Cuppels v. Mountaire Corportation

IN THE SUPERIOR COURT FOR THE STATE OF DELAWARE
GARY and ANNA-MARIE CUPPELS
individually and on behalf of others
similarly situated,
Plaintiffs,
V. C.A. NO.: S18C-06-009 CAK
MOUNTAIRE CORPORATION,
MOUNTAIRE FARMS INC., and
MOUNTAIRE FARMS OF
DELAWARE, INC.,
Defendants.
Submitted: June 5, 2020
Decided: June18, 2020
Upon Defendant Mountaire Corporation’s Motion to Dismiss for Lack of Personal
Jurisdiction under Superior Court Civil Rule 12(b)(2)
DENIED
MEMORANDUM OPINION AND ORDER
Chase T. Brockstedt, Esq. and Stephen A. Spence, Esq., Baird Mandalas Brockstedt,
LLC, 1413 Savannah Road, Suite 1, Lewes, DE 19958, Attorneys for Plaintiffs
Philip C. Federico, Esq. and Brent P. Ceryes, Esq., Schochor, Federico and Staton, P.A.,
1211 St. Paul Street Baltimore, MD 21202, Admitted Pro Hac Vice, Attorneys for
Plaintiffs
John C. Phillips, Jr., Esq. and Lisa C. McLaughlin, Esq., Phillips, McLaughlin & Hall,
1200 North Broom Street, Wilmington, DE 19806, Attorneys for Defendants
F. Michael Parkowski, Esq., Michael W. Teichman, Esq. and Elio Battista, Jr., Esq.,
Parkowski, Guerke & Swayze, P.A., 1105 North Market Street, 19th Floor, Wilmington,
DE 19801, Attorneys for Defendants
James R. Wedeking, Esquire, Sidley Austin LLP, 1501 K Street, N.W., Washington, DC
20005, Admitted Pro Hac Vice, Attorneys for Defendants
KARSNITZ, J.
This case provides an object lesson on how a motion for dismissal for lack of
personal jurisdiction can languish in a procedural morass for years because of unnecessary
discovery delays. As our Supreme Court has said, “[d]iscovery abuse has no place in our
courts, and the protection of litigants, the public, and the bar demands nothing less than
that our trial courts be diligent in promptly and effectively taking corrective action to
‘secure the just, speedy and inexpensive determination of every proceeding’ before
39 |
them.”' Although this case may be a complex case in a number of ways (e.g., number of
parties, claims, witnesses and amount of evidence), the motion itself is relatively
straightforward. If the facts which were ultimately elicited through jurisdictional
discovery had been produced in a timely fashion, this motion could have been disposed
of months ago, freeing the parties to focus on the merits of the case, saving significant
legal fees and court costs, and conserving judicial resources. On May 8, 2020, I denied
Plaintiffs’ Motion for A Rule to Show Cause and Discovery Sanctions against
Defendants.’ However, as I said at oral argument that day:
The cumulative effect of how the defendants have defended the case
has slowed it down considerably. I agree with the comment from the
plaintiffs today that one of the reasons this case schedule is ambitious
is because the defendants have made it so. I will not countenance that
in the future. If this kind of discovery problem arises again, I will take
a different view of it than I am here today. I intend to closely monitor
the case to ensure it moves along appropriately.
' Holt v. Holt, 472 A.2d 820, 824 (Del. 1984) (quoting Del. Super. Ct. Civ. R. 1).
2 DI. 375. (“D.L.” shall refer to Docket Index Numbers.)
3 Id., at 62 — 63.
Towards that end, I will finally dispose of the issue of personal jurisdiction today.
PROCEDURAL HISTORY OF THE MOTION
On June 13, 2018, Plaintiffs filed a putative class action complaint (the
“Complaint”) against Mountaire Corporation, an Arkansas corporation (“MC”),
Mountaire Farms Inc., a Delaware corporation (“MFI”) and Mountaire Farms of
Delaware, Inc., a Delaware corporation (“MFODI”) (individually, a “Defendant,” and
collectively, “Defendants”). On July 20, 2018, Defendants filed, inter alia, a Motion to
Dismiss pursuant to Rule 12(b)(2) of the Superior Court Rules of Civil Procedure for lack
of personal jurisdiction over MC. On August 24, 2018, Defendants filed an Opening Brief
in Support of this Motion. On October 11, 2018, Plaintiffs filed an Answering Brief in
opposition to this Motion, and on October 12, 2018, Plaintiffs filed an Amended
Complaint. On October 26, 2018, Defendants filed a Motion to Dismiss the Amended
Complaint pursuant to Rule 12(b)(2) for lack of personal jurisdiction over MC (the
“Motion”). On November 16, 2018, Defendants filed an Opening Brief in support of the
Motion. On December 7, 2018, Plaintiffs filed an Answering Brief in opposition to the
Motion. On December 21, 2018, Defendants filed a Reply Brief in support of the Motion.
