in effectuating the Merger, and the most recent draft

of the agreement governing the transaction. Id. The materials described a complex “Up-

C” structure that would be used to implement the Merger. PX 136 at ‘452, ‘552–62. The

materials noted that the Company would merge with and into a newly formed LLC

(“MergerCo”) that was a subsidiary of Foresight. Notably, MergerCo would be the

Company surviving the Merger. See id. at ‘562; Dkt. 100 at 22. Depending on the class of

units of the Company that a member held, the merger consideration would consist of a

combination of cash, units in MergerCo, and publicly traded shares of Foresight. See PX

‘552–62.

       The Board scheduled an additional meeting for 7:00 a.m. on Tuesday, May 25,

2021, in case they needed extra time to “finalize the documents before approval.” PX 136

at ‘786. During this meeting, the Board planned to consider whether to approve the

Merger.

       At 1:41 a.m. on May 25, 2021, Puathasnanon circulated a set of finalized

documents for the Board to consider when it met less than six hours later. AC ¶ 80. When

the Board met, a majority of the Board approved the Merger. The Hudson Managers

abstained, citing a lack of time to review the final documents. Id. ¶ 82.

                                             11
E.       This Litigation

         On June 11, 2021, Hudson filed this lawsuit and sought a preliminary injunction

against the Merger. The parties conducted expedited discovery, and Hudson presented its

preliminary injunction application.

         On September 14, 2021, the court denied Hudson’s request for a preliminary

injunction of the Merger. The court held that Hudson had failed to show a reasonable

likelihood of success on any claim that could not be addressed after the closing of the

Merger. As a result, Hudson had failed to make the showing of irreparable harm

necessary to support an injunction. See Dkt. 116 at 34.

         On December 3, 2021, the Merger closed. Hudson then filed an amended

complaint.

         Counts IX and X of the amended complaint assert that Puathasnanon breached her

fiduciary duties as an officer by excluding the Hudson Managers from the process that

led to the Merger, misrepresenting the legal advice that the Company received from

outside counsel, and providing misleading information to the Hudson Managers. AC ¶¶

155–64.

                              II.     LEGAL ANALYSIS

         Puathasnanon has moved for dismissal under Rule 12(b)(2) for lack of personal

jurisdiction. “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.” Ryan v. Gifford, 935 A.2d 258, 265 (Del. Ch.

2007).

                                            12
       Under Delaware law, the exercise of personal jurisdiction has two requirements.

Matthew v. Fläkt Woods Gp. SA, 56 A.3d 1023, 1027 (Del. 2012). First, the plaintiff must

identify a valid method of serving process. Second, the exercise of personal jurisdiction

must rest on sufficient minimum contacts between the defendant and Delaware such that

the exercise of personal jurisdiction “does not offend traditional notions of fair play and

substantial justice.” Id. (quoting Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)).

A.     Service of Process

       As a method of serving process, Hudson relies on Section 18-109(a) of the LLC

Act. In relevant part, it states:

       A manager . . . may be served with process in the manner prescribed in this
       section in all civil actions or proceedings brought in the State of Delaware
       involving or relating to the business of the limited liability company or a
       violation by the manager . . . of a duty to the limited liability company or
       any member of the limited liability company, whether or not the manager . .
       . is a manager . . . at the time suit is commenced.

       A manager’s . . . serving as such constitutes such person’s consent to the
       appointment of the registered agent of the limited liability company (or, if
       there is none, the Secretary of State) as such person’s agent upon whom
       service of process may be made as provided in this section.

