Free MEMORANDUM in Support - District Court of Delaware - Delaware

’ Case 1 :04-cv—O1339-SLB Document 44-8 Filed 06/O3/2005 Pagel of4
EXHIBIT 7
Not Reported in A.2d P3g€ I
Not Reported in A.2d, 1991 WL 129174
(Cite as: Not Reported in A.2d)
H
Not Reported in A.2d, 1991 WL 129174 Plaintiffs, Red Sail Limited Partners, L.P., and
Only the Westlaw citation is currently available. Delphi Easter Partners Limited Partnership, are the
UNPUBLISHED OPINION. CHECK COURT only limited partners of Easter Show Limited
RULES BEFORE CITING. Partnership. The principal defendants are: the
Court of Chancery of Delaware, New Castle general partner, Spectacular Partners, Inc.; its sole
County. stockholder, Radio City Music Hall Productions,
RED SAIL EASTER LIMITED PARTNERS, L.P., Inc.; and Rockefeller Group, Inc., the sole
aDelaware limited partnership, Delphi Easter stockholder of Radio City. Easter Show is a
Partners Limited Partnership, a New York limited Delaware limited partnership, and Spectacular
partnership, Plaintiffs, Partners and Radio City are both Delaware
v. corporations. Rockefeller Group is a New York
RADIO CITY MUSIC HALL PRODUCTIONS, corporation.
INC., a Delaware corporation, Rockefeller Group,
Inc., a New York corporation, Spectacular Partners, Rockefeller Group has moved for dismissal under
Inc., a Delaware corporation, Easter Show Limited Rule l2(b)(2) and (5). It claims that no facts exist
Partnership, a Delaware limited partnership, that would justify the assertion of personal
Defendants. jurisdiction over it by this court because it was not a
Civ. A. No. 12036. party to the partnership agreement or any of the
other agreements at issue; it does no business in
Submitted: June 12, 1991. Delaware; and it has done no act in Delaware
Decided: July 10, 1991. related to this transaction. It affirms that it did
cause the incorporation of Radio City Music Hall
William Prickett , and Ronald A. Brown, Jr. of Products, Inc., as a Delaware corporation (as well as
Prickett, Jones, Elliott, Kristol & Schnee, certain other subsidiaries), and it acknowledges that
Wilmington, for plaintiffs. that required a filing in Delaware, but it asserts that
William D. Johnston , and Melanie K. Sharp of that act was years ago and has no relationship
Young, Conaway, Stargatt & Taylor , Wilmington whatsoever with the claims that plaintiffs would
(Ronald S. Rauchberg , Esquire, and Michael D. require it now to defend in this jurisdiction. This
Povman of Proskauer Rose Goetz & Mendelsolm, sole contact, unrelated to the facts alleged to
New York City, of counsel), for defendants Radio constitute a wrong, is, it says, insufficient under the
City Music Hall Productions, Inc., Rockefeller International Shoe line of cases FN1 to support this
Group, Inc. and Spectacular Partners, Inc. cou1t’s exercise of personal jurisdiction over it.
Joseph A. Rosenthal of Morris, Rosenthal, Monhait
& Gross, P.A., Wilmington, for Easter Show Plaintiffs respond that, in Sternberg v. O’Neil,
Limited Partnership. Del.Supr., 550 A.2d 1105 (1988) , the Delaware
Supreme Court interpreted International Shoe and
MEMORANDUM OPINION its progeny to permit the courts of this state to
exercise personal jurisdiction over the parent of a
ALLEN , Chancellor. wholly—owned subsidiary incorporated in Delaware
*1 This is an action by the limited partners of a on any cause of action arising out of the operation of
Delaware limited partnership against the that subsidiary. FN2
partnership, its corporate general partner, and the
corporate parent and grandparent of the general Rockefeller Group’s principal place of business is
partner. The allegation is that defendants have New York City. Its principal activity is
breached duties arising out of the limited partnership developing, owning, and operating real estate. The
agreement and certain ancillary agreements between record contains no evidence that Rockefeller Group
the limited partners and the general partner and its owns real estate in Delaware or that it otherwise
parent. Pending is a motion of the corporate conducts business in Delaware. The only acts in
grandparent—Rockefeller Group, Inc.-to dismiss the Delaware that Rockefeller Group has done involve
complaint for lack of personal jurisdiction. filings necessary to form and to merge several
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wholly-owned subsidiaries. Neither the formation who in person or through an agent:
nor the merger of any of those corporations
constitute any part of the facts alleged in the (1) Transacts any business or performs any character
complaint as a wrong. The record establishes that, of work or service in the State;
before April of 1984, Rockefeller Group created
four Delaware subsidiaries and caused two of those (3) Causes tortious injury in the State by an act or
subsidiaries to merge into one of the other two. omission in this State;
One of these two remaining Delaware subsidiaries is
Radio City, the other is not a party to this litigation (4) Causes tortious injury in the State or outside of
or otherwise associated with the agreements at issue. the State by an act or omission outside the State if he
regularly does or solicits business, engages in any
*2 The record also contains evidence of activity in other persistent course of conduct in the State or
Delaware by subsidiaries of Rockefeller Group. In derives substantial revenue from services, or things
April of 1984 a subsidiary of Rockefeller Group used or consumed in the State. (emphasis added)
registered to do business in Delaware. This
subsidiary, however, is in no way involved in this Application of these words to the acknowledged
case. facts of Rockefeller Group’s involvement with the
alleged wrongs does not require great subtlety or the
The question whether to exercise personal recitation of legal precedent. It is rather straight-
jurisdiction over a non—resident defendant involves a forward.
