In Otto Candies, LLC v KPMG LLP, a company allegedly defrauded its creditors and bondholders. The creditors and bondholders sued the Swiss accounting firm and its Delaware and Mexican member firms, which audited the relevant financial statements for negligent misrepresentation. The Swiss accounting firm and the Mexican member firm which were neither Delaware nor U.S.-based entities moved to dismiss for lack of personal jurisdiction.
The Court ruled that it had no personal jurisdiction over those foreign entities because the relevant audits did not occur in Delaware. It also held that Section 3104(c)(6) of the Delaware long-arm statute 10 Del. C., which gives the Court jurisdiction over nonresidents who contract to insure or act as surety for any agreement, among other things, executed or to be performed within Delaware, did not apply because discovery confirmed neither the Swiss accounting firm nor its Mexican member firm insured the Delaware member firm for anything related to this action, including any Delaware risk or the relevant audits.
BOTTOM LINE: Make sure you include a forum-selection clause in agreements with foreign entities.