Click to Chat

Nevada Courts Have Jurisdiction Over Nevada Corporate Officers & Directors

Posted by: on Mon, Sep 17, 2012

Share this post

Recently, the Nevada Supreme Court, in Consipio Holding, BV, et al. v. Carlberg, 128 Nev. Adv. Op. 43 (August 9, 2012), held that corporate officers and directors of Nevada corporations can be subject to jurisdiction in the State of Nevada – even if they have never visited the State of Nevada or done any business in Nevada of any kindif they take some action which is harmful to a Nevada corporation they are charged with governing.

The Consipio holding provides broad authority to Nevada courts to hear cases, particularly in the nature of shareholder derivative actions, against corporate officers and directors, where there is an allegation that the Nevada corporation was harmed by such officer or director’s actions.

The Nevada Supreme Court recognized that the exercise of specific, personal jurisdiction over a non-resident of Nevada generally requires a consideration of many factors, including principally, whether or not the defendant has purposefully availed itself of the privilege of acting in Nevada, and whether those activities have a substantial enough connection with Nevada that it is reasonable to exercise jurisdiction in the Nevada courts over that defendant. However, they also noted that, in this case, the corporation alleged to have suffered harmed, while incorporated in Nevada, had its principal place of business in Spain, and that all of the corporate officer and director defendants were citizens and residents of European nations. Indeed, of the defendants, only one had even recently visited Nevada, and others had visited the state years prior for purely personal reasons.

Nevertheless, the Nevada Supreme Court noted that in spite of these sparse connections to the State of Nevada, a corporation incorporated in Nevada is deemed to be a Nevada citizen. Hence, they concluded “[w]hen 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 . . . Further, officers or directors ‘cause important consequences’ in Nevada when they directly harm a Nevada corporation.” Consipio, 128 Nev. Adv. Op. 43, at p. 6 (emphasis supplied). In the Consipio case, the defendants were alleged to have financially harmed the Nevada corporation for the personal gain of the defendants, including by obtaining significant loans for the CEO and president of the corporation and entities that he controlled. Further, the officers and director defendants were alleged to have failed to demand repayment of the loans, and to have removed funds from the company.

As a result of all the foregoing, the Nevada Supreme Court held that – in spite of the fact that the Nevada corporation’s defendant officers and directors had not conducted business in Nevada, and had only minimal and distant contacts with Nevada – the fact that the entity they are alleged to have harmed was a Nevada corporation was enough for the court to decide that Nevada courts have jurisdiction to decide an action related to such alleged harm.

It is important to note that the Consipio decision was decided on the facts presented, and that the Nevada Supreme Court did not decide that all officers and directors of Nevada corporations would always be subject to jurisdiction in Nevada for any type of action. However, in the limited context of shareholder derivative actions, involving alleged harm to a Nevada corporation, it appears the Court has given broad jurisdiction to Nevada courts to hear and decide such matters.

About the Authors: The law firm of Albright, Stoddard, Warnick & Albright is an A-V Rated Nevada-based full-service law firm having attorneys licensed in Nevada, California and Utah. Our firm’s practice includes a strong emphasis on corporate and business law, including advising businesses from start-ups to well-established companies in the jurisdictions where we are licensed. Our litigation attorneys regularly litigate corporate law matters in Nevada state and federal courts.

Note: This article, and any other information you obtain at this website, is not offered as legal advice, nor should it be relied upon as such, nor is it a solicitation for legal services. Only a licensed attorney can advise you with respect to your specific legal needs. We welcome your contacting our firm to discuss such representation. Contacting us does not create an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established.

About the Authors: The law firm of Albright, Stoddard, Warnick & Albright is an A-V Rated Nevada-based full-service law firm having attorneys licensed in Nevada, California and Utah. Our firm’s practice includes a strong emphasis on personal injury accidents. Call us at 702-384-7111.

Note: This article, and any other information you obtain at this website, is not offered as legal advice, nor should it be relied upon as such, nor is it a solicitation for legal services. Only a licensed attorney can advise you with respect to your specific legal needs. We welcome your contacting our firm to discuss such representation. Contacting us does not create an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established.