IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
DLAYAL HOLDINGS, INC., a Delaware corporation, Plaintiff, v. C.A. No. 2020-1067-LWW MARWAN AL-BAWARDI,
Defendant. MARWAN ALBAWARDI,
Third Party Plaintiff,
v.
RODGER GRACEY, BETTY GRACEY and MARNIE GRACEY,
Third Party Defendants. DLAYAL HOLDINGS, INC., a Delaware corporation, Plaintiff, v. C.A. No. 2020-1070-LWW RODGER GRACEY, BETTY GRACEY and MARNIE GRACEY, (COORDINATED) Defendant.
MEMORANDUM OPINION
Date Submitted: September 28, 2021 Date Decided: December 27, 2021
Lisa Zwally Brown and Corinne R. Moini, GREENBERG TRAURIG, LLP, Wilmington, Delaware; Counsel for Plaintiff Dlayal Holdings, Inc. Daniel K. Astin, CIARDI CIARDI & ASTIN, Wilmington, Delaware; Albert A. Ciardi and Walter W. Gouldsbury, CIARDI CIARDI & ASTIN, Philadelphia, Pennsylvania; Marc Litt and Evan Weintraub, WACHTEL MISSRY LLP; New York, New York; Counsel for Third-Party Plaintiff Marwan Albawardi
Sidney S. Liebesman and Katelyn M. Crawford, FOX ROTHSCHILD LLP, Wilmington, Delaware; Justin P. Phelps, GIBSON WATSON MARINO LLC, Wichita, Kansas; Counsel for Defendants and Third-Party Defendants Rodger Gracey, Betty Gracey, and Marnie Gracey
WILL, Vice Chancellor This decision resolves a question of personal jurisdiction regarding three
Kansas residents who are the defendants and third-party defendants in two
coordinated actions. The parties’ disputes largely concern a Delaware limited
liability company formed for the purposes of managing real property in several
states. None of those properties are in Delaware. The properties in question are two
ranches in Kansas that were managed by the defendants.
The actions in this court cannot proceed against the three Kansas residents.
The plaintiffs assert that jurisdiction is proper because the defendants should be
considered acting managers of the entity. But the defendants merely oversaw the
day-to-day operations of the ranches, which is not equivalent to managing the entity
that owned those properties. I therefore grant the defendants’ motions to dismiss
pursuant to Court of Chancery Rule 12(b)(2).
I. BACKGROUND Unless otherwise noted, the following facts are based on the Verified
Complaints filed by plaintiff Dlayal Holdings, Inc. in two coordinated actions and
the Verified Third Party Complaint filed by plaintiff Marwan Albawardi, along with
the documents they incorporate by reference.1 Additional facts recited are not
1 For clarity, docket references in this decision are designated as “Albawardi” for the matter C.A. No. 2020-1067-LWW and “Gracey” for the matter C.A. No. 2020-1070-LWW. Verified Compl. (“Albawardi Compl.”) (Albawardi Dkt. 1); Verified Compl. (“Gracey Compl.”) (Gracey Dkt. 1); Verified Third Party Complaint (Albawardi Dkt. 6); see Winshall v. Viacom Int’l, Inc., 76 A.3d 808, 818 (Del. 2013) (“[A] plaintiff may not reference certain documents outside the complaint and at the same time prevent the court 1 subject to reasonable dispute or are subject to judicial notice.2 In deciding the motion
to dismiss brought by defendants and third-party defendants Rodger Gracey, Betty
Gracey, and Marnie Gracey pursuant to Court of Chancery Rule 12(b)(2), this court
will “consider the pleadings, affidavits and any discovery of record.”3
A. Oasis and Its Formal Managers
Oasis Direct Seven LLC (“Oasis”), a Delaware limited liability company, was
formed in 1998 “primarily to own and manage real property in various states.”4
Oasis is wholly owned by its sole member plaintiff Dlayal Holdings, Inc., a real
estate holding and management company.5 Defendant and third-party plaintiff
Albawardi was designated as the manager of Oasis at its inception and held the role
