Stisser v. SP Bancorp, Inc.

Gary W. Stisser, et al. v. SP Bancorp, Inc., et al., No. 1790, Sept. Term, 2015
Opinion by Leahy, J.
HEADNOTES
Courts > Personal Jurisdiction > General Jurisdiction
A nonresident parent corporation cannot be said to be “at home” in Maryland, and therefore
subject to general jurisdiction in the State, based solely on its incorporation of a merger
subsidiary within Maryland.
Courts > Personal Jurisdiction > Specific Jurisdiction
We do not say that the act of forming a subsidiary in Maryland cannot subject a parent
company to personal jurisdiction in Maryland, but “[t]he quality and quantity of contacts
required to support the exercise of personal jurisdiction will depend upon the nature of the
action brought and the nexus of the contacts to the subject matter of the action.” Sleph v.
Radtke, 76 Md. App. 418, 428 (1988).
Courts > Personal Jurisdiction > Specific Jurisdiction
A nonresident parent corporation’s formation of a merger subsidiary in Maryland, does not
exhibit the parent’s intent to establish continuing obligations in Maryland where the merger
subsidiary was not intended to do business in Maryland and nothing about the formation
of the subsidiary was directed at residents of Maryland.
Courts > Personal Jurisdiction > Specific Jurisdiction
It is not the mere filing of an instrument that gives rise to specific jurisdiction, but the
execution of an instrument that is fraudulent or causes a tortious injury within Maryland—
particularly when the instrument is, at best, only tangentially related to the plaintiff’s claim.
Courts > Personal Jurisdiction > Specific Jurisdiction
To impute to a nonresident parent corporation the specific jurisdictional contacts of its
subsidiary (absent a showing of fraud or a clear disregard of the corporate fiction) would
run counter to the Supreme Court’s holdings in Daimler AG v. Bauman, 134 S. Ct. 746,
759-60 (2014); Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 929
(2011); and World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 295-99 (1980).
Courts > Personal Jurisdiction > Specific Jurisdiction > Corporate Directors
Absent a director-consent statute, it would violate the due process rights of nonresident
corporate directors to subject them to personal jurisdiction in Maryland based solely on
their directorship in a company that, although incorporated in Maryland, was headquartered
in out of state and conducted all of its business outside Maryland.
Courts > Personal Jurisdiction > Specific Jurisdiction > Corporate Directors
Nonresident corporate directors who never enter Maryland in connection with corporate
business do not purposefully avail themselves of the privileges and protections of Maryland
law by directing corporate activity outside of the state, even when the corporation files a
legal document in Maryland, if the cause of action does not arise out of that document’s
filing and there is no reason to impute to the individual directors the corporation’s act of
filing that document.
Circuit Court for Baltimore City
Case No. 24-C-14-003610
REPORTED
IN THE COURT OF SPECIAL APPEALS
OF MARYLAND
No. 1790
September Term, 2015
GARY W. STISSER, et al.
v.
SP BANCORP, INC., et al.
Woodward, C.J.,
Leahy,
Reed,
JJ.
Opinion by Leahy, J.
Filed: November 29, 2017
This appeal concerns Maryland’s power to exercise personal jurisdiction over a
company headquartered in Texas, as well as the out-of-state directors of another company
that was incorporated in Maryland and headquartered in Texas. All relevant activity
leading to the merger of companies challenged in the underlying shareholder action
occurred outside Maryland except one: the incorporation of a transitory merger subsidiary.
Gary W. Stisser and Fundamental Partners (“Appellants”) are not residents of
Maryland, but they owned shares of common stock in SP Bancorp, Inc. (“SP”), which was
a company headquartered in Texas and incorporated in Maryland. They filed a shareholder
class action in the Circuit Court for Baltimore City following the merger of SP into a newly
formed subsidiary of Green Bancorp, Inc. (“Green”)—a bank holding company
incorporated under Texas law with its principal place of business in Texas.
Appellants filed the lawsuit against SP and the individual members of SP’s Board
of Directors (“SP Directors”) (collectively, the “SP Defendants”), and against Green and
Green’s newly-formed Maryland subsidiary, Searchlight Merger Sub, Inc. (“Searchlight”)
(collectively, the “Green Defendants”).1 Appellants’ primary contention was that the SP
Directors breached their fiduciary duty, aided and abetted by Green, in contriving the
merger to advance their interests at the shareholders’ expense. The circuit court granted
motions to dismiss filed by the SP Defendants and the Green Defendants (together as
“Appellees”), finding that the court lacked personal jurisdiction over the SP Directors and
Green, and that, although the court had jurisdiction over SP and Searchlight, Appellants
1
The underlying action also included a claim against Commerce Street Capital,
LLC, which the circuit court dismissed with prejudice and which is not part of this appeal.
failed to state a claim against them.
Appellants noted an appeal to this Court presenting four questions, which we have
rephrased as follows:2
1. By forming Searchlight in Maryland for the purpose of consummating a
merger, did Green subject itself to personal jurisdiction in Maryland?
2. Are the SP Directors subject to personal jurisdiction in Maryland because
the Articles of Merger were filed in Maryland?
3. Were SP and Searchlight necessary parties under Maryland Rule 2-
211(a)?
4. Does the Complaint state a claim for relief against each of the Appellees?
We hold that Green was not subject to specific jurisdiction in Maryland because (1)
2
The questions as presented by Appellants were:
1. “Did the circuit court err in holding that Green’s formation of Searchlight,
a Maryland corporation, for the sole purpose of consummating a merger
with another Maryland corporation in Maryland, did not constitute a
‘transaction of business’ in Maryland for the purposes of Maryland’s
long-arm statute?”
2. “Did the circuit court err in holding that the non-resident directors of SP,
a Maryland corporation, did not transact business in Maryland for the
purpose of the Maryland long-arm statute when they caused the merger
to be consummated in Maryland with the filing of articles of merger in
Maryland?”
3. “Did the circuit court err in dismissing SP and Searchlight given that each
is a party to the merger agreement, the Complaint seeks rescission of the
merger, and Md. Rule 2-211(a) requires joinder of all necessary parties?”
4. “Does the Complaint state a claim for relief against each of the
Defendants such that the Court may not affirm the decision of the Circuit
Court on the alternate ground raised by the Defendants, but not decided
by the Circuit Court, that the Complaint fails to state a claim for relief?”
2
the quality and quantity of its contacts in Maryland in relation to the merger did not rise to
the level of “transacting any business” in Maryland within the meaning of Maryland’s long-
arm statute; and (2) Maryland’s exercise of jurisdiction would not comport with traditional
notions of due process under International Shoe Co. v. Washington, 326 U.S. 310 (1945),
given Green’s limited and attenuated contacts in Maryland. In accordance with the
Supreme Court’s recent decisions delimiting the authority of state courts to exercise
general jurisdiction over nonresident corporations and corporate directors, we also
conclude Green was not “at home” in Maryland for purposes of general personal
jurisdiction. Bristol Myers Squibb Co. v. Superior Ct. of Cal, S.F. Cty., 137 S. Ct. 1773(2017) [hereinafter “Bristol-Myers”]; BNSF Ry. Co. v. Tyrell, 137 S. Ct. 1549 (2017);
Daimler AG v. Bauman, 134 S. Ct. 746 (2014); Goodyear Dunlop Tires Operations, S.A.
v. Brown, 564 U.S. 915 (2011). Consistent with Daimler, we hold that a nonresident parent
corporation is not subject to general jurisdiction in Maryland based solely on its
incorporation of a subsidiary within Maryland. We also decline to impute SP’s contacts to
its directors, and hold that the SP Directors—all nonresidents who never entered Maryland
in connection with SP business—did not purposefully avail themselves of the privileges
and protections of Maryland law.
In light of these holdings, we do not reach Appellants’ third and fourth questions.
BACKGROUND
Back in October 2010, SP converted its business structure from a mutually-owned
thrift to a stock-based ownership bank holding company. This conversion triggered federal
3
regulations prohibiting the sale of SP for the next three years.3 SP was incorporated in
Maryland and served as the holding company and parent of SharePlus Bank, a Texas-
chartered state bank. SP’s principal place of business was in Texas, and the company did
not have any offices or employees in Maryland. Indeed, according to the record on appeal,
none of the SP Directors resided or were employed in Maryland.
By mid-2012, the SP Directors began entertaining the idea of a possible merger with
Green. On August 2, 2012, Mr. Jeffrey L. Weaver, SP’s President, and Mr. Paul M.
Zmigrosky, the Chairman of SP’s Board of Directors, met in Dallas, Texas with
representatives from Green, “during which the representatives of Green initiated a high
level discussion of a potential reverse merger with SP Bancorp following expiration of the
three year restriction.”
A. Preliminary Negotiations
In July of 2013, SP hired Commerce Street Capital (“CSC”), an investment banking
firm, to help find potential candidates to merge with SP. The next month, representatives
from SP and Green met again in Texas to discuss a potential merger. On September 14,
2013, CSC presented SP with an analysis of a merger of equals, using Green as the basis
3
12 C.F.R. § 563b.525 (2012) stated, in pertinent part:
(a) For three years after [a converting bank] convert[s], no person may,
directly or indirectly, acquire or offer to acquire the beneficial ownership of
more than ten percent of any class of [the converting bank’s] equity security
without [the Office of Thrift Supervision’s] prior written approval. . . .
(b) . . . [A]n offer is made when it is communicated. An offer does not
include non-binding expressions of understanding or letters of intent
regarding the terms of a potential acquisition.
4
for a merger partner. At this presentation, CSC advised the SP Directors on different
growth strategies, including the purchase of a smaller financial institution, a merger of
equals, or acquisition by a larger financial institution. Over the next few months, Mr.
Zmigrosky and Mr. Weaver held preliminary discussions with several candidates,
including a larger bank that the parties referred to as “Party A.”
On January 9, 2014, from its headquarters in Texas, Green submitted a letter of
intent to purchase SP for $43 million, representing approximately $25.91 per share. In the
letter, Green proposed retention agreements for certain members of SP’s senior
management and non-compete covenants for the remaining SP Directors. The SP Directors
met the next day at their headquarters in Texas to discuss Green’s offer as well as the
preliminary negotiations with Party A. At the meeting, the SP Directors decided to form a
mergers and acquisitions subcommittee (“Committee”), composed of Chairman
Zmigrosky and Directors Carl Forsythe, P. Stan Keith, and Jeff Williams. The Committee,
in part, served to shield Mr. Weaver from merger negotiations due to the concern that, as
President, Mr. Weaver was likely to be offered continued employment post-merger.
Throughout February, the Committee negotiated with and considered offers from
Party A and a third entity. The most valuable offer came from Party A for approximately
$23.78 per share comprised of cash and Party A stock. After learning of Party A’s offer,
Green revised its own offer, and increased the original offer price by approximately 21%.
Ultimately, the Committee determined that Green’s second offer was the best option, and
on February 27, 2014, the Committee recommended that the full board of SP Directors
accept Green’s offer. In response, the SP Directors instructed the Committee to terminate
5
negotiations with Party A and execute Green’s non-binding letter of intent.
B. SP and Green Negotiate the Merger
Green and SP, through outside counsel, continued negotiations and conducted due
diligence in Texas and in New York over the course of the next month. Then, on March
28, 2014, Mr. Weaver met with representatives from Green in Dallas to discuss the
possibility of his post-merger employment with Green. Three days later, CSC disclosed to
SP that it owned a 3% share in Green. The Committee met with its legal counsel to discuss
CSC’s potential conflict of interest and determined that CSC had no existing commercial
relationship with Green but, to avoid any potential impropriety, the Committee decided to
engage Mercer Capital Management, Inc. as an independent advisor to render a fairness
opinion on the merger.
On April 24, 2014, the SP Directors met with counsel, CSC, and Mercer to discuss
Green’s proposal. At this meeting, Mercer offered its preliminary conclusions from its
fairness inquiry, indicating a “strong comfort level” that the merger met or exceeded SP’s
fair market value. Then, on May 1 and 5, 2014, the SP Directors met in Texas with legal
counsel and the two financial advising firms to consider the merger. On May 1, the
Committee provided the SP Directors with their recommendation to approve the merger.
On May 5, Mercer issued its opinion that the merger was fair. Using multiple measures,
Mercer valued SP in a range between $16.20 and $32.05 per share. Green’s final proposed
offer would pay $29.55 per share, which put the purchase price in the 96th percentile of
Mercer’s valuation—a 24.26% increase from Green’s initial offer and approximately 40%
over the price at which SP’s shares closed the day prior. This 40% difference between
6
purchase price and market price of the shares represented the approximate cash payout for
shareholders.4 Mercer concluded that the merger with Green was “fair, from a financial
point of view, to [SP’s] shareholders.” At the meeting’s conclusion, on May 5, the SP
Directors voted unanimously to approve the merger agreement.