In an Order dated August 22, 2018 and clarified on November 7, 2018, this Court
stayed discovery in this case, pending disposition of, inter alia, the Motion. On February
22, 2019, the Court reopened discovery for the limited purpose of deciding whether MC
has sufficient contacts with Delaware to permit the Court to exercise personal jurisdiction
2
over it. Plaintiffs were given until August 20, 2019 to plead with particularity how this
Court might exercise personal jurisdiction over MC. After correspondence to the Court
by counsel for the parties on May 1, 2019 and May 3, 2019, on May 29, 2019, the Court
entered an Order Clarifying the Scope of Jurisdictional Discovery. That Order disallowed
discovery as to general jurisdiction over MC or a conspiracy claim against MC, but
allowed discovery as to specific jurisdiction over MC and a claim against MC based on
agency. On June 19, 2019, the Special Master who had been appointed to expedite
discovery* extended these deadlines. Completion of jurisdictional discovery was required
by September 20, 2019, Plaintiffs were required to file a Second Amended Complaint by
October 7, 2019, and Defendants were required to file a Response within fourteen days
thereafter. On August 1, 2019, this Court affirmed those deadlines.
After a stay occasioned by an unsuccessful attempt at mediation, and after a
November 22, 2019 hearing, on November 26, 2019 I ordered counsel for the parties to
notify me by December 4, 2019 if the Motion was ripe for adjudication. Subsequently
counsel for the parties informed me that there was disagreement on the issue of ripeness
of the Motion, and I held a hearing on December 30, 2019. In a January 9, 2020 Pretrial
Scheduling Order, I ordered that discovery on the issue of personal jurisdiction over
Defendant MC be completed by July 1, 2020, and that MC not be required to file an
* Order of Reference to Special Master entered by this Court on May 14, 2019 (DI. 124, D.I. 125).
3
Answer until thereafter. On January 29, Defendants MFI and MFODI filed an Answer to
the Amended Complaint. After a March 9, 2020 office conference, on March 11, 2020 I
ordered Plaintiffs to file an appropriate Motion to Compel Defendants to respond to
personal jurisdiction discovery. On April 14, 2020, Plaintiffs filed a Motion for a Rule to
Show Cause and Discovery Sanctions, which Defendants opposed on May 4, 2020. On
May 8, 2020, I denied the Motion for Discovery Sanctions, but on May 15, 2020, I ordered
the Plaintiffs to file a supplemental submission on MC’s Motion to Dismiss for Lack of
Personal Jurisdiction by May 18, 2020. On that date, Plaintiffs filed a Supplemental
Submission on Mountaire Corporation's Motion to Dismiss for Lack of Personal
Jurisdiction, On May 26, 2020, Plaintiffs filed a Second Supplemental Submission on
Mountaire Corporation's Motion to Dismiss for Lack of Personal Jurisdiction, and a
Second Motion for Discovery Sanctions against Defendants. On June 5, 2020,
Defendants filed their Response to Plaintiffs’ First and Second Supplemental Submissions
on Mountaire Corporation’s Motion to Dismiss for Lack of Personal Jurisdiction. On
June 8, 2020, Defendants filed their Amended Response to Plaintiffs’ First and Second
Supplemental Submissions on Mountaire Corporation's Motion to Dismiss for Lack of
Personal Jurisdiction. Thus, the issue of personal jurisdiction over MC is now finally ripe
for adjudication, more than two years since the Complaint was filed.
STATUS OF THE CASE
In their Amended Complaint, Plaintiffs assert claims against MC, MFI and
MFODI, jointly and severally, for alleged negligence, gross negligence, recklessness,
negligence per se, nuisance, trespass, and unjust enrichment. These claims stem from
Plaintiffs’ assertion that Defendants owned, operated and managed a chicken processing
plant in Millsboro, Delaware (the “Facility”) and caused unsafe quantities of wastewater
and sludge generated, treated and/or disposed of at that plant to be released on lands near
Plaintiffs’ residences. Plaintiffs allege that Defendants, individually and collectively: 1)
participated in a material way in owning and operating the Facility and associated real
property used for disposal of wastewater and sludge over the relevant time period; 2)
through their individual and joint direction, control, and coordination developed,
implemented, and carried out the projects, policies and procedures that proximately
caused the pollution and damages detailed herein; 3) hired, fired, managed, supervised,
and instructed employees, agents and contactors involved in the conduct described herein;
4) promoted and marketed the “Mountaire” brand and products in Delaware; 5)
collectively and individually transacted business, solicited business, sold service and
products, and entered into contracts causing them to earn revenue directly or indirectly
from such business activities conducted in and directed at Delaware; and 6) otherwise
engaged in conduct that contributed to the pollution and damages described therein.
5
In the Amended Complaint, Plaintiffs seek remediation of property, groundwater
and drinking water wells damaged by Defendants’ wastewater and sludge disposal, the
creation of a public water system, the implementation of various improvements to the
wastewater treatment, storage and disposal facilities, and both compensatory and punitive
damages.
With regard to personal jurisdiction over MC, Plaintiffs argue that, although MC is
an Arkansas corporation, MC has sufficient contacts with Delaware to support personal
jurisdiction over it under both the Delaware long-arm statute and federal Constitutional
Due Process protections. As an additional theory of personal jurisdiction, the Amended
Complaint alleges that MFODI acted as MC’s agent, and that MC as principal is liable
for the acts of MFODI as its agent in Delaware.
