Justia Delaware Supreme Court Opinion Summaries

In 2025, the Delaware General Assembly amended the Delaware General Corporation Law to add new “safe harbor” provisions for transactions involving a corporation and its controlling stockholder. These amendments, enacted as Senate Bill 21, allowed certain transactions to avoid equitable relief or damages if approved either by a committee of disinterested directors or by a majority of disinterested stockholders, and applied these changes retroactively to acts and transactions occurring before their adoption. Shortly after enactment, a stockholder of a Delaware corporation brought a derivative action alleging that the corporation’s CEO and majority stockholder breached their fiduciary duties by causing the company to overpay for an asset. The plaintiff also challenged the constitutionality of SB 21, arguing that it impermissibly deprived the Delaware Court of Chancery of its equity jurisdiction and retroactively extinguished accrued or vested causes of action.The Court of Chancery, recognizing the importance and novelty of the constitutional issues, certified two questions of law to the Delaware Supreme Court: whether the safe harbor provisions unconstitutionally divested the Court of Chancery of its equity jurisdiction, and whether applying them to past transactions violated due process by eliminating vested claims.The Supreme Court of Delaware reviewed the certified questions de novo. It held that the statutory amendments did not violate Article IV, § 10 of the Delaware Constitution because they did not remove the Court of Chancery’s ability to hear equitable claims, but instead established substantive standards for when relief may be granted. The Court also ruled that retroactive application of the safe harbor provisions under Section 3 of SB 21 did not violate Article I, § 9, since the changes did not extinguish a vested property right or accrued cause of action, but merely altered the applicable standard of review. The Court answered both certified questions in the negative, upholding the constitutionality of the challenged amendments. View "Rutledge v. Clearway Energy Group LLC" on Justia Law

A delivery driver employed by a large package delivery company fell from her work vehicle on February 3, 2022, resulting in injuries to her neck and back. She initially received conservative medical treatments, including physical therapy, pain management, and multiple injections, but her condition worsened. By mid-2023, her treating physician recommended and performed two surgeries. The physician continued to restrict her from working following these procedures. The parties agreed the initial injury was compensable but disputed whether the surgeries were caused by the 2022 accident or by a subsequent event in 2023, and whether her total-disability status ended in December 2023.The Industrial Accident Board first found that the surgeries were related to the 2022 accident and that her total disability ended in December 2023. After a motion for clarification, the Board reversed its finding on the disability end date, concluding that, under Delaware law, a claimant remains totally disabled if instructed not to work by a treating physician, regardless of physical improvement. The employer appealed, arguing the Board improperly construed witness testimony and exceeded its authority by revisiting its prior decision. The Superior Court of the State of Delaware reviewed the Board’s actions, found both of the employer’s arguments unpersuasive, held that substantial evidence supported the Board’s findings, and affirmed the Board’s decision and order.On further appeal, the Supreme Court of the State of Delaware affirmed the Superior Court’s judgment. The Supreme Court held that the Board’s finding that only one work-related accident occurred was supported by substantial evidence, and that the Board acted within its authority in correcting its legal error regarding the duration of the claimant’s total disability. The Supreme Court confirmed that, under controlling precedent, a claimant remains totally disabled while following a treating physician’s order not to work. View "United Parcel Service v. Smith" on Justia Law

