Delaware Corporate and Commercial Litigation Blog : Delaware Litigation Lawyer & Attorney : Francis G. X. Pileggi : Corporate, Business, Commercial, Delaware Chancery Court

The Delaware Chancery Court, by Order available here, has amended Chancery Court Rules 3(aa) and 15(c), effective March 2, 2009. The text of the Order is so short, I will repeat it verbatim:

This 31st  day of December, 2008, IT IS HEREBY ORDERED that Court of Chancery Rule 3(aa) is amended by deleting the first sentence of Rule 3(aa) in its entirety and substituting in place of the first sentence the following language, which shall be effective Monday, March 2, 2009.

Rule 3(aa)

All complaints, counterclaims , cross-claims and third-party complaints, and any amendments thereto, shall be verified by each of the parties filing such pleading.

IT IS FURTHER ORDERED that Court of Chancery Rule 15 (c)(3) shall be amended by deleting subparagraph (c)(3) in its entirety and substituting in its place the following language , which shall become effective March 2, 2009.

Rule 15(c)(3)

The amendment changes the party or the name of the party against whom a claim  is asserted if the foregoing provisions of subdivision (2) of this paragraph are satisfied and, within 120 days of the filing of the complaint , or such additional time the Court allows for good cause shown, the party to be brought in by amendment.
 

The change to Chancery Court Rule 3(aa) makes it clear that not only do complaints need to be verified, but so too counterclaims, cross-claims, third-party complaints, and any amendments thereto.

The change to Rule 15(c)(3) refers to a new limit of 120 days from the filing of the complaint (with exceptions) as a deadline for when amendments that change the party or the name of the party will relate back to the date of the original pleading.

"All ye who labor" in the vineyards of Delaware corporate/business litigation, be forewarned.

UPDATE/CLARIFICATION: The Chancellor sent an email today to members of the Delaware Bar, shortly after the above Order was circulated by email, to provide clarification about the referenced amendment to Rule 15(c)(3). His Honor's email follows verbatim.

To all members of the Bar:

This is to clarify one possible ambiguity regarding the Chancery Rule 15(c)(3) amendment that you just received today via the DSBA's List Service. The Court of Chancery only amended the introductory paragraph to Rule 15(c)(3), beginning with the words "the amendment"  and ending with the words "by amendment". Nothing in the amendment to the introductory paragraph of Chancery Rule 15(c)(3) was intended to alter or modify the remaining subparagraphs (A) and (B) to Rule 15(c)(3). Those subparagraphs remain unchanged.

Thank you for your attention to this matter.

Bill Chandler
 

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 In Winner Acceptance Corp. v. Return of Capital Corp., (Del. Ch., Dec. 23, 2008), read  44-page opinion here, the Chancery Court decided that it had equitable jurisdiction (where it raised the issue sua sponte), over whether the allegations in this case were within its limited parameters. Importantly, there was no specific allegation or request for relief that mentioned the phrase "piercing the corporate veil" but the court noted that no special talismanic words were needed to invoke its jurisdiction and that instead it looks to the essence of the claims made and the relief sought. 

The gist of the complaint was that the individual shareholders should be held personally liable for their fraudulent activities despite the conventional protection of the corporate shield.
The court described the criteria that it will apply to determine whether a claim for "piercing the corporate  veil" will be allowed to proceed, as it was in this case. See footnotes 24, 27 & 29.

 Also addressed were the following claims and issues:

• Under certain circumstances, the requirement pursuant to Chancery Rule 3(aa) that  all complaints be verified can be satisfied by the attorney as agent for the plaintiff, though in this case the original complaint was amended with the verification of the party being added shortly after the original filing;
• fraud v. equitable fraud (footnote 56);
• unjust enrichment;
• statute of limitations for the above claims; and
• Indispensable parties pursuant to Chancery Rules 19 and 12(b)(7).

UPDATE: The Wall Street Journal online today highlighted this post here.

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