Nevada Considers Personal Jurisdiction Over Corporate Officers and Directors

Nevada Considers Personal Jurisdiction Over Corporate Officers and Directors

      In a recent decision, the Nevada Supreme Court considered whether the courts of that state would have jurisdiction over individuals consequent to their serving as an officer or director of a Nevada corporation, at least with respect to claims that their conduct in said positions has injured the corporation.  The court determined that, notwithstanding the absence of a specific statute to that effect, the courts would have jurisdiction.  Consipio Holding, B.V. v. Carlberg, 128 Nev. Adv. Op. 3 (Nev. Aug. 9, 2012).

      Consipio and others were the shareholders in Private Media Group, Inc. (PMG), a Nevada corporation on whose behalf they asserted a derivative claim against Berth Milton, its president, and certain directors.  It was asserted that the directors assisted Milton in causing financial harm to PMG.

      While PMG is incorporated in Nevada, its principal place of business is in Spain, and all the respondent directors and officers were citizens and residents of various European countries; none had visited in Nevada in connection with their service as an officer or director of PMG.  In the face of the derivative action, citing their respective lack of contacts with Nevada, the various defendants moved to dismiss for lack of personal jurisdiction.  Those motions were ultimately granted by the trial court, which dismissal was appealed to the Supreme Court.  In turn, the Supreme Court reversed the determination of the trial court. 

      The Supreme Court’s opinion was premised upon the fact that a Nevada corporation is a citizen of Nevada.  Under Nevada’s long-arm statute, which is deemed to be coextensive with the federal Due Process Clause, specific personal jurisdiction may be exercised over a non-resident where that non-resident defendant has purposely availed himself of “acting in the forum state or of causing important consequences in that state,” citing Jarstad v. National Farmers Union, 552 P.2d 49, 53 (Nev. 1976).  Where, as here, the consequence of the directors’/officers’ actions directly impacted a Nevada citizen, it was found that there was sufficient contacts to exercise jurisdiction.  Further, the court cited the Nevada corporate derivative action statute as not only authorizing suits of that nature, but also provides “notice to officers and directors that they are subject to derivative suits for violation of their authority.”

      The court, it would seem, invited the Nevada legislature to expand the derivative action statute to give it the same effect as the Delaware consent to jurisdiction statute, Del. Code Ann. tit. 10, § 3114. 

      Issues of this nature should not arise in Kentucky.  Amendments adopted in 2012 to the Kentucky corporate acts make clear that service as a director or officer of a corporation constitutes a consent to jurisdiction in Kentucky for actions in connection therewith.  See KRS § 271B.8-030(5); id. § 271B.8-400(5); id. § 272.171(8); id. § 272.181; id. § 273.211(5); and id. § 273.227(7).  A similar rule was adopted applicable to each member and manager of a Kentucky LLC.  KRS § 275.335(2).