6 Del. C. § 18-109(a) (formatting added).

       Like other entity statutes that authorize service of process on members of the

governing body of an entity or its officers, Section 18-109(a) only provides a basis for

specific jurisdiction, not general jurisdiction. See Total Hldgs. USA, Inc. v. Curran

Composites, Inc., 999 A.2d 873, 885 n.39 (Del. Ch. 2009). The claim against the manager

must therefore “involv[e] or relat[e] to the business of the limited liability company or a

violation by the manager . . . of a duty to the limited liability company or any member of

                                            13
the limited liability company.” 6 Del. C. § 18-109(a). Puathasnanon does not contest that

dimension of the analysis. She has argued separately that the plaintiff has failed to state

any actionable claim against her, but she does not dispute that the claims involve or relate

to the business of the Company or assert violations of duties that she allegedly owed to

the Company or to members of the Company.

       Section 18-109(a) defines the term “manager” to encompass both formal managers

and acting managers. It states:

       As used in this subsection (a) and in subsections (b), (c) and (d) of this
       section, the term “manager” refers

       (i) to a person who is a manager as defined in § 18-101(10) of this title and

       (ii) to a person, whether or not a member of a limited liability company,
       who, although not a manager as defined in § 18-101(10) of this title,
       participates materially in the management of the limited liability company;

       provided however, that the power to elect or otherwise select or to
       participate in the election or selection of a person to be a manager as
       defined in § 18-101(10) of this title shall not, by itself, constitute
       participation in the management of the limited liability company.

6 Del. C. § 18-109(a) (formatting added); accord id. § 18-110(c) (using same definition).

The two-part manager definition in Section 18-109(a) references Section 18-101(10),

which defines a “manager” as “a person who is named as a manager of a limited liability

company in, or designated as a manager of a limited liability company pursuant to, a

limited liability company agreement or similar instrument under which the limited

liability company is formed.” Id. § 18-101(10).

       The first category of persons identified in Section 18-109(a)—formal managers—

encompasses persons who have been officially named as managers in or designated

                                            14
pursuant to the entity’s governing documents. The second category of persons—acting

managers—encompasses other persons, not formally named as managers, who

nevertheless “participate[] materially in the management of the limited liability

company.” 6 Del. C. § 18-109(a)(ii).

       Hudson contends that Puathasnanon was an acting manager under Section 18-

109(a)(ii). Hudson does not claim that Puathasnanon was a formal manager under Section

18-109(a)(i).

       1.       Playing A Significant Role In Management

       To reiterate, Section 18-109(a)(ii) permits a plaintiff to serve process on a person

who “participates materially in the management of the limited liability company.” Based

on dictionary definitions, “[t]he plain meaning of the word ‘participate’ involves taking

part in or playing a role in an activity or event.” Metro Storage Int’l LLC v. Harron, 2019

WL 3282613, at *8 (Del. Ch. July 19, 2019) (citing definitions). “When modifying the

word ‘participate,’ the word ‘materially’ introduces a level of significance. It requires

meaningful participation, rather than minor participation.” Id. (same). The plain language

of Section 18-109(a)(ii) thus confers the status of an acting manager on an individual who

has a significant role in managing an LLC or who plays a significant part in an activity or

event that constitutes part of the management of the LLC.

       This court has applied the plain language of the material-participation test in three

cases, holding on each occasion that an officer of an LLC who held the title of president

and performed functions customarily associated with that role satisfied the requirements

for acting manager status. See id. at *11; Phillips v. Hove, 2011 WL 4404034, at *22

                                            15
(Del. Ch. Sept. 22, 2011); PT China LLC v. PT Korea LLC, 2010 WL 761145, at *5 &

n.25 (Del. Ch. Feb. 26, 2010). These precedents support the general principle that at the

pleading stage, a showing that a defendant occupied a senior role in an LLC and

performed functions consistent with that role is sufficient to qualify the defendant as an

acting manager for purposes of Section 18-109.

