Chancery Reopens Final Judgment to Allow Motion for Contempt

T.R. Investors, LLC v. Genger, C.A. No. 3994-CS (Del. Ch. Nov. 9, 2012).

Issue Addressed: Whether a final judgment in this case should be reopened under Chancery Rule 60(b)(6) in order for the prevailing party to present a motion for contempt due to the lack of compliance with the final order by the losing party.

Short Answer:  Yes.

Brief Background

Further background details are available from prior Delaware decisions in this case highlighted on these pages here, here and here.

This case started as an action under Section 225 of the Delaware General Corporation Law, which is a statute designed to provide a summary proceeding in order to review the corporate election process to prevent a Delaware corporation from being immobilized by controversies about whether a given officer or a director is properly holding office.  After lengthy litigation, the court made a plenary determination in prior proceedings regarding both the ownership of contested blocs of shares that constituted a majority, as well as determining the voting rights for those shares.  After trial and subsequent to post-trial motions, as well as a remand from the Delaware Supreme Court, a final revised judgment, which reflected counsel for the parties conferring and agreeing on the form of order, Genger then attempted to interfere with the final adjudication by the court through litigation in New York which now attempts to relitigate the issues decided in the final judgment by the Court of Chancery regarding the ownership of the shares that were subject to that final judgment.

This decision is based on a motion to reopen the final judgment in order to seek to hold Genger in contempt.

Analysis 

The court describes the prerequisites for seeking to hold a party in civil contempt in order to coerce obedience with a prior court order.  In order to establish civil contempt, a party must demonstrate that the defendant violated the order of the court, of which they had notice and by which they were bound.  See footnotes 22 and 23.

Those factors clearly apply in this case and it was indisputable that there was a final determination regarding the ownership of shares and that Genger appeared to be acting in contravention of that final order and interfering with the ability of the majority shareholder to freely use and dispose of the shares under its control.

Procedurally, the court described that Court of Chancery Rule 60(b)(6) is an appropriate basis for a party to move for a finding of contempt in a case in which a final judgment is being violated.  Under Rule 60(b)(6), the moving party must demonstrate why there are “extraordinary circumstances” that justify reopening the case.  In this case, there is a plausible basis to argue that Genger has taken steps to impede the undisputed ownership of shares in violation of the final judgment of the court.  Based on these circumstances, the court reasoned that the moving party should have an opportunity to present a motion for contempt and on that basis granted the motion to reopen the final judgment under Rule 60(b)(6).