Delaware Chancery Court Asserts Personal Jurisdiction over Third Party Defendants in Connection with Contribution Sought for the Advancement of Legal Fees and Costs
By Annette Becker and Sophia Lee Shin
In Konstantino v. AngioScore, Inc. v. Quattro Vascular PTE Ltd, et al., the Delaware Court of Chancery reviewed a motion to dismiss filed by three Singapore entity defendants seeking dismissal of a third party claim brought by AngioScore, Inc. (“AngioScore”) for lack of personal jurisdiction and by the Singapore entity defendants and a Delaware entity defendant for failure to state a claim for contribution and tortious interference with contract in connection with the manufacture and sale of a competing product. The Court of Chancery denied the third party defendants’ motion in part, holding that the Court had personal jurisdiction over the three Singapore entity defendants under the conspiracy theory of jurisdiction, and that AngioScore stated a claim for contribution from all of the third party defendants, and granted the motion in part, holding that AngioScore had not stated a claim for tortious interference with contract.
In Konstantino, Eitan Konstantino (“Konstantino”) brought a suit in Delaware Chancery Court seeking the advancement of fees and expenses in connection with a lawsuit brought in the District Court for the Northern District of California (the “Federal Lawsuit”) by AngieScore against Konstantino for breach of fiduciary duties for usurping a corporate opportunity of AngioScore when he developed a balloon catheter device (the “Chocolate Device”) for his own benefit through a group of affiliated competitor companies while serving as a director of AngioScore and not offering the opportunity to AngioScore. AngioScore develops, manufactures, and markets the AngioSculpt Scoring Balloon Catheter (“AngioSculpt”) for both coronary and peripheral interventional markets. Konstantino was the principal inventor of AngioSculpt. The Court of Chancery granted summary judgment in Konstantino’s favor, ordering advancement from AngioScore in accordance with an indemnification agreement among the parties (the “AngioScore Agreement”). AngioScore filed a counterclaim against Konstantino and a third party claim for contribution and tortious interference with contract against four entities that comprise a corporate family that manufactures and sells the Chocolate Device (the “Third Party Defendants”). One entity was incorporated in Delaware with the other three incorporated in Singapore.
The Chancery Court denied the motion to dismiss brought by the Third Party Defendants incorporated in Singapore, holding that AngioScore successfully made a prima facie showing that such Third Party Defendants are subject to personal jurisdiction in Delaware based on the Instituto Bancario factors of the conspiracy theory of jurisdiction (namely that a conspiracy exists, the defendants are members of the conspiracy, that a substantial act or substantial effect in furtherance of the conspiracy occurred in Delaware, the defendant knew or had reason to know of the act in the forum state, and the act was a direct and foreseeable result of the conduct in furtherance of the conspiracy). The Chancery Court held that since Konstantino was found in the Federal Lawsuit to have breached his fiduciary duties to AngioScore by creating the Chocolate Device for the benefit of the Third Party Defendants, and each of the Third Party Defendants was involved in the manufacturing and sale process of the Chocolate Device, the Third Party Defendants either aided and abetted this breach, or were liable as successors in interest to the liabilities Konstantino incurred in the Federal Lawsuit as a result of such breach. In addition, since Konstantino was the CEO of each of the Third Party Defendants and was aware of the efforts to sell the Chocolate Device in Delaware, his knowledge is imputed to each of the Third Party Defendants. Further, the Chancery Court found that it was foreseeable that the sales efforts in the United States would include Delaware.
The Chancery Court denied the Third Party Defendants’ motion to dismiss AngioScore’s claims regarding contribution on the grounds that AngioScore had failed to state a claim for relief. AngioScore sought contribution from the Third Party Defendants for the advancement of expenses in connection with the Federal Lawsuit. The Chancery Court applied the Chamison test, which requires that a party seeking contribution must show that the other insurer’s liability is concurrent, benefits the same insured, and insures the same risk. The parties disputed whether the contribution sought was with respect to the “same risk.” Indemnification agreements executed between Konstantino and certain of the Third Party Defendants (the “Third Party Agreements”) provide for advancement of costs and expenses incurred by a director when serving in such role at the request of the entity for which he or she serves. Although Konstantino was sued due to his status as a director of AngioScore, he also served as a director and officer of the Third Party Defendants. The Chancery Court held that AngioScore could conceivably show the required nexus between the subject matter of the Federal Lawsuit and Konstantino’s actions as a director and officer of the Third Party Defendants, and advancement rights would be triggered under Third Party Agreements.
The Chancery Court dismissed without prejudice AngioScore’s claim for tortious interference with the performance of Konstantino’s obligations under the AngioScore Agreement. The Chancery Court held that AngioScore failed to offer facts that could show that an intentional act taken by any of the Third Party Defendants was a significant factor in causing the breach.
Konstantino v. AngioScore, Inc. v. Quattro Vascular PTE Ltd, et al., C.A. No. 9681-CB (Del. Ch. October 9, 2015) (Bouchard, C.)