       In this case, the same precedents support the exercise of jurisdiction over

Puathasnanon. As chief legal officer and general counsel, she occupied a senior role at

the Company. The pleading-stage record supports an inference that she performed

functions consistent with that role and, as a result, played a significant part in the events

giving rise to the case. Puathasnanon worked with the Company’s outside counsel to

guide the Company, its officers, and the Board through the process of negotiating,

approving, and effectuating the Merger. As part of that process, she provided advice to

the formal managers serving on the Board and to the Company’s officers. Indeed, it is

reasonable to infer that as chief legal officer, Puathasnanon played a major role in

shaping and carrying out the Company’s legal strategy with respect to the Merger. At the

pleading stage, that is sufficient to support an inference that Puathasnanon qualifies as an

acting manager for purposes of a Rule 12(b)(2) motion.

                                             16
       2.     Full-Time Work For The Company In A Managerial Role

       Dictionary definitions serve as an important starting point when determining plain

meaning.3 In many cases, reliance on dictionary definitions will be sufficient. But

dictionary definitions are not the only possible source of plain meaning. Words appear in

sentences, and “the meaning of sentences depends critically on context.” U.S. v. Costello,

666 F.3d 1040, 1044 (7th Cir. 2012) (Posner, J.). The natural habitat of words is thus a

larger text; words appear in phrases, in sentences, in paragraphs, and in entire provisions.

Those provisions in turn appear within still-larger texts, such as a statute or contract.

When interpreting those documents, a court cannot read words in isolation; the court

must construe the document as a whole.4 Although dictionary definitions contribute

significantly to the analysis, the words they contain do not appear in their natural habitat.

       3
        See, e.g., In re Solera Ins. Coverage Appeals, 240 A.3d 1121, 1132 (Del. 2020)
(“This Court often looks to dictionaries to ascertain a term’s plain meaning.”); Lorillard
Tobacco Co. v. Am. Legacy Found., 903 A.2d 728, 738 (Del. 2006) (“Under well-settled
case law, Delaware courts look to dictionaries for assistance in determining the plain
meaning of terms which are not defined in a contract.”); USA Cable v. World Wrestling
Fed’n Ent. Inc., 766 A.2d 462, 474 (Del. 2000) (explaining that a term generally should
be “construed in accordance with its ordinary dictionary meaning.”).
       4
         The holistic interpretation principle applies to contracts. See E.I. du Pont de
Nemours & Co., Inc. v. Shell Oil Co., 498 A.2d 1108, 1113 (Del. 1985) (“In upholding
the intentions of the parties, a court must construe the agreement as a whole, giving effect
to all provisions therein.”); accord GMG Cap. Invs., LLC v. Athenian Venture P’rs I,
L.P., 36 A.3d 776, 779 (Del. 2012). It likewise applies to statutes. See Oceanport Indus.,
Inc. v. Wilmington Stevedores, Inc., 636 A.2d 892, 900 (Del. 1994) (“The General
Assembly passed the pertinent statutes as a whole and not in parts or sections.
Consequently, each part or section should be read in light of every other part or section to
produce an harmonious whole.”).

                                             17
Indeed, in a symposium on statutory interpretation, one distinguished jurist referred to

dictionaries as “word museums,”5 and another commentator called them “word zoos.”6

       In addition to relying on dictionary definitions, a court may look to how a term or

phrase is used in a particular legal context.7 Put another way, “[u]nless a different

intention is manifested” in the contract, “where language has a generally prevailing

meaning, it is interpreted in accordance with that meaning,” and “technical terms and

words of art are given their technical meaning when used in a transaction within their

technical field.” Restatement (Second) of Contracts § 202(3) (Am. L. Inst. 1981).

