283 A.3d 1183
Del. Ch.2022Background
- Stream entered an Omnibus Agreement that would transfer Stream's legacy assets to an entity controlled by its secured creditors (SLS and Hawk); SeeCubic was formed as the designee to receive those assets. Stream later sued to invalidate the Omnibus Agreement; the Court of