STANDARD OF REVIEW
Upon a motion to dismiss for lack of personal jurisdiction under Superior
Court Civil Rule 12(b)(2), Plaintiffs bear the burden of establishing a basis to exercise
personal jurisdiction over a nonresident defendant like MC.° “In ruling on a Rule
12(b)(2) motion, the Court may consider the pleadings, affidavits, and any discovery of
> AeroGlobal Capital Mgmt., LLC v. Cirrus Indus., Inc., 871 A.2d 428, 437 (Del. 2005); Boone y.
Oy Partek, 724 A.2d 1150, 1155 (Del. Super. 1997), aff'd, 707 A.2d 765 (Del. 1998); Ali v. Beechcraft
Corp., 2014 WL 3706619, at *2 (Del. Super. June 30, 2014); Outokumpu Eng’g Enterprises, Inc. v.
Kvaerner EnviroPower, Inc., 685 A.2d 724, 727 (Del. Super. 1996).
6
record.”° “The Court must accept all factual allegations in the complaint as true and
view all factual inferences in a light most favorable to the plaintiff[s].”’
To withstand the Motion, the Amended Complaint (and Plaintiffs’ Supplemental
Submissions) must allege facts sufficient to satisfy the requirements of Delaware’s long-
arm statute, and my exercise of jurisdiction must comport with the requirements of Due
Process Clause of the Fourteenth Amendment of the United States Constitution.’ The
Delaware Supreme Court has interpreted the Delaware long-arm statute as permitting
Delaware courts to exercise personal jurisdiction over foreign defendants up to the limits
imposed by the Due Process Clause of the Fourteenth Amendment.’ However, the
Delaware Supreme Court has not collapsed the analysis under the Delaware long-arm
statute into the federal Constitutional Due Process analysis.'!? Therefore, to exercise
personal jurisdiction over a nonresident Defendant, I must separately determine that I
have personal jurisdiction under both state and federal law.!!
Although I gave the parties until July 1, 2020 to complete jurisdictional discovery,
° Ryan v. Gifford, 935 A.2d 258, 265 (Del. Ch. 2007); See Hart Holding Co. v. Drexel Burnham Lambert
Inc., 593 A.2d 535, 538-39 (Del. 1991); Amaysing Techs. Corp. v. CyberAir Communs., 2005 WL
578972, at *3 (Del. Ch. Mar. 3, 2005).
’ Tell v. Roman Catholic Bishops of Diocese, 2010 WL 1691199, at *3 (Del. Super., April 26, 2010).
See Degregorio v. Marriott Intl., Inc., 2018 WL 3096627, at *5 (Del. Super. June 20, 2018); AeroGlobal
871 A.2d at 437.
S Aeroglobal, 871 A.2d at 438; Hercules Inc. v. Leu Trust & Banking (Bahamas) Ltd., 611 A.2d 476,
480 (Del. 1992); Boone, 724 A.2d at 1155; Ali, 2014 WL 3706619, at *2; Outokumpu, 685 A.2d at 727.
° AeroGlobal, 871 A.2d at 438; Hercules, 611 A.2d at 480.
'° Merck & Co., Inc. v. Barr Laboratories, Inc., 179 F. Supp. 2d 368, 372 (D. Del. 2002).
Nd
7
the parties now agree that there has been sufficient jurisdictional discovery to allow me
to adjudicate the Motion. Before jurisdictional discovery, Plaintiffs need only make a
prima facie showing of jurisdiction in order to survive the Motion. After jurisdictional
discovery, as here, Plaintiffs “must allege specific facts supporting its position” and
demonstrate my personal jurisdiction over MC by a preponderance of the evidence. '*
PERSONAL JURISDICTION
There are two types of personal jurisdiction under Delaware law: specific
jurisdiction and general jurisdiction."
Specific jurisdiction refers to my power to
adjudicate claims arising from MC’s Delaware contacts, while general jurisdiction
consists of my authority to adjudicate claims unrelated to MC’s contacts with
Delaware. '*
This Court ruled on May 29, 2019, as to the scope of jurisdictional
discovery, that Plaintiffs could only pursue specific jurisdiction over MC based on its
contacts with Delaware.'> For MC’s acts to be a basis for jurisdiction, “under Delaware
law, it is not sufficient that an act ‘relate to’ the causes of action alleged; rather, it must
be alleged that the act ‘set in motion’ a ‘series of events’ that could give rise to the causes
"2 See Reid v, Siniscalchi, 2018 WL 620475, at *13 (Del. Ch. Jan. 30, 2018) (citing Hart Holding Co.
Inc. v. Drexel Burnham Lambert Inc., 593 A.2d at 539); Medi-Tec of Egypt Corp. v. Bausch & Lomb
Surgical, 2004 WL 415251, at *2 (Del. Ch. Mar. 4, 2004) (internal quotation marks and footnote
omitted).
'3 See Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2846, 2851 (2011); Outokumpu,
685 A.2d at 727; Boone, 724 A.2d at 1155.
14 Id.
'S PDI. 148, Stokes, J. May 29, 2019 Order at 8.
of action.”'® The question is “whether a cause of action arises from [MC’s] contacts
with” Delaware.!’
