In an opinion issued just after Christmas, Vice Chancellor J. Travis Laster ruled that a derivative lawsuit may proceed against the directors and officers of Fox Corporation. The plaintiffs are claiming that the directors and senior officers decided to violate the law by having Fox News defame Dominion and Smartmatic, a voting machine manufacturer and author of software. In 2023, Fox settled with Dominion for $787.5 million while Smartmatic's case against fox is still pending. The Vice Chancellor's decision is not a ruling on the merits of the plaintiffs' claims, but he did find that Rupert Murdoch faces a "substantial risk of liability" with respect to the Count I of the complaint - that he "acted in bad faith by causing Fox News to pursue 'a tortious business model of propagating factually unfounded, defamatory conspiracy theories, without institutionalized policies of fact-checking, retractions, or assessment of defamation risk.'"
I am wondering how Rupert Murdoch can be sued in the Delaware Court of Chancery. Fox Corporation is, of course, a Delaware corporation, but what establishes Delaware's personal jurisdiction over Rupert Murdoch, an individual? Those familiar with Delaware law will undoubtedly point to Delaware's "deemed consent" statute and note that Mr. Murdoch is both a director and officer of Fox Corporation. Del. Code tit. 10, § 3114. Some, however, have questioned the constitutionality of that statute. See E. Chiappinelli, The Myth of Director Consent: After Shaffer, Beyond Nicastro, 37 Del. J. Corp. L. 783 (2013).
Some may question whether it is simply too late to question the constitutionality of Section 3114 since it has been on Delaware's books since 1977 (officers were added effective in January 2004, Act of June 30, 2003, ch. 83). However, it should be remembered that Section 3114 was enacted shortly after the United States Supreme Court had found Delaware's prior sequestration statute (former tit. 10, § 366) unconstitutional, even though that statute had been in effect for a half century. Shaffer v. Heitner, 433 US 186 (1977).
Others may point out that the Delaware Supreme Court has found that Section 3114 is not facially unconstitutional. Hazout v. Tsang Mun Ting, 134 A.3d 274 (Del. 2016). It should be remembered, however, that in Shaffer the U.S. Supreme Court reversed the decision of the Delaware Supreme Court upholding the constitutionality of former Section 366. Greyhound Corp. v. Heitner, 361 A. 2d 225 (1976).
I do not know Mr. Murdoch's personal circumstances and it is possible that he may have other contacts with Delaware to support personal jurisdiction. Previously, lawyers have wanted to litigate in Delaware's courts and therefore would not be inclined to raise jurisdictional challenges. However, recent decisions by the Court of Chancery may lead counsel to challenge the constitutionality of Delaware's "deemed consent" statute in the federal courts.
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