until 2001 when he formally resigned.6 Albawardi remained involved in the
from considering those documents’ actual terms.” (quoting Fletcher Int’l, Ltd. v. ION Geophysical Corp., 2011 WL 1167088, at *3 n.17 (Del. Ch. Mar. 29, 2011))); Freedman v. Adams, 2012 WL 1345638, at *5 (Del. Ch. Mar. 30, 2012) (“When a plaintiff expressly refers to and heavily relies upon documents in her complaint, these documents are considered to be incorporated by reference into the complaint . . . .”). 2 See, e.g., In re Books–A–Million, Inc. S’holders Litig., 2016 WL 5874974, at *1 (Del. Ch. Oct. 10, 2016) (explaining that the court may take judicial notice of “facts that are not subject to reasonable dispute” (citing In re Gen. Motors (Hughes) S’holder Litig., 897 A.2d 162, 170 (Del. 2006))); Lima Delta Co. v. Glob. Aerospace, Inc., 2017 WL 4461423, at *4 (Del. Super. Oct. 5, 2017) (explaining that dockets, pleadings, and transcripts from a foreign action are subject to judicial notice). 3 Ryan v. Gifford, 935 A.2d 258, 265 (Del. Ch. 2007) (citing Cornerstone Techs., LLC v. Conrad, 2003 WL 1787959, at *3 (Del. Ch. Mar. 31, 2003)). 4 Gracey Compl. ¶ 10; see also id. ¶ 7. 5 Id. ¶ 10. 6 Albawardi Compl. ¶¶ 10, 14.
2 management of Oasis.7 Until 2019, his written consent was required for all material
actions taken by the formal managers of Oasis.8
Multiple individuals served as managers of Oasis following Albawardi’s
resignation. Paul Aiken was formally designated as Oasis’s manager in its Second
Restatement of Operating Agreement and held the role from 2001 to 2004.9 Ezra
Swartwood served as manager from 2004 to 2011.10 And Izzat Tawil held the
position from 2011 to 2020.11
B. The Kansas Ranches
In late 2000 or early 2001, Albawardi, as manager of Oasis, signed a Power
of Attorney (“POA”) granting Rodger Gracey the authority to purchase a ranch in
Kansas (the “First Ranch”) on Oasis’s behalf.12 Rodger Gracey managed the First
Ranch from 2001 through June 2019.13 His spouse, Betty Gracey, “handled the
accounting for the Ranch and was active in management decisions.”14 Marnie
7 Id. ¶ 14. 8 Id. ¶ 15; Albawardi Compl. Ex. A. § 6.2 (Albawardi Dkt. 3). 9 Albawardi Compl. ¶ 16; Albawardi Compl. Ex. A § 6.1. 10 Albawardi Compl. ¶ 16. 11 Id. 12 Gracey Compl. ¶ 14. 13 Id. ¶¶ 15-16. 14 Id. ¶ 15.
3 Gracey, their daughter (who was previously married to Albawardi), also worked at
the Ranch.15 The Graceys were then, and remain, Kansas residents.16
In subsequent years, Oasis’s managers executed additional POAs that granted
Rodger Gracey continued authority to manage the First Ranch. In 2005, then-
manager Swartwood executed a POA permitting Rodger Gracey to perform “[a]ny
and all activities, duties and responsibilities related to running, maintaining,
improving, or administering the affairs of [the First Ranch]” from February 7, 2005
to February 1, 2008.17 In 2011, then-manager Tawil executed a second POA
appointing Rodger Gracey as property administrator and manager of the First
Ranch.18 Rodger Gracey was authorized to “sign any contract, agreement, lease,
license or any other document required for the purpose of administering and
managing the [First Ranch]” but was not authorized “to sell or permanently
encumber the [First Ranch].”19
On November 13, 2015, Owl Creek Ranch LLC was formed as a Kansas
limited liability company with Oasis as its sole member.20 Rodger Gracey was
15 Id. 16 Id. ¶¶ 4-6. 17 Id. ¶ 16; Gracey Compl. Ex. C at 1 (Gracey Dkt. 3). 18 Gracey Compl. ¶ 17. 19 Id.; Gracey Compl. Ex. D at 3. 20 See Gracey Compl. ¶ 4; Gracey Defs.’ Opening Br. Ex. 4 at Ex. B (Gracey Dkt. 13).
