Justia Delaware Supreme Court Opinion Summaries

In a final judgment, the Delaware Court of Chancery ordered NVIDIA Corporation (“NVIDIA” or the “Company”) to produce books and records to certain NVIDIA stockholders under Section 220 of the Delaware General Corporation Law. In the underlying action, the stockholders alleged certain NVIDIA executives knowingly made false or misleading statements during Company earnings calls that artificially inflated NVIDIA’s stock price, and then those same executives sold their stock at inflated prices. As such, the stockholders sought to inspect books and records to investigate possible wrongdoing and mismanagement at the Company, to assess the ability of the board to consider a demand for action, to determine whether the Company’s board members were fit to serve on the board, and to take the appropriate action in response to the investigation. In resisting the request, NVIDIA argued the stockholders were not entitled to the relief they sought because: (1) the scope of the original demands failed to satisfy the form and manner requirements; (2) the documents sought at the trial were not requested in the original demands; (3) the stockholders failed to show a proper purpose; (4) the stockholders failed to show a credible basis to infer wrongdoing; and (5) the requests were overbroad and not tailored to the stockholders’ stated purpose. The Court of Chancery rejected these arguments and ordered the production of two sets of documents—certain communications with the CEO and certain specific sets of emails. The Delaware Supreme Court held: (1) the stockholders’ original demands did not violate Section 220’s form and manner requirements; (2) the stockholders did not expand their requests throughout litigation; (3) the Court of Chancery did not err in holding that sufficiently reliable hearsay evidence may be used to show proper purpose in a Section 220 litigation, but did err in allowing the stockholders in this case to rely on hearsay evidence because the stockholders’ actions deprived NVIDIA of the opportunity to test the stockholders’ stated purpose; (4) the Court of Chancery did not err in holding that the stockholders proved a credible basis to infer wrongdoing; and (5) the documents ordered to be produced by the Court of Chancery were essential and sufficient to the stockholders’ stated purpose. Thus, the judgment of the Court of Chancery is affirmed in part, reversed in part, and remanded for further proceedings. View "NVIDIA Corporation v. City of Westland Police & Fire Retirement System" on Justia Law

Appellant Wilbur Medley, appealed a superior court's denial of his motion for sentence modification. Medley was convicted after pleading guilty to second degree burglary pursuant to an agreement. In challenging his sentence, Medley argued: (1) the superior court improperly delegated its sentencing authority because DOC staff and court administrative staff amended his original sentence order to strip him of 563 days of credit time; and (2) the sentencing judge denied his right to be present with counsel for sentencing when the judge, sua sponte and without a hearing, issued the amended sentence. After review, the Delaware Supreme Court rejected Medley’s contentions and affirmed the denial of sentence modification. View "Medley v. Delaware" on Justia Law

In 2012, Craig Melancon was shot three times: once from a .22 caliber firearm, and twice from what appeared to be a .38 revolver. A friend, Anthony Coursey, and another bystander, Marla Johnson, saw two hooded individuals running from the scene. Coursey later identified one of the fleeing men as Reuel Ray. Ray was charged with, and ultimately convicted of, felony murder, attempted robbery, and related crimes, for which he received a life sentence plus 20 years. He appealed those convictions to the Delaware Supreme Court, claiming that the trial court erred by: (1) not granting a mistrial after a juror expressed concerns for her safety; and (2) not providing the jury with certain cautionary instructions, neither of which Ray requested, following the denial of Ray’s mistrial request. In 2017, the Supreme Court affirmed Ray’s convictions. Soon after that, Ray moved for postconviction relief claiming: (1) the State’s failure to disclose that, approximately one month before Ray’s trial, it had dismissed a criminal charge then pending against a key prosecution witness violated his due process rights under Brady v. Maryland; (2) his trial counsel’s inadequate pretrial investigation, which failed to uncover the witness’s pending charge and its eventual dismissal, constituted ineffective assistance of counsel in violation of Ray’s right to counsel and due process; and (3) his counsel failed to provide effective representation at trial and on appeal by allowing an obviously flawed jury instruction on the elements of felony murder to guide the jury’s deliberations. The Superior Court rejected each of Ray’s arguments. The Supreme Court determined that the Superior Court’s erroneous felony-murder instruction and Ray’s counsel’s failure to object or to raise the error on direct appeal warranted a new trial on the felony-murder charge and the related firearm charge. The Supreme Court rejected, however, Ray’s contention that the State’s Brady violation justified relief as to all his convictions. Because those convictions were not influenced by the flawed felony-murder instruction and were supported by abundant evidence independent of the putatively biased witness’s testimony, the Court expressed confidence in them. View "Ray v. Delaware" on Justia Law