SP announced the merger agreement that same day and set August 15, 2014, as the
record date for its special meeting, at which point then-current owners of SP common stock
would be entitled to a vote at the special meeting. The special meeting, scheduled for
October 8, 2014, in Plano, Texas, required a quorum of eligible voters, in person or by
proxy, representing a majority of SP’s 1,602,313 outstanding shares of common stock. Of
those voting shareholders, the merger agreement required a bare majority for its approval.
C. Shareholders Institute a Class Action
Following SP’s announcement, Mr. Stisser and Fundamental Partners filed class
actions on June 10 and 12, 2014, respectively, on their own behalf and on behalf of those
similarly situated, against the Appellees and CSC in the Circuit Court for Baltimore City.5
The circuit court thereafter granted the Appellants joint motion to consolidate their claims
into a single action.
On August 25, 2014, SP filed its definitive proxy statement with the Securities
Exchange Commission (“SEC”) pursuant to Section 14(a) of the Securities Exchange Act
4
The SP Directors and executive officers owned 12.3% of the outstanding shares,
with Mr. Weaver, himself, owning 1.9% (29,726 shares).
5
The underlying complaint does not state where Mr. Stisser resides or where
Fundamental Partners is located. The docket in case No. 21-C-14-003610, filed by Mr.
Stisser, lists his mailing address at a location in “Boston, NY.”
7
of 1934, and sent copies of the statement from Texas to its shareholders, informing them it
would hold a special shareholder meeting in Texas. Just over two weeks later, on
September 10, the Appellants filed a motion for preliminary injunction in Baltimore, asking
the circuit court to enjoin the merger. Meanwhile, in Texas, Green offered Mr. Weaver a
position post-merger.
On October 3, 2014, SP filed a supplement to its original proxy, which it sent to the
SEC and all shareholders. The supplement disclosed, among other things, that in 2013, SP
“sold certain market rate loans made by SP [] to certain of its directors and officers to
Green.” It also explained that, as early as March 28, 2014, Green’s President and CEO,
Mr. Geoffrey D. Greenwade, expressed his intention to employ Mr. Weaver post-merger.
For this reason, the supplement explained, Mr. Weaver “was expressly excluded” from the
Committee. Additionally, it disclosed the basis and methodology of Mercer’s fairness
opinion, including the factors Mercer considered in predicting SP’s potential growth rate.
Additionally, it explained the basis of the approximately 21% increase in Green’s proposal,
that Party A had expressed difficulty competing with a cash offer, and that Party A’s second
offer was “substantially equivalent to [its] prior proposal.” Accordingly, the Committee
believed Party A’s offer would be “economically dilutive to [SP] stockholders and subject
to significant execution risk[,]” and the Committee broke off negotiations with Party A
because Green’s offer “presented more value to [SP] stockholders[.]” SP postponed its
special shareholder meeting from October 8 to October 15 “in order to provide stockholders
with additional time to consider the supplemental disclosures.”
Back in Maryland, three days after SP supplemented its proxy statement, the circuit
8
court held a conference call with the parties to discuss the status of the Appellants’ motion
for preliminary injunction. Following that call, Appellants sent the court a letter stating
that they believed their claims were still viable, but conceding that it would “be difficult,
if not impossible to demonstrate the requisite irreparable harm and balancing of the
equities[]” necessary to support a preliminary injunction. Consequently, Appellants asked
the court to remove the next day’s oral argument from the court calendar.
SP convened its special meeting in Texas on October 15, 2014, and 99.5% of the
SP shareholders who voted cast their votes in favor of the merger, with 75.8% of the total
outstanding shares voting in favor of the merger. SP, along with Searchlight, Green’s
newly formed subsidiary in Maryland, filed articles of merger with the Maryland State
Department of Assessments and Taxation on October 17, 2014 (“Articles of Merger”).6 As
explained in the proxy statement,
Searchlight Merger Sub Corp., a wholly owned subsidiary of Green, [was] a
newly formed Maryland corporation created solely for the purpose of
engaging in the transactions contemplated by the merger agreement and
ha[d] not carried on any activities other than in connection with the merger.
The address of the Merger Sub [wa]s 4000 Greenbriar St., Houston, Texas[.]
When SP and Searchlight effected the merger, Searchlight merged into and was subsumed
by SP.
D. The Underlying Complaint
On November 7, 2014, Appellants filed an amended consolidated complaint
(“Complaint”) in the Circuit Court for Baltimore City. The Complaint stated that the circuit
6
SP’s Articles of Incorporation did not provide dissenting shareholders with
appraisal rights.
9
court had jurisdiction over each SP Director for the following reasons:
(a) [each Director] created continuing obligations invoking the benefits and
protections of Maryland law between [himself/herself] and SP Bancorp,
which was incorporated in, and hence a resident of, this State at the time of
the actions challenged herein; and (b) [each Director’s] improper conduct
alleged in this Complaint occurred in substantial part, was directed at,
intended to have its primary effect in, and/or culminated in purposeful actions
in, this State.
The Complaint alleged that collectively, the SP Directors,
acting deliberately, dishonestly, breached their fiduciary duties to SP
Bancorp’s public shareholders by acting to cause or facilitate the [Merger]
Agreement[.] . . . The [Merger] Agreement was not in the best interests of SP
Bancorp’s shareholders, but was, and is, in the best interests of the Individual
Defendants. This is particularly true of Mr. Weaver, who received
significant personal profits as a result of the [Merger] Agreement and fully
expected to be employed by the surviving company following consummation
of the [Merger] Agreement.
The Complaint also asserted that to “exert influence” over the SP Directors, Green
purchased SP’s outstanding loans to Directors Williams, Forsythe, and Cozby during the
summer of 2013. Additionally, Appellants suggested that the SP Directors were self-
interested in the merger agreement because it entitled them to cash payments for unvested
stock options as well as a “change in control” severance payment.
Counts I - III alleged that the SP Directors breached their fiduciary duties; aided and
abetted Mr. Weaver’s breaches of loyalty, fair dealing, and due care;7 and breached their
duty to disclose all material facts in the proxy statement. In Count IV, Appellants alleged
7
Count II was against the SP Directors other than Mr. Weaver, alleging that, “[b]y
reason of the foregoing, the Individual Defendants, other than Mr. Weaver, have
deliberately, actively and dishonestly aided and abetted Defendant Weaver in his breaches
of his fiduciary duties.”
10
that Green aided and abetted the SP Directors’ alleged breaches of fiduciary duties by (1)
promising Mr. Weaver post-merger employment; (2) discussing the merger within the
three-year period following SP’s conversion from a mutually-owned thrift, during which
federal regulations prohibited SP from negotiating a merger; (3) purchasing loans owed by
the SP Directors to exert undue influence over them; (4) concealing from the SP Directors
that CSC was a shareholder in Green; (5) soliciting a No Solicitation Clause; (6)
negotiating the merger with an intent to exploit the SP Directors’ conflicts of interest; (7)
negotiating a termination fee should the merger break down; and (8) agreeing to indemnify
the SP Directors. Finally, in Count V, the Complaint asserted a claim against CSC for
aiding and abetting the SP Directors’ alleged breaches of fiduciary duties.
E. Motions to Dismiss
On December 19, 2014, the SP Defendants filed a motion to dismiss the Complaint
against them, arguing that the court lacked personal jurisdiction over the SP Directors and
that the Complaint failed to state a claim upon which relief could be granted against the SP
Defendants. The motion included an affidavit of Director Williams, in which he attested
that he was an SP Director prior to the merger and:
3. SP Bancorp, Inc. has at all times since its formation had its corporate
offices in Plano, Texas. SP Bancorp, Inc., has not had any branch or office
in Maryland, and has not conducted any corporate business in Maryland.
4. The banks previously owned and operated by SP Bancorp, Inc. were all
located in the greater Dallas, Texas area, Louisville, Kentucky and Irvine,
California.
5. The meetings of the SP Directors took place in Plano, Texas or sometimes
by phone from Plano, Texas.
11
6. The SP directors all live in Texas. Paul Zmigrosky also has a residence
in Michigan. Carl Forsythe also has a residence in Massachusetts.
7. On January 10, 2014, the SP Directors formed a Strategic Review
Committee . . . to consider potential strategic transactions involving SP
Bancorp. I was a member of that committee. The [] committee held its
meetings in Texas, or by phone from Texas.
The SP Defendants refuted Appellants’ claim that SP was sold under value by
pointing out that the merger was approved unanimously by all ten SP Directors, and that
each owned substantial stock in the company and, therefore, had a personal interest in
achieving the maximum sale price for the sale of SP. They also contended that other than
Mr. Weaver, none of the remaining nine Directors were alleged to have any potential role
in the surviving bank and, “like the other SP Bancorp shareholders, the SP Directors’
ownership interest was completely extinguished by the cash-out Merger.” Therefore, the
Appellants based their Complaint “on the implausible assertion that all nine of the
disinterested SP directors approved a merger that was contrary to each of their financial
interests solely because Mr. Weaver might obtain a job with the surviving bank.”
Regardless, they argued, the SP Directors were not subject to jurisdiction in Maryland
because SP is a “phantom” corporation, with none of its operations taking place in
Maryland—it’s headquartered in Texas and operates in Texas, Kentucky, and California.
The Green Defendants also filed a motion to dismiss the claims against Green for
lack of personal jurisdiction, and to dismiss the claims against both Green Defendants for
failure to state a claim. They asserted that Maryland lacked personal jurisdiction over
Green because all of the conduct on which Appellants based their claims occurred outside
of Maryland and Green had no other connection to the forum. Additionally, they argued
12
that Appellants failed to state a claim against Searchlight, because they “d[id] not make a
single allegation about any conduct, let alone wrongful conduct,” by Searchlight. Included
with their motion was an affidavit by Mr. Greenwade, who attested that Green was
incorporated and headquartered in Texas with “no offices or employees in Maryland.” He
further attested that Green does not solicit business in Maryland, “has no local address or
local telephone number[,]” and “no agent to accept service in Maryland.” In regard to the
merger, he specified that no merger negotiations occurred in Maryland; that Green sent the
letter of intent from Texas to the SP Directors in Texas; that SP responded by sending a
letter to Green in Texas; that the parties negotiated in Texas and through counsel in New
York; that Green conducted due diligence at SP’s offices in Texas; that Green offered
employment to Mr. Weaver by telephone in Texas; that Green signed the merger agreement
in Texas and that he (Greenwade) believed that SP did as well; that the SP shareholders
voted at a meeting in Texas; and that Green purchased the loans of several SP Directors
from its offices in Texas.
Appellants countered that the SP Directors were subject to jurisdiction in Maryland
because they “transacted business” in the forum by causing the merger between SP and
Searchlight to be consummated in Maryland with the filing of the Articles of Merger.
Appellants also contended that the SP Directors were subject to jurisdiction because the
alleged tortious conduct—breaching their fiduciary duties—was not complete until the
merger was consummated in Maryland. Exercising jurisdiction would satisfy due process,
Appellants argued, because the SP Directors chose to consummate the merger in Maryland
and chose Maryland law to govern the merger. Appellants insisted that “the formation of
13
a Maryland corporation to acquire another Maryland corporation and the consummation of
that acquisition in Maryland is precisely the sort of ‘significant activity’ in Maryland that
supports long arm jurisdiction.” Jurisdiction would comport with due process, according
to Appellants, because Green purposefully availed itself of Maryland law by choosing to
organize Searchlight under Maryland law rather than the law of another state.
The circuit court held a hearing on Appellees’ motions on March 27, 2015.
Subsequently, in a Memorandum Opinion and Order issued on April 8, 2015, the court
dismissed the actions against Green and the SP Directors for lack of personal jurisdiction
and/or failure to state a claim, and dismissed the actions against Searchlight and SP for
failure to state a claim. The court began with some general observations: neither SP nor
Green had offices in Maryland or solicited business within the state; none of the SP
Directors resided in Maryland; Green initiated merger negotiations in Texas; Green sent
the letter of intent from Texas to SP in Texas; SP responded by sending its own letter to
Green within Texas and negotiations continued in Texas and New York; and Green
conducted due diligence in Texas.