The Court allowed Plaintiffs to show two types of contacts: MC’s own contacts
with Delaware, or MC’s contacts with Delaware through MFODI as its agent.!®
MC’S Contacts in Delaware
Delaware Long-Arm Statute
The Delaware long-arm statute'? permits the exercise of personal jurisdiction over
MC as a nonresident Defendant when the claims arose from MC’s activities within
Delaware.’ Specifically, the long-arm statute would allow the exercise of personal
jurisdiction when Plaintiffs’ claims arise from the in-state acts of MC as a nonresident
Defendant who in person or through an agent:
(1) transacts any business or performs any character of work or service in
the State;
(2) contracts to supply services or things in the State;
(3) causes tortious injury in the State by an act or omission in the State;
(4) causes tortious injury in the State or outside of the State by an act or omission
outside the State if the person regularly does or solicits business, engages in any
other persistent course of conduct in the State or derives substantial revenue from
services, or things used or consumed in the State;
'6 Otto Candies, LLC v. KPMG, LLP, 2017 WL 3175619 (Del. Super. July 26, 2017) at *24 (footnotes
and citations omitted).
17 Td. at *23.
'8 TT. 148, Stokes, J. May 29, 2019 Order at 9.
'9 10 Del. C. § 3104(c).
0 See Kloth v. S. Christian Univ., 494 F. Supp. 2d 273, 278 (D. Del. 2007) aff'd, 320 F. App’x 113 (3d
Cir. 2008).
9
(5) has an interest in, uses or possesses real property in the State; or
(6) contracts to insure or act as surety for, or on, any person, property, risk, contract,
obligation or agreement located, executed or to be performed within the State at the
time the contract is made, unless the parties otherwise provide in writing.7!
Subsections (1), (2) and (3)? and (5)?3 and (6)*4 above have been deemed to be specific
jurisdiction provisions, leaving subsection (4) as a general jurisdiction provision. The
long-arm statute confers personal jurisdiction over MC as a nonresident Defendant if
Plaintiffs’ claims relate to the particular jurisdictional grounds alleged (i.e., the Plaintiffs’
claims arise out of activities undertaken by MC in Delaware).”>
Federal Due Process Clause
As discussed in a line of cases from our Supreme Court, the exercise of
personal jurisdiction over nonresident defendants has fundamental Due Process
limitations.*° “For purposes of the Due Process analysis, the relevant inquiry is whether
the nonresident defendant maintained sufficient ‘minimum contacts’ with Delaware such
that compelling [the nonresident defendant] to defend [itself] in the State would be
*1 10 Del. C. § 3104(c)(1)-(6).
*2 Boone v. Oy Partek Ab, 724 A.2d 1150, 1155 (Del. Super. 1997), aff'd, 707 A.2d 765 (Del. 1998)
(TABLE), cert. den., 118 S. Ct. 2345 (1998); Dassen v. Boland, 2011 WL 1225579 at *4 (Del. Super.
March 23, 2011); Tell v. Roman Catholic Bishops of Diocese of Allentown, 2010 WL 1691199 at *8.
3 Otto Candies, LLC v. KPMG, LLP, 2017 WL 3175619 at *24.
4 Stephens v. Bank of Delaware, 1993 WL 81282 at *3 fn 2 (Del. Super. 1993).
5 Outokumpu, 685 A.2d at 728.
*6 Salzberg v. Sciabacucchi, 2020 WL 1280785, at *15 (Del. Supr. March 18, 2020), citing McDermott
y. Lewis, 531 A.2d 206 (Del. 1987); Hercules, 611 A.2d at 480 (citing LaNuova D & B SpA v. Bowe
Co., Inc., 513 A.2d 764, 768 (Del. 1986)).
10
consistent with the traditional notions of fair play and substantial justice.”?’ “The Court
must determine whether exercising its jurisdiction is consistent with the Due Process
Clause of the United States Constitution.””* “If Plaintiff fails to satisfy this analysis, the
exercise of personal jurisdiction over Defendant is improper and the Complaint must be
dismissed.””? The Due Process Clause of the Fourteenth Amendment permits the exercise
of personal jurisdiction when Plaintiffs’ claims arise from MC’s purposeful contacts with
Delaware.*° For the exercise of personal jurisdiction to be proper under the Due Process
Clause, not only must MC have “engaged in sufficient ‘minimum contacts’ with Delaware
to require it to defend itself in the courts of this State consistent with the traditional notions
of fair play and justice,” but Plaintiffs’ claims must arise from one or more of the in-state
acts giving rise to those contacts.°!
Thus, the essential element of personal jurisdiction over MC under both the
Delaware long-arm statute and the federal Due Process Clause is a relationship between
Plaintiffs’ claims and MC’s purposeful contacts with Delaware.
Agency
7? Waters v. Deutz Corp., 479 A.2d 273, 276 (Del. 1984) (internal quotation and citation omitted).
8 Reid v. Siniscalchi, 2018 WL 620475 at *14; Eagle Force Holdings, LLC v. Campbell, 187 A.3d
1209, 1228 (Del. 2018).