4 appointed as the manager of Owl Creek, which purchased a second property adjacent
to the First Ranch in Kansas (the “Second Ranch” and, with the First Ranch, the
“Ranches”).21 Marnie Gracey assisted with the purchase of the Second Ranch.22
Betty Gracey acted as an accountant and bookkeeper for the Ranches.23
In 2019, Oasis informed the Graceys that it planned to sell the Ranches.24
Upon reviewing the books and records of the First Ranch in preparation for the sale,
Oasis and Dlayal discovered accounting irregularities.25 The Graceys had allegedly
received substantial grants from government programs but failed to account for or
remit the funds to Oasis.26 The Graceys also purportedly misappropriated company
funds, made unauthorized purchases, and incurred substantial debt in Oasis’s name
without authorization.27 Oasis revoked the POA authorizing Rodger Gracey to
manage the First Ranch.28
21 See Gracey Compl. ¶¶ 4, 18; Gracey Defs.’ Opening Br. Ex. 4 at Exs. B, O, P. 22 See Gracey Compl. ¶ 6; Gracey Defs.’ Opening Br. Ex. 4 at Exs. O, P. 23 Gracey Compl. ¶ 5. 24 Id. ¶ 18. 25 Id. ¶¶ 18, 23. 26 Id. ¶ 19; Albawardi Compl. ¶ 21. 27 Gracey Compl. ¶¶ 20-21; Albawardi Compl. ¶¶ 22-23. 28 Gracey Compl. ¶ 22; Albawardi Compl. ¶ 27.
5 C. This Litigation
Litigation in this court commenced on December 17, 2020 when plaintiff
Dlayal filed two separate complaints: one against Albawardi (the “First Action”)29
and another against the Graceys (the “Second Action”).30 The First Action advances
one count for breach of fiduciary duty.31 The Second Action seeks a declaration
from this court that Dlayal is the sole member of Oasis.32 On January 27, 2021, the
Graceys moved to dismiss the Second Action.33
On January 29, 2021, Albawardi filed a third-party complaint against the
Graceys in the First Action, seeking indemnification for the breach of fiduciary duty
claim filed against him.34 On April 5, 2021, the Graceys moved to dismiss the
third-party complaint in the First Action.35
II. LEGAL ANALYSIS
The Graceys have moved to dismiss Albawardi’s third-party complaint in the
First Action and Dlayal’s complaint in the Second Action for lack of personal
29 Albawardi Dkt. 1. 30 Gracey Dkt. 1. A separate but related proceeding among the parties is ongoing in the Sixteenth Judicial District Court, Comanche County, Kansas. See Gracey Compl. ¶¶ 23-24; Gracey Defs.’ Opening Br. Exs. 4-16. 31 Albawardi Compl. ¶¶ 29-32. 32 Gracey Compl. ¶¶ 29-35. 33 Gracey Dkt. 6. 34 Albawardi Dkt. 6 ¶¶ 23-26. 35 Albawardi Dkt. 10.
6 jurisdiction under Court of Chancery Rule 12(b)(2) and because this court is an
improper venue.36 The Graceys also seek dismissal of the Second Action pursuant
to Court of Chancery Rule 12(b)(6) for failure to state a claim upon which relief can
be granted. For the reasons discussed below, I conclude that this court lacks personal
jurisdiction over the Graceys. I therefore do not address the Graceys’ remaining
arguments.37
Because a motion under Rule 12(b)(2) presents factual and legal questions, a
court cannot grant it “simply by accepting the well pleaded allegations of the
complaint as true, because the pleader has no obligation to plead facts that show the
amenability of the defendant to service of process.”38 Thus, “[w]hen a defendant
moves to dismiss a complaint pursuant to Court of Chancery Rule 12(b)(2), the
plaintiff bears the burden of showing a basis for the court’s exercise of jurisdiction
over the defendant.”39 “If, as here, no evidentiary hearing has been held, plaintiffs
Defs.’ Opening Br. 1. Presumably, the motions are also brought under Court of Chancery 36
Rule 12(b)(3), though the Graceys’ briefs do not say so explicitly. 37 Dlayal maintains that, even if the court lacks personal jurisdiction over the Graceys, dismissal of the Second Action is unwarranted because the Graceys are not necessary parties and it can pursue the action in rem. See Pl.’s Answering Br. 7 (Gracey Dkt. 16). Presently, however, Dlayal’s declaratory judgment action is not brought in rem but against the Graceys. I decline to opine on whether or how Dlayal could re-file its complaint. 38 Ruggiero v. FuturaGene, plc., 948 A.2d 1124, 1131 (Del. Ch. 2008) (quoting Hart Hldg. Co., Inc. v. Drexel Burnham Lambert, Inc., 593 A.2d 535, 538 (Del. Ch. 1991)). 39 Ryan, 935 A.2d at 265.
