Last April, I warned that October 1, 2014 would be a critical day for directors of Nevada corporations. See Why October 1, 2014 Is An Important Date For Management Persons Of Nevada Entities. Now, we have a case giving proof to my warning. Advanced Vision Solutions, Inc. v. Lehman, 2015 U.S. Dist. LEXIS 9035 (January 26, 2015).
The case was brought by a Nevada corporation alleging, among other things, theft of a corporate opportunity. The two defendants moved to dismiss for lack of personal jurisdiction. Because the corporation alleged that one of the directors had been a director, Judge Andrew P. Gordon considered whether that director was subject to personal jurisdiction pursuant to Nevada’s “deemed consent” statute, NRS 75.160. That statute provides:
Every nonresident of this State who, on or after October 1, 2013, accepts election or appointment, including reelection or reappointment, as a management person of an entity, or who, on or after October 1, 2014, serves in such capacity, and every resident of this State who accepts election or appointment or serves in such capacity and thereafter removes residence from this State shall be deemed, by the acceptance or by the service, to have consented to the appointment of the registered agent of the entity as an agent upon whom service of process may be made in all civil actions or proceedings brought in this State by, on behalf of or against the entity in which the management person is a necessary or proper party, or in any action or proceeding against the management person for a violation of a duty in such capacity, whether or not the person continues to serve as the management person at the time the action or proceeding is commenced. The acceptance or the service by the management person shall be deemed to be signification of the consent of the management person that any process so served has the same legal force and validity as if served upon the management person within this State.
Strictly speaking, the statute doesn’t say that it creates personal jurisdiction. However, Judge Gordon found that many courts “hold that director consent statutes like this create personal jurisdiction” (citing Shaffer v. Heitner, 433 U.S. 186, 216 (1977) and Marvani S.p.A. v. Keehan, 900 F. Supp. 2d 377, 387 (D. Del. 2012)).
The alleged director, however, claimed that she had never accepted a position of director. Judge Gordon noted that the defendant had provided no authority that a director is required to sign a document to accept a director position. This wasn’t a case of a naked allegation of acceptance. Judge Gordon found that the defendant had conducted herself as a director; participating in board meetings, delegating board tasks, carrying out tasks on the board’s behest, and developing a plan to spin-out a product to the corporation’s shareholders. There is no discussion Professor Eric Chiappinelli’s thesis that implied consent statutes are unconstitutional. The Myth of Director Consent: After Shaffer, Beyond Nicastro, 37 Del. J. Corp. L. 783 (2013).
Judge Gordon also considered whether the director defendant’s contacts with Nevada established an alternative basis for personal jurisdiction. Perhaps that will be grist for a future post.