29 Ohrstrom v. Harris Tr. Co., 1998 WL 8849, at *2 (Del. Ch. Jan. 8, 1998).
3° See Intellectual Ventures I, LLC v. Ricoh Company, Ltd., 67 F. Supp. 3d 656, 659 (D. Del. 2014)
(citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985)); Outokumpu, 685 A.2d at 731.
3! Aeroglobal, 871 A.2d at 440; Outokumpu, 685 A.2d at 728.
11
I may also exercise personal jurisdiction over MC as the corporate parent MFODI,
a Delaware corporation, based upon jurisdiction over that subsidiary on the theory that
MFODI was acting as agent for MC.*? To succeed under the agency theory, Plaintiffs
must show that “the parent corporation dominates the activities of the subsidiary....
[T]he control must be actual, participatory, and total.”°> To determine whether a
sufficient degree of control exists to establish an agency relationship, I consider several
factors: the extent of overlap of officers and directors, methods of financing, the division
of responsibility for day-to-day management, arrangements for payment of salaries and
expenses, stock ownership, and the process by which each corporation obtains its
business.** “No one factor is either necessary or determinative; rather it is the specific
combination of elements which is significant.”
In addition, under standard principles of agency law, MFODI’s actions may be
imputed to MC.*° To support personal jurisdiction, MFODI must have acted within
the scope of its agency and intended, at least in part, to serve MC’s interests,*’ and MC
32 Applied Biosystems, Inc. v. Cruachem, Ltd.,772 F. Supp. 1458, 1463 (D. Del. 1991); Sears, Roebuck
& Co. v. Sears ple, 744 F. Supp. 1297, 1304 (D. Del. 1990). This theory of personal jurisdiction is
distinct from “piercing the corporate veil” or the “alter ego” theory for purposes of liability.
HMG/Courtland Properties, Inc. v. Gray, 729 A.2d 300, 307 (Del. Ch. 1999); Sternberg v. O’Neil,
550 A.2d 1105, 1125-1126 n. 45 (Del. 1988).
33 Japan Petroleum Co. (Nigeria) v. Ashland Oil, Inc., 456 F. Supp. 831, 841 (D. Del. 1978).
34 Id.; Applied Biosystems, Inc., 772 F. Supp. at 1463.
33 EBG Holdings LLC v. Vredezicht's Gravenhage, 2008 WL 4057745, at *11 (Del. Ch.) (quotations
omitted).
36 Qutokumpu, 685 A.2d at 730.
37 Tell v. Roman Catholic Bishops of Diocese of Allentown, 2010 WL 1691199 at *10 (citing Restatement
(Second) of Agency § 228).
12
must have directed, authorized, or known of MFODI’s actions.*8
ANALYSIS
MC’s Contacts in Delaware
Delaware Long-Arm Statute
On May 12, 2000, Townsend, Inc. executed a Deed to the Facility to
MFODI, which continues as the record owner of the Facility.2? However, MC and MFI
both joined MFODI in executing a mortgage recorded with the Sussex County Recorder
of Deeds, which secures a $55,000,000 promissory note made jointly and severally by
MC, MFODI and MFI payable to the order of Farm Credit Services of Arkansas, a federal
association, with its principal place of business in Arkansas (“Lender”). The purpose of
this secured loan was to purchase, inter alia, the Facility.4° While it is true that under
§3104(c)(5) of the Delaware long arm statute, MC is not strictly the record owner of title
to the Facility under the Deed, MC is jointly and severally liable on the loan used to
purchase the Facility and the mortgage securing that loan. Thus, if any of the three
borrowers defaulted on the loan, including MC, the lender could sue MC alone on the
promissory note or foreclose on the Facility. Thus, I think it is fair to say that under
§3104(c)(5) MC “has an interest in ... real property in the State;” indeed, a very
38 Dassen v. Boland, 2011 WL 1225579, at *6 (Del. Super.); EBG Holdings, 2008 WL 4057745, at
*11.
3° See Deed (Ex. C to Defendants’ Response).
*° The loan proceeds were also used to purchase a chicken plant in Selbyville, Delaware, as well as the
nearby land for wastewater and sludge disposal. D.I. 82, Ex. D.
13
significant interest. MC considered the acquisition so important that it held a special
meeting of its board of directors to award Ronald Cameron, MC’s Chairman and CEO, a
special bonus of $460,000 for negotiating and completing the acquisition of the
Facility. I have little doubt that MC would step in to protect its interest by curing a
default on the promissory note or preventing foreclosure of the mortgage.
Moreover, under §3104(c)(6) of the long arm statute, I think it is fair to say that
MC “contracts to insure or act as surety for, or on, any person, property, risk, contract,
obligation or agreement located, executed or to be performed within the State at the time
the contract is made.” Although MC is not the express guarantor of a loan secured by a
mortgage recorded in Delaware, it is a co-borrower under the promissory note and a co-
mortgagor under the mortgage. As discussed above, upon a default by MFODI or MFI,
MC would essentially act as a surety for the defaulting obligors.