The court ruled that Green was not subject to general jurisdiction in Maryland based
on its incorporation of Searchlight in the state and that the Appellants otherwise “failed to
show a ‘substantial connection’ between Green and Maryland, as they have not
demonstrated that Green engaged in ‘significant activities’ or ‘created continuing
obligations’ in Maryland.” Appellants, according to the court, provided no substantive
support for their “principal-agent” theory between Green and Searchlight, only “vaguely
allud[ing]” that Green was Searchlight’s alter ego. Further, the filing of the Articles of
14
Merger, which incorporated Searchlight, was not a “purposeful tortious act” under
Maryland’s long-arm statute, and no injury was felt in Maryland because Searchlight’s
incorporation was not central to the case. The court noted that “Searchlight did not exist
until after the parties agreed to the Merger.” Green did not “invoke” the benefits of
Maryland law, the court continued; instead, it selected Delaware law to govern the merger
and purchased a business that did not operate within Maryland. The court concluded that
Maryland has neither general nor specific personal jurisdiction over Green, after observing
the following:
Plaintiffs have provided no support for their argument that forming a
subsidiary is a “significant activity” that supports long-arm jurisdiction.
Green has not engaged in “significant activities” or “created continuing
obligations” in Maryland. Green is incorporated in Texas and has its
headquarters in Houston. All of its branches are in Texas, except a branch
in Kentucky[,] which was established subsequent to the Merger. Green has
no local offices in Maryland nor does it conduct, transact, or solicit business
in Maryland. Furthermore, it has no employees, addresses, telephone
numbers, or agents for service of process in Maryland. No merger
negotiations occurred in Maryland, and all of the meetings between Green
and SP [] occurred in Texas, except for negotiations by counsel in New York.
Turning to the SP Directors, the court ruled that Appellants failed to prove that the
Directors purposefully availed themselves of the laws of Maryland. The court ruled that
mere acceptance of a directorship is not enough to subject the SP Directors to personal
jurisdiction, reasoning that, unlike states such as Delaware, Maryland has not adopted a
statute subjecting corporate directors to personal jurisdiction based on their acceptance of
a directorship. Further, the court held, SP’s conduct was not attributable to its Directors.
It was SP—not the SP Directors—that signed and filed the Articles of Merger in Maryland.
All of the SP Directors’ conduct—the directors’ meetings, shareholder meetings, and
15
merger negotiations—occurred in Texas and New York. Consequently, the court
concluded, the SP Directors lacked minimum contacts in Maryland.
The court then dismissed the claims against Searchlight and SP, ruling that
Appellants failed to state a claim against those defendants because the Complaint asserted
no allegations against either Searchlight or SP.
For about six months following Appellees’ dismissal from the action, Appellants’
litigation continued against CSC until Appellants agreed to dismiss with prejudice their
claim against CSC. Appellants then noted their timely appeal of the court’s decision to
dismiss Appellees from the case.
DISCUSSION
I.
Legal Framework
We examine whether the circuit court was legally correct in dismissing the
underlying action against Green and the SP Directors for lack of personal jurisdiction.
CSR, Ltd. v. Taylor, 411 Md. 457, 472 (2009) (citations omitted).
In deciding whether a Maryland court may exercise personal jurisdiction over an
out-of-state defendant, the court must examine whether jurisdiction is established under
Maryland’s long-arm statute and whether the exercise of jurisdiction comports with the
Due Process Clause of the Fourteenth Amendment. Id. at 464. The Supreme Court has
long held that the Fourteenth Amendment limits the power of state courts to exercise
personal jurisdiction over out-of-state defendants. Int’l Shoe, supra, 326 U.S. at 311, 321;
Pennoyer v. Neff, 95 U.S. 714, 733 (1878). In the seminal case of International Shoe, the
16
Supreme Court ruled that the Due Process Clause limits a state’s exercise of personal
jurisdiction over a foreign or out-of-state defendant to circumstances in which a defendant
has “certain minimum contacts with [the forum state] such that the maintenance of the suit
does not offend ‘traditional notions of fair play and substantial justice.’” 326 U.S. at 316(quoting Milliken v. Meyer, 311 U.S. 456, 463 (1940) (other citations omitted)).
Recently, in Bristol-Myers, supra, the Supreme Court emphasized that “[i]n
determining whether personal jurisdiction is present, a court must consider a variety of
interests[,]” including those of the forum state “‘and of the plaintiff in proceeding with the
cause in the plaintiff’s forum of choice.’ But the ‘primary concern’ is ‘the burden on the
defendant.’” 137 S. Ct. at 1780 (internal citations omitted). This burden includes not just
the practical and logistical aspects of litigation but “the more abstract matter of submitting
to the coercive power of a state that may have little legitimate interest in the claims in
question.” Id. In this way, “restrictions on personal jurisdiction ‘are more than a guarantee
of immunity from inconvenient or distant litigation. They are a consequence of territorial
limitations on the power of the respective states.’” Id. (quoting Hanson v. Denckla, 357
U.S. 235, 251 (1958)). Still, following International Shoe, “‘the relationship among the
defendant, the forum, and the litigation, rather than the mutually exclusive sovereignty of
the States . . . became the central concern of the inquiry into personal jurisdiction.’”
Daimler, supra, 134 S. Ct. at 754 (quoting Shaffer v. Heitner, 433 U.S. 186, 204 (1977)).
Thereafter, courts applying the concept of “fair play and substantial justice” developed two
categories of personal jurisdiction in cases involving out-of-state corporate defendants:
general (or all-purpose) jurisdiction and specific (or case-linked) jurisdiction. Id.; see also
17
Bristol-Myers, 137 S. Ct. at 1779-80; Goodyear, 564 U.S. at 919.
General jurisdiction over a company exists only in “instances in which the
continuous corporate operations within a state [are] so substantial and of such nature as to
justify suit against it on causes of action arising from dealings entirely distinct from those
activities.” Int’l Shoe, 326 U.S. at 318 (citations omitted). The Supreme Court has recently
explained general jurisdiction by way of analogy to an individual defendant’s domicile:
general jurisdiction exists when a corporation is “at home” in the forum state. Goodyear,
564 U.S. at 924. “The ‘paradigm’ forums in which a corporate defendant is ‘at home,’
. . . are the corporation’s place of incorporation and its principal place of business.” BNSF
Ry. Co., 137 S. Ct. at 1558 (quoting Daimler, 134 S. Ct. at 761 n.19). A court with general
jurisdiction over a company may hear any claim against that company, even if all of the
activity that gave rise to the claim occurred in a different state. Bristol-Myers, 137 S. Ct.
at 1780; Goodyear, 564 U.S. at 924.
“Specific jurisdiction is very different.” Bristol-Myers, 137 S. Ct. at 1780. Specific
jurisdiction exists only when the claim “arise[s] out of or relate[s] to the defendant’s
contacts with the forum[.]” Helicopteros Nacionales de Colom., S.A. v. Hall, 466 U.S.
408, 414 n.8 (1984). A defendant corporation is subject to specific personal jurisdiction
only if it can be demonstrated that (1) the defendant has “purposefully directed its activities
at residents of the forum”; (2) the plaintiff’s claims “arise out of or relate to” those activities
directed at the state; and (3) whether the exercise of personal jurisdiction would “comport
with fair play and substantial justice” so as to be constitutionally reasonable. Burger King
Corp. v. Rudzewicz, 471 U.S. 462, 472, 476 (1985) (internal quotation marks and citations
18
omitted). See also CSR, Ltd., 411 Md. at 477; Beyond Sys., Inc. v. Realtime Gaming
Holding Co., LLC, 388 Md. 1, 26 (2003). In determining what is reasonable under the Due
Process Clause and would not offend “traditional notions of fair play and substantial
justice,” Int’l Shoe, 326 U.S. at 316, we consider several factors. Those factors are “the
burden on the defendant, the forum state’s interest in adjudicating the dispute, the
plaintiff’s interest in obtaining convenient and effective relief, the interstate judicial
system’s interest in obtaining the most efficient resolution of controversies, and the shared
interest of the several States in furthering fundamental substantive social policies.” Burger
King, 471 U.S. at 477 (internal quotation marks omitted) (quoting World-Wide Volkswagen
Corp. v. Woodson, 444 U.S. 286, 292 (1980)); see also Asahi Metal Indus. Co., Ltd. v.
Superior Ct. of Cal., Solano Cty., 480 U.S. 102, 113 (1987).
We must emphasize that when based on specific jurisdiction, a court’s adjudicatory
authority is limited to those “‘issues deriving from, or connected with, the very controversy
that establishes jurisdiction.’” Goodyear, 564 U.S. at 919 (citation omitted). This
“category [of jurisdiction] is represented by International Shoe itself, a case in which the
in-state activities of the corporate defendant ‘had not only been continuous and systematic,
but also g[a]ve rise to the liabilities sued on.’” Daimler, 134 S. Ct. at 754 (quoting Int’l
Shoe, 326 U.S. at 317). “[T]he commission of certain ‘single or occasional acts’ in a State
may be sufficient to render a corporation answerable in that State with respect to those
acts” without rendering the corporation subject to jurisdiction more generally “with respect
to matters unrelated to the forum connections.” Goodyear, 564 U.S. at 923 (quoting Int’l
Shoe, 326 U.S. at 318). This means that continuous activity of only “some sorts” within a
19
state “‘is not enough to support the demand that the corporation be amenable to suits
unrelated to that activity.’” Bristol-Myers, 137 S. Ct. at 1781 (citation omitted).
In its more recent cases, the Supreme Court has cautioned against blending the
general jurisdiction analysis with that of specific jurisdiction, explaining that a
corporation’s ties that would “serv[e] to bolster the exercise of specific jurisdiction do not
warrant a determination that, based on those ties, the forum has general jurisdiction over a
defendant.” Goodyear, 564 U.S. at 927 (emphasis added) (noting that the North Carolina
Court of Appeals “elided the essential difference between case-specific and [all-purpose]
general jurisdiction”). Several months ago, the Supreme Court reiterated this point. In
Bristol-Myers, the Court held that the “settled principles” of specific jurisdiction “provide
no support” for a “sliding scale” approach that treats personal jurisdiction as if it exists on
a continuum, permitting states to exercise specific jurisdiction over corporations not at
home in the state based off of the volume of general forum contacts the corporation has
unrelated to the claim at issue.8 137 S. Ct. at 1780.
8
After the parties briefed and argued the instant appeal, the Supreme Court heard
Bristol-Myers and BNSF Ry. Co. Anticipating these decisions, we held this opinion back
in the event that either case were to alter the applicable jurisdictional analysis (and, if so,
to permit the parties to file additional briefing). We determine, however, that both opinions
reaffirm the Court’s contemporary ‘clarification’ of general and specific jurisdiction as
articulated in Goodyear and Daimler.
In BNSF Ry. Co., the Supreme Court considered the cases of two injured workers
who brought suit in Montana against the defendant railroad company that had thousands
of miles of track in Montana and employed thousands of workers in the state, but was
incorporated in Delaware and principally located in Texas. 137 S. Ct. at 1554. In holding
that the defendant railroad was not “at home” in Montana for purposes of general personal
jurisdiction, Justice Ginsburg reiterated: “The Fourteenth Amendment due process
constraint described in Daimler . . . applies to all state-court assertions of general
20
II.
Green
Appellants contend that Maryland has jurisdiction over Green based on both
modalities of personal jurisdiction. First, they maintain that Green is subject to general
jurisdiction in Maryland because of Searchlight’s presence in the state, given that
Searchlight is Green’s mere instrumentality. Second, they claim Maryland can exercise
specific jurisdiction over Green by way of its long-arm statute because the company
“transacted business” in the state when it formed Searchlight under Maryland law and
consummated the merger in Maryland.
jurisdiction over nonresident defendants; the constraint does not vary with the type of claim
asserted or business enterprise sued.” Id. at 1558-59.
Bristol-Myers involved a California State court mass action against Bristol-Myers,
a drug company and resident of Delaware and New York, for alleged injuries caused to the
plaintiffs by the drug Plavix. 137 S. Ct. at 1778. The plaintiffs were 86 California residents
and 592 residents from 33 other states. Id. Bristol-Myers challenged the California court’s
personal jurisdiction over it in regard to the claims asserted by the out-of-state plaintiffs.
Id. at 1777-78. The Court held that the Due Process Clause did not permit California’s
exercise of specific personal jurisdiction over the out-of-state consumers, and noted that
“[o]ur settled principles regarding specific jurisdiction control this case.” Id. at 1781, 1783;
but see id. at 1789 (Sotomayor, J., dissenting) (“The effect of the Court’s opinion today is
to eliminate nationwide mass actions in any State other than those in which a defendant is
‘essentially at home’” (internal quotations omitted)). We note that the Supreme Court’s
rejection of the California Supreme Court’s “sliding scale” approach in Bristol-Myers calls
into question the conception the Court of Appeals articulated in Camelback Ski Corp. v.