two part inquiry: (1) may the defendant
constitutionally be required to litigate the plaintiff’s In organizing subsidiary corporations in Delaware,
claim in this jurisdiction given the defendant’s Rockefeller Group has transacted business in this
conduct, its relationship with the forum and the state (subsection (c)(l)), but the claims sought to be
claims sought to be adjudicated; and (2) does the litigated here—breach of contract and breach of
Delaware statutory law authorize exercise of the alleged fiduciary duties, or wrongful participation or
constitutional power (if it exists in the conspiracy in either-in no sense relates to those
circumstances) to compel such adjudication in the activities in Delaware. Compare Papendick v.
courts of this state. Bosch, Del.Supr., 410 A.2d 148 (1979), cert.
denied, 446 U.S. 909 (1980). Section 3104
I need not express an opinion on the expressly requires that where substituted service is
constitutionality of requiring one in the position of employed under its terms, the wrong alleged must
Rockefeller Group to defend litigation of this sort in arise from the "acts enumerated." As the wrongs
Delaware since I am firmly of the view that the here alleged do not arise from the business that
language of the statutory enactment plaintiffs invoke Rockefeller Group transacted in Delaware,
to justify service of process—Section 3104 of Title 10 subsection (c)(1) of Section 3104 does not authorize
of the Delaware Code-cannot be stretched to cover service of process upon it in this case.
this case without breaking the necessary connection
between statutory words and common usage of the *3 Subsection (c)(3) authorizes service of process
English language. See T rans—Americas Airlines, when there is a tortious injury in the state by an act
Inc. v. Kenton, Del.Supr., 491 A.2d 1139, 1142-43 or omission in this state. Since the only act in
(1985). Delaware that Rockefeller Group can be said to have
done is to cause the formation and merger of its
Plaintiffs invoke three subsections of Section subsidiaries, and since those acts themselves are no
3104(c) as authorizing service of process on part of any wrong (in this state or outside of it), this
Rockefeller Group in this case. The pertinent subsection offers plaintiffs no ground to require
statutory language is as follows: Rockefeller Group to appear in this action. FN3
(c) As to a cause of action brought by any person These two sub-sections address specific personal
arising from any of the acts enumerated in this jurisdiction-that is, jurisdiction to adjudicate a
section, a court may exercise personal jurisdiction specific claim that itself is associated in some way
over any nonresident, or his personal representative, with the forum jurisdiction. Subsection (c)(4)
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addresses a situation in which a defendant is opinion, the Supreme Court did not intend in
generally affiliated with the forum jurisdiction. LaNuova to direct the trial court to ignore the
That is, subsection (c)(4) will apply when a specific words of Section 3104 and to henceforth
defendant has had contacts with this state that are so analyze all questions arising under Section 3104
extensive and continuing that it is fair and consistent only in the broad terms of fundamental fairness that
with state policy to require that the defendant appear guide determination of the constitutional question.
here and defend a claim even when that claim arose The Supreme Court commands that this statute be
outside of this state and causes injury outside of this given a liberal construction so that its purpose is
state. See Sternberg v. O’Neil, 550 A.2d at 1117; achieved, but it has not directed that the application
Sears, Roebuck & C0. v. Sears plc, 744 F.Supp. of statutory words to the facts in hand be slighted.
1297, 1302-04 (D.Del. 1990). Plainly, the minimal
connection that Rockefeller Group has had with this *4 Nor on the current record can the activities of
state would be insufficient to predicate service of Rockefeller Group’s subsidiaries in Delaware be
process on Section 3104(c)(4). There is here no attributed to Rockefeller Group. FN5 Courts in
"persistent course of conduct in the State" nor is Delaware will ignore the separate corporate
there any suggestion that Rockefeller Group existence of a subsidiary and attribute its activities
"derives substantial revenue from services, or things in Delaware to the parent only if the subsidiary is
used or consumed in the State." Therefore, the alter ego or a mere instrumentality of the parent,
subsection (c)(4) is unavailing to plaintiffs. or if the subsidiary acts as the agent of the parent.
