I blogged my take on VC Laster's recent McDonald's decision and that of Kevin LaCroix. Now comes Keith Bishop:
Today's post does not question the ruling, but does question why the case is in Delaware and why Delaware law is being applied.
Although McDonald's Corporation was incorporated in Delaware, its principal executive office is in Chicago and I assume that Mr. Fairhurst was employed in Illinois and not in Delaware. So why is Mr. Fairhurst subject to the personal jurisdiction of the Court of Chancery? Vice Chancellor Laster provides the explanation:
The absence of an earlier decision holding that officers owe oversight duties likely has a more practical explanation. Before January 1, 2004, Delaware’s jurisdiction-by-consent statute did not extend to officers. See Del. S.B. 126, 149th Gen. Assem., 81 Del. Laws ch. 83 (2003). After that date, stockholder plaintiffs moved slowly to name officers as defendants. Only recently has naming officers as defendants become more frequent, prompting the General Assembly to authorize exculpation for officers for stockholder claims, albeit not for claims by or in the name of the corporation, effective August 1, 2022. Del. S.B. 273, 151st Gen. Assem., 83 Del. Laws ch. 377 (2022).
The fly in the ointment ( Ecclesiastes 10:1) is that the Delaware's jurisdiction-by-consent statute is constitutionally suspect. See Will Mallory Doom Delaware's Officer Exculpation Statute And Its Corporate Hegemony?
Bishop goes on to point out that conflicts of law rules may lead to a result other than applying Delaware law. He raises some great points.
