No. CV 10 6011812S
February 15, 2011
MEMORANDUM OF CLARIFICATION RE MOTION TO DISMISS
On June 8, 2010, the plaintiffs, Kenneth Anderson, Louellen Anderson and Patrick Healy, stockholders, filed a one-count complaint against the defendant, The Children's Corner, Inc. (Corporation), a Delaware Corporation with its principal place of business in Ridgefield, Connecticut. The plaintiffs allege that the satisfaction of their written demand to inspect the records of the Corporation pursuant to Delaware Code Ann. title 8, § 220 (2010) was contingent on the execution of a confidentiality and non-disclosure agreement. The Corporation subsequently refused to accept a confidentiality agreement proposed by the plaintiffs and refused to allow the inspection of the records. Consequently, the plaintiffs allege that the defendant has violated § 220.
On July 13, 2010, the defendant filed a motion to dismiss for lack of subject matter jurisdiction on the ground that § 220 vests exclusive jurisdiction to decide controversies under the statute to the Delaware Court of Chancery. The plaintiffs filed an objection on August 3, 2010. The matter was heard at short calendar on October 12, 2010. On December 22, 2010, the court denied the defendant's motion to dismiss. On January 10, 2011, the defendant filed a motion for clarification, which was docketed on January 24, 2011. The plaintiffs did not object to this motion. The court finds that the Connecticut Superior Court does have subject matter jurisdiction over the complaint and, therefore, the defendant's motion to dismiss was properly denied.
"A motion to dismiss . . . properly attacks the jurisdiction of the court, essentially asserting that the plaintiff cannot as a matter of law and fact state a cause of action that should be heard by the court . . . A motion to dismiss tests, inter alia, whether, on the facts of the record, the court is without jurisdiction." (Internal quotation marks omitted.) Caruso v. Bridgeport, 285 Conn. 618, 627, 941 A.2d 266 (2008). "The motion to dismiss shall be used to assert (1) lack of jurisdiction over the subject matter, (2) lack of jurisdiction over the person, (3) improper venue, (4) insufficiency of process, and (5) insufficiency of service and process. This motion shall always be filed with a supporting memorandum of law, and where appropriate, with supporting affidavits as to facts not apparent on the record." Practice Book § 10-31(a). "[T]he question of subject matter jurisdiction, because it addresses the basic competency of the court, can be raised by any of the parties, or by the court sua sponte, at any time . . . Moreover, [t]he parties cannot confer subject matter jurisdiction on the court, either by waiver or by consent." (Internal quotation marks omitted.) New Hartford v. Connecticut Resources Recovery Authority, 291 Conn. 511, 518, 970 A.2d 583 (2009).
"[T]he plaintiff bears the burden of proving subject matter jurisdiction, whenever and however raised." (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. New London, 265 Conn. 423, 430 n. 12, 829 A.2d 801 (2003). "[I]t is the burden of the party who seeks the exercise of jurisdiction in his favor . . . clearly to allege facts demonstrating that he is a proper party to invoke judicial resolution of the dispute . . . It is well established that, in determining whether a court has subject matter jurisdiction, every presumption favoring jurisdiction should be indulged." (Citation omitted; internal quotation marks omitted.) Wilcox v. Webster Ins. Co., 294 Conn. 206, 213-14, 982 A.2d 1053 (2009).
The defendant argues that the language of the Delaware statute explicitly states that the Delaware Court of Chancery is the only court with jurisdiction over the propriety of requests by stockholders to inspect the records of a corporation. Conceding that this is an issue of first impression, the defendant points to other jurisdictions that have declined to adjudicate a claim under § 220 and contends that Connecticut's jurisdictional principle reinforces its argument. The plaintiffs assert that the Connecticut's jurisdictional principle speaks only to the relationship between the Superior Court and other Connecticut courts and not to the relationship between Connecticut courts and foreign courts. The plaintiffs further assert that there is "no authority for the notion that a sister state's legislative body has the authority to divest the Superior Courts of Connecticut of jurisdiction over any matter over which Connecticut courts could otherwise exercise jurisdiction."
Whether the Connecticut Superior Court has subject matter jurisdiction over claim brought under § 220 is a case of first impression. Section 220(c) provides in relevant part: "If the corporation, or an officer or agent thereof, refuses to permit an inspection sought by a stockholder . . . within 5 business days after the demand has been made, the stockholder may apply to the Court of Chancery for an order to compel such inspection. The Court of Chancery is hereby vested with exclusive jurisdiction to determine whether or not the person seeking inspection is entitled to the inspection sought."