Kevin Diep, a stockholder of El Pollo Loco Holdings, Inc. (“EPL”), filed derivative claims against some members of EPL’s board of directors and management, as well as a private investment firm. The suit focused on two acts of alleged wrongdoing: concealing the negative impact of price increases during an earnings call and selling EPL stock while in possession of material non-public financial information. After the Delaware Court of Chancery denied the defendants’ motion to dismiss, the EPL board of directors designated a special litigation committee of the board (“SLC”) with exclusive authority to investigate the derivative claims and to take whatever action was in EPL’s best interests. After a lengthy investigation and extensive report, the SLC moved to terminate the derivative claims. All defendants but the private investment firm settled with Diep while the dismissal motion was pending. The Court of Chancery granted the SLC’s motion after applying the two-step review under Zapata Corp. v. Maldonado, 430 A.2d 779 (Del. 1981). Diep appealed, but after its review of the record, including the SLC’s report, and the Court of Chancery’s decision, the Delaware Supreme Court found that the court properly evaluated the SLC’s independence, investigation, and conclusions, and affirm the judgment of dismissal. View "Diep v. Trimaran Pollo Partners, L.L.C." on Justia Law

Zelda Sheppard appealed a superior court’s affirmance of an Industrial Accident Board (“IAB” or “Board”) decision granting Allen Family Foods’ (“Employer”) Petition for Review (“Petition”). The IAB determined that Sheppard’s prescribed narcotic pain medications were no longer compensable. Sheppard sought to dismiss the Petition at the conclusion of Employer’s case-in-chief during the IAB hearing, arguing that the matter should have been considered under the utilization review process. After hearing the case on the merits, the IAB disagreed, holding that Employer no longer needed to compensate Sheppard for her medical expenses after a two-month weaning period from the narcotic pain medications. On appeal, Sheppard argued the IAB erred as a matter of law when it denied Sheppard’s Motion to Dismiss Employer’s Petition because Employer failed to articulate a good faith change in condition or circumstance relating to the causal relationship of Sheppard’s treatment to the work injury. Accordingly, Sheppard argued that the Employer was required to proceed with the utilization review process before seeking termination of her benefits. The Delaware Supreme Court determined the IAB’s decision was supported by substantial evidence, therefore the superior court’s decision was affirmed. View "Sheppard v. Allen Family Foods" on Justia Law

The Delaware Supreme Court addressed whether approval of a corporation’s Class B stockholders was required to transfer pledged assets to secured creditors in connection with what was, in essence, a privately structured foreclosure transaction. Stream TV Network, Inc. (“Stream” or the “Company”), along with Mathu and Raja Rajan, argued that the agreement authorizing the secured creditors to transfer Stream’s pledged assets (the “Omnibus Agreement”) was invalid because Stream’s unambiguous certificate of incorporation (“Charter”) required the approval of Stream’s Class B stockholders. Stream’s Charter required a majority vote of Class B stockholders for any “sale, lease or other disposition of all or substantially all of the assets or intellectual property of the company.” Stream argued the trial court erred by applying a common law insolvency exception to Section 271 in interpreting the Charter, and that the enactment of 8 Del. C. 271 and its predecessor superseded any common law exceptions. It contended that, in any event, such a “board only” common law exception never existed in Delaware. SeeCubic, Inc. argued the court correctly found that neither the Charter, nor Section 271, required approval of the Class B shares to effectuate the Omnibus Agreement. Because the Supreme Court agreed that a majority vote of Class B stockholders was required under Stream’s charter, it vacated the injunction, reversed the declaratory judgment, and remanded for further proceedings. View "Steam TV Networks, Inc. v. SeeCubic, Inc." on Justia Law