A life insurance policy was taken out on Norman Frank, then later sold to an investor unconnected to him. After Frank’s death in 2018, the insurer paid over $5 million in death benefits to the policy’s beneficiary. In 2023, Frank’s estate filed suit in the Superior Court of the State of Delaware to recover those proceeds, alleging that the policy was procured as part of a “stranger originated life insurance” (STOLI) scheme, in violation of Delaware’s statutory prohibition on life insurance contracts lacking an insurable interest.The defendants removed the case to the United States District Court for the District of Delaware. That court dismissed one defendant, Wells Fargo, leaving GWG DLP Master Trust as the sole defendant. The Trust moved to dismiss, arguing the estate’s claim under 18 Del. C. § 2704(b) was barred by Delaware’s general three-year statute of limitations for actions “based on a statute” (10 Del. C. § 8106(a)), since the death benefits were paid in 2019 and the suit was not filed until 2023. The estate argued that either no limitations period applied due to public policy, or that the claim accrued later when the executor was appointed. The District Court certified the question of what limitations period, if any, applies to the Delaware Supreme Court.The Supreme Court of Delaware held that claims under 18 Del. C. § 2704(b) are subject to the three-year statute of limitations in 10 Del. C. § 8106(a). The court reasoned that § 2704(b) created a new statutory right for estates to recover death benefits paid on policies lacking an insurable interest, which falls within the scope of actions “based on a statute.” The court rejected the estate’s argument that strong public policy against STOLI contracts precluded a limitations defense, and clarified that the limitations period may be subject to tolling doctrines in cases of concealment or fraud. View "GWG DLP Master Trust Dated 03/01/06 v. Estate of Frank" on Justia Law

A software company that provides donor management and data hosting services for nonprofit and educational entities experienced a significant ransomware attack. Hackers accessed and exfiltrated sensitive client data over several months, leading to widespread concern among the company’s clients about the adequacy of the company’s response. Rather than conducting a thorough investigation and remediation itself, the company provided clients with a toolkit for self-investigation and remediation. Dissatisfied, the clients undertook their own investigations and incurred expenses for legal counsel, notifications, credit monitoring, and other remedial measures. Insurance carriers that had issued policies covering such cyber incidents paid out claims for these losses, then sought to recover from the software company as subrogees and assignees of their insured clients.The Superior Court of the State of Delaware initially dismissed the insurers’ complaints for failing to state a claim and, after amended complaints were filed, dismissed them with prejudice. The Superior Court reasoned that the insurers failed to provide sufficient factual support for each insured’s claim by pleading in the aggregate, and further found that proximate cause had not been adequately alleged, as the complaints did not link the damages to any specific contractual obligation.On appeal, the Supreme Court of the State of Delaware reviewed the Superior Court’s decision de novo. The Supreme Court held that the insurers, as subrogees/assignees, adequately pled a breach of contract claim under New York law, which governed the agreements, and that Delaware’s notice pleading standard was satisfied. The Court found that the amended complaints sufficiently alleged the existence of contracts, performance by the insureds, breach by the company, and resulting damages, and that proximate cause was properly pled. The Supreme Court reversed the Superior Court’s dismissal and remanded for further proceedings. View "Travelers Casualty and Surety Company of America v. Blackbaud, Inc." on Justia Law

A dispute arose following the acquisition of an online video game company, where the buyer agreed to pay a base purchase price with the possibility of an additional earnout payment if certain financial targets were met. The merger agreement included a provision requiring disputes over the calculation of this earnout to be resolved by a mutually agreed-upon accounting firm acting as an arbitrator. After closing, the seller representative alleged that the buyer acted in bad faith to reduce the earnout, failed to provide required information and access, and breached both express and implied contractual obligations. The buyer responded by invoking the alternative dispute resolution (ADR) clause and moved to compel arbitration.The Court of Chancery of the State of Delaware granted the buyer’s motion, finding that the seller’s claims—including those alleging bad-faith conduct and denial of information access—were fundamentally disputes over the earnout calculation and thus fell within the scope of the ADR provision. The court held that questions about information access and related procedural matters were for the arbitrator to decide. The seller’s complaint was dismissed with prejudice, and the dispute proceeded to arbitration, where the arbitrator ruled in favor of the buyer. The Court of Chancery later confirmed the arbitrator’s award, rejecting the seller’s arguments regarding undisclosed conflicts of interest.The Supreme Court of the State of Delaware reviewed the case. It affirmed the Court of Chancery’s judgment, holding that the bad-faith breach claims and the information-access claim were properly subject to arbitration under the agreement. The court found no error in the lower court’s refusal to vacate the arbitration award, concluding that the seller failed to demonstrate an undisclosed relationship that would indicate evident partiality. The Court of Chancery’s decisions to compel arbitration and to confirm the award were affirmed. View "Fortis Advisors LLC vs. Stillfront Midco AB" on Justia Law