       The concept of “material participation” is one such term. The LLC Act did not

invent it. Rather, the concept of material participation has a rich pedigree under federal

       5
        Frank H. Easterbrook, Text, History, and Structure in Statutory Interpretation, 17
Harv. J.L. & Pub. Pol’y 61, 67 (1994).
       6
         A. Raymond Randolph, Dictionaries, Plain Meaning, and Context in Statutory
Interpretation, 17 Harv. J.L. & Pub. Pol’y 71, 74 (1994).
       7
          See Hazout, 134 A.3d at 290 & n.58 (collecting authorities demonstrating that
where legislature uses term with “well-settled legal meaning,” it uses it in its “legal
sense”); LeVan v. Indep. Mall, Inc., 940 A.2d 929, 933 (Del. 2007) (looking to “both
legal and non-legal definitions” of “to make” when interpreting statute of
limitations); Penton Bus. Media Hldgs., LLC v. Informa PLC, 2018 WL 3343495, at *12
(Del. Ch. July 9, 2018) (“When established legal terminology is used in a legal
instrument, a court will presume that the parties intended to use the established legal
meaning of the terms.”); Viking Pump, Inc. v. Liberty Mut. Ins. Co., 2007 WL 1207107,
at *13 (Del. Ch. Apr. 2, 2007) (“[W]here a word has attained the status of a term of art
and is used in a technical context, the technical meaning is preferred over the common or
ordinary meaning.”). Cf. Am. Legacy Found. v. Lorillard Tobacco Co., 2005 WL
5775806, at *11 (Del. Ch. Aug. 22, 2005) (presuming use of words with “no accepted
blackletter legal definition . . . was an implicit agreement by the parties to avoid the use
of legal terms of art”).

                                            18
tax law, where it determines whether a taxpayer is an active participant in a trade or

business, rather than a passive investor, and hence the extent to which the taxpayer can

claim deductions for certain business losses.8 The concept also plays a role in

determining whether the interest that a taxpayer owns in an entity taxable as a partnership

either (i) has the characteristics of a general partner interest and hence obligates the

taxpayer to pay self-employment tax on the taxpayer’s share of business income or (ii)

has the characteristics of a limited partner interest and hence does not obligate the

taxpayer to pay self-employment tax.9

       Both issues are particularly pertinent to LLCs, which emerged as the brainchild of

a group of sophisticated entity lawyers and tax practitioners who sought the entity-law

Holy Grail of limited liability and partnership tax treatment. In 1977, they convinced the

State of Wyoming to adopt the first LLC statute. In 1988, the Internal Revenue Service

(the “IRS”) ruled that this entity amalgam could indeed deliver both features. The IRS

ruling accelerated the LLC’s popularity,     and over the ensuing years, a number of

       8
        Harron, 2019 WL 3282613, at *9; see, e.g., I.R.C. § 469; Mattie K. Carter Tr. v.
United States, 256 F. Supp. 2d 536, 539–42 (N.D. Tex. 2003); Aragona Tr. v. Comm’r,
142 T.C. 165, 171 (2014).
       9
         Harron, 2019 WL 3282613, at *9; see, e.g., I.R.C. § 1402; Riether v. United
States, 919 F. Supp. 2d 1140, 1158–60 (D.N.M. 2012); Karen C. Burke, Exploiting the
Medicare Tax Loophole, 21 Fla. Tax Rev. 570, 590–606 (2018) (describing “functional
approach” to determining whether member in manager-managed LLC who is not
designated as formal manager nevertheless is sufficiently active participant in business to
acquire attributes of general partner and be subject to self-employment tax).

                                            19
jurisdictions enacted LLC statutes. Delaware was one of those jurisdictions, and in 1992,

the LLC Act became law.10

       Given this history, “it is logical that the LLC Act would use tax-related concepts

like ‘material participation’ consistently with the tax code, or at least would avoid using

them inconsistently with the tax code. Harron, 2019 WL 3282613, at *10. Authorities

governing the material-participation test for purposes of the tax code therefore can

provide guidance as to how Section 18-109(a)(ii) uses the term. Id.

       The tests that federal tax law enlists to determine the extent of the taxpayer’s

involvement in the LLC turn on facts and circumstances. The general rule is that a

taxpayer “participates materially in a business if he or she works on a regular, continuous,

and substantial basis in operations.” I.R.C. § 469(h)(1). Under regulations enacted by the

IRS, a taxpayer satisfies the requirements for material participation if she meets any one

of seven tests, including (i) working more than 500 hours during a year in an activity, (ii)

performing substantially all the work for an activity, or (iii) working more than 100 hours

during a year in an activity where no one else works more than the taxpayer. Temp.

