Nevada Supreme Court States That Directly Harming a Nevada Corporation Subjects Nonresident Officers and Directors to Suit in Nevada

By Jerry Carter.  The Nevada Supreme Court handed down a significant opinion in Consipio Holding, BV v. Carlberg, 128 Nev. Adv. Op. No. 43 (Aug. 9, 2012) (“Consipio“), regarding the circumstances under which nonresident officers and directors of a Nevada corporation can be sued in Nevada for injuring the Nevada corporation.  The Nevada Supreme Court reaffirmed that “[a] district court can exercise personal jurisdiction over nonresident officers and directors who directly harm a Nevada corporation.”  Officers or directors who directly harm a Nevada corporation are affirmatively directing conduct toward Nevada, and by doing so can be subject to personal jurisdiction even without a director consent statute. The Nevada Supreme Court stated:

“A corporation that is incorporated in Nevada is a Nevada citizen. Quigley v. C. P. R. R. Co., 11 Nev. 350, 357 (1876) (‘[A] corporation is a citizen of the state where it is created.’). When officers or directors directly harm a Nevada corporation, they are harming a Nevada citizen. By purposefully directing harm towards a Nevada citizen, officers and directors establish contacts with Nevada and ‘affirmatively direct[ ] conduct’ toward Nevada. Trump, 109 Nev. at 700, 857 P.2d at 748. Further, officers or directors ‘caus[e] important consequences’ in Nevada when they directly harm a Nevada corporation. See Jarstad, 92 Nev. at 387, 552 P.2d at 53. When a cause of action arises out of an officer’s or director’s purposeful contact with Nevada, a district court can exercise personal jurisdiction over that officer or director. See id.”

The Nevada Supreme Court also relied upon NRS 78.135(1), which expressly authorizes lawsuits “against the officers and directors of the corporation for violation of their authority.”  The Court stated:

“NRS 78.135(1) not only authorizes suits, but also provides notice to officers and directors that they are subject to derivative suits for violation of their authority. By providing this notice, NRS 78.135(1) provides an officer or director the understanding that by violating their authority as a Nevada corporation’s officer or director, they are subject to an action under Nevada’s laws in Nevada. Thus, NRS 78.135(1) not only authorizes lawsuits against officers and directors for violating their authority, but it supports a district court’s authority to exercise personal jurisdiction over officers and directors in such lawsuits.”

The Nevada Supreme Court agreed that “an individual’s position as a corporation’s director does not automatically subject that individual to jurisdiction in Nevada.”  Nevertheless, Nevada courts may exercise personal jurisdiction where “factual analysis” shows that the nonresident defendant directly harmed the Nevada corporation.  The Court noted that “after the district court determines that an officer or director directly harmed a Nevada corporation, it must also determine whether it is reasonable to exercise personal jurisdiction.”

The Northern Nevada Business Court Report recently commented on a Washoe County Business Court Order stating that it will decide a dispute regarding control of a Nevada corporation even though one of the parties to the dispute is a California resident.  That case did not involve the degree of factual analysis that seems to be contemplated in Consipio.  However, that case was different than Consipio in that the nonresident defendant aspired to control over the Nevada corporation while the defendants in Consipio were former officers and directors.  An individual who is trying to establish control over a Nevada corporation can reasonably be expected to come to Nevada to make his or her case.

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