As Defendants correctly point out, however, neither the fact that MC is obligated
on a note and mortgage in Delaware, nor the fact that MC negotiated the loan and co-
signed the loan documents, is sufficient in sui to act as a basis for personal jurisdiction.
Although those actions may relate to Plaintiffs’ claims, there must be more. The actions
must be alleged to have set in motion a series of events that could give rise to Plaintiffs’
claims. However, this does not mean that, at this stage of the proceedings, Plaintiffs must
have proved the causal link between Defendants’ actions and Plaintiffs’ claims; rather, it
is enough if, after jurisdictional discovery, Plaintiffs have alleged specific facts supporting
14
Jurisdiction over MC by a preponderance of the evidence. I do not consider each contact
by MC in isolation. Rather, it is the totality of MC’s contacts taken together, and not one
or two, that may build a case for personal jurisdiction. While the mere creation of a
Delaware business or the acquisition of Delaware real property by a non-resident
defendant, standing alone, might be insufficient as a basis for personal jurisdiction,"!
taken together with other actions by Defendants it evidences the first step in a chain of
actions that led to Plaintiffs’ claims.
Plaintiffs point to other actions in Delaware which they assert set in motion or
contributed to the series of events that led to their claims, as follows.
In 2002, a member of the MFODI and MFI Executive Committee presented the
wastewater problems at the Facility to the MC Executive Committee, and the discussion
concluded with MC recognizing the need to “‘fix Delaware’ then increase volume.”’”
This action by MC relates directly to Plaintiffs’ claims.
In 2002, MC knew there were wastewater problems at the Facility. At the September
11, 2002 MC Executive Committee meeting, it was noted that a meeting was scheduled
with the EPA “to discuss nitrate levels.” An individual “assumed responsibility for
wastewater” and was hired by MC as the Director of Engineering and Environmental
“! Connecticut Gen. Life Ins. Co., 2011 WL 5222796, at *2; Baier v. Upper N.Y. Inv. Co. LLC, 2018
WL 1791996, at *8-9 (Del. Ch. Apr. 16, 2018); LVI Grp. Investments, LLC v. NCM Grp. Holdings,
LLC, 2017 WL 3912632, at *5 (Del. Ch. Sept. 7, 2017).
A17-19,
15
Services for MFODI and MFI.*? Providing or performing such services in Delaware is a
basis for personal jurisdiction under §3104(c)(1) and (2) of the Delaware long arm statute
and relates directly to Plaintiffs’ claims.
In 2009, MC bought a Millsboro, Delaware home for the President of MFODI
and MFI so that he could live in Delaware in his “full-time role as President of poultry
operations.”“4 MC decided to buy the house and paid for the house. I view this as an
interest in, use or possession of Delaware real property as a basis for personal jurisdiction
under §3104(c)(5) of the Delaware long arm statute.
MC has funded the Facility through capital investments and guaranties. The latter
is a basis for personal jurisdiction under §3104(c)(6) of the Delaware long arm statute.
On June 7, 2000, the MFODI and MFI Executive Committee presented to the MC
Executive Committee a $6.355M capital expenditure for the Facility,*° and on
September 26, 2001, the MFODI and MFI Executive Committee presented to the MC
Executive Committee $3.8M in “significant capital projects” in Delaware for the next
year to increase production.”
MC employees regularly fly from Arkansas to Georgetown, Delaware for meetings in
Millsboro on a myriad of business meetings on risk management, Facility inspections,
43 A20-23.
4411. 82, Ex. E.
45 D1. 82, Ex. F.
46 Al-3.
47 A8-10.
16
EPA meetings, and employee training.*® Since the Facility was purchased, MC has held
fourteen MC Board of Directors and MC Executive Committee meetings in Delaware.”
I see these actions by MC as the transaction of business in Delaware as a basis for personal
jurisdiction under §3104(c)(1) of the Delaware long arm statute.
To summarize, the Delaware long-arm statute confers personal jurisdiction over
MC as a nonresident Defendant where MC has taken certain actions enumerated in the
statute in Delaware either in person or through an agent (see discussion, below). In
addition, Plaintiffs’ claims must arise out of those actions taken by MC in Delaware; i.e.,
Plaintiffs’ claims must relate to the particular jurisdictional grounds alleged under the
statute. In my view, and as discussed above, MC’s actions in Delaware are numerous and
relate to several enumerated sections of the statute. Plaintiffs’ claims arise from one or
more of those actions. There is a nexus between Plaintiffs’ claims and MC’s actions in
Delaware. Plaintiffs have demonstrated by a preponderance of the evidence that MC’s
actions in Delaware set in motion a series of events that could give rise to Plaintiffs’
claims. I therefore have personal jurisdiction over MC under the Delaware long-arm
statute.
Federal Due Process Clause
As discussed above, for purposes of the Due Process Clause of the Fourteenth
“8 DLL. 82, Ex. H.
“° MC’s Amend. Ans. Pls. 1‘ Set of Interrog. on Jurisdiction, January 31, 2020 at p. 5.