Behning—that where personal jurisdiction does not “fit neatly” into the categories of
specific and general jurisdiction “the proper approach is to identify the approximate
position of the case on the continuum that exists between the two extremes, and apply the
corresponding standard, recognizing that the quantum of required contacts increases as the
nexus between the contacts and the cause of action decreases.” 312 Md. 330, 339 (1988).
Given that in the instant case Appellants allege that Green had only one contact in
Maryland—the incorporation of Searchlight—we do not need to examine the viability of
the sliding scale approach in this appeal.
21
A. General Jurisdiction
Appellants do not contend that Green is “at home” in Maryland. Instead, they claim
that Green is subject to general jurisdiction in Maryland by virtue of its ownership of
Searchlight. According to Appellants, Green formed Searchlight as an instrumentality, or
alter ego, for the sole purpose of engaging in the merger, and exercised complete control
over Searchlight until the merger was completed, at which point Searchlight ceased to exist.
Appellants maintain that Maryland law permits courts to attribute a subsidiary’s actions to
its foreign parent corporation when the parent is “closely allied” with the subsidiary and
exercised “actual supervision and control” over its activities. Harris v. Arlen Props., Inc.,
256 Md. 185, 199-200 (1969); Thomas v. Hudson Sales Corp., 204 Md. 450, 454, 463, 466
(1954)).
Green responds, quoting from Daimler, 134 S. Ct. at 754, that Appellants must show
that Green’s contacts in Maryland were so “‘continuous and systematic’ as to render [it]
essentially at home” here.9 Green advances several reasons why Appellants cannot rely on
the presence of Green’s subsidiary in Maryland as a basis for general jurisdiction over
Green. First, Green contends that its formation of a subsidiary in Maryland is insufficient
9
Green claims that Appellants waived the argument that Green was subject to
general jurisdiction in Maryland. Our review of the record, however, establishes that the
argument was sufficiently preserved below. During argument before the circuit court,
Appellants pressed their allegation that there was no legal distinction between Green and
Searchlight, and the Green Defendants responded preemptively to that argument,
maintaining that Appellants failed to allege facts sufficient to support piercing the
corporate veil. Moreover, the circuit court specifically found that “[t]here is no general
jurisdiction, as the only possible connection with Maryland is with Green’s subsidiary,
Searchlight, which is incorporated in Maryland.”
22
under Daimler, 134 S. Ct. at 759-60, to subject it to general jurisdiction here. Second,
Green observes that Appellants failed to allege any facts that would have allowed the court
to pierce the corporate veil between Searchlight and Green. And, citing to Daimler again,
Green points out that even if we were to impute Searchlight’s contacts to Green, such
contacts alone are still insufficient to establish general jurisdiction over it.
Until recently, the Supreme Court addressed general jurisdiction infrequently. In
fact, from 1952 to 2011, the Court issued only two opinions in which general jurisdiction
was the central issue. See Helicopteros, 466 U.S. at 418 (holding that “mere purchases
[made in the forum state], even if occurring at regular intervals, are not enough to warrant
a State’s assertion of [general] jurisdiction over a nonresident corporation in a cause of
action not related to those purchase transactions” (footnote omitted)); Perkins v. Benguet
Consol. Mining Co., 342 U.S. 437, 447-48 (1952) (holding that a foreign corporation was
subject to general jurisdiction in Ohio, its principal, albeit a limited-wartime place of
business, and that it did not violate due process for Ohio to adjudicate a controversy that
did not arise in that forum).
In the intervening 60 years, the Court of Appeals of Maryland and the United States
Court of Appeals for the Fourth Circuit, consistent with International Shoe, Perkins, and
Helicopteros, examined Maryland’s ability to exercise general personal jurisdiction over
corporations based on the companies’ “continuous and systematic” contacts in the state.
See, e.g., Carefirst of Md., Inc. v. Carefirst Pregnancy Ctrs., Inc., 334 F.3d 390, 397 (4th
Cir. 2003) (citations omitted); CSR, Ltd., 411 Md. at 477-78 (further explaining that the
defendant must have also “purposefully availed itself of the privilege of conducting
23
activities in the State,” and then once minimum contacts are established within the forum
state, those contacts must be considered in light of other factors to determine whether the
assertion of personal jurisdiction comports with ‘fair play and substantial justice” (citations
omitted)). Then, in 2011, 2014, and again just this year, the Supreme Court revisited the
general jurisdiction doctrine. See BNSF Ry. Co., 137 S. Ct. at 1558-59; Daimler, 134 S.
Ct. at 760-62; Goodyear, 564 U.S. at 923-29. The Court in Daimler explained that the
proper “inquiry under Goodyear is not whether a foreign corporation’s in-forum contacts
can be said to be in some sense ‘continuous and systematic[;]’ it is whether that
corporation’s ‘affiliations with the State are so continuous and systematic as to render [it]
essentially at home in the forum State.’”10 Daimler, 134 S. Ct. at 761 (quoting Goodyear,
564 U.S. at 919).
The plaintiffs in Daimler were 22 residents of Argentina who brought suit in federal
district court in California against DaimlerChrysler Aktiengesellschaft (“Daimler”), a
German company. Id. at 750-51. Plaintiffs alleged that Daimler’s subsidiary, Mercedes-
Benz Argentina (“MB Argentina”), collaborated with State security forces during
Argentina’s 1976-1983 “Dirty War” to “kidnap, detain, torture, and kill certain MB
Argentina workers, among them, plaintiffs or persons closely related to plaintiffs.” Id. The
plaintiffs predicated jurisdiction on a theory of general jurisdiction based on the California
contacts of another Daimler subsidiary, Mercedes-Benz USA, LLC (“MBUSA”), which
10
We are not aware of, nor have the parties referred us to, any Maryland State
appellate decision that has addressed general jurisdiction since the Supreme Court’s
decisions in Goodyear and Daimler.
24
was incorporated in Delaware and principally located in New Jersey but did business in
California. Id. at 751.
The federal district court granted Daimler’s motion to dismiss, but the U.S. Court
of Appeals for the Ninth Circuit reversed on the theory that a state can exercise jurisdiction
over a parent corporation if its subsidiary performed “sufficiently important” services
within the forum state. Id. Additionally, the Ninth Circuit “looked to whether the parent
enjoys ‘the right to substantially control’ the subsidiary’s activities.” Id. at 760 n.15
(citation omitted). The Supreme Court, however, rejected both the “sufficiently important”
and “substantial control” test. Id. at 759-60 & n.15. The Court explained that “in no event”
could the Ninth Circuit’s analysis be sustained because it would “subject foreign
corporations to general jurisdiction whenever they have an in-state subsidiary or affiliate,
an outcome that would sweep beyond even the ‘sprawling view of general jurisdiction’ [the
Court] rejected in Goodyear.” Id. at 759-60 (quoting Goodyear, 564 U.S. at 929). The
Court disapproved of the exercise of general jurisdiction over a corporation “in every State
in which a corporation engages in a substantial, continuous, and systematic course of
business” reasoning that such a formulation was “unacceptably grasping.” Id. at 760-61
(citation and internal quotation marks omitted).
Daimler expressly rejected an approach that would subject a foreign corporation to
general jurisdiction based on its control of a subsidiary resident in the forum state.11 Id. at
11
Appellants rely on Harris v. Arlen Props., Inc. and Thomas v. Hudson Sales Corp.
for the proposition that Maryland may exercise general jurisdiction over a foreign
corporation for the actions of a “closely allied” subsidiary in Maryland over which the
foreign company had “actual supervision and control.” Appellants’ reliance on these cases
25
759-60; see also Vitro Elecs. v. Milgray Elecs., Inc., 255 Md. 498, 502 (1969) (observing
that “numerous cases [] hold that a foreign corporation is not construed as doing business
within a state merely because of its ownership of all of the shares of stock of another
corporation doing business in the state.” (citations omitted)). And in BNSF Ry. Co., the
Supreme Court underscored that “in-state business, as we clarified in Daimler and
Goodyear, does not suffice to permit the assertion of general jurisdiction over claims . . .
that are unrelated to any activity occurring” in the forum state. BNSF Ry. Co., 137 S. Ct.
at 1559.
Applying the foregoing legal precepts to the facts before us, we hold that Green
cannot be said to be “at home” in Maryland with no contact in Maryland save for the
fleeting existence of its merger subsidiary, Searchlight. See Daimler, 134 S. Ct. at 760
(citing Goodyear, 564 U.S. at 923). Consistent with Daimler, we hold that a nonresident
parent corporation is not subject to general jurisdiction in Maryland based solely on its
incorporation of a subsidiary within Maryland.
Appellants seek to distinguish Daimler by pointing to the fact that they allege
is misguided. The Harris case involved application of Maryland’s long-arm statute and
centered on the question of specific jurisdiction. See 256 Md. at 186. And Thomas is
distinguishable on the facts. Thomas was a garnishment action. 204 Md. at 453. It is true
that the Court of Appeals imputed to the parent company its subsidiary’s forum contacts,
reasoning that the corporate structure resembled a principal/agent relationship and the
subsidiary, through its Maryland representatives, acted as if it were the parent company’s
sale’s department. Id. at 463. But in Thomas, both the parent and subsidiary were
Michigan companies, and the Court considered, for the purposes of garnishment, whether
the extensive contacts by the subsidiary’s agents in Maryland—to include a district
manager and sales manager living in Maryland and soliciting business in Maryland—were
sufficient for Maryland to exercise jurisdiction over the parent. Id. at 456-57.
26
Searchlight is an alter ego, while the plaintiffs in Daimler made no similar allegation. On
this limited point, Appellants are correct—they have, in fact, alleged Searchlight is an alter
ego, but they have failed to establish either the validity or the relevance of that allegation.
They make no showing (or argument), for example, that Searchlight was fraudulently
incorporated12 or that Green and Searchlight failed to keep “separate records, separate and
distinct accounting procedures, separate corporate books, and held separate directors’
meetings.” See Vitro, 255 Md. at 504-06 (refusing to pierce the corporate veil and “adopt
a doctrine which . . . would have the effect of breaking down observed distinctions between
parent and subsidiary corporations, where fraud or deception is not present”). More
importantly, however, regardless of whether Searchlight was Green’s alter ego,
Appellants’ general jurisdiction argument would still fail under Daimler. Appellants urge
us to pierce the corporate veil of Searchlight to reach Green. Were we to do that, we would
be back to examining Green’s jurisdictional contacts in Maryland—of which its
incorporation of Searchlight is the only one. Even if Green created a Maryland corporation
as its alter ego, Green would remain subject to general jurisdiction only where it is “at
home,” which is normally its “place of incorporation and its principal place of business.”
BNSF Ry. Co., 137 S. Ct. at 1552 (citation omitted). Appellants’ concession that
“Searchlight ceased to exist after the merger” only underscores the point that the
12
“Maryland is more restrictive than other jurisdictions in allowing a plaintiff to
pierce a corporate veil.” Residential Warranty Corp. v. Bancroft Home Greenspring
Valley, Inc., 126 Md. App. 294, 309 (1999). In Maryland, we will disregard the corporate
fiction only in instances of fraud or when necessary to “enforce a paramount equity.” Bart
Arconti & Sons, Inc. v. Ames-Ennis, Inc., 275 Md. 295, 310 (1975) (citations omitted).
27
evanescent existence of Searchlight in Maryland could not have created even one
continuing contact or affiliation by Green in Maryland.
B. Specific Jurisdiction
Appellants argue that forming a Maryland corporation to acquire another Maryland
corporation and consummating that merger in Maryland is “significant activity” bringing
Green within reach of Maryland’s long-arm statute. To support the point that Green
invoked the protection of Maryland law by creating Searchlight, Appellants rely mainly on
Delaware cases, such as Sternberg v. O’Neil, 550 A.2d 1105, 1123 (Del. 1988), which they
contend are consistent with this Court’s decision in Sleph v. Radtke, 76 Md. App. 418, 429
(1988). Appellants claim that the fact that Green was a party to the merger agreement,
which called for the filing of the Articles of Merger in Maryland, is controlling and that it
is irrelevant that the merger was negotiated outside of Maryland and that Green did not
sign the Articles of Merger.
Appellants assert that Maryland has a substantial and legitimate interest in providing
a forum to resolve claims involving the corporate fiduciaries of Maryland corporations.
Although Appellants again cite Delaware case law to support this proposition, Parfi
Holding AB v. Mirror Image Internet, 794 A.2d 1211, 1230 (Del. Ch. 2001), they seek to
incorporate Maryland law by contending that this interest is consistent with the “internal
affairs” doctrine, which dictates that Maryland corporation law is the province of Maryland
courts. Storetrax.com, Inc. v. Gurland, 397 Md. 37, 52 (2007) (“‘[O]nly one State should
have the authority to regulate a corporation’s internal affairs—matters peculiar to the
relationships among or between the corporation and its current officers, directors, and
28
shareholders—because otherwise a corporation could be faced with conflicting demands.’”