In 1993, Joseph Cornette was involved in a drunk driving incident that resulted in a serious car accident and injury to another driver. He pleaded guilty to Assault Second Degree and Driving Under the Influence (DUI), with other charges being dismissed as part of a plea agreement. After serving his sentence and remaining crime-free for decades, Cornette received an unconditional pardon for his assault conviction from the Governor of Delaware. He then petitioned for discretionary expungement of the pardoned assault conviction, without seeking expungement for the DUI conviction.The Superior Court of the State of Delaware denied Cornette’s petition. Initially, a court commissioner found that DUI offenses are not eligible for expungement and denied relief. On appeal, a Superior Court judge denied Cornette’s petition on the grounds that Delaware law requires all charges in a case to be eligible for expungement before any charge in that case may be expunged. The court reasoned that because Cornette’s DUI conviction was not eligible for expungement, the pardoned assault conviction could not be expunged either. A motion for reargument was also denied.The Supreme Court of the State of Delaware reviewed the case and reversed the judgment of the Superior Court. The Supreme Court held that under 11 Del. C. § 4375, an individual with a pardoned conviction may seek discretionary expungement of that specific conviction, even if other charges in the case are not eligible for expungement. The Court concluded that the statute permits partial expungement and does not require all charges in a case to be eligible. The case was remanded to the Superior Court for further proceedings consistent with this interpretation. View "Cornette v. State" on Justia Law

Two masked men entered a restaurant in Sussex County, Delaware, where one stole jewelry from a patron and the other fatally shot two individuals. The State alleged that Yony Morales-Garcia was the shooter, acting to protect his brother, Emner Morales-Garcia, who confessed to the robbery. The brothers were indicted on multiple charges and scheduled for separate trials. Emner accepted a plea deal, pleading guilty to first-degree robbery and second-degree conspiracy. Yony’s first trial ended in a hung jury, but in a second trial, he was convicted on all counts, including two for first-degree murder.The Superior Court of the State of Delaware presided over both trials, ultimately entering convictions against Yony following the second trial. At trial, the prosecution referenced Emner’s guilty plea both during opening statements and through a detective’s testimony, even though Emner was not called by the State as a witness in its case-in-chief. Yony’s defense objected on appeal, arguing that these references amounted to prosecutorial misconduct and, alternatively, that the court erred by failing to instruct the jury on the limited relevance of Emner’s plea.The Supreme Court of the State of Delaware found that the State’s repeated references to Emner’s guilty plea constituted prosecutorial misconduct, violating the principles articulated in Allen v. State regarding the improper use of a co-defendant’s guilty plea as substantive evidence. The Court held that this misconduct was plain error, prejudiced the fairness of the trial, and created a reasonable probability that the outcome would have been different absent the error. The Supreme Court of Delaware reversed Yony’s convictions and remanded the case for a new trial. View "Morales-Garcia v. State" on Justia Law