       10
          See Symonds & O’Toole, supra, § 1.01[A] & [B]; Susan Pace Hamill, The Story
of LLCs: Combining the Best Features of a Flawed Business Tax Structure, in Business
Tax Stories, 295 (Steven A. Bank & Kirk J. Stark eds., 2005). Ever since, tax planning
has been a major driver of governance decisions involving LLCs. See generally John M.
Cunningham & Vernon R. Proctor, Drafting Delaware Limited Liability Company
Agreements: Forms and Practice Manual § 1.03[B] (2011) (titling section: “The
Importance of Tax Knowledge in Handling Delaware LLC Formations”); id. § 15.02
(titling section: “The Importance of Tax Knowledge for Lawyers Engaged in LLC
Formation Practice”); id. chs. 15–22 (eight chapters addressing implications of federal
and state tax issues for LLC formation).

                                            20
Treas. Reg. § 1.469-5T(a) (2022). Although the IRS has not promulgated regulations

governing when a non-managing member would be deemed to have the attributes of a

general partner for purposes of self-employment tax, it has applied similar factors,

including a test based on participating in an entity’s trade or business for more than 500

hours per year. See Burke, supra, at 594; Cunningham & Proctor, supra, § 18.03[D].

       These standards reinforce the pleading-stage inference that Puathasnanon

participated materially in the business of the Company and hence qualifies as an acting

manager for purposes of Section 18-109 of the LLC Act. It is reasonable to infer that

serving as the Company’s chief legal officer and general counsel was a full-time job and

that the holder of those positions worked on a regular, continuous, and substantial basis to

fulfill the associated obligations, thereby satisfying the criteria for the general rule for

material participation. By the same token, it is reasonable to infer that serving as the

Company’s chief legal officer and general counsel required the holder of those positions

to work more than 500 hours in a year in the activities that those positions entail. The

allegations of the complaint depict Puathasnanon as a full-time general counsel with

primary responsibility for the legal function at the Company. In connection with the

Merger, the complaint describes how Puathasnanon provided advice to the Company’s

officers and the Board, interacted with the Company’s outside counsel, attended

meetings, prepared communications, and commented on materials.

       By using the tax law tests for material participation to inform the analysis of

Section 18-109, this decision is not equating the two. The Delaware statute plainly

focuses on material participation in the management of the LLC. It would not be

                                            21
sufficient to support service under Section 18-109 for an individual merely to be

employed in a full-time capacity by the LLC or to participate in the LLC’s trade or

business for more than 500 hours per year. But if an individual inferably participated in a

senior management position for more than 500 hours per year, that fact suggests a degree

of participation in management that is sufficiently significant to qualify as material. Once

again, the pleading-stage record amply supports an inference that Puathasnanon qualifies

as an acting manager for purposes of a Rule 12(b)(2) motion.

       3.     The Corporate Officer Consent Statute

       A final source of interpretive guidance regarding the extent to which Section 18-

109 extends to senior officers of an LLC is the analogous jurisdictional statute for

corporations. That statute originally applied only to directors, and Delaware courts lacked

the ability to exercise personal jurisdiction over senior officers. In re Am. Int’l Gp., Inc.,

965 A.2d 763, 778 (Del. Ch. 2009). To fix that flaw, the General Assembly amended the

statute to encompass senior officers. See 10 Del. C. § 3114(b).

       Section 3114(b) extends to any person who “[i]s or was the president, chief

executive officer, chief operating officer, chief financial officer, chief legal officer,

controller, treasurer or chief accounting officer of the corporation at any time during the

course of conduct alleged in the action or proceeding . . . .” 10 Del. C. § 3114(b). Section

3114(b) thus expressly encompasses a chief legal officer.