7 need only make a prima facie showing of personal jurisdiction and the record is
construed in the light most favorable to the plaintiff.”40
Delaware courts resolve questions of jurisdiction using a two-step analysis.41
First, the court must “determine that service of process is authorized by statute.”42
Second, the defendant must have certain minimum contacts with Delaware such that
the exercise of personal jurisdiction “does not offend traditional notions of fair play
and substantial justice.”43
Both Dlayal and Albawardi identify 6 Del. C. § 18-109(a) as the statutory
basis for exercising personal jurisdiction over the Graceys.44 “The Delaware
Limited Liability Company Act (the ‘LLC Act’) authorizes service of process on the
managers of limited liability companies formed under the laws of this State.”45
Section 18-109(a) states, in relevant part:
A manager . . . of a limited liability company may be served with process in the manner prescribed in this section in all civil actions or proceedings brought in the State of Delaware involving or relating to
40 Id. (internal citation omitted). 41 Id. 42 Id. 43 Matthew v. Fläkt Woods Gp. SA, 56 A.3d 1023, 1027 (Del. 2012) (quoting Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). 44 See Pl.’s Answering Br. 8-9; Third-Party Pl.’s Answering Br. 6-7 (Gracey Dkt. 18). 45 In re Mobilactive Media, LLC, 2013 WL 297950, at *29 (Del. Ch. Jan. 25, 2013); see Total Hldgs. USA, Inc. v. Curran Composites, Inc., 999 A.2d 873, 885 n.39 (Del. Ch. 2009) (noting that Section “18–109 of the LLC statute [] provides a basis for specific, not general, personal jurisdiction over defendants”).
8 the business of the limited liability company or a violation by the manager . . . of a duty to the limited liability company or any member of the limited liability company, whether or not the manager . . . is a manager . . . at the time suit is commenced.
A manager’s . . . serving as such constitutes such person’s consent to the appointment of the registered agent of the limited liability company . . . as such person’s agent upon whom service of process may be made as provided in this section.46
The term “manager” as defined in Section 18-109(a) includes both formal
managers and acting managers.47 A formal manager is designated as such in a
limited liability company’s governing documents.48 An acting manager is not
formally designated as a manager in the entity’s governing documents but
“participates materially in the management of the limited liability company.”49
Dlayal and Albawardi concede that none of the Graceys were formal managers of
Oasis.50 They contend that the Graceys should be viewed as acting managers of
Oasis for purposes of Section 18-109(a) due to their participation in the management
of the Ranches.51
46 6 Del. C. § 18-109(a). 47 Metro Storage Int’l LLC v. Harron, 2019 WL 3282613, at *5-6 (Del. Ch. July 19, 2019); see 6 Del. C. § 18-109(a). 48 See 6 Del. C. § 18-109(a); see also 6 Del. C. § 18-101(12). 49 6 Del. C. § 18-109(a). 50 Pl.’s Answering Br. 10-11; Third-Party Pl.’s Answering Br. 8-9; see supra Section I.A (discussing Oasis’s formal managers). 51 See Pl.’s Answering Br. 8-13; Third-Party Pl.’s Answering Br. 6-12.