There is a split in authority in other jurisdictions as to whether the Delaware statute divests sister states of jurisdiction to hear an action under § 220. Virginia has interpreted the statute such that it cannot hear a claim brought under § 220. Foti v. Western Sizzlin Corp., 64 Va. Cir. 64 (2004). "This [Virginia] court has no jurisdiction to hear a claim under a Delaware statute when the Delaware legislature has conferred jurisdiction exclusively on its own courts and neither the Constitution of Virginia nor the General Assembly grants authority to supercede such restriction." New York, however, is of the opinion that Delaware could not divest jurisdiction of sister states. The Appellate Division of the Supreme Court of New York held that "a statute or rule of another state granting the courts of that state exclusive jurisdiction over certain controversies does not divest the New York courts of jurisdiction over such controversies." (Internal quotation marks omitted.) Sachs v. Adeli, 26 App. Div.3d 52, 55, 804 N.Y.S.2d 731 (2005).
Because of the split in authority, the court turns to the statutory history of § 220 for context to the meaning of "exclusive jurisdiction." Prior to 1967, when the relevant portion of § 220 was adopted by the Delaware General Assembly, the Court of Chancery did not have "jurisdiction to order an inspection by a stockholder of corporate books and records as a matter of independent and primary relief." Perrott v. United States Banking Corporation, 53 F.Sup. 953, 957 (1944); State v. Standard Oil Company of Kansas, 41 Del. 172, 177-78, 18 A.2d 235 (Del.Super.Ct. 1941); Parrish v. Commonwealth Trust, 21 Del.Ch. 121, 181 A. 658, 659 (Del.Ch. 1935); Delaware Corporation Law Revision Committee, Memorandum, April 27, 1965. It could only order the production of records "incidentally, where it appears that the information . . . will be of material and relevant assistance in support of any allegation of the bill of complaint or issue submitted by the litigation." State v. Standard Oil Company of Kansas, supra, 178. Thus, the power to order an inspection was split between two trial-level courts: the Delaware Superior Court and the Court of Chancery. In the drafting of § 220, the Delaware Corporation Law Revision committee, tasked by the Delaware Assembly in 1963 to rewrite Delaware's corporation law, explicitly named the Court of Chancery so matters could be resolved expeditiously by one trial-level court. Delaware Corporation Law Revision Committee, Memorandum, April 27, 1965; 1 R. Balotti J. Finkelstein, The Delaware Law of Corporations Business Organizations (3d Ed. 2007 Sup.) § 7.42, p. 7-84; 1 R. Ward, Jr., E. Welch and A. Turezyn, Folk on the Delaware General Corporation Law (4th Ed. 1998) § 220.2, p. GCL-VII-146.
Turning to the present case, the language of § 220 states that a stockholder who is refused inspection " may apply to the Court of Chancery for an order to compel such inspection." (Emphasis added.) Though the statute also states that "the Court of Chancery is hereby vested with exclusive jurisdiction," in light of the statutory history of the creation of that language, the court declines to find that the Delaware legislature was divesting sister states with jurisdiction to hear a claim under the statute. Rather, the legislature was seeking to address the relationship between the state's two trial-level courts. Moreover, unlike in Virginia where subject matter jurisdiction may only be conferred on the courts by the constitution or general assembly; Foti v. Western Sizzlin Corp., supra, 64 Va. Cir. 64; the jurisdictional principle of Connecticut presumes that the Superior Court has jurisdiction. Figueroa v. CS Ball Bearing, 237 Conn. 1, 10, 675 A.2d 845 (1996); See State ex rel. Morris v. Bulkeley, 61 Conn. 287, 374, 23 A. 186 (1891) (holding that "[t]he Superior Court of this state as a court of law is a court of general jurisdiction. It has jurisdiction of all matters expressly committed to it and of all others cognizable by any law court of which the exclusive jurisdiction is not given to some other court. The fact that no other court has exclusive jurisdiction in any matter is sufficient to give the Superior Court jurisdiction over that matter"). Any divestiture of jurisdiction is expressed only in reference to other Connecticut courts, not sister states. See General Statutes § 51-164s ("[t]he Superior Court shall be the sole court of original jurisdiction for all causes of action, except such actions over which the courts of probate have original jurisdiction, as provided by statute"); Figueroa v. CS Ball Bearing, supra, 237 Conn. 10-11 (comparing the difference in jurisdiction between the workers' compensation commission and the Superior Court); Carten v. Carten, 153 Conn. 603, 612-13, 219 A.2d 711 (1966) (analyzing the limits of jurisdiction between the Court of Common Pleas and the Superior Court); Walkinshaw v. O'Brien, 130 Conn. 122, 133, 32 A.2d 547 (1943) ("the Superior Court . . . has general jurisdiction, civil or criminal, in all cases not placed by our statutes within the jurisdiction of some other court").
Considering the language and history of the Delaware statute, as well as the reasoning of other jurisdictions and in light of Connecticut's jurisdictional principles, the court finds that the Connecticut Superior Court does have subject matter jurisdiction over this complaint and the defendant's motion to dismiss was denied accordingly on December 22, 2010.