Cheryl WIGGINS, Plaintiff/Counterclaim Defendant, v. PHYSIOLOGIC ASSESSMENT SERVICES, LLC, and Defendant/Counterclaim Plaintiff, Jordan Klear, Defendant.
C.A. No. N15C-01–186 CLS
Superior Court of Delaware.
June 3, 2016
Date Submitted: March 2, 2016
SCOTT, J.
Accordingly, it is hereby ordered that S. Harold Lankenau is suspended from engaging in the practice of law as a member of the Delaware Bar for a period of eighteen months, commencing February 22, 2016. It is further ordered that he pay the costs of this proceeding. ODC is directed to disseminate this opinion in accordance with the Rules of the Board on Professional Responsibility.
Lauren E.M. Russell, Esquire, Margaret M. DiBianca, Esquire, Young, Conaway, Stargatt & Taylor, LLP, Wilmington, Delaware, Attorneys for Defendant Jordan Klear.
OPINION
SCOTT, J.
Defendant Jordan Klear (“Klear“) has moved to dismiss Plaintiff‘s, Cheryl Wiggins (“Plaintiff“), amended complaint for lack of personal jurisdiction pursuant to Superior Court Civil Rule 12(b)(2). For the following reasons, Klear‘s Motion to Dismiss is GRANTED.
Background
This action arises from the termination of Plaintiff‘s employment at Physiologic Assessment Services, LLC (“PAS“), in December of 2014. Plaintiff filed her initial complaint on January 23, 2015, solely against PAS, asserting claims for breach of contract, promissory estoppel, and violation of Pennsylvania‘s Wage Payment and Collection Law (“WPCL“). On July 22, 2015, Plaintiff filed an amended complaint, adding Klear as a co-defendant to the action and alleging personal liability against him, as chief executive officer (“CEO“) of PAS, for the WPCL claims only. The amended complaint asserts that personal jurisdiction over Klear is authorized by
PAS is a Delaware limited liability company that maintains its principal place of business in Pennsylvania and the Corporation Trust Company as registered agent for service of process in Delaware. PAS is in the business of providing intraoperative neurophysiologic monitoring (“IONM“) services to physicians and medical facilities and employed Plaintiff to provide clinical IONM services on its behalf. Plaintiff is a resident of Pennsylvania and, while employed by PAS, worked primarily at PAS‘s place of business in Pennsylvania. Plaintiff has never held an ownership interest in or an officer position at PAS.
Klear is also a resident of Pennsylvania and maintains an office at PAS‘s place of business in Pennsylvania. Klear is CEO of PAS and actively involved in the management of human resources at PAS, specifically the hirings, firings, and salary adjustments of both executive and clinician personnel. Plaintiff entered into an Employment Agreement (“EA“) with PAS on November 26, 2013, and Klear signed the EA on behalf of PAS under the title of CEO.
The events leading up to and culminating in the termination of Plaintiff‘s employment with PAS, which form the basis of Plaintiff‘s claims against Klear, transpired as follows: In September, 2014, nine months after Plaintiff began working at PAS, Klear informed Plaintiff that he had decided to terminate PAS‘s Vice President of Clinical Operations and redistribute the job‘s non-clinical, executive functions. Klear then met several times with Plaintiff and, on September 24th, verbally offered her a raise of $20,000 in exchange for her performing some of the job‘s executive functions, which Plaintiff accepted. Klear subsequently held a meeting in early October with Plaintiff and other personnel, where he detailed the redistribution of the job‘s duties, and, shortly thereafter, Plaintiff began performing her new responsibilities. After at least two pay periods thereafter, PAS had yet to pay Plaintiff any of the additional compensation for her increased job responsibilities, and she so informed Klear. In response, Klear promised to discuss PAS‘s non-payment of Plaintiff‘s salary increase with PAS‘s comptroller.
On December 8th, Klear called Plaintiff into a meeting, where he accused her of conspiring with co-workers to solicit PAS employees to work for a yet-to-be-formed business in which Plaintiff had allegedly invested. Following the meeting, Klear issued a letter to Plaintiff, notifying her that, pursuant to § 7(a)(iv) of the EA, PAS was giving her 15 days’ notice of its termination of her employment for good cause based on her alleged violation of the non-solicitation covenant in § 9(c) of the EA.
Counts V, VI, and VII of Plaintiff‘s amended complaint allege violation of Pennsylvania‘s WPCL by PAS and are asserted against both PAS and Klear.2 Specifically, Plaintiff alleges that Klear is personally liable (i) for all of the damages to which she is entitled resulting from PAS‘s violations of Pennsylvania‘s WPCL, and (ii) as an “employer” for any violations of Pennsylvania‘s WPCL.3 In support of these allegations, Plaintiff alleges that Klear was at all relevant times a high ranking officer of PAS, who was actively involved in managing PAS‘s affairs, and
Parties’ Contentions
Klear asserts that subjecting him, as a nonresident, to personal jurisdiction in Delaware is not authorized by
Further, Klear argues that Delaware law is not inextricably bound up in Plaintiff‘s claims, because the contract at issue, Plaintiff‘s Employment Agreement, specifically states that New Jersey law applies, and Delaware has little interest in the resolution of Plaintiff‘s claims against Klear, because he resides and works in Pennsylvania, Plaintiff worked and currently resides in Pennsylvania, and PAS‘s primary place of business is in Pennsylvania. Therefore, Klear argues that subjecting him to personal jurisdiction in Delaware would violate due process.
