In a letter opinion In the Matter of Texas Eastern Overseas, Inc., No. 4326-VCN (Jan. 20, 2010), Vice Chancellor Noble denied a Motion to Stay Pending Appeal filed by Texas Eastern Overseas, Inc. (“TEO”). Read letter decision here. The Court’s prior decision was highlighted here.
Kevin Brady, a highly regarded Delaware litigator, prepared this synopsis.
This matter arose out of a request by AmeriPride Services Inc. for the appointment of a receiver for TEO, a dissolved Delaware corporation, which the Court granted on November 20, 2009. (See link above.) TEO’s predecessor-in-interest, Valley Industrial Services, Inc. (“VIS”), owned and operated an industrial cleaning facility in California that is now owned by AmeriPride. Under VIS’s ownership, hazardous substances were released from the facility into the soil and groundwater. After AmeriPride spent significant sums remediating the facility, it filed an action in California seeking contribution from TEO. Vice Chancellor Noble granted AmeriPride’s petition and appointed a receiver for TEO which then sought certification of an interlocutory appeal and a stay pending appeal. The Court of Chancery denied that request on December 23, 2009. TEO then filed this motion to stay pending appeal of the Court’s final order.
Under Delaware Supreme Court Rule 32(a) a stay pending appeal is initially directed to the trial court’s discretion. This can be a “catch-22” because of the inherent tension in this exercise in that it requires the trial court to analyze the likelihood for success on appeal after it has already determined the merits of the action. In Kirpat, Inc. v. Delaware Alcoholic Beverage Control Commission (741 A.2d 356 (Del. 1998)), the Delaware Supreme Court set forth four factors that the trial court must consider when deciding a motion to stay: 1) the likelihood of success on the merits of the appeal; 2) whether the petitioner will suffer irreparable injury if the stay is not granted; 3) whether any other interested party will suffer substantial harm if the stay is granted; and 4) whether the public interest will be harmed if the stay is granted. The Kirpat Court also stated that “in deciding a motion for a stay, the trial court should balance all pertinent considerations together instead of allowing a definitive determination under one factor, such as the likelihood of success on appeal, to control. If the several irreparable harm factors favor granting a stay, “then a court may exercise its discretion to reach an equitable resolution by granting a stay if the petitioner has presented a serious legal question that raises a ‘fair ground for litigation and thus for more deliberative investigation.’”
After analyzing the Kirpat factors, Vice Chancellor Noble denied the request for a stay stating that “even with the Court’s attention directed to the irreparable harm factors, on balance, they do not tip in favor of a stay…. TEO will suffer no harm if a stay is not granted—it will merely be a vehicle through which AmeriPride will seek recovery from the insurers. On the other hand, neither the public nor AmeriPride will suffer harm if a stay is granted…. Moreover, the Court has already explained in the Letter Opinion that it does not view this case as presenting a serious legal question that raises a fair ground for further litigation.”