Delaware Supreme Court Expands Personal Jurisdiction Over Directors and Officers

Contrary to notions held by Delaware practitioners for decades, the Delaware Supreme Court held in Hazout v. Tsang, No. 353, 2015 (Del. Feb. 26, 2016), that a non-resident officer of a Delaware corporation is subject to personal jurisdiction of Delaware Courts in an action brought "by or on behalf of, or against" the corporation if that officer "is a necessary or proper party" to the case, even if the case does not involve an alleged breach of fiduciary or statutory duties.

The action stems from Marc Hazout, a director and officer of Silver Dragon Resources, Inc., negotiating with plaintiff and his co-investors to infuse Silver Dragon with $3.4 million of capital in a transaction that would have resulted in a change in control of the company. While the investors wired the first $1 million to Silver Dragon, the deal did not ultimately close. Plaintiff alleged that Hazout transferred $750,000 of those funds to Travellers International, Inc. a company he controlled. Plaintiff filed an action against in Delaware Superior Court against Silver Dragon, Hazout, and Travellers for unjust enrichment, fraud, and fraudulent transfer in violation of the Delaware Uniform Fraudulent Transfer Act.