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

In Crescent/Mach I Partners L.P. v. Dr. Pepper Bottling Co. of Texas, (Del. Supr., December 1, 2008), read opinion here, the Delaware Supreme Court (in a rare occurrence) reversed the Chancery Court on a procedurally unusual basis in an appraisal case that was previously highlighted on this blog here. (That summary also includes links to prior opinions in the case). In a nutshell, the Supreme Court reversed the opinion of the trial court that had merely fixed a computational error pursuant to Rule 60(a). The High Court's reasoning was based primarily on the fact that the case had already been settled, so the matter was moot. The appellate opinion also includes a short explanation of the Discounted Cash Flow method of valuation (DCF) that was used by the trial court.

 The parties entered into a settlement shortly after the trial court entered a final judgment in the appraisal case and after the trial court dismissed a related fiduciary duty claim. After the settlement, one of the parties applied to the trial court under Chancery Court Rule 60 to modify what it argued was a clerical error in the computation (which was discovered by a disinterested person who was writing an article about the case). The opposing party argued that the error was substantive. The trial court relied on  In re IBP, S’holders Litig., 793 A.2d 396, 397 (Del. Ch. 2002), aff’d by Tyson Foods v. Aetos Corp., 818 A.2d 145, 148 (Del. 2003).

Delaware's High Court reasoned that:

IBP is inapposite. The IBP court’s pronouncement that judicial decisions are public documents was for the purpose of explaining why a party cannot use a settlement to seek vacatur of pre-settlement rulings. Although judicial decisions are public records, that fact cannot empower a court to modify a judgment rendered moot by settlement, even if the judgment contains errors. To hold otherwise would distort the doctrine of mootness and undercut the finality of settlements.

Also included in this opinion is a useful discussion of the impact, if any, of a recorded decision that precedes a settlement, as well as "justiciability" and "mootness" in general. Compare generally, a recent Chancery Court decision about vacatur highlighted here.

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In Steel Partners II, L.P. v. Point Blank Solutions, Inc., 2008 WL 3522431 (Aug. 12, 2008),  the initial complaint was filed to force the holding of a shareholders meeting (which had not taken place since 2005), pursuant to DGCL Section 211. After a stipulation was entered into for a date to hold the meeting, the defendant moved for leave of court to postpone the date of the meeting by 90 days. The Chancery Court denied the request.

The request was based on allegations that the plaintiff and its CEO together own about 40% of the stock and would attempt to install their own directors and then seek to buy the company at the lowest possible price for its own investors. In addition, the postponement was requested due to an alleged conflict that the plaintiff's CEO had with the majority.

The court reasoned that the best way to deal with the issues presented was to communicate them to the shareholders and let them decide, based on those facts, who they wanted as directors--instead of further delaying the exercise of the shareholder franchise, which under Delaware law is sacrosanct.

Moreover, whether the "extraordinary circumstances" of Rule 60(b) or the "good cause shown" as provided for in the parties' stipulation, was the appropriate standard to apply for the requested change of the date, the court determined that even the lower "good cause" standard had not been met in order to further delay the shareholders' meeting.

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