In response, Plaintiff argues that her claims do relate to PAS‘s business, because they involve the human resource decisions Klear made, which decisions constitute the “day-to-day operations of PAS” and because Klear owes a duty to PAS to ensure that it complies with state and federal wage payment and employment laws. Plaintiff further argues that the due process requirement is also satisfied, because Klear‘s liability arises under Pennsylvania‘s WPCL due to his role as CEO and decision-maker at PAS and, thus, he indistinguishable from PAS for purposes of personal jurisdiction.
As to due process, Plaintiff also argues that, as CEO, Klear caused PAS to be formed as a Delaware entity, purposefully availed PAS and himself of the benefits and protections of Delaware, and, therefore, cannot credibly be surprised to have to defend the WPCL claims in this forum. Plaintiff contends that, to hold otherwise, would (i) promote the inefficient result of bifurcating symbiotic claims in separate jurisdictions, (ii) frustrate clear legislative intent, (iii) create a substantial risk of inconsistent judgments, (iv) force Plaintiff to reinstitute the WPCL claims against Klear in Montgomery County, Pennsylvania, while continuing to prosecute the WPCL claims against PAS in nearby Wilmington, Delaware, where Klear will be called as a fact witness, and (v) reward Klear‘s minimal inconvenience. Alternatively, Plaintiff argues that Klear consented to personal jurisdiction when he, as CEO, allegedly caused PAS to file affirmative claims in this action.
Standard of Review
On a motion to dismiss for lack of personal jurisdiction pursuant to Superior Court Civil Rule 12(b)(2), the plaintiff bears the burden of showing a basis for the trial court‘s exercise of jurisdiction over a nonresident defendant.5 Absent an evidentiary hearing or jurisdictional discovery, the plaintiff need only make a prima facie showing that the exercise of per-
Under the circumstances here, Plaintiff‘s burden is satisfied if she makes a prima facie showing that (1) service of process on Klear, as a nonresident “manager,” is authorized by
Discussion
I. Section 18-109 of the Delaware LLC Act
The “implied consent” provision of the Delaware LLC Act,
Typically, claims that the Court of Chancery have found capable of surviving the Rosheim test involve disputed managerial acts or rights arising under LLC agreements, where it is clear that the relevant “rights, duties and obligations” of the defendant-manager are those owed by the defendant-manager to the LLC.12 However, it appears that the Court of Chancery has also implied that a plaintiff‘s claims against a nonresident defendant, who,
Plaintiff‘s amended complaint asserts, albeit in conclusory fashion, that Klear is both CEO and manager of PAS, which Klear does not explicitly deny, either by affidavit or otherwise; therefore, the Court will assume that he is a manager of PAS.14 It follows, then, that in order to determine whether personal jurisdiction is, in fact, authorized by § 18-109(a), our inquiry must focus on Plaintiff‘s claims against Klear—that Klear is personally liable as an “employer” under Pennsylvania law for Plaintiff‘s damages resulting from PAS‘s violation of Pennsylvania‘s WPCL.15 The issue, thus, becomes whether Plaintiff has alleged any facts from which this Court can infer what duties or obligations Klear owed to PAS, which he may have breached when he allegedly made the decisions to withhold certain wages earned by Plaintiff and to fire Plaintiff, and upon which her claims focus centrally.
While Plaintiff asserts in her Response that Klear owed a duty and was obligated to PAS to “ensur[e] that PAS fully complies with state and federal wage payment and other employment laws,” Plaintiff offers no facts in support of this assertion and, thus, the Court is left to assume that it should make this inference based on solely on Plaintiff‘s allegation that Klear made certain human resource decisions that were in violation of Pennsylvania‘s WPCL, absent any indication of whether the law would impose such a duty or obligation. Regardless, even if this Court were to make such an assumption, it appears that Plaintiff has not met her burden of showing that her claims against Klear, which are based solely on PAS‘s violation of Pennsylvania‘s WPCL and do not arise independently thereunder, “focus centrally” on any duty Klear owed to PAS, when
Of course, Plaintiff‘s claims may still relate to PAS‘s business where they otherwise relate to the internal business affairs of the LLC or to the running of the LLC‘s day-to-day operations, provided due process is not violated. Here, it appears to the Court that Plaintiff has made a prima facie showing that Klear was involved in the running of PAS‘s day-to-day operations, based on Plaintiff‘s detailed allegations as to Klear‘s proximity to PAS‘s human resource decisions in regard to not only her but also to her co-workers and, even, an executive officer. However, even if this Court were to find that Plaintiff has met her burden of showing that the claims she asserts against Klear, which are premised on PAS‘s violation of Pennsylvania law and not Klear‘s, relate to Klear‘s human resource decisions, Plaintiff makes no argument for how the resolution of these claims, which undisputedly arise under Pennsylvania law, is inextricably bound up in Delaware law, much less how it could be that Delaware has a strong interest in providing a forum for the resolution of the dispute, when Delaware law is not implicated anywhere under the facts.