Buechner v. Farbenfabriken Bayer
I conclude therefore that Section 3104 does not Aktiengesellschaft, Del.Supr., 154 A.2d 684 (1959)
authorize this court to exercise jurisdiction over ; Sears, Roebuck & C0., 744 F.Supp. at 1304;
Rockefeller Group. This conclusion is not Mobile Oil Corp. v. Linear Films, Inc., 718
inconsistent with the holding in Sternberg v. O’Neil, F.Supp. 260, 265-72 (D.Del.l989). The record
Del.Supr., 550 A.2d 1105 (1988). That case contains no evidence that either basis for imputing
addressed the constitutional issue that questions of the acts of the subsidiary to the parent apply to
personal jurisdiction over non—resident defendants Radio City or to the Rockefeller Group subsidiary
inevitably raises. It did not concem the separate that registered to do business here.
question whether Delaware law authorized service of
process, since the defendant there had appointed an Finally, plaintiffs assert personal jurisdiction over
agent and so was "present" in the state. Id. at 1109 Rockefeller Group based on a conspiracy theory of
(citing Pennsylvania Fire Ins. Co. v. Gold Issue jurisdiction. It cites Istituto Bancario Italiano SpA
Mining and Milling C0., 243 U.S. 93, 95 (1917). v. Hunter Eng. C0., Inc., Del.Supr., 449 A.2d 210
FN4 (1982), but that case too dealt with the constitutional
faimess issue, not with statutory construction. ln
In Steinberg, the Delaware Supreme Court held that all events, the claim is that Rockefeller Group
it was consistent with traditional notions of fair play conspired with its wholly owned subsidiary to
and substantial justice—that is, it was constitutional- breach the partnership agreement and the ancillary
to require a foreign corporation that had long owned agreements, and that the formation of Spectacular
all of the stock of a Delaware corporation to appear Partners and Easter Show were acts in Delaware in
and defend a double derivative suit charging the furtherance of that conspiracy.
directors of the Delaware company and its parent
with breach of fiduciary duty. A theory of personal jurisdiction based upon an
alleged conspiracy between a foreign corporation
Plaintiffs argue that, after Steinberg, this court must and its wholly owned Delaware subsidiary is very
be authorized to exercise jurisdiction under Section close to being merely another way to assert that a
3104 over an out—of—state parent of a Delaware controlling shareholder may always be sued in
corporation because Section 3104 has been Delaware on any claim made against the subsidiary.
"construed to confer jurisdiction to the maximum A controlling shareholder does by definition control
extent possible under the due process clause." (or have the power to control) the acts of its
LaNuova D & B, S.p.A. v. Bowe C0., Inc., subsidiary. Thus, an attempt to apply a conspiracy
Del.Supr., 513 A.2d 764, 768 (1988). ln my theory to parent—subsidiary corporations in order to
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extend the reach of Section 3104 raises particular FN4. The present case is also different in this
concerns. I need not address those concerns, respect from In re USACafes, L.P. Lit., Del.Ch.,
however, because, assuming that Rockefeller Group Cons. C.A. 11146, Allen, C. (June 7, 1991), where
may be subjected to the compulsion of legal process the directors of a Delaware corporation were subject
under Section 3104 if any party with whom it is in to service of process under the director’s longarm
conspiracy could be served under Section 3104, still statute, 10 Del. C. § 3114.
plaintiffs have failed to show that any of the
defendants could be served under the terms of that FN5. Indeed, the record does not disclose any such
statute. In other words, if the conspiracy theory activities in Delaware, except the filing by Radio
means Rockefeller Group may be sued in any City of the incorporation documents of Spectacular
jurisdiction in which an act in furtherance of the Partners and the filing by Spectacular Partners of the
conspiracy occurred, plaintiffs have failed to make a limited partnership documents. Thus, while those
prima facie case that the only Delaware acts-filing Rockefeller Group subsidiaries are plainly "present"
of the Spectacular Partners incorporation document in Delaware by reason of their incorporation, they
and of the limited partnership documents—were part do not do business generally in this state for
of a conspiracy to breach duties created by the purposes of Section 3104(c).
funding of the limited partnership obligations. It is Del.Ch.,1991.
not enough to sustain service of process under Red Sail Easter Ltd. Partners, L.P. v. Radio City
Section 3104 when challenged on a motion under Music Hall Productions, Inc.
Rule 12(b)(2) or (5) that plaintiffs might imagine Not Reported in A.2d, 1991 WL 129174
that an act in Delaware might possibly be related to
the wrong alleged and that a non-resident defendant END OF DOCUMENT
might possibly have participated in some way in that
action ("conspired"). Plaintiffs’ obligation is to
come forward with some evidentiary support for
such speculation. See Hart Holding C0. Inc. v.
Drexel Burnham Lambert Inc., Del.Ch., C.A. No.
11514, Allen, C. (Feb. 13, 1991). Here they have
not done so.
*5 The motion to dismiss is therefore GRANTED.
FN1. See, e.g., International Shoe Co. v.
Washington, 326 U.S. 310 (1945) ; Sha]j‘er v.
Heitner, 433 U.S. 186 (1977) ; Burger King v.
Rudzewicz, 471 U.S. 462 (1985) ; Burnham v.
Superior Court of CalQ°ornia, 110 S.Ct. 2105 (1991) '
FN2. This principle is breath—taking in scope. It
would apply for example to support jurisdiction over
a New York corporation that owned a Delaware
subsidiary whose employee was involved, during the
course of his employment, in an intersection
collision in Los Angeles.
FN3. In so concluding l need not express any view
on the question whether a financial impact on a
Delaware corporation (arising for example from the
misappropriation of trade secrets) is "tortious injury
in the State" within the meaning of this section.
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