(quoting Edgar v. MITE Corp., 457 U.S. 624, 645 (1982)).
Green insists that its single contact with Maryland does not subject it to specific
jurisdiction here. Relying in large part on Vitro, supra, Green asserts that Appellants do
not and cannot claim that the act of incorporating Searchlight or the filing of the Articles
of Merger were themselves wrongful or that these were the acts giving rise to their
substantive claims.
It is telling, Green suggests, that Appellants rely on unpublished Delaware decisions
rather than the rules the Supreme Court has enumerated. For example, Green contends that
applying the Burger King analysis, Appellants “have not, and cannot, show a ‘substantial
connection’ between Green and Maryland, because Green has not engaged in ‘significant
activities’ or ‘created continuing obligations’ in Maryland.’” Burger King, 471 U.S. at
475-76. Green contends, citing Aphena Pharma Solutions-Md. LLC v. BioZone Labs. Inc.,
912 F. Supp. 2d 309, 315 (D. Md. 2012), that “transacting business” in Maryland has been
applied narrowly to companies that engage in significant negotiations and/or intentional
advertising and selling in Maryland. Green points out that it is a Texas corporation with
its principal place of business in Texas and that SP’s only non-Texas branch that Green
acquired was in Kentucky. Therefore, Green’s transaction with SP did not “create
continuing obligations invoking the benefits and protections of Maryland law,” because all
of SP’s offices and branches were in Texas and Kentucky—despite its past incorporation
in Maryland.
Green maintains that all the misconduct alleged in the Complaint occurred in Texas:
29
(1) Green representatives met with SP in Texas; (2) Green purchased the loans from SP in
Texas; (3) Green’s alleged discussions concerning Mr. Weaver’s future employment
occurred wholly within Texas, where Mr. Weaver is employed; and (4) the parties executed
the merger agreement in Texas.13
Maryland has construed its long-arm statute to authorize the exercise of personal
jurisdiction “to the full extent allowable under the Due Process Clause.” CSR, Ltd., 411
Md. at 473 (citation omitted). The statute is found in the Courts and Judicial Proceedings
Article (“CJP”) of the Maryland Code (1973, 2013 Repl. Vol.), and provides:
§ 6-103. Cause of action arising from conduct in State or tortious injury
outside State.
(a) Condition. – If jurisdiction over a person is based solely upon this
section, he may be sued only on a cause of action arising from any act
enumerated in this section.
(b) In general. – A court may exercise personal jurisdiction over a person,
who directly or by an agent:
(1) Transacts any business or performs any character of work or
service in the State;
(2) Contracts to supply goods, food, services, or manufactured
products 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 he regularly does or solicits business, engages
in any other persistent course of conduct in the State or derives substantial
revenue from goods, food, services, or manufactured products used or
consumed in the State;
13
Green states in its brief that, although the parties agreed that Delaware law would
govern the merger agreement and any disputes thereunder, Maryland law still governs to
the extent that it is “mandatorily applicable.” We agree with Green. The question of
whether Maryland may exercise jurisdiction over a nonresident corporation is not a
question of Delaware substantive law, but a dual consideration of this state’s long-arm
statute and the Fourteenth Amendment’s Due Process Clause. See Dynacorp Ltd. v.
Aramtel Ltd., 208 Md. App. 403, 478 (2012).
30
(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.14
Pertinent to this appeal, Appellants allege only that § 6-103(b)(1) applies, conferring
personal jurisdiction over an out-of-state defendant when the plaintiff(s) can prove that the
defendant “[t]ransacts any business” in the state.15 We begin, then, by analyzing whether
Green’s contacts amount to “transact[ing] any business” in Maryland within the meaning
of our long-arm statute. In so doing, we apply the three-pronged inquiry, supra, for
determining whether the exercise of specific personal jurisdiction over the defendants in
this case would comport with due process. See Beyond Sys., 388 Md. at 22 (“Because we
have consistently held that the reach of the long arm statute is coextensive with the limits
of personal jurisdiction delineated under the due process clause . . ., our statutory inquiry
merges with our constitutional examination.” (citing Mohamad v. Michael, 279 Md. 653,
657 (1977)).
1. “Purposeful Availment” and “Arising Out of”
The Supreme Court has instructed that when a state seeks to exercise specific
jurisdiction over an out-of-state defendant who has not consented to suit there, the
defendant must have “purposefully directed” activities “at residents of the forum,” and the
14
Subsection (C) of CJP § 6-103 applies to computer information and computer
programs.
15
In the proceedings below, Appellants also alleged that jurisdiction was proper
under the long-arm statute based on tortious injury, but they have abandoned that argument
on appeal.
31
litigation at issue must “result[] from alleged injuries that ‘arise out of or relate to’ those
activities.” Burger King, 471 U.S. at 472 (citations omitted). The “‘purposeful availment’
requirement ensures that a defendant will not be haled into a jurisdiction solely as a result
of ‘random,’ ‘fortuitous,’ or ‘attenuated’ contacts, or the ‘unilateral activity of another
party or a third person.’” Id. 471 U.S. at 475-76 (citations omitted). Therefore, when a
defendant has “‘deliberately’ engaged in significant activities within a State” or created
“continuing obligations” there, the defendant has assumed the privilege of conducting
business in the forum. Id. (citations omitted). And because these activities enjoy the
benefits and protections of the state’s laws, “it is presumptively not unreasonable to require
[the defendant] to submit to the burdens of litigation in that forum as well.” Id. (citations
omitted).
In order to illustrate what is meant by the requirement that the litigation must result
from alleged injuries that “arise out of or relate to” activities “purposefully directed” at the
forum state, the Burger King Court provided the following examples:
Thus “[t]he forum State does not exceed its powers under the Due Process
Clause if it asserts personal jurisdiction over a corporation that delivers its
products into the stream of commerce with the expectation that they will be
purchased by consumers in the forum State” and those products subsequently
injure forum consumers. Similarly, a publisher who distributes magazines in
a distant State may fairly be held accountable in that forum for damages
resulting there from an allegedly defamatory story. And with respect to
interstate contractual obligations, we have emphasized that parties who
“reach out beyond one state and create continuing relationships and
obligations with citizens of another state” are subject to regulation and
sanctions in the other State for the consequences of their activities.
Id. at 472-73 (internal citations omitted). See also Waldon v. Fiore, 134 S. Ct. 1115, 1119-
120, 1124 (2014) (When asked to decide whether a court in Nevada could exercise personal
32
jurisdiction over a Georgia police officer on the basis that he knew that confiscating funds
found on petitioners while travelling through Georgia would cause harm to the petitioners
in Nevada where they lived, the Supreme Court held that the Nevada court lacked personal
jurisdiction because no part of the officer’s conduct occurred in Nevada and a plaintiff
cannot be the only link between the defendant and the forum.)
Under Maryland’s long-arm statute, “[a] nonresident who has never entered the
state, either personally or through an agent, may be deemed to have ‘transacted business’
in the State within the meaning of [CJP § 6-103(b)(1)] as long as his or her actions
culminate in ‘purposeful activity’ within the State.” Sleph, 76 Md. App. at 427 (citations
omitted). “The quality and quantity of contacts required to support the exercise of personal
jurisdiction will depend upon the nature of the action brought and the nexus of the contacts
to the subject matter of the action.” Id. at 428 (citing Camelback Ski Corp. v. Behning, 312
Md. 330, 333 (1988) [hereinafter “Camelback II”]). Thus, a single tortious contact with
the state may create specific jurisdiction, but several contacts related to the cause of action
only tangentially may not. Id.According to the Court of Appeals, to satisfy the “purposeful availment”
requirement, there must be
so substantial a connection between [the defendant] and the forum state that
having to defend a lawsuit there would be foreseeable. In Maryland, a
substantial connection will be established if [the defendant] either engaged
in significant activities in the State, or created continuing obligations with
the State’s residents, thus taking advantage of the benefits and protections of
Maryland law.
CSR, Ltd., 411 Md. at 464-65. In CSR, Ltd., the defendant-petitioner, Colonial Sugar
33
Refining Co., Ltd. (“CSR”), was an Australian company that acted as the exclusive U.S.
distributor for its wholly-owned subsidiary, which was also an Australian company. Id. at
465. CSR sold asbestos to customers outside of Maryland, but some of its product passed
through the Port of Baltimore. Id. The plaintiff-respondents were the personal
representatives of two men who worked as stevedores at the Port and eventually died from
mesothelioma, which they contended was caused by asbestos exposure at the Port. Id. at
464. CSR challenged whether its conduct fell within the scope of Maryland’s long-arm
statute, arguing that it never purposefully directed its goods toward the state; it “never
conducted or solicited any business in Maryland;” it was “never incorporated or licensed
to do business in Maryland;” it “never appointed an agent for the purpose of accepting
service of process in Maryland;” and it “never maintained an office, telephone listing,
mailing address, or bank account in Maryland, nor did it own, lease, or possess an interest
in property in the State.” Id. at 466-67. Plaintiffs, on the other hand, insisted that CSR
transacted business in Maryland by utilizing the Port of Baltimore, and specified that at
least three CSR shipments that went through the Port were “Cost, Insurance, Freight”
arrangements, meaning that CSR retained responsibility for the cargo until it was unloaded
in Baltimore. Id. at 468-69 & n.5 Plaintiffs also noted that CSR advertised its product
regularly in a trade magazine that was distributed in Maryland. Id. at 469. The circuit
court found these contacts insufficient and dismissed the claim against CSR for want of
personal jurisdiction. Id. at 469-70.
The Court of Appeals granted CSR’s petition for certiorari and reversed this Court’s
interim decision in which we concluded that the shipment of asbestos to Maryland
34
established minimum contacts. Id. at 470-71. The Court of Appeals held that the exercise
of jurisdiction over CSR would have offended the Due Process Clause, reasoning that
CSR’s shipments through Baltimore “d[id] not satisfy the ‘purposeful availment’
requirement because CSR neither engaged in significant activities in Maryland nor created
continuing obligations with the residents of the State.” Id. at 476, 486. The Court observed
that CSR had no customers in Maryland and no professional relationship with the Maryland
stevedores; that Maryland’s port was merely a conduit, not where CSR directed its sales;
that the sales were directed through Maryland at the direction of CSR’s customers, not
CSR; and that CSR likely would not need to use Maryland courts to sue buyers because
buyers pay CSR before it ships its goods, making the port-state an unlikely venue for CSR
to bring suit. Id. at 487-91 & n.12. In regard to the magazine advertisements, the Court
concluded that CSR did not target its advertising specifically to Maryland customers, and
it was insufficient for purposes of conferring jurisdiction that it may have been foreseeable
that the advertisements would reach Maryland. Id. at 492-93 (citation omitted).
Turning our focus now to cases that involved factual circumstances more similar to
those presented in this appeal, we start with Vitro, supra, in which the Court of Appeals
considered whether Maryland’s long-arm statute reached the parent of a Maryland
corporation based on the subsidiary’s presence in the state and the parent’s execution of a
single document. 255 Md. at 499-501, 506-07. Vitro, a Delaware corporation qualified to
do business in Maryland, purchased certain electronic parts from Milgray/Washington,
Inc., a Maryland corporation. Id. at 499-500. Vitro’s contract had conditioned the sale on
the parts’ compliance with certain government specifications. Id. In completing the sale,
35
Milgray/Washington, Inc. obtained the necessary parts from its parent company—Milgray
Electronic Inc., a New York corporation. Id. at 500. The parent company sent the parts to
its subsidiary, which in turn sent them to Vitro. Id. Vitro became concerned that the parts
were non-compliant and requested a certificate of compliance to which it was entitled under
its contract with the subsidiary. Id. The parent company drafted a certification in response,
sent it to the subsidiary, which in turn sent it to Vitro. Id. The government rejected the
parts as non-compliant. Id.Vitro filed suit in Maryland against both the parent and its subsidiary, and the parent
moved the court to dismiss the claim against it for lack of personal jurisdiction. Id. The
circuit court held a hearing to consider the motion and found the following facts: the parent
owned 100% of the subsidiary’s common stock; the two corporations had the same officers;
the same accountant handled the books for both corporations out of the same office; the
parent listed a Maryland address in the local telephone book; and the subsidiary stocked a
supply of the parent’s products in its inventory; but, the two corporations maintained
separate books, records, minutes, directors’ meetings, and accounting procedures. Id.Additionally, the court found that Vitro and the subsidiary executed their contract in New
York, but it was unclear where the parties executed the compliance certificate or how it
was delivered to the subsidiary. Id. at 500-01. Based on these findings, the circuit court
dismissed the claim against the parent corporation for want of personal jurisdiction, and
Vitro appealed. Id.On appeal, the Court of Appeals reasoned that the weakness in Vitro’s case was that
the parent corporation did not engage in any activities that could add up to persistent
36
contacts with Maryland, such as “direct solicitation by sales representatives in the state, the
sending of price lists to customers through the mails, general mail advertising combined
with advertising in periodicals circulated in the state, participation with the locally
franchised dealer in promoting sales, and the presence in the state of service and
maintenance representatives.” Id. at 505-06 (citation and quotation marks omitted). In
addition to the parent corporation’s lack of direct contacts with Maryland, the Court
observed that the parent and subsidiary “took pains to maintain separate records, separate
and distinct accounting procedures, separate corporate books, and held separate directors’
meetings” and concluded that it could not, “out of hand, brush aside these observed
distinctions.” Id. at 506.
