Litigation

Court of Chancery Upholds Jurisdiction Over Nonresident Attorney

By Morris James LLP

Sample v. Morgan, C.A. No. 1214-VCS (November 27, 2007).

In this major decision, the Court of Chancery has upheld its jurisdiction over a non-Delaware attorney who is alleged to have aided and abetted a breach of fiduciary duty by directors. Given the breadth of this decision, it has major implications for counsel to Delaware corporations.

First, the Court held that the attorney's arranging for the filing of a certificate with the Delaware Secretary of State satisfied the single act required to permit service of process on the attorney and his law firm under the Delaware Long Arm Statute. That is nothing new under Delaware law as other decisions have held that filing of such a certificate meets the statutory requirement for service.

Second, the Court held, in what may prove to be its most controversial decision, that Due Process was satisfied in subjecting the attorney to jurisdiction by a Delaware court. Noting that this "is a highly unusual case", the Court had no problem holding that giving advice on Delaware law and controlling the course of litigation in Delaware justified subjecting the attorney to jurisdiction here. What may prove to be controversial, however, are sections of the opinion that suggest that regularly providing advice on Delaware corporate law is sufficient to satisfy the requirement of Due Process in asserting jurisdiction over the non-Delaware lawyer for claims arising out of that advice.

Finally, the opinion holds that an attorney may be held liable for aiding and abetting a breach of fiduciary duty when he knows his advice is being used to carry out the breach. This is important because the knowledge requirement may be satisfied when the lawyer claims expertise in Delaware law and his advice is wrong. The inference then is that he knows his advice is wrong. While this seems to go too far, it is not clear how far the logic of the opinion may be stretched by other courts.

Full post as published by Delaware Business Litigation Report on November 27, 2007 (boomark / email).