9 A. Material Participation in the Management of an LLC
Determining what qualifies as material participation for purposes of Section
18-109(a) presents a question of statutory interpretation. The principles of statutory
construction are “designed to ascertain and give effect to the intent of the legislators,
as expressed in the statute.”52 If the statutory language is unambiguous, the court
must “adhere to the plain meaning of the statutory language.”53
“Section 18-109(a)(ii) permits a plaintiff to serve process on a person who
‘participates materially in the management of the limited liability company.’”54 That
language is not susceptible to multiple interpretations and a literal reading would not
“lead to an unreasonable or absurd result not contemplated by the legislature.”55
“[T]he plain meaning of the statutory language” therefore controls.56
The plain meaning of the phrase “participates materially” has been interpreted
as “taking part in or playing a role in an activity or event. When modifying the word
52 Chase Alexa, LLC v. Kent Cty. Levy Ct., 991 A.2d 1148, 1151 (Del. 2010); see Dir. of Revenue v. CNA Hldgs., Inc., 818 A.2d 953, 957 (Del. 2003) (“The goal of statutory construction is to ‘ascertain and give effect to the intent of the legislature.’” (quoting Ingram v. Thorpe, 747 A.2d 545, 547 (Del. 2000))). 53 Hazout v. Tsang Mun Ting, 134 A.3d 274, 286 (Del. 2016); see Eliason v. Englehart, 733 A.2d 944, 946 (Del. 1999) (“If a statute is unambiguous, there is no need for judicial interpretation, and the plain meaning of the statutory language controls.”). 54 Metro Storage, 2019 WL 3282613, at *8 (quoting 6 Del. C. § 18-109(a)). 55 Dir. of Revenue, 818 A.2d at 957 (quoting Newtowne Vill. Serv. Corp. v. Newtowne Rd. Dev. Co., Inc., 772 A.2d 172, 175 (Del. 2001)). 56 Id. (quoting Eliason, 733 A.2d at 946).
10 ‘participate,’ the word ‘materially’ introduces a level of significance. It requires
meaningful participation, rather than minor participation.”57 Based on that
interpretation, Section 18-109(a) requires that an individual take a meaningful part
or play a significant role in management of a limited liability company in order to
qualify as an acting manager. This court has found that a defendant participated
materially in the management of a limited liability company for purposes of Section
18-109 when the defendant: (1) served as an officer of the limited liability company
and ran its day-to-day operations, (2) performed actions within the exclusive
purview of a manager, or (3) conceded that he materially participated in the
management of the limited liability company in question.
In PT China LLC v. PT Korea LLC, the court exercised personal jurisdiction
over a third-party defendant who was named “as a Principle and key man” in a joint
venture between two limited liability companies and was responsible for developing
the joint venture’s investment opportunities.58 The defendant conceded that “he
57 Metro Storage, 2019 WL 3282613, at *8 (citing Participation, Black’s Law Dictionary (11th ed. 2019); Material, Black’s Law Dictionary (11th ed. 2019)); see also Lone Pine Res., LP v. Dickey, 2021 WL 2311954, at *7 (Del. Ch. June 7, 2021) (“The Metro Storage Court took a plain-language approach to Section 18-109 in light of the Delaware Supreme Court’s decision in Hazout . . . . This decision takes the same approach.”). 58 2010 WL 761145, at *5 n.25 (Del. Ch. Feb. 26, 2010).
11 participated materially in the management of [the two limited liability
companies].”59
In Phillips v. Hove, the defendant served as the president of a limited liability
company, took over the day-to-day operations of the company in all respects, and
filed a bankruptcy petition on its behalf.60 The court found that, because he
“effectively ran the business,” he satisfied the requirements of Section 18-109(a) and
consented to suit in Delaware.61
In In re Mobilactive Media, LLC, the court held that personal jurisdiction was
proper under the implied consent statute where a defendant directed a limited
liability company’s filing of an action seeking dissolution.62 The entity allegedly
had no employees at the time of the filing.63 Moreover, the court recognized that an
application for dissolution statutorily required that it be made “by or for a member
or manager.”64
In Metro Storage International LLC v. Harron, the defendant “served as the
president of [two limited liability companies], managed [their] day-to-day affairs,
59 Id. 60 2011 WL 4404034, at *9, *22, *24 (Del. Ch. Sept. 22, 2011). 61 Id. at *22. 62 2013 WL 297950, at *30 (Del. Ch. Jan. 25, 2013). 63 Id. 64 Id. (quoting 6 Del. C. § 18-802).