Interestingly, the only Court of Chancery cases that actually discuss the application of these two factors are cases involving disputes over the actual managerial acts taken pursuant to or rights available under a LLC operating agreement and, thus, in both cases it was axiomatic that the parties would “have to look to Delaware statutory and case law regarding the allocation of managerial power” and, accordingly, it could only be that Delaware maintained a strong interest in providing a forum for their resolution.17
Therefore, it appears that where, as here, the claims against a nonresident manager-defendant do not directly involve disputed managerial act or rights arising under an LLC agreement, courts must apply the minimum contacts analysis on a case-by-case basis, so as to protect defendants from the risk of unconstitutional applications of § 18–109, and “make ‘a realistic evaluation of the relationship’ that [the defendant] has established with Delaware to determine whether it is ‘keeping with traditional notions of fair play and substantial justice’ to require him to defend [the] disputes in [Delaware] court.”18
II. Constitutional Analysis
“Under due process analysis, the Court must consider whether the nonresi-
Plaintiff initially contends that due process is satisfied because Klear is indistinguishable from PAS for purposes of personal jurisdiction. This Court respectfully disagrees. While Pennsylvania‘s WPCL may indeed impose personal liability on high-ranking corporate officers like Klear under these circumstances, as Plaintiff alleges, and it also may well be that Delaware‘s legislature, too, recognizes the virtues of imposing such liability, personal liability alone is simply not equivalent to personal jurisdiction.22
Plaintiff next contends that the facts in Cornerstone Technolgies, LLC v. Conrad are similar to the case sub judice and, thus, due process would not be violated by asserting personal jurisdiction over Klear. This Court, again, disagrees. In Cornerstone, the Court of Chancery was presented with a situation where the plaintiffs made a prima facie showing that the defendant was a founding member, director, and officer, by virtue of evidence that he signed the LLCs’ operating agreements, and, thus, found that the defendant could have formed the two LLCS as Pennsylvania entities, but instead personally and purposely participated in the choice to invoke the laws of this State.23 Here, Plaintiff argues that Klear, like the defendant-manager in Cornerstone, purposefully participated in forming PAS as a Delaware entity based on the following two assertions, the latter of which having been made in the last footnote in conjunction with a novel reference to Delaware‘s long-arm statute: (1) “Klear, as CEO, caused PAS to be formed as a Delaware entity,” and (2) “Klear signed, as an ‘Authorized Person’ for PAS, a Certificate of Amendment Changing Only the Registered Office or Registered Agent of a Limited Liability Company, which he caused to be filed with the Office of the Delaware Secretary of State in July 2014.” Without more, this Court cannot make the inference that Klear caused PAS to be formed under Delaware law.
Because Plaintiff has not alleged any facts from which this Court can infer that Klear was a founding manager or otherwise participated, purposely or otherwise, in the decision to form PAS under the laws of Delaware, neither allegation constitutes a prima facie showing that
III. Consent or Waiver Implied From the Filing of PAS‘s Counterclaims
“Because the defense of lack of personal jurisdiction is a personal right, it may be obviated by consent or otherwise waived.”25 Plaintiff, therefore, argues in the alternative that Klear is subject to the personal jurisdiction of this Court because he consented. A court may find that a defendant has waived his defense of lack of personal jurisdiction where “the defendant‘s conduct did not reflect a continuing objection to the power of the court to act over the defendant‘s person.”26 Specifically, “[t]he personal jurisdiction defense may be lost by failure to assert it seasonably, by formal submission in a cause, or by submission through conduct.”27 “Put another way, in determining whether a defendant has waived his defense of lack of personal jurisdiction, or has consented to jurisdiction, it is instructive to look at whether the defendant has abandoned a solely defensive posture and become an actor in the cause.”28
Plaintiff argues that Klear caused PAS to file “affirmative claims” in this Court, solely by virtue of “his capacity as CEO.”29 For reasons similar to those relied upon by this Court in its finding that Plaintiff failed to meet her burden of making a prima facie case that the requirements of due process were satisfied, see infra, this Court finds that Plaintiff has also failed to meet her burden of showing that Klear consented to personal jurisdiction. Plaintiff offers no other evidence to support an inference that, because Klear is the CEO of PAS and PAS filed counterclaims in this action, it necessarily follows that PAS‘s actions should be imputed to Klear in order that Klear be found to have consented to or waived his defense to personal jurisdiction by this Court over his
Conclusion
Accordingly, for the foregoing reasons, Defendant Jordan Klear‘s Motion to Dismiss for lack of personal jurisdiction is GRANTED.
IT IS SO ORDERED.
[SIGNATURE]