       The fact that Section 3114(b) extends to C-suite officers, including the chief legal

officer, indicates that those officers participate materially in the management of the

corporation in a manner sufficient to support jurisdiction in Delaware by implied consent.

                                             22
By the same logic, individuals who hold comparable roles in an LLC participate

materially in the management of the LLC in a manner sufficient to support jurisdiction in

Delaware by implied consent. Under this reasoning, Section 18-109 extends to a general

counsel and chief legal officer like Puathasnanon.

       Puathasnanon draws a different inference from the contrast in language between

Section 3114 and Section 18-109. She stresses that although Section 3114 expressly

mentions the chief legal officer, Section 18-109 does not. She infers that the General

Assembly must have intentionally omitted chief legal officers, because the General

Assembly plainly knew how to name them specifically. She concludes that because the

General Assembly did not do so in Section 18-109, the court should hold that a chief

legal officer cannot qualify as an acting manager for purposes of service of process.

       That argument is not convincing. For starters, it proves too much. Section 3114

mentions not only the chief legal officer, but also other C-suite officers, including the

president. Under Puathasnanon’s interpretation, Section 18-109 could not reach any

officers, because it does not list any specific titles. The upshot of such a rule would be

that the Delaware courts could not exercise jurisdiction over key actors in a Delaware

entity. Moreover, this court has held previously that Section 18-109 extends to an

individual who holds the title of president and fulfills those functions. See Harron, 2019

WL 3282613; Hove, 2011 WL 4404034; PT China, 2010 WL 761145. Puathasnanon’s

reading conflicts with those precedents, because Section 18-109 does not mention the

title of “president” either.

                                            23
       There is a different and obvious reason why the drafters of the LLC Act did not

attempt to include a list of officer positions in Section 18-109. An LLC is a flexible and

primarily contractual entity. The statutory scheme contemplates members and managers,

and it provides for member-managed LLCs and manager-managed LLCs. Within the

parameters of the statute, however, drafters have great freedom to create a bespoke entity

that suits their needs. See Llamas v. Titus, 2019 WL 2505374, at *17–18 (Del. Ch. June

18, 2019); Obeid v. Hogan, 2016 WL 3356851, at *6 (Del. Ch. June 10, 2016). The LLC

Act does not contemplate a customary set of officer provisions, nor is there a historical

set of officer positions that an LLC might be expected to have.

       A flexible entity requires a flexible jurisdictional statute. Because of the flexibility

of LLCs, Section 18-109 understandably eschews specific officer titles as a means of

securing jurisdiction over senior officers. Instead, Section 18-109(a)(ii) empowers

Delaware courts to exercise personal jurisdiction over individuals who participate

materially in the business of an LLC, regardless of title or membership status, for claims

relating to their actions. The LLC Act’s language is encompassing, not exclusionary.

       In this case, the governance structure of the Company bolsters the analogy to

Section 3114 and the use of Section 18-109 to encompass Puathasnanon. Article V of the

LLC Agreement creates a manager-managed structure that approximates many features

of a corporation. Section 5.1 vests sole authority in the Board to direct and oversee the

business and affairs of the Company. Ex. 1 § 5.1. Section 5.4 empowers the Board to

delegate authority to officers, and it expressly aligns P3 officer responsibilities with those

of a corporate officer. See Ex. 1 § 5.4. In particular, Section 5.4 lists as examples of

                                              24
officer positions several of the corporate officer titles that appear in Section 3114, such as

“chief executive officer, chief operating officer, [and] chief financial officer.” Id. In her

capacity as chief legal officer and general counsel, Puathasnanon has titles and serves in

roles that correspond to an officer position that Section 3114 encompasses and which

supports personal jurisdiction in Delaware.