12 made decisions for the [companies], and only sought approval from the officially
designated manager for major issues like financial commitments.”65 Under a plain
language interpretation of Section 18-109(a)(ii), the court held that the defendant
was participating materially in the management of both companies.66
And in Lynch v. Gonzalez, the court found after trial that a preponderance of
the evidence demonstrated that a defendant acted as an entity’s manager under
Section 18-109(a) because the defendant “formally served as [the limited liability
company’s] President, controlled [its] management and business, and made the
ultimate decisions for the [limited liability company].”67
B. The Graceys’ Lack of Material Participation in the Management of Oasis The Complaints do not allege any such material participation in the
management of Oasis by the Graceys. The plaintiffs contend that Rodger Gracey
had a meaningful role in the management of Oasis by exercising his authority over
the Ranches from 2001 to 2019.68 They point out that Rodger Gracey was granted
multiple POAs appointing him as property administrator and manager of the First
65 2019 WL 3282613, at *11 (Del. Ch. July 19, 2019). 66 Id. 67 2020 WL 4381604, at *40 (Del. Ch. July 31, 2020). 68 Pl.’s Answering Br. 10-12; Third-Party Pl.’s Answering Br. 8-9; see supra Section I.B.
13 Ranch.69 The plaintiffs argue that these facts are analogous to those in Metro Storage
and Phillips, where the defendants were found to be acting managers.70
But there are key distinctions between the facts presented here and those at
issue in Metro Storage and Phillips. In both of those cases, the defendant served as
the president of the limited liability company and managed the day-to-day operations
of the entity.71 Rodger Gracey did not serve as an officer of Oasis. He is not alleged
to have overseen Oasis’s operations, participated in the management of its
investment portfolio, held decision-making authority over all of its assets, or
performed any actions within the exclusive purview of a manager. He was not even
consulted when Oasis decided to sell the Ranches. As the Complaints repeatedly
allege, Rodger Gracey simply managed the day-to-day operations of two of Oasis’s
Kansas assets: the First Ranch and Second Ranch.72 Overseeing the Ranches is not
69 Pl.’s Answering Br. 10; Third-Party Pl.’s Answering Br. 8-9. 70 Pl.’s Answering Br. 12-13; Third-Party Pl.’s Answering Br. 10-12. 71 See supra Section II.A. 72 Gracey Compl. ¶ 4 (alleging that Rodger Gracey “acted as a manager and agent of two ranches owned by Oasis”); id. ¶ 15 (alleging Rodger Gracey “was given the responsibility to manage the Ranch”); id. ¶ 17 (describing the POA as limited to the Indian Creek Ranch); Albawardi Compl. ¶ 4 (explaining that the Graceys were “responsible for the management, accounting and other work, respectively, for a property that Oasis purchased in Kansas known as the Indian Creek Ranch”); id. ¶ 10 (alleging that “Rodger [Gracey] was managing the day-to-day operations of the Ranch”); id. ¶ 20 (describing the POA as giving Rodger Gracey authority to engage in “any and all activities, duties and responsibilities related to running, maintain[ing], improving or administering the affairs of [the First Ranch]”); id. ¶ 21 (same); see Fla. R & D Fund Inv’rs, LLC v. Fla. BOCA/Deerfield R & D Inv’rs, LLC, 2013 WL 4734834, at *8 (Del. Ch. Aug. 30, 2013) (“The management of the underlying assets of an LLC is analytically distinct from the management of the LLC itself for the 14 equivalent to materially participating in the management of Oasis. Oasis did not
exist solely to manage the Ranches. It was, according to Dlayal, “formed . . .
