High court overturns decision regarding whether Delaware has legal oversight over businesses registered in state
- The Delaware Supreme Court has issued a ruling over a decades-old decision regarding jurisdiction.
- It overturns a ruling that says corporations registered in Delaware are subject to state jurisdiction.
- The ruling was 4-1 and involves an Atlanta auto-parts supplier.
An out-of-state company can no longer be sued in Delaware merely because it does business within the state, the Delaware Supreme Court has ruled.
Under a 1988 state Supreme Court ruling, a plaintiff could sue a company in Delaware for a personal injury or other tort claim that occurred in another state. That meant a large retail chain operating a store in Delaware or a company with an office in the state could be vulnerable to a Delaware lawsuit simply because it did business here.
However, in this week’s rare 4-1 split decision, the Supreme Court reversed that holding in Genuine Parts Co. v. Cepec. The opinion was authored by Delaware Supreme Court Chief Justice Leo E. Strine.
“This is a positive for companies not incorporated in Delaware, but do business in Delaware,” said Donald W. Durandetta, a professor of business at Wilmington University. “It is increased protection for doing business in Delaware.”
Plaintiffs Ralph and Sandra Cepec are Georgia residents who sued automobile equipment supplier Genuine Parts Co., the parent company of NAPA AutoParts. Genuine is a Georgia corporation headquartered in Atlanta and operates more than 60,000 retail stores throughout the nation, including about 15 in Delaware.
Ralph Cepec worked for Genuine Parts in a Jacksonville, Florida, warehouse between 1988 and 1991. He filed a personal injury lawsuit in Delaware saying he was exposed to asbestos during his employment, causing mesothelioma and other illnesses.
Last year, the Cepecs sued Genuine Parts in Delaware, despite that than 1 percent of its stores and employees are based in Delaware and less than 1 percent of its revenue comes from the state, according to the court’s opinion. Genuine Parts is registered to do business in Delaware, giving the state’s court system general jurisdiction over the company under Delaware law.
The case started in the Delaware Superior Court, which upheld the state’s jurisdiction over Genuine Parts, citing the state Supreme Court’s 1988 decision in Sternberg v. O’Neil. Genuine Parts appealed to the Supreme Court, which reversed the lower court. In the decision, the high court ruled plaintiffs can only file a lawsuit against a company in Delaware if the claim resulted from the defendant’s connection to the state. A plaintiff no longer pursue a claim in Delaware just because a company does business here.
Plaintiffs can still file lawsuits in Delaware against national corporations if the injury occurred in the state or there is some other connection.