After a hearing, a superior court held James Plaches in violation of the terms of his probation after he admitted to police contact. The court sentenced Plaches to seven years of unsuspended prison time, followed by community supervision with conditions. On appeal, Plaches argued he could not have violated his probation by complying with a condition of his probation, namely, reporting police contact. Plaches argued the court specifically found one fact, police contact, and based on that finding, the Superior Court erroneously held that “‘obviously’ the [c]ourt must find that [Plaches] violated the terms and conditions of his probation.” The Delaware Supreme Court was unable to determine on this record what evidence the Superior Court relied on when it found Plaches in violation of his probation. Therefore, it reversed the Superior Court's judgment and remanded for additional findings. View "Plaches v. Delaware" on Justia Law

In 2014, Elizabeth Elting, a co-founder of TransPerfect Global, Inc. (“TPG”), asked the Delaware Court of Chancery to appoint a custodian to sell the Company because of a hopeless deadlock between Elting and fellow co-founder, Philip Shawe. More than eight years later, Elting sold her shares to Shawe, who won a court-ordered auction supervised by Robert Pincus, a custodian duly appointed by the Court of Chancery. The parties executed the sale agreement (the “SPA”) in November 2017. A contentious relationship emerged between Shawe and Pincus, resulting in "seemingly endless" litigation in Delaware, New York and Nevada, millions in contested legal fees, and an inability to agree on any material aspect of Pincus' tenure as Custodian, up to and including his discharge. This case consolidated three challenges brought by Shawe and TPG to orders of the Court of Chancery, each implicating Pincus’ right to petition the trial court for reimbursement of fees and expenses under the SPA and various court orders. In sum, the Delaware Supreme Court: (1) reversed and vacated the Court of Chancery’s October 17, 2019 Contempt Order and Sanction only as they applied to Shawe; affirmed the Contempt Order and Sanction as they applied to TPG; (3) affirmed the court’s April 14, 2021 Discharge Order terminating the custodianship of Pincus; and (4) affirmed the April 30, 2021 Fee Order awarding Pincus $3,242,251 in fees, subject to the qualification that TransPerfect Global, Inc. was the only party liable for the $1,148,291 Contempt Sanction. View "Transperfect Global, Inc., et al. v. Pincus, et al." on Justia Law

Two questions of law were certified to the Delaware Supreme Court by the United States Court of Appeals for the Eleventh Circuit: (1) when faced with an action brought by an estate under 18 Del. C. 2704(b), an innocent downstream investor in a stranger-originated life insurance (“STOLI”) policy, or its securities intermediary, could assert certain defenses under the Delaware Uniform Commercial Code; and (2) whether downstream investors in a STOLI policy could sue to recover any premiums they paid. The Court answered question one in the negative: in the sui generis context of STOLI schemes, these defenses are not available. The Court answered question two in the affirmative: yes, if the party being sued can prove its entitlement to those premiums under a viable legal theory. View "Wells Fargo Bank v. Estate of Phyllis M. Malkin" on Justia Law

Delmarsh, LLC, a real-estate company, owned six lots in Bowers, Delaware. The lots had long been designated as wetlands on the State Wetlands Map. The Department of Natural Resources and Environmental Control (“DNREC”) removed a portion of the lots from the Wetlands Map in 2013 at Delmarsh’s request. In June 2019, Delmarsh requested that DNREC designate the remaining portion of the lots as non-wetlands. DNREC denied the request, and Delmarsh appealed to the Environmental Appeals Board (“the Board”). The Board affirmed DNREC’s denial. Delmarsh appealed to the Superior Court, arguing that refusal to reclassify the lands as non-wetlands, constituted a taking. The Superior Court affirmed the Board’s decision. The Delaware Supreme Court affirmed: At the time DNREC turned down Delmarsh’s request to de-designate the remainder of the lots as wetlands, the lots were zoned C/A: Conservation–Agriculture. Instead of focusing on the economic impact of the de-designation on the lots as zoned at the time of DNREC’s decision, Delmarsh relied exclusively on the economic impact on the lots as later rezoned to R-1—single-family residential housing. “By its own admission, the rezoning to residential occurred after the denial of its DNREC application. Delmarsh did not offer any argument or evidence that DNREC’s refusal to redesignate the lots caused them to lose any value while they were zoned as C/A. In the absence of such evidence, the Superior Court held correctly that no taking occurred.” View "Delmarsh, LLC v. Environmental Appeals Board of the State of Delaware" on Justia Law