       It is particularly easy to apply Section 18-109 to Puathasnanon because of the

provisions in the LLC Agreement that create a corporate-like governance structure and

draw explicit parallels between the Company’s senior officers and their corporate

counterparts in this case. But those provisions are not essential to the result. This decision

would reach the same pleading-stage holding without those provisions. As the chief legal

officer of the Company, Puathasnanon is subject to personal jurisdiction in Delaware by

analogy to Section 3114.

       4.     Puathasnanon’s Counter Arguments

       To argue against service of process under Section 18-109(a)(ii), Puathasnanon

relies most heavily on two recent Delaware cases: Dlayal Holdings, Inc. v. Al-Bawardi,

2021 WL 6121724 (Del. Ch. Dec. 27, 2021) and CelestialRX Investments, LLC v.

Krivulka, 2019 WL 1396764 (Del. Ch. Mar. 27, 2019). These cases are not persuasive

precedents for Puathasnanon's motion to dismiss.

       The Dlayal Holdings case involved an LLC (Oasis) that was a wholly owned

subsidiary of a real estate holding and management company. Dlayal Hldgs., 2021 WL

6121724, at *2. The third-party defendant (Gracey) did not serve as a formal manager of

either Oasis or its parent company. Id. Instead, he was the day-to-day manager of two

                                              25
ranches that Oasis owned. Gracey’s duties included entering into contracts necessary for

managing the ranches, but he was not authorized to sell or permanently encumber the

ranches. Id. Oasis held other assets, so it was not possible to infer at the pleading stage

that managing the assets of the entity was the functional equivalent of managing the

entity itself. See id. at *8. The court declined to infer that Gracey was an acting manager

of Oasis who was subject to personal jurisdiction in Delaware. Id. at *6.

       This case is different. Puathasnanon was a senior officer of the Company, not a

subsidiary. She held presumptively senior roles within the entity. The operative

complaint alleges that she acted consistently with those roles in connection with the

Merger. She advised the Company’s officers and the Board regarding the Merger, she

worked with outside counsel, and she oversaw the legal issues raised by the transaction.

See AC ¶¶ 44, 56. If Puathasnanon had been a more junior lawyer within the

organization, perhaps advising a business unit or overseeing a single legal function, then

the analogy to Dlayal Holdings could be more persuasive. Instead, Puathasnanon was the

chief legal officer and general counsel.

       In CelestialRX, a formal manager dominated the LLC to the extent that he was

described as the “emperor, supreme leader, and dictator for life” with “absolute control

and discretion without expressed limits.” 2019 WL 1396764, at *19. So great was the

formal manager’s domination of the entity that the title of “employee” more accurately

described the role of the president and CEO. Id. at *22. When a plaintiff sought to sue the

president and CEO in Delaware, this court declined to exercise personal jurisdiction,

holding that the formal manager controlled the entity. See id.

                                            26
       The Harron decision analyzed the CelestialRX decision extensively as part of a

line of decisions that have applied what the Harron case labeled the “control overlay

test.” See 2019 WL 3282613, at *17–20.11 The Harron decision examined the control

overlay test and explained why it conflicts with the plain language of Section 18-109.

That analysis remains applicable here and defeats Puathasnanon’s reliance on

CelestialRX. She has not meaningfully distinguished the analysis in Harron, which this

decision will not repeat.

       Puathasnanon’s arguments are not sufficient to support a pleading-stage dismissal.

Hudson is entitled to an inference that Puathasnanon participated materially in the

management of the Company and is subject to service of process under Section 18-109.

B.     Due Process

       Once a plaintiff has identified a valid method of serving process, the court must

assess “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.” AeroGlobal Cap. Mgmt., LLC v. Cirrus Indus., Inc., 871

A.2d 428, 440 (Del. 2005) (internal quotation marks omitted). In addition to the

defendant’s contacts with the state, relevant factors include “the forum State’s interest in

adjudicating the dispute; the plaintiff’s interest in obtaining convenient and effective

       11
         In addition to CelestialRX, the cases in this line of authority include: Wakley
Ltd. v. Ensotran, LLC, 2014 WL1116968 (D. Del. Mar. 18, 2014); In re Arctic Ease,
LLC, 2016 WL 7174668 (Del. Ch. Dec. 9, 2016); Florida R & D Fund Invs., LLC v.
Florida BOCA/Deerfield R & D Invs., LLC, 2013 WL 4734834 (Del. Ch. Aug. 30, 2013).

