## Facts

- A shareholder of an Ohio parent corporation filed a double derivative action in the Delaware Court of Chancery seeking equitable relief and damages on behalf of the parent and its wholly owned Delaware subsidiary.
- The complaint alleged that officers and directors breached fiduciary duties by mismanaging corporate affairs and by causing false and misleading statements to be made to a federal regulator about an SEC investigation.
- The parent corporation was incorporated in Ohio but had registered to do business in Delaware and appointed a Delaware registered agent for service of process under Delaware’s corporate qualification statutes.
- The subsidiary was incorporated in Delaware and was wholly owned by the parent.

## Issues

1. Whether a foreign corporation’s registration to do business in Delaware and appointment of a Delaware agent for service of process constitutes consent to Delaware courts’ general personal jurisdiction.
2. If not, whether a foreign parent’s ownership of a Delaware subsidiary, where the litigation concerns alleged mismanagement of that subsidiary, supplies minimum contacts for specific personal jurisdiction consistent with due process.
3. Whether dismissal of the entire action was required where the parent corporation was treated as an indispensable party and the trial court found no personal jurisdiction over it.

## Decision

- The Delaware Supreme Court reversed the dismissal.
- The court held that the parent corporation consented to Delaware’s general personal jurisdiction by registering to do business in Delaware and appointing a Delaware agent for service of process.
- Independently, the court held that the parent’s ownership of the Delaware subsidiary—given the suit’s focus on the subsidiary’s affairs—constituted minimum contacts supporting specific personal jurisdiction consistent with due process.
- Because the trial court’s dismissal rested on its jurisdictional error as to the parent, the basis for dismissing the case as to all defendants fell away, and the action could proceed.

## Legal Principles

- A foreign corporation that qualifies to do business in Delaware and appoints a Delaware agent for service of process may be treated as having consented to general personal jurisdiction in Delaware courts.
- Even without consent, a foreign parent’s ownership of a Delaware subsidiary can be a forum contact that is directly related to a derivative or double derivative action centered on alleged wrongdoing involving the subsidiary, supporting specific jurisdiction.
- Due process requires contacts such that the defendant could reasonably anticipate being sued in the forum and that exercising jurisdiction comports with fair play and substantial justice.

## Conclusion

Delaware courts may exercise personal jurisdiction over a foreign parent corporation in a double derivative action when the parent has registered to do business and appointed an in-state agent, and, alternatively, when the parent’s ownership of a Delaware subsidiary is directly connected to the claims.


Sternberg v. O'Neil, 550 A.2d 1105 (Del. 1988)