In an article just published in the Delaware Journal of Corporate Law, I argue that Delaware’s implied-consent-to-jurisdiction statute is unconstitutional. That statute, Section 3114, is routinely invoked to assert personal jurisdiction over virtually every nonresident director and officer defendant in shareholder litigation. The Supreme Court’s decision in J. McIntyre Machinery, Ltd. v. Nicastro underscores Section 3114’s constitutional problems, which were plain in 1977 when Delaware adopted it in the wake of Shaffer v. Heitner.

My article is the first in a generation to challenge Section 3114 and the first ever to consider it in light of Nicastro. I analyze the Court of Chancery’s rationalizations upholding the statute and bring to light that court’s failure to conduct the required minimum contacts analysis.

Simply put, in a typical shareholder lawsuit, no defendant has minimum contacts with Delaware. None of the defendants (or plaintiffs, for that matter) lives or works in Delaware. The corporation is not headquartered there and may well have no business office, no assets, and no employees there. Certainly no relevant event takes place in Delaware, nor has any harm been suffered there. In reality, the Court of Chancery routinely claims personal jurisdiction over virtually everyone sued for breach of duty as a director or officer of a Delaware corporation even though no minimum contacts exist.

The Supreme Court has rejected jurisdiction by “implied consent” for over fifty years. Yet Section 3114 is based on Delaware’s claim that every officer and director “impliedly consents” to personal jurisdiction simply by serving as an officer or director. Mere awareness of Section 3114 is not sufficient under the Due Process clause because awareness is not “purposefully availing” oneself of the protections of Delaware law nor would it be “fair and reasonable” to assert personal jurisdiction under current Supreme Court jurisprudence.

Moreover, serving as an officer or director while aware of Section 3114 cannot constitute actual consent because such logic would allow any state to assert personal jurisdiction over almost any defendant simply by ensuring that the defendant was aware of the state’s statute.

I propose a new amenability statute for officers and directors rooted in their actual consent. It would require every officer and director to consent to jurisdiction explicitly every year. This statute is workable and is constitutional under Nicastro. It will help stem the migration of corporate litigation away from Delaware, and will provide a desirable measure of neutrality in Delaware corporate law between management and stockholders.

The article may be found here.