Ultimately, however, the Court remanded the case. Id. at 507-08. In considering
whether the parent company was subject to specific personal jurisdiction in Maryland by
issuing the certificate, the Court reasoned that it could have been, “if the certificate had
been fraudulently or negligently executed, causing tortious injury to the [plaintiff].” Id. at
506 (emphasis added; footnote omitted). Thus, the Court determined that it was not enough
that the parent company executed a letter on behalf of its Maryland subsidiary—it must
have done so tortiously, and that tort must have occurred in the state in order for Maryland
to exercise personal jurisdiction based on that contact. Id. at 507. But because the record
on appeal was insufficient to determine how or where the certificate was executed, the
Court left that issue to be determined on remand. Id.In another case, this Court held that entering into a single, one-time contract for the
purchase of two packaging machines amounted to purposeful availment. Jason Pharm.,
37
Inc. v. Jianas Bros. Packaging Co., Inc., 94 Md. App. at 428, 435 (1993). The defendant,
Jianas Brothers Packaging Co. (“Jianas”), a Missouri company, initiated contact with a
corporation based in Maryland, Jason Pharmaceuticals, Inc. (“Jason”), for the purchase of
the machines. Id. at 428. Over several months, Jianas negotiated a contract by making
about 40 telephone calls to Jason’s business in Maryland. Id. at 429. Once the parties
agreed to terms, Jianas counter-signed the proposal for the machines at a sale price of
$700,000, and sent the contract along with a $35,000 down payment to Jason in Maryland,
which Jason then deposited the payment in a Maryland bank. Id. Prior to the sale, Jason
stored the machines in Ohio until they were sent to Kentucky so that a third party could
test them. Id. The third party refused to sign the warranty as it appeared in the proposal
but signed a modification of the warranty. Id. When Jianas failed to complete the sale,
Jason brought suit in Maryland. Id. at 428-29.
At the outset, Judge Rosalyn Bell, writing for this Court, determined that the case
turned on the question of specific (rather than general) jurisdiction because it involved a
contractual dispute, and applied Maryland’s long-arm statute to the facts presented. Id. at
430. This Court held that a person negotiating with a company located in Maryland and
then sending a down payment to Maryland constituted “transacting business” within the
meaning of the long-arm statute, CJP 6-103(b)(1). Id. at 433.
We later distinguished Jason in Zavian v. Foudy, 130 Md. App. 689, 701-02
(2000). In Zavian, a Maryland attorney brought suit against three nonresident athletes on
the United States Women’s National Soccer Team after the women refused to pay the
attorney’s fees allegedly due under a management contract that the attorney had terminated.
38
Id. at 691-92. The parties’ relationships began when each defendant contacted the attorney
in Maryland after finding her name on a list of attorneys willing to provide discounted or
pro bono legal services to female athletes. Id. & n.1. The attorney negotiated the contracts
by phone and mail from her Maryland office, where she also drafted the contracts and sent
them along with payment invoices to the athletes. Id. at 691-92. Then, pursuant to the
contracts, the attorney engaged in substantive negotiations from her Maryland office with
a number of apparel companies on the athletes’ behalf. Id. at 692.
We affirmed the circuit court’s grant of the athletes’ motion to dismiss for lack of
personal jurisdiction. Id. We reasoned that the actions and negotiations the attorney made
in her capacity as the athletes’ manager could not be imputed to the athletes for the purpose
of establishing minimum contacts by the athletes. Id. at 699. We concluded that “appellees
did not purposely seek a Maryland agent, endorsements of Maryland companies, or
advertisements directed to Maryland soccer fans.” Id. at 702. The athletes contacted the
attorney because her name was on the list of attorneys willing to represent athletes, not
because she was a Maryland lawyer. Id. Distinguishing the facts in Zavian from those in
Jason, we noted that unlike the “‘extensive negotiations’” in Jason, the athletes engaged
in little to no negotiations over the terms of the management contracts, they never visited
Maryland, and the claim for unpaid fees suggests they never sent a check to Maryland. Id.
at 701-02. Therefore, we concluded, the athletes’ contacts did not amount to “transacting
business” in Maryland pursuant to the state’s long-arm statute. Id. Although the
contracting parties in Zavian intended to create an ongoing relationship, as compared to
the single purchase contract in Jason, we focused on the quality of the athletes’ purposeful
39
contacts with the forum to determine whether they were such that they intended to avail
themselves of the benefits and protections of Maryland law. Id.
The Fourth Circuit considered the minimum contacts necessary to exercise
jurisdiction over a foreign corporation that contracted with a Maryland corporation in
Ellicott Machine Corp., Inc. v. John Holland Party Ltd., 995 F.2d 474 (4th Cir. 1993). In
that case, Ellicott, a Maryland corporation, brought a declaratory judgment action against
Holland, an Australian corporation, arising out of a subcontract between the two parties.
Id. at 475-76. The two parties began negotiations in Australia at the behest of the general
contractor, which owned a 10% interest in Holland, but Ellicott rejected Holland’s bid. Id.
at 476. Holland then contacted Ellicott in Maryland and faxed to Maryland a revised bid
on the subcontract. Id. The parties revised and exchanged copies of a draft purchase
agreement between Australia and Maryland over a month and a half, negotiating along the
way via letter, fax, and telephone. Id. Ellicott eventually accepted Holland’s terms and
Holland began performing the contract in Australia until unforeseen costs caused it to
demand more money than the subcontract called for, at which point Ellicott filed for a
declaratory judgment in Maryland. Id. The federal district court granted Holland’s motion
to dismiss for lack of personal jurisdiction because of its insufficient forum contacts, and
Ellicott appealed. Id. at 476-77.
The Fourth Circuit affirmed on appeal, holding that Maryland’s exercise of
jurisdiction over Holland would violate the Due Process Clause.16 Id. at 479-80. Although
16
The Fourth Circuit explained that it need not analyze whether Holland “transacted
business” within the meaning of Maryland’s long-arm statute separately from the minimum
40
Holland initiated the business relationship and pursued Ellicott to Maryland, the Court
determined that these contacts were fairly insubstantial and mitigated by the fact that
Holland had no other contacts with Maryland, the contract did not have a “‘substantial
connection’” to Maryland, because it was performed in Australia, and the parties did not
have a long-standing relationship. Id. at 478-79 (quoting Burger King, 471 U.S. at 481).
Appellants in this appeal rely principally on Harris and Sleph. In Harris, a
Maryland real estate broker, Harris, allegedly entered into a “‘co-op’ sales arrangement
with another real estate broker” for the sale of a specific property. 256 Md. at 187. After
that property sold without his knowledge, Harris brought an action for lost commissions
against the broker, the sellers, and the purchasers, many of which were nonresidents,
including Arlen, a developer incorporated in New York. Id. at 186, 190. The circuit court
dismissed the action against several of those defendants, including Arlen, for lack of
personal jurisdiction, and Harris appealed. Id. at 191-94. The case made its way to the
Court of Appeals, where, in considering whether Arlen’s forum contacts brought it within
the scope of Maryland’s long-arm statute, the Court found it “of no material consequence”
that Arlen had negotiated and executed the sales contract in the District of Columbia. Id.
at 198. The Court focused instead on other acts that Arlen and its agents purposefully
conducted in Maryland, including: its agents’ persistent site visits, Arlen’s engineers filing
a building permit with Prince George’s County, negotiations with the telephone company
contacts inquiry under the Due Process Clause, “[b]ecause the Maryland legislature
designed its long-arm statute to extend personal jurisdiction to the limits allowed by federal
due process, our normal two-step inquiry merges into one.” Ellicott, 995 F.2d at 477 (citing
Mohamed, 279 Md. at 657 (1977).
41
for an easement to run cables, and its engineers arranging for the installation of storm
drains. Id. at 196-98. The Court imputed to Arlen these forum contacts by its agents and
held that they amounted to “transacting business” as the term is used under Maryland’s
long-arm statute. Id.
The defendants in Sleph were a husband and wife, both residents of Virginia, who
negotiated and purchased a 79% interest in five commercial properties in Maryland, and
thereafter visited those properties on numerous occasions to check on their investment. 76
Md. App. at 421-22. This Court held that “[t]heir activities within this State, before and
after the execution of their mortgage, performed directly and through their co-venturers,
constituted sufficient purposeful activity to satisfy the [long-arm] statute.” Id. at 427. We
reasoned that their commercial real estate venture “creat[ed] a ‘continuing obligation’
between [the defendants] and a Maryland resident which invoked the benefits and
protections of Maryland law.” Id. at 429. “Of the relevant considerations, we deem[ed]
none more compelling than the interest of this State, as well as the interest of the interstate
judicial system, in providing a single forum for the litigation of disputes that arise from
interests in land located within the forum.” Id. (emphasis added).
The Sleph Court did not rule—as Appellants suggest—that the filing of a legal
instrument in Maryland automatically subjects a defendant to specific jurisdiction. Rather,
this Court emphasized Maryland’s interest “in providing a single forum for the litigation
of disputes that arise from interests in land located within the forum.” Id. at 429 (emphasis
added). That interest is absent in the case sub judice.
Applying the principles rendered in the foregoing decisions, we hold that Green has
42
not “transacted business” in Maryland within the meaning of our long-arm statute.
Maryland’s specific jurisdiction over Green is necessarily limited to Appellants’ causes of
action arising from Green’s forum contacts. At the outset we can discard Appellants’
contention that Green’s ownership of a subsidiary in Maryland subjects it to specific
jurisdiction here. To the extent this claim bleeds into general jurisdiction (i.e., Green is
subject to jurisdiction based solely on its ownership interest in a subsidiary corporation in
Maryland), we have already addressed that argument.17 Appellants urge, however, that it
was Green’s act of filing Searchlight’s Articles of Incorporation in Maryland that
establishes specific jurisdiction over Green in Maryland. Appellants do not allege—nor is
there any indication—that Green was negligent, fraudulent, or otherwise tortious by its
incorporation of Searchlight.18 Rather, Appellants appear to allege that Green, by a number
of acts that took place in Texas, exerted improper influence over the SP Directors to aid
and abet the Directors’ alleged breaches of fiduciary duties, culminating in their self-
serving decision to merge with Green and Green’s incorporation of Searchlight in
Maryland. But against these facts, the mere act of filing Searchlight’s Articles of
17
Appellants relied on the Supreme Court of Delaware’s decision in Sternberg v.
O’Neil, 550 A.2d 1105, 1123 (Del. 1988), to support jurisdiction on these grounds. In
Sternberg, the Court sustained the exercise of jurisdiction over a foreign parent corporation
in a suit based on the alleged wrongdoing of its subsidiary, which the parent corporation
registered as a Delaware corporation. Id. In light of the Supreme Court’s decision in
Daimler, however, the Supreme Court of Delaware ruled recently that its decision in
Sternberg is too broad to be consistent with Daimler. Genuine Parts Co. v. Cepec, 137
A.3d 123, 126-28 (Del. 2016).
18
Appellants’ counsel conceded at oral argument before this Court that
Searchlight’s filing of the Articles of Merger was neither fraudulent or tortious.
43
Incorporation in Maryland falls short of the grip of Maryland’s long arm.
First, the facts do not demonstrate that Green purposefully availed itself of doing
business in Maryland. We do not say that the act of forming a subsidiary in Maryland
cannot subject a parent company to personal jurisdiction in Maryland, but “[t]he quality
and quantity of contacts required to support the exercise of personal jurisdiction will
depend upon the nature of the action brought and the nexus of the contacts to the subject
matter of the action.” Camelback II, 312 Md. at 338; Sleph, 76 Md. App. at 428. Here,
the subsidiary formed by Green was not intended to do business in Maryland and nothing
about the formation of the subsidiary was directed at residents of Maryland. Green has no
offices in Maryland, does not solicit business in Maryland, and has no registered agent in
Maryland. Even Searchlight was given a Texas address. In Maryland, a substantial
connection will be established if the defendant “either engaged in significant activities in
the State, or created continuing obligations with the State’s residents, thus taking advantage
of the benefits and protections of Maryland law.” CSR, Ltd., 411 Md. at 464-65. Clearly,
Green did not intend to establish continuing obligations in Maryland by forming
Searchlight.