17
Amendment to the Unites States Constitution, the relevant inquiry for me is whether MC
maintained sufficient “minimum contacts” with Delaware such that compelling MC to
defend itself in Delaware would be consistent with the traditional notions of fair play and
substantial justice. The Due Process Clause permits the exercise of personal jurisdiction
when Plaintiffs’ claims arise from MC’s “purposeful” contacts with Delaware. For the
exercise of personal jurisdiction to be proper under the Due Process Clause, not only must
MC have engaged in sufficient “minimum contacts” with Delaware, but also Plaintiffs’
claims must arise from one or more of the in-state actions giving rise to those contacts.
The essential element of personal jurisdiction over MC under the Due Process Clause is
a relationship between Plaintiffs’ claims and MC’s purposeful contacts with Delaware.
In my view, MC’s contacts with the State of Delaware exceeded minimum
contacts; they were numerous and purposeful. As discussed above, Plaintiffs’ claims
arise from one or more of the Delaware actions giving rise to those contacts. There is a
nexus between Plaintiffs’ claims and MC’s purposeful contacts with Delaware. I therefore
have personal jurisdiction over MC under the federal Due Process Clause.
18
Agency
Assuming arguendo that MC is not subject to personal jurisdiction in its own
right, it may nonetheless be subject to personal jurisdiction as principal if its wholly
owned subsidiary, MFODI, a Delaware corporation, has taken actions as its agent
giving rise to Plaintiffs’ claims. However, in no jurisdiction, particularly in
Delaware, does a court lightly disregard the separateness of corporate family entities
for jurisdictional (or other) purposes. MC purposefully established MFODI and MFI
in order to obtain the multiple benefits that derive from the corporate structure, and
corporate formalities should not be cavalierly disregarded.
As discussed above, there are two ways to establish personal jurisdiction under the
agency theory. First, Plaintiffs can show that MC dominates the activities of MFODI,
and that this control is actual, participatory, and total. To determine whether a sufficient
degree of control exists to establish an agency relationship, there are several factors to
consider, including: the extent of overlap of officers and directors; methods of financing;
the division of responsibility for day-to-day management; arrangements for payment of
salaries and expenses; stock ownership; and, the process by which each of MC and
MFODI obtains its business. No one factor is either necessary or determinative; rather it
is the specific combination of factors that is significant.
Second, Plaintiffs can show that MFODI acted within the scope of its agency and
intended, at least in part, to serve MC’s interests, and that MC directed, authorized, or
19
knew of MFODI’s actions.
Control
Plaintiffs point to the following evidence to demonstrate that MC “controls”
MFODI for purposes of personal jurisdiction.
Since 2000, the overlap of directors between MC and MFODI has been 100%,
and the overlap of officers between MC and MFODI has been 75%.°? MC’s
board of directors has designated Ronald Cameron, MC’s Chairman and President,
as the sole proxy of all subsidiaries.°' Since 2001, MC’s stockholders have reviewed and
approved the actions of Ronald Cameron, as sole proxy for the subsidiaries, including
MFODI, at every annual stockholder meeting of stockholders.”
MC makes capital investment decisions for MFODI, including the creation and
expansion of resource recovery facilities, the acquisition of additional property,
and the creation of wastewater treatment facilities.~
MC, not MFODI, manages processing volumes and production at the Facility.**
All profits from Delaware operations are remitted by MFODI to MC. MFODI
does not retain cash. Rather, cash is remitted to MC, and MC — not MFODI — decides
how capital is to be used to fund Delaware operations and capital improvements.°°
°° A236-255.
51 A172-179.
>? A200-219.
3 A194, A196, A6, All, A12, A53, A151-52, A156-57, A165.
4 A41, A197-198, A20-23, A27-29, A39-47, A88-95, A107-109, A121-126, A135-138, A164-167,
° A390, A392.
20
MC obtains loans, secured by the collective assets of all MC subsidiaries,
including MFODI, to finance MC’s own operations and those of its subsidiaries.*°
Numerous financing documents are signed in Arkansas by MC simultaneously on
behalf of MC, MFI and MFODI.°’ MC receives the loan proceeds and distributes them to
MFODI in MC’s discretion.°*
MC pays the salary of MFODI executives and management, but these amounts are
never repaid by MFODI to MC. Rather, the costs accrue year after year, increasing
MFODI’s liability to MC for “unpaid management fees” to now over $122 million.>’
In addition to paying the compensation of MFODI executives and management, the
MFODI officer responsible for wastewater operations in Delaware reports directly to the
MC board and not to the MFODI board.°°
Since 2000, MC has held quarterly Executive Committee meetings where MFODI’s
operations are managed.°' MFODI only holds perfunctory annual board meetings at
MC’s headquarters in Arkansas.° MFODI does not maintain annual board or quarterly
Executive Committee minutes in the ordinary course of its own business.
The MC Executive Committee, sometimes meeting in Delaware, controls and
6 A301-389,
57 A275-330.
8 A395.
? A392, A396.
60 A220-235, A4, A17, A20-22, A27, A134, A156, A165.
6! A194, A197, A20-21, A45, A-88, A156.
& A220-235.
