Court Finds No Personal Jurisdiction Over Foreign Director Of California Corporation

Frank Hemm, a citizen of Switzerland, served on the board of directors of Rodo Medical, Inc., a California corporation.  He was also an executive of Institut Straumann AG, a Swiss corporation and investor in Rodo.   Mr. Hemm attended Rodo board meetings on at least 13 occasions between September 2016 and April 2018, primarily by phone and at least once in person.  After Rodo entered into a transaction that more than doubled Straumann's ownership in Rodo, two preferred shareholders sued.  Mr. Hemm and Straumann both moved to quash service of summons.  The trial court granted the motion.

The Court of Appeal affirmed, finding that  Mr. Hemm had availed himself of the privilege of conducting activities in California through his approximately two-year service on Rodo's board of directors.  However, the Court found that the appellants offered no evidence of fraudulent or tortious misconduct, or of any actual wrongdoing, by Mr. Hemm directed at California.   In this regard, the Court noted that Mr. Hemm's conflict as a director of Rodo and officer of Straumann had been known; that he did not draft the information statement sent to Rodo's shareholders; and that he had recused himself from voting on the transaction as a director of Rodo.

California does not have an implied consent statute similar to Del. Code tit. 10, § 3114.  However, Professor Eric A. Chiappinelli has argued that Delaware's statute is unconstitutional.  See The Myth of Director Consent: After Shaffer, Beyond Nicastro, 37 Del. J. Corp. L. 783 (2013).