Holding Several Auction Sales in the State of Delaware Constitutes Sufficient Business Transaction to Bring the Corporate Seller within the Requirements of Subchapter XVI, Chapter 1, Title 8 of the Delaware Code

In Wier v. Fairfield Galleries, Inc., 377 A.2d 28 (Del. Ch. 1977), the Delaware Court of Chancery held that a corporation conducting several auction sales in Delaware can be said to have engaged in sufficient business transactions to fall within the requirements of Del. Code Ann. tit. 8, § 371(b).  

In this case, the Plaintiff brought an action to permanently enjoin two corporate defendants and three of the corporate officers from transacting business in the State of Delaware.  The Plaintiffs alleged that the corporate defendants and its officers violated 8 Del.C. § 371(b).  The Complaint filed by the Plaintiff alleged that defendant Fairfield Galleries, Inc. is doing business in Delaware by being engaged in the auction sale of jewelry in New Castle County.  And defendant, Midland Park Auction Galleries, Inc. is doing business in the state by being engaged in the auction sale of jewelry and oriental rugs in New Castle County.   The corporations and their officers filed motions to dismiss the complaint.

The Defendants contended that they have not done business in the State and cited to cases such as Crowell Corp. v. Topkis Construction Co., 267 A.2d 613 (Del.Super. 1970); Sinwellan Corp. v. Farmers Bank of Delaware, 345 A.2d 430 (Del.Super. 1975), and Klein v. Sunbeam Corp., 47 Del. 526, 8 Terry 526, 94 A.2d 385 (Del.Supr. 1952) to support their contention. Id. at 32.   

The Sinwellan case involved a foreign corporation which had not complied with 8 Del.C. § 383 (actions by and against foreign corporations). Id.  The corporation, however, conducted only limited activities in Delaware. Id. The Court of Chancery of Delaware held that the "doing business" test under 8 Del.C. § 383 is stricter than the "doing business" test under 8 Del.C. § 382. Id. The Court noted that, in Sinwellan, the corporation’s major purpose was operating a lodge in Maryland and its activities in Delaware were only incidental to its major purpose. Id. Sinwellan was therefore permitted to bring its action in Delaware courts. Id.

The Court found that Sinwellan was not a controlling case here.  In the case at hand, Defendants were alleged to be engaged in conducting jewelry auction in Delaware, their primary business purpose, without first qualifying to do business in Delaware pursuant to the provisions of 8 Del.C. § 382. Id.

The Court stated that, in the Klein case, the Delaware Supreme Court said:

The question of what constitutes "doing business" in a state other than that of incorporation has been passed upon repeatedly by the federal courts. The process of judicial decision has culminated in International Shoe Co. v. Washington, 326 U.S. 310, 66 S. Ct. 154, 90 L. Ed. 95 which laid down the rule that a foreign corporation is doing business in a state sufficiently to constitute corporate presence in that state when the business done amounts to solicitation of business with some additional evidence of business activity within the confines of the state. Largely upon the authority of the International Shoe Co. case, the court below denied the defendant's motion to quash the service of process.
Id.

The Court stated that, from the Exhibits attached to the Complaint and Amended Complaint it can be assumed that the corporate defendants, or either of them, conducted a series of auctions in Delaware and leased premises to conduct auctions. Id.  They also advertised the auction extensively. Id.  And at the auction they solicited bids from the public on various jewelry items. Id.

The Court held that the test established by International Shoe Co. v. Washington, supra, for doing business was probably met, even if defendants conducted a single auction because on that one occasion numerous bids were solicited from public. Id.  In this case, the Plaintiff alleged that defendants conducted several auction sessions. Id.  Therefore, the criteria in International Shoe Co. have been easily met. Id.

The Court found that the Plaintiff’s complaint, if true, adequately set forth facts to show that the corporate defendants were doing sufficient business transactions in Delaware to bring them under 8 Del.C. § 371(b) requirements. Id. Plaintiff's well plead allegations are to be accepted as true for the purposes of defendants' motions. Id. at 33.  

The Court therefore held that the Plaintiff’s Complaint will not be dismissed as to the corporate defendants at this time. Id.