A stockholder derivative suit was filed alleging that Tesla’s non-employee directors, with the approval of Elon Musk, breached their fiduciary duties by granting themselves excessive stock option compensation between 2017 and 2020. After discovery and mediation, the parties reached a settlement. Under its terms, the directors agreed to return to Tesla a mix of cash, stock, and unexercised stock options, and to forgo future compensation for certain years. The settlement also included various corporate governance reforms.The Court of Chancery of the State of Delaware approved the settlement, rejecting an objector’s arguments regarding the fairness and structure of director contributions and the binding nature of future stockholder approval votes for director compensation. The court valued the benefit to Tesla using the intrinsic value (“in the money” value) of the returned options, along with returned cash and stock, and awarded attorneys’ fees as a percentage of the calculated benefit. Tesla objected to the fee award, arguing that the value of the returned options to the company was far less than their intrinsic value and should instead be measured by the grant date fair value (GDFV), which reflects the accounting benefit to Tesla.The Supreme Court of the State of Delaware affirmed the approval of the settlement but reversed the method used to calculate the attorneys’ fee award. It held that the intrinsic value of the cancelled options should not have been included in determining the monetary benefit to Tesla for purposes of a common fund fee calculation. The Court concluded that, in derivative litigation, unless an investor-level benefit falls within a recognized exception, the benefit to the corporation is controlling. The Supreme Court modified the fee award to reflect only the actual corporate benefit and remanded for any further disputes regarding fees. View "IN RE TESLA, INC. DIRECTOR COMPENSATION STOCKHOLDER LITIGATION" on Justia Law

A man and woman who had been in a relationship for five years were married in a ceremony on a dock, officiated by a minister, with only the groom’s minor son physically present at the ceremony. Two adults had previously signed the marriage license as witnesses, but only one of them was arguably present nearby in a vehicle; the other was definitely absent. After the ceremony, the marriage license was properly filed and accepted by the state. The couple lived as husband and wife until the groom’s unexpected death five months later. Following the death, a dispute arose between the widow and the decedent’s father, who acts as personal representative of the estate, regarding the decedent’s property and home.The decedent’s father sought a declaratory judgment in the Court of Chancery of the State of Delaware, arguing that the widow was not the decedent’s legal spouse because the marriage was not solemnized in the presence of two reputable adult witnesses as required by statute. He contended this failure rendered the marriage void, and sought to prevent the widow from inheriting. The Court of Chancery treated this as a petition for annulment under the Delaware Divorce and Annulment Act, but denied relief, finding that the petitioner lacked standing to seek annulment after the decedent’s death and that minor defects in solemnization do not necessarily void a marriage.On appeal, the Supreme Court of the State of Delaware reviewed the statutory requirements for marriage and found that, despite the absence of one adult witness, the parties had intended a lawful marriage and acted in good faith. The court held that the witness requirement is directory, not mandatory, and the marriage was not void for lack of a witness. The court affirmed the judgment below, holding that the marriage was valid and the petitioner could not seek its annulment. View "Lafon v. Felmlee" on Justia Law

Harman International Industries was acquired by Samsung Electronics in a reverse triangular merger, after which a class of former Harman shareholders filed a federal securities lawsuit alleging that disclosures made in connection with the transaction were misleading and violated Sections 14(a) and 20(a) of the Securities Exchange Act. The shareholders claimed they were deprived of a fully informed vote and the full value of their shares, seeking damages equal to the difference between the merger price and Harman’s true value. The parties settled the suit for $28 million, which was distributed to a class defined as shareholders who held Harman stock at any time during the relevant period, including some who did not receive merger consideration.Harman sought coverage for the $28 million settlement under its Directors and Officers (D&O) insurance policies with Illinois National Insurance Company, Federal Insurance Company, and Berkley Insurance Company. The insurers denied coverage, invoking a “Bump-Up Provision” that excluded settlements representing an effective increase in deal consideration for claims alleging inadequate consideration in an acquisition. Harman sued the insurers for breach of contract in the Delaware Superior Court. After initial motions were denied due to insufficient facts, both sides moved for summary judgment on the applicability of the Bump-Up Provision.The Delaware Superior Court held that the Bump-Up Provision did not exclude coverage because the underlying complaint did not allege inadequate consideration as a viable remedy, and the settlement amount did not represent an effective increase in deal consideration. On appeal, the Supreme Court of Delaware affirmed the Superior Court’s judgment, holding that although the complaint did allege inadequate consideration, the insurers failed to prove the settlement amount effectively increased the deal consideration. Thus, the $28 million settlement was covered under Harman’s policies. View "Illinois National Insurance Company and Federal Insurance Company v. Harman International Industries, Incorporated" on Justia Law