primarily to own and manage real property in various states.”73
These facts are closer to those found in In Matter of Dissolution of Arctic
Ease, LLC.74 In Artic Ease, the limited liability company in question owned a
subsidiary.75 The defendant negotiated a distribution agreement on behalf of the
subsidiary, arranged bridge financing for the subsidiary, and marketed the
subsidiary’s products.76 The court held that “these allegations [were] not sufficient
to suggest that [the defendant] materially participated in management” of the limited
liability company.77 Although the court conducted its analysis under the control
overlay called into question by Vice Chancellor Laster in Metro Storage, the court
in Artic Ease nonetheless “reached a logical outcome on the facts, because the
purposes of Section 18-109(a)(ii).”); Wakley Ltd. v. Ensotran, LLC, 2014 WL 1116968, at *5 (D. Del. Mar. 18, 2014) (finding that the fact a defendant “assumed management over one of [a limited liability company’s] projects . . . fail[ed] to demonstrate the necessary control or decision-making role that has been found to satisfy the statutory standard for personal jurisdiction”). 73 Gracey Compl. ¶ 10 (emphasis added). Counsel for Dlayal represented that, during the relevant period, Oasis also owned properties in Colorado and Massachusetts. See Oct. 7, 2021 Letter (Gracey Dkt. 23). Rodger Gracey is not alleged to have been involved in the operations of or exercised authority over those properties. 74 2016 WL 7174668 (Del. Ch. Dec. 9, 2016). 75 Id. at *4. 76 Id. 77 Id. at *5.
15 allegations . . . do not appear to have supported jurisdiction under a plain-language
interpretation of the material-participation test.”78
Moreover, the POAs that granted Rodger Gracey the authority to administer
the First Ranch do not provide a basis to deem him a manager of Oasis.79 Under 6
Del. C. § 18-407, a manager may delegate any of her “rights, powers, or duties to
manage and control the business and affairs of the limited liability company.”80
Such a delegation “shall not . . . cause the person to whom any such rights, powers
and duties have been delegated to be a . . . manager . . . of the limited liability
company.”81
In short, Rodger Gracey did not participate materially in the management of
Oasis. His role was limited to managing the Ranches. He therefore cannot be
deemed a manager of Oasis as defined by Section 18-109 for purposes of personal
jurisdiction.
The plaintiffs’ arguments regarding jurisdiction over Betty and Marnie
Gracey are even more strained. Betty Gracey served as a bookkeeper for the
78 Metro Storage, 2019 WL 3282613, at *19; see also Arctic Ease, 2016 WL 7174668, at *5. 79 See Wakley, 2014 WL 1116968, at *6 (holding that, under Section 18-407, the court did “not have a statutory basis for personal jurisdiction” over defendants who had been delegated authority by a formal manager). 80 6 Del. C. § 18-407. 81 Id.
16 Ranches. Marnie Gracey worked at the First Ranch and assisted in the purchase of
the Second Ranch. There are no allegations that either Betty or Marnie Gracey
controlled Oasis’s management or business. The limited responsibilities they
allegedly had with regard to the Ranches cannot support an inference that Betty or
Marnie Gracie participated materially in the management of Oasis. They do not fall
within the definition of a manager for the purposes of Section 18-109 and cannot be
served on that basis.
Dlayal and Albawardi have therefore failed to identify a statutory basis for
exercising personal jurisdiction over the Graceys. No other basis for jurisdiction
over the Graceys is asserted.82
III. CONCLUSION
For the reasons described above, this court lacks personal jurisdiction over the
Graceys. Their motion to dismiss pursuant to Court of Chancery Rule 12(b)(2) is
granted. Dlayal’s Complaint in the Second Action and Albawardi’s Third-Party
Complaint in the First Action are dismissed in their entirety.
82 Because the plaintiffs have failed to allege a non-frivolous basis for personal jurisdiction, the court declines to order jurisdictional discovery. “[T]he decision to grant jurisdictional discovery is discretionary.” Neurvana Med., LLC v. Balt USA, LLC, 2019 WL 5092894, at *2 (Del. Ch. Oct. 10, 2019). “Before ordering personal jurisdiction discovery, there must be at least ‘some indication that this particular defendant is amenable to suit in this forum.’” Id. at *1 (quoting In re Am. Int’l Gp., Inc., 965 A.2d 763, 831 n.195 (Del. Ch. 2009)). There is no such indication here.