                                            27
relief . . . ; [and] the interstate judicial system’s interest in obtaining the most efficient

resolution of controversies . . . .” 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)).

       Asserting jurisdiction over a senior corporate officer based on an implied consent

statute “readily satisfies due process” for purposes of claims that relate to the defendant’s

role as an officer. Ryan, 935 A.2d at 273. The court in Ryan asserted jurisdiction over the

chief financial officer of a corporation (Jasper) under Section 3114(b). Id. In making

short work of the due process issue, the court emphasized Jasper’s role as a corporate

officer, explaining: “It almost goes without any further elaboration that, as chief financial

officer of a Delaware corporation, Jasper availed himself of Delaware law such that he

should reasonably anticipate being haled into Delaware's courts.” Id.

       The same analysis applies under Section 18-109. Due process is satisfied on the

basis of implied consent as long as (i) the allegations against the defendant-manager

focus centrally on the defendant’s rights, duties and obligations as a manager of a

Delaware LLC; (ii) the resolution of the matter will be inextricably bound up in Delaware

law; and (iii) “Delaware has a strong interest in providing a forum for the resolution of

the dispute relating to the manager’s ability to discharge his managerial functions.” Assist

Stock Mgmt. L.L.C., v. Rosheim, 753 A.2d 974, 982 (Del. Ch. 2000). A person who takes

on a managerial role has “impliedly consented to being sued in a Delaware court to

adjudicate disputes so inherently intertwined with that fiduciary position.” Id.; accord

Feeley v. NHAOCG, LLC, 2012 WL 966944, at *7 (Del. Ch. Mar. 20, 2012) (“Section

                                             28
18-109 extends, consistent with due process, to encompass an alleged violation by a

manager of . . . duties owed by the manager under the operative limited liability company

agreement.”). Section 18-109 extends further to encompass matters “involving or relating

to the business” of the LLC, and it is possible that a minimum contacts analysis might be

required to avoid an unconstitutional application of that broadly worded language. Id. at

980; accord Hartsel v. Vanguard Gp., Inc., 2011 WL 2421003, at *9 (Del. Ch. June 15,

2011), aff’d, 38 A.3d 1254 (Del. 2012). But when the action relates to a violation by the

manager of a fiduciary duty owed to the LLC and its members, then the exercise of

jurisdiction under Section 18-109 complies with due process. PT China, 2010 WL

761145, at *5; see id. at 8 n.44 (“By accepting a key management position over two

Delaware limited liability companies, [the defendant] submitted himself to the

jurisdiction of the Delaware courts in suits pertaining to his rights, duties, and obligations

as a manager.”).

       This is an easy case for the minimum contacts analysis. Puathasnanon served as

the general counsel and chief legal officer of a Delaware entity. In doing so, she both held

and exercised “the authority and duties that are normally associated with that office.” Ex.

1 § 5.4. When she took on those roles and assumed the associated powers and duties, she

consented implicitly to jurisdiction in this court for claims involving her actions. She

doubtless anticipated—and in any event should have anticipated—that she could face

litigation in Delaware over her actions as a senior officer of a Delaware entity. The

claims against her in this case assert that she breached her fiduciary duties when acting in

those roles. The constitutional requirements of due process are satisfied, and this court

                                             29
can exercise personal jurisdiction over Puathasnanon for purposes of Counts IX and X.

                                III.    CONCLUSION

       Puathasnanon is subject to personal jurisdiction in Delaware for purposes of the

claims asserted in this case. Her motion to dismiss this action pursuant to Rule 12(b)(2) is

denied.

                                            30