The second failing in Appellants’ argument is that the filing of Searchlight’s articles
of incorporation was—at best—only tangentially related to Appellants’ claim for aiding
and abetting. The power of Maryland courts to exercise specific jurisdiction is confined to
“‘issues deriving from, or connected with, the very controversy that establishes
jurisdiction.’” Goodyear, 564 U.S. at 919 (citation omitted). It is not the mere filing of a
legal instrument in Maryland that gives rise to specific jurisdiction, but the execution of an
44
instrument that is fraudulent or causes a tortious injury within Maryland. See Vitro, 255
Md. at 506-07 (remanding the case so that the trial court could determine where the parent
executed the allegedly faulty certificate of compliance and whether its execution was
negligent or fraudulent); Food Fair Stores, Inc. v. Greeley, 264 Md. 105, 110 (1972)
(placing no jurisdictional significance on the trustee’s mailing from Pennsylvania to
Maryland a letter to the plaintiff denying his pension benefits absent any indication that the
trustee played any role in the decision to deny the plaintiff’s benefits claim); see also
Christian Book Distrib., Inc. v. Great Christian Books, Inc., 137 Md. App. 367, 395 (2001)
(holding that it would violate the Due Process Clause to exercise jurisdiction based on the
defendant faxing a closing document (containing an alleged negligent misrepresentation)
to Maryland absent any allegation of fraud when the defendant was never physically
present in the forum state and had no other connection to that State); cf. Harris, 256 Md.
at 196-97 (reasoning that the defendant’s persistent conduct in Maryland “may have been
tortious, thus, rendering him, individually, subject to suit in Maryland”).
Appellants offer that the successful negotiation of a merger with a Maryland
corporation culminating in the filing of the Articles of Merger in Maryland constituted
transacting business in Maryland. As Appellants acknowledge, however, Green was not a
signatory to the Articles of Merger, and Searchlight, not Green, filed the Articles of Merger
in Maryland. To impute to Green the specific jurisdictional contacts of its subsidiary
(absent a showing of fraud or a clear disregard of the corporate fiction) would run counter
to the Supreme Court’s holdings in Daimler, 134 S. Ct. at 759-60, Goodyear, 564 U.S. at
929, and World-Wide Volkswagen, 444 U.S. at 295-99. In Greeley and Zavian, the Court
45
of Appeals and this Court, respectively, held that we will not impute to a defendant the
jurisdictional contacts of a third party. See Greeley, 264 Md. at 110; Zavian, 130 Md. App.
at 699. Clearly, Searchlight’s filing of the Articles of Merger is not, by itself, sufficient to
confer jurisdiction over Green in Maryland.
Once we remove Green’s filing of Searchlight’s Articles of Incorporation from our
jurisdictional equation, there are no alleged activities by Green in Maryland—or directed
at Maryland—left to consider. In what seems to be an implicit concession, Appellants
place no emphasis on the jurisdictional relevance of the actual merger negotiations, despite
their prominence in the aiding and abetting claims against Green. Presumably, this is
because all the actions relevant to Appellants’ allegations of aiding and abetting occurred
outside of Maryland.19 Green, a Texas corporation, engaged SP in negotiations in Texas—
the place where SP is principally located. Green offered continued employment to Mr.
Weaver in Texas, where he was employed at the time of the offer. The parties executed
the merger agreement in Texas, and it included a Delaware choice-of-law provision. Green
acquired SP’s branches in Texas and Kentucky. SP sent its shareholders the allegedly
misleading proxy statement from Texas to notify them that it would hold a special
shareholder meeting in Texas, and the shareholders—many of them Texans—voted in
Texas to approve the merger. There is no allegation that SP or Green did any banking
business in Maryland, or had any plans to, or that any of the Directors or parties—including
Appellants—had any business or residences in Maryland. There is no indication that Green
19
Appellants’ counsel conceded at oral argument that all conduct relevant to merger
negotiations occurred outside of Maryland.
46
sought out SP because of its place of incorporation, nor any indication that Green, through
its negotiations, sought to create a continuing obligation with the citizens of Maryland. See
CSR, Ltd., 411 at 463. Moreover, Appellants do not identify in the underlying direct
shareholder class action any shareholders who were Maryland residents or that any alleged
harm would be felt in this state.
As we stated earlier, this Court and the Court of Appeals have made clear that there
is a difference between soliciting a transaction from a Maryland resident and actually
soliciting a transaction in Maryland. See, e.g., Camelback II, 312 Md. at 340; Zavian, 130
Md. App. at 701-02. During the negotiations, when the acts that form the basis of
Appellants’ complaint occurred (before Searchlight was formed and before the Articles of
Merger were filed), Green had no contacts in Maryland, and we will not impute SP’s
incorporation in Maryland to Green. Equally, as in CSR Ltd., Maryland was merely a
conduit through which Green completed a transaction that was directed at and principally
impacted another forum. See 411 Md. at 488-90. All of the merger negotiations and
alleged breaches of fiduciary duties took place in Texas, and none were directed at residents
in Maryland. Accordingly, we hold that Appellants failed to establish a nexus between
Green’s only true contact in Maryland—filing the articles for Searchlight, a transitory
merger subsidiary with a Texas address—and Appellants’ cause of action sufficient to
satisfy Maryland’s long-arm statute.20
As the Court of Appeals explained in CSR Ltd., once we have determined that the
20
defendant’s contacts with Maryland do not satisfy the “‘purposeful availment’
requirement, thus attaining sufficient minimum contacts with the State,” we need not move
47
on to the third prong of the analysis to “consider whether the exercise of personal
jurisdiction would be constitutionally reasonable[.]” 411 Md. at 493; cf. Daimler, 134 S.
Ct. at 762 n.20 (“When a corporation is genuinely at home in the forum State, . . . any
second-set inquiry would be superfluous.”). Nevertheless, in this case, applying the
fundamental fairness factors that the Supreme Court delineated to ensure that the exercise
of jurisdiction comports with due process, Burger King, 471 U.S. at 477 (quoting World-
Wide Volkswagen, 444 U.S. at 292), only bolsters our analysis under Maryland’s long-arm
statute against exercising personal jurisdiction over Green. See Ellicott, 995 Md. 479-80
(holding that Maryland’s exercise of personal jurisdiction “would not comport with
traditional notions of ‘fair play and substantial justice[,]’ in part, because litigating in
Maryland would “impose a heavy burden” on the Australian defendant and witnesses who
were located primarily in Australia, and because “[n]early all aspects of the contract took
place in Australia and principally affected Australian interests” (citations omitted)).
The first factor (burden on the defendant) weighs heavily in Green’s favor. Green—
a Texas corporation that negotiated in Texas with SP’s Directors, who resided in Texas,
for the merger of SP’s banks in Texas and Kentucky—had a legitimate interest in and
expectation of not being haled into court in Maryland. See Camelback II, 312 Md. at 343.
The second factor (Maryland’s interest in the dispute) weighs weakly in Appellants’ favor.
Although Maryland has some interest in resolving disputes arising from the management
and merger decisions of businesses incorporated in the state, the direct shareholder class
action underlying this appeal is attenuated from Maryland and the impact of the merger
will be felt in Texas, where both Green and SP are principally located and where nearly all
of the merged banks operate. Additionally, this is not a derivative action in which the
plaintiffs allege harm to the corporation itself; Appellants allege no harm in Maryland aside
from asserting generally and without specific knowledge that SP, as a publicly-traded
corporation, presumably has a shareholder who resides in Maryland and would qualify as
a class member. The third factor (Appellants’ interest in obtaining effective relief) also
does not weigh in favor of Maryland exercising jurisdiction. Appellants have not alleged
any personal connection to Maryland, nor have they indicated why litigating this dispute
in Maryland would be more convenient or effective than if they did so in Texas. Finally,
the fourth and fifth factors (the interstate judicial system’s interest in effective relief and
the states’ shared interest in furthering substantive social policies) weighs against
exercising jurisdiction in Maryland. Appellants’ claims arose out of merger negotiations
conducted in Texas by Texans concerning one Texas bank’s acquisition of another bank’s
branches located principally in Texas. The witnesses and all of the relevant facts are
located in Texas. The interstate judicial system is best served by resolving disputes in the
forum more closely related to the cause of action. A contrary result would incentivize
forum shopping—a practice that both Maryland and Texas consider to be inefficient and
injurious to the interstate judicial system. See, e.g., Am. Motorists Ins. Co. v. ARTRA Grp.,
Inc., 338 Md. 560, 578 (1995); In re AutoNation, Inc., 228 S.W.3d 663, 668 (Tex. 2007).
48
III.
SP Directors
Appellants allege that the SP Directors are subject to personal jurisdiction in
Maryland by virtue of their seat on the SP’s Board of Directors and because they “caused”
SP to file articles of merger in Maryland.
A. SP Directors’ Contacts as Directors of a Maryland Corporation
Appellants argue that the SP Directors are subject to specific jurisdiction in Maryland
based on their acceptance of a directorship in a Maryland corporation. They urge us to
adopt Delaware’s approach, which, in response to the Supreme Court’s decision in Shaffer
v. Heitner, acted to permit jurisdiction based on a directorship alone.
The Shaffer Court addressed the constitutionality of a Delaware statute allowing a
court of that state to take jurisdiction of a lawsuit by sequestering property in Delaware
that belonged to the defendants. 433 U.S. at 186. As part of the case, the Court considered
the issue of personal jurisdiction based solely on an individual’s directorship in a Delaware
corporation.
Heitner, a nonresident of Delaware, filed a shareholder derivative action in Delaware
against Greyhound Corporation, a Delaware company with its principal place of business
in Phoenix, Arizona; Greyhound Lines, Inc., its wholly owned, out-of-state subsidiary; and
several of the company’s officers and directors, none of whom were Delaware residents.
433 U.S. at 189-90. Heitner alleged that the officers and directors breached their duties to
the company, causing Greyhound to engage in conduct that ultimately made the company
liable for damages. Id. at 190. The activities that led to the imposition of damages took
49
place in Oregon. Id. The officers and directors asked the court to dismiss the suit against
them, asserting that they lacked sufficient contacts with Delaware. Id. at 192-93. Heitner
opposed their dismissal, arguing that “by accepting positions as officers or directors of a
Delaware corporation,” the defendants had accepted the substantial benefits the state
provides to corporate officers and directors, and thereby subjected themselves to
jurisdiction in Delaware. Id. at 215-16. The Supreme Court of Delaware affirmed the
Court of Chancery’s exercise of jurisdiction over the directors, determining that the
proceeding was quasi in rem based on the presence in Delaware of the stock shares that the
directors owned.21 Id. at 193-95. The Supreme Court of the United States granted certiorari
and reversed. Id. at 195.
After concluding that quasi in rem proceedings must be evaluated under the
standards of International Shoe, just like in personam proceedings, the Court determined
that the statutory presence of the directors’ stock was unrelated to the cause of action and
not grounds for jurisdiction. Id. at 212-13. The Court then considered whether the directors
could be subject to personal jurisdiction based solely on their position on the board of a
21
Pursuant to the statute in question, Heitner had filed a motion and accompanying
affidavits together with his complaint, which resulted in an order sequestering
approximately 82,000 shares of Greyhound common stock belonging to 19 of the
defendants. Shaffer, 433 U.S. at 191-92. The defendants argued, among other things, that
the ex parte sequestration procedure did not accord them due process of law, and that they
did not have sufficient contacts in Delaware to sustain the jurisdiction of Delaware’s courts.
Id. at 193. Justice Marshall, writing for the majority, questioned the proposition established
in Pennoyer, supra, that state-court jurisdiction could stand on the presence of property in
the state alone, and concluded that “the time is ripe to consider whether the standard of
fairness and substantial justice set forth in International Shoe should be held to govern
actions in rem as well as in personam.” Id. at 206.
50
Delaware corporation. Id. at 215-16. The appellants argued that Delaware had an interest
in supervising the management of a Delaware corporation. Id. at 214. But the Court noted
that under Delaware law, the exercise of jurisdiction was based on stock holdings, not
board membership, demonstrating that the Delaware legislature had not displayed a strong
interest in securing jurisdiction over corporate fiduciaries. Id. at 214-15. The Court
reasoned that Delaware’s failure to enact a jurisdictional statute that treated the acceptance
of a directorship as consent to jurisdiction left the directors with “no reason to expect to be
haled before a Delaware court.” Id. at 216. For these reasons, the Court held that
Delaware’s assertion of jurisdiction based on an individual’s corporate directorship
violated the Due Process Clause. Id. at 216-17.
