Reed Smith Client Alerts

The Delaware Court of Chancery recently explored whether the day-to-day management of two ranches in Kansas by three Kansas residents amounted to “material participation” in the management of a Delaware entity and was thus sufficient for purposes of personal jurisdiction under 6 Del. C. section 18-109(a). See Dlayal Holdings, Inc. v. Al-Bawardi; Dlayal Holdings, Inc. v. Gracey, COORD: 2020-1067-LWW, 2020-1070-LWW (Del. Ch. Dec. 27, 2021), Ultimately, the court held that it lacked personal jurisdiction over the three defendants because they were not managers of the two limited liability companies in question. This decision highlights the fact that even if a non-resident defendant manages the day-to-day operations of a Delaware entity, the court will not compel that defendant to appear in Delaware unless the non-resident defendant managed the business affairs of the entity.


This action arises from two coordinated suits filed by plaintiff Dlayal Holdings, LLC (Dlayal), which is the sole member and owner of Oasis Direct Seven LLC (Oasis). In the first action (No. 2020-1067), Dlayal asserted that defendant, Marwan Al-Bawardi, breached his fiduciary duties to Oasis. In turn, Al-Bawardi filed a third-party complaint against Rodger, Betty, and Marnie Gracey (the Graceys) for indemnification. In the second action (No. 2020-1070), Dlayal alleged that it was the sole member of Oasis and sought declaratory judgment against the Graceys.

According to the complaint and the third-party complaint, Oasis was formed in 1998 with the primary purpose “to own and manage real property in various states.” In 2000 or 2001, Rodger Gracey purchased a ranch in Kansas, and under a power of attorney from Al-Bawardi, assigned the purchase of the ranch to Oasis. In 2015, the property adjacent to the ranch was purchased by Owl Creek Ranch LLC, an entity whose sole member is also Oasis.

From the time each ranch was purchased and until June 2019, Rodger Gracey managed the day-to-day operations of the ranches, Betty Gracey handled the accounting and bookkeeping for the ranches, and Marnie Gracey assisted with other ministerial responsibilities. The Graceys were at all times (and continue to be) residents of Kansas.