Alston & Bird has secured a major win in the Delaware Supreme Court, which ruled that out-of-state companies can no longer be sued in Delaware merely because they register to do business within the state.
The decision in the case, Genuine Parts Co. v. Cepec, reverses a 2015 decision by the state Superior Court holding that a corporation consents to general personal jurisdiction simply by complying with a state’s basic registration requirement to do business.
The decision also overrules longstanding Delaware precedent established by the Delaware Supreme Court's 1988 decision in Sternberg v. O'Neil, which the Superior Court had relied on in its opinion.
Writing for the majority, Delaware Supreme Court Chief Justice Leo E. Strine, Jr., said: ″An incentive scheme where every state can claim general jurisdiction over every business that does any business within its borders for any claim would reduce the certainty of the law and subject businesses to capricious litigation treatment as a cost of operating on a national scale or entering any state’s market.″
The case arose in February 2015, when the plaintiffs, Georgia residents, sued Genuine Parts and others for personal injury. Genuine Parts is a Georgia corporation headquartered in Atlanta and operates hundreds of retail automotive parts stores nationally.
Although Genuine Parts is registered to do business in Delaware, historically providing general jurisdiction over the company under Delaware law, less than 1 percent of the company’s employees work in Delaware, less than 1 percent of its auto parts stores are located there, and less than 1 percent of its revenue is derived from the state, as indicated in Strine’s opinion.
Genuine Parts moved for dismissal, arguing that the court lacked personal jurisdiction over it. But the motion was denied, as was a subsequent motion by the company to certify an interlocutory appeal. In November, Genuine Parts appealed the ruling to the state Supreme Court, arguing that the lower court had erred in finding that registering to do business and appointing an agent for service of process created general jurisdiction.
In siding with Genuine Parts, the Delaware Supreme Court relied extensively on two recent U.S. Supreme Court rulings – Goodyear Dunlop Tires Operations, S.A. v. Brown and Daimler AG v. Bauman – which limit where a company may be sued for claims that do not relate to its place of incorporation or principal place of business.
“In light of the U.S. Supreme Court‘s clarification of the due-process limits on general jurisdiction in Goodyear and Daimler, we read our state‘s registration statutes as providing a means for service of process and not as conferring general jurisdiction.
Accordingly, we reverse the Superior Court‘s judgment that denied Genuine Parts‘ motion to dismiss the claims against it for lack of personal jurisdiction,” wrote Strine in his opinion.
Representing Genuine Parts are Alston & Bird partner Jim Grant, senior associate Jonathan Parente and associate Ronnie Gosselin.
The case is Genuine Parts Co. v. Cepec, case number N15C-02-184, in Delaware Supreme Court.