21
funds the training and culture for MFODI through the MFODI Director of Human
Resources, who is compensated by MC, not MFODI.°
Direction
Plaintiffs point to the following evidence to demonstrate that MC “expressly
directed” MFODI for purposes of personal jurisdiction.
MC directed MFODI how to address and manage environmental issues of
wastewater and sludge.® This is reflected in MC Executive Committee meeting minutes.
In 2002, the MC Executive Committee reviewed the “Delaware groundwater situation”
and conferred about a meeting “with the EPA to discuss nitrate levels” scheduled for a
few weeks later. In 2003, the MC Executive Committee discussed “Delaware sludge
disposal needs” including completing permitting processes and acquiring more land.®° In
2011, the MC Executive Committee discussed the “completion of waste water upgrades
at Millsboro” planned for 2012.67 (A59). In September 2017, the MC Executive
Committee approved more capital projects including Millsboro wastewater, but they left
open the amount of the investment.*® In December 2017, the MC Executive
Committee discussed an “estimated upgrade cost” of $26.5 Million for Millsboro
69 439-43,
4 A4, A6, All, A22, A24, A38, A47-48, A53, A56, A59, A71-72, A76, A89, A100, A151-152,
A156-157, A161, A165.
6 A24.
8 A27.
67 A59.
8 A52,
22
wastewater. On June 6 and 7, 2018, the MC Executive Committee approved a
“Millsboro WW treatment plant” upgrade with a total cost of over $110 Million.”
MC directed MFODI to expand operations of the Facility, overtaxing an aged
Facility in desperate need of wastewater upgrades.’'! In 2002, the MC Executive
Committee discussed “expansion plans being developed in ... Millsboro as part of the four
year plan,” which “concluded with ‘fix Delaware’ then increase volume.”” In 2003, the
MC Executive Committee discussed alternative plans for growth that all involved adding
to the processing at the Millsboro facility.” In 2009 and 2010, the MC Executive
Committee discussed improving the costs and yields at the Millsboro facility. In 2013,
the MC Executive Committee directed MFODI to increase speed and expand production.”
In 2014, the MC Executive Committee combined plans for more growth with the purchase of
a new Delaware headquarters.” Finally, in September 2018, despite knowing the
Facility’s wastewater treatment plant required substantial upgrading, the MC
Executive Committee directed MFODI to “max out” capacity and sales.”’
2 AST,
70 A165.
7! 4194-199, A188, Al-2, Al2, A18, A20-21, A38, A41, A44-45, A47-48, A53, A55, A59, A79,
A88, A100, A109, A125-126, A151-152, A164, A166.
72 A18.
3 A27,
74 430, A47-48, A53.
7 A88, A197, A198, A109.
76 A199,
7 A170.
23
Defendants reject Plaintiffs’ evidence with respect to both control and direction,
and assert that MFODI is a separate and distinct entity from MC, that the overlapping
officers and directors wear different hats, that MFODI has complete autonomy over its
finances, that MFODI’s executives and management are independent in their decision
making, that all decisions relating to the day-to-day operation and management of the
Facility are made solely by MFODI, that MC does not control MFODI’s executives by
paying their compensation, that no inference should be drawn from MFODI’s perfunctory
board or Executive Committee meetings and minutes, and that MC does not control the
culture of MFODI. Defendants’ concluding argument is that MFODI is not a “shell
corporation.” But this misses the point — a subsidiary may not be a “shell” but can still
be controlled by the parent for purposes of establishing personal jurisdiction.
I am struck by the fact that the only piece of evidence relied on by Defendants in
their argument on personal jurisdiction, other than Affidavits of interested directors,
officers, and management executives, is the Deed to the Facility. There is not one single
document — board or Executive Committee meeting agenda, board or Executive
Committee meeting minutes, corporate resolution, internal letter, memo or email — that
supports Defendants’ contention that MFODI acts independently of MC. Further, there
is not one single document that refutes Plaintiffs’ contention that MC conducts business
in Delaware. One would think that, if such documents existed, Defendants would have
produced them to support their argument.
24
MC, MFODI and MFI constitute a family-run business run from Arkansas by
one person: Mr. Cameron, the Chairman and Chief Executive Officer of all three
companies. A corporate structure was put in place to preserve the corporate
separation of the parent and its subsidiaries for a variety of legal purposes. However,
at least under Delaware law applicable to personal jurisdiction over MC, the way in
which the business has been run undermines that corporate structure.
MC as the parent company dominates MFODI in at least four ways: (1) almost
complete overlap of MC and MFODI directors and officers; (2) MC finances the
operations of MFODI and MFODI sends back the profits to MC; (3) MC provides
direction and guidance as to how it wants MFODI managed; and, (4) MC sells chicken
and controls the processing at the MFODI Facility to fill its orders. My opinion is that
the facts of record establish that MC totally controlled its subsidiaries, including MFODI,
to the degree necessary to establish jurisdiction through an agent.
CONCLUSION
For the reasons set forth above in this Opinion, I deny Defendants’ Motion to
Dismiss for Lack of Personal Jurisdiction under Superior Court Civil Rule 12(b)(2).
IT IS SO ORDERED.
25
ce: Prothonotary
David. A. White, Esquire, Special Master
26