Just thirteen days after the Supreme Court issued its decision in Shaffer, the
Delaware legislature responded directly. Del. Code Ann. Tit. 10 § 3114; see Armstrong v.
Pomerance, 423 A.2d 174, 179 n.8 (Del. 1980); Verity Winship, Jurisdiction Over
Corporate Officers and the Incoherence of Implied Consent, 2013 U. Ill. L. Rev. 1171,
1177 (2013). The State enacted new legislation notifying “[e]very nonresident of
[Delaware] who . . . accepts election or appointment as a director, trustee or member of the
governing body of a corporation organized under the laws of [Delaware]” that, in so doing,
they were consenting to jurisdiction in Delaware in all actions against their corporation in
which they are a necessary party and in all actions alleging a violation of duty to the
corporation. Del. Code Ann. Tit. 10 § 3114; Armstrong, 423 A.2d at 175 n.1.
Consequently, Delaware now asserts jurisdiction over the nonresident directors of
Delaware corporations in actions based on an alleged breach of the directors’ fiduciary
51
duties or where the corporation is a proper and necessary party. Armstrong, 423 A.2d at176 n.5. The Court in Armstrong explained that the legislature authorized personal
jurisdiction in these categories of cases because they are cases it deemed to be “inextricably
bound up in Delaware law and where Delaware has a strong interest in providing a forum
for redress of injuries inflicted upon or by a Delaware domiciliary, i.e., a Delaware
corporation.” Id. The Maryland General Assembly has not enacted a similar law.
Other state and federal courts considering the issue, in light of Shaffer, have held
that these so-called “director consent” statutes are necessary to provide the directors with
notice sufficient to permit the state’s exercise of personal jurisdiction over them without
running afoul of the Due Process Clause. See, e.g., Am. Freedom Train Found. v. Spurney,
747 F.2d 1069, 1074-75 (1st Cir. 1984) (holding that nonresident directors lacked the
requisite nexus to Massachusetts, in significant part, because “Massachusetts, unlike some
states, has not enacted a statute that treats acceptance of a directorship as consent to
jurisdiction in the state of incorporation” (citation omitted)); Behm v. John Nuveen & Co.,
555 N.W.2d 301, 306-07 (Minn. Ct. App. 1996) (ruling that “[a] state may assert
jurisdiction over its corporate officers and directors by statute,” but holding that because
“Minnesota has no such statute . . . nonresident directors and officers cannot fairly be held
to have consented to personal jurisdiction in Minnesota courts”); Consipio Holding, BV v.
Carlberg, 282 P.2d 751, 756 (Nev. 2012) (distinguishing Shaffer based on a Nevada statute
authorizing suit against corporate directors and “provid[ing] notice to officers and directors
that they are subject to derivative suits for violation of their authority” (footnote omitted)).
Appellants point to the Fourth Circuit’s decision in Pittsburgh Terminal Corp. v.
52
Mid Allegheny Corp., 831 F.2d 522, 527-30 (4th Cir. 1987), which they insist distinguishes
Shaffer and permits jurisdiction, without a director-consent statute, based on a foreign
defendant’s position on an in-state corporation’s board of directors. In Pittsburgh
Terminal, the Fourth Circuit considered whether a federal district court in West Virginia
erred by dismissing an action for lack of personal jurisdiction against two nonresident
corporate directors of a company incorporated and principally located in West Virginia.
Id. at 524. Relying on Justice Brennan’s partial dissent in Shaffer, the Court reasoned that
West Virginia had a strong interest in resolving suits involving its corporate directors,
despite the lack of a legislative statement to that effect. Id. at 528 & n.9 (citing Shaffer,
433 U.S. at 222 (Brennan, J., concurring and dissenting)). The Fourth Circuit ruled that a
forum may exercise personal jurisdiction based on a corporate officer’s acceptance of a
directorship even without a director-consent statute because Shaffer did not require long-
arm statutes to use “word[s] of art” such as “director” to bring nonresident directors within
the state’s jurisdiction. 831 F.2d at 527. The Fourth Circuit concluded that the term
“transacting business” was a sufficient catchall. Id. & n.7; but see Shaffer, 433 U.S. at 216(“[A]ppellants had no reason to expect to be haled before a Delaware court. Delaware,
unlike some states,[22] has not enacted a statute that treats acceptance of a directorship as
consent to jurisdiction in the State.” (emphasis added; footnote omitted)).
22
The Court in Shaffer cited to three states’ director-consent statutes: Conn. Gen.
State. Rev. §33-322 (1976); N.C. Gen. Stat. § 55-33 (1975); S.C. Code Ann. § 3-5-70(1977).
53
To the extent Pittsburgh Terminal is persuasive authority, we note the case is
distinguishable on the facts. The Fourth Circuit noted that the corporation at issue was not
a “phantom” corporation (registered to do business in a state with no other presence or
connection to that state) like the corporation at issue in Shaffer and like SP in the present
case. See 831 F.2d at 528. Moreover, the directors were directors of a West Virginia
corporation that did business in West Virginia, and approved the transaction through a
telephone call to West Virginia. Id. at 524.
In Maryland, the Court of Appeals has made plain that a party’s reasonable
expectation of being haled into court is central in determining whether that court has
personal jurisdiction over a party. CSR, Ltd., 411 Md. at 479-80; Camelback II, 312 Md.
at 342-43. The Supreme Court stated clearly in Shaffer that Delaware’s exercise of
jurisdiction in that case violated due process because Delaware lacked a statute notifying
the directors that that they consented to jurisdiction by accepting their positions as
directors. 433 U.S. at 216 & n.47. Accordingly, we conclude that it would violate the due
process rights of nonresident defendants to subject them to personal jurisdiction in
Maryland based solely on their directorship in a company incorporated in Maryland.
Without a director-consent statute, the out-of-state SP Directors had “no reason to expect
to be haled before a [Maryland] court” when their only contact with Maryland was their
directorship in a company that, although incorporated in Maryland, was headquartered in
Texas and conducted all of its business outside Maryland. See Shaffer, 433 U.S. at 216.
We believe that this result furthers the aim of the Due Process Clause by “giv[ing] a degree
of predictability to the legal system that allows potential defendants to structure their
54
primary conduct with some minimum assurances as to where that conduct will and will not
render them liable to suit.” World-Wide Volkswagen, supra, 444 U.S. at 297.
B. SP Directors’ Forum Contacts in Causing the Merger
Appellants contend, however, that this is not a case in which jurisdiction would be
predicated based solely on the defendants’ acceptance of a directorship because the SP
Directors personally availed themselves of Maryland law by causing the Articles of Merger
to be filed in this state. Appellants argue that the SP Directors are subject to personal
jurisdiction in Maryland based on their “clear and substantial” purposeful activity in the
state—namely, merging two Maryland corporations in Maryland. This is consistent with
Maryland law, according to Appellants, because Maryland does not require a defendant’s
physical presence in the state to permit the exercise of personal jurisdiction. The SP
Directors respond that they are not subject to jurisdiction despite their seats on SP’s board
because all activities relevant to the underlying shareholder class action took place outside
Maryland and none of the SP Directors have entered Maryland in connection with SP’s
business.
Appellants and the SP Directors refer us to the federal district court’s decision in
Topik v. Catalyst Research Corp., 339 F. Supp. 1102, 1105-06 (D. Md. 1972) in support
of their arguments. Topik was a shareholder derivative suit filed against the nonresident
directors of a Maryland corporation following its merger with an out-of-state corporation.
Id. at 1103-04. The individual directors in Topik were residents of Pennsylvania but
attended annual board meetings in Maryland. Id. at 1104-05. In assessing Maryland’s
long-arm statute, the federal district court held that, because the decisions concerning the
55
merger were made in Pennsylvania, the “cause of action against the individual defendants
d[id] not arise from their transacting any business in this state[.]” Id. at 1106. Similarly,
the court held that jurisdiction could not exist based on tortious injury in the state because
any acts or omissions in Maryland were committed by agents of the corporation itself and
not agents of the individual directors. Id. (citing CJP § 6-103(b)(3)). The court instructed
that “[i]t is the action of the individual defendants themselves in formulating a policy for
the corporation to follow which forms the basis of the tort alleged and not the action of the
corporation in following that policy. The corporate employees who acted in Maryland
were agents of the corporation and not agents of the individual directors under these
circumstances.” Id. at 1106.
The court then turned to whether it could exercise jurisdiction over the directors by
their causing tortious injury through acts committed outside of Maryland, as long as they
had a sufficient nexus with Maryland based on the solicitation of business, receipt of
substantial revenue from goods or services manufactured or consumed in Maryland, or any
other persistent conduct in the state. Id. at 1106-07 (citing CJP § 6-103(b)(4)). The court
held that, based on the directors’ attendance at annual stockholder meetings and annual
board of directors meetings in Maryland, the directors satisfied subsection (4) by
establishing a persistent course of conduct in Maryland, even though they were not
regularly doing business in the state. Id. at 1107-08. The court explained, “‘Traditional
notions of fair play and substantial justice’ would seem to allow the stockholders of a
corporation to sue the directors for breach of fiduciary duty in the home state of a
corporation, at least as long as the directors regularly come into that state to meet with
56
and to deal with the stockholders at annual meetings.” Id. at 1108 (emphasis supplied).
Insofar as the Topik court recognized that it could not exercise jurisdiction under the
“transacting business” prong of the Maryland long-arm statute (CJP § 6-103(b)(1)), the
case supports Appellees’ position. Appellants must rely on the court’s holding that the
directors could be sued in Maryland for their alleged breaches of fiduciary duty outside
Maryland under CJP § 6-103(b)(4) based on their regular attendance at directors’ and
stockholders’ meetings in Maryland. There are several problems with Appellants’
argument, starting with the fact that they do not rely on CJP § 6-103(b)(4) as conferring
personal jurisdiction over the Directors in this case. Moreover, Appellants rely on SP’s
filing of the Articles of Merger in Maryland as the operative jurisdictional contact; yet,
they do not allege that the Articles of Merger were fraudulent or even that they caused a
tortious injury in Maryland. See id.; see also Vitro, 255 Md. at 506. Further, as Topik
instructs, the allegation falls short as there is no indication that any of the SP Directors filed
this instrument personally or did more than merely participate in SP’s decision to merge
with Green. See 339 F. Supp. at 1106.
The contacts that the Topik Court found determinative were the annual trips that the
directors made into Maryland for shareholder meetings and directors meetings. Id. at 1107.
The SP Directors in this case made no such visits to Maryland. Because Appellants have
not alleged that the SP Directors personally and purposefully directed any contact toward
Maryland with respect to the merger agreement, we need not delve into the due process
analysis. See CSR, Ltd., 411 Md. at 493.
We determine that the SP Directors—all nonresidents—who never entered Maryland
57
in connection with SP business, did not purposefully avail themselves of the privileges and
protections of Maryland law by negotiating a merger in Texas with Green, a Texas
corporation, or by sending its shareholders a proxy statement and notice of shareholder
meeting from Texas, because all of the relevant activity occurred outside of Maryland. The
only act that occurred in Maryland was SP’s filing of the Articles of Merger in Maryland—
an act, as we have explained, we will not impute to the corporation’s directors for
jurisdictional purposes under the facts presented. Thus, we hold the circuit court did not
err in dismissing the SP Directors for want of personal jurisdiction.
IV.
Our resolution of Appellants’ first and second questions disposes of Appellants’
contentions that SP and Searchlight were necessary parties under Maryland Rule 2-211(a),
and that their complaint stated a claim for relief against each of the Appellees. Although
the circuit court below acknowledged that it had personal jurisdiction over SP and
Searchlight, Appellants’ sole contention below and on appeal is that SP and Searchlight
were necessary parties in the litigation of their claims against Green and the SP Directions.
Having held that Appellants may not maintain their action in Maryland against Green and
the SP Directors, there is no longer a cause of action to which SP and Searchlight are
necessary parties. Although Appellants maintain that they stated a claim for relief against
each of the Appellees—including SP and Searchlight—the 27 pages of briefing they
dedicate to this issue refer to only the SP Directors and Green. In fact, Appellants concede
that their “complaint does not specifically allege a claim against [SP and Searchlight].”
58
Therefore, we uphold the circuit court’s decisions dismissing SP and Searchlight from the
underlying action.
JUDGMENTS OF THE CIRCUIT
COURT FOR BALTIMORE CITY
AFFIRMED. COSTS TO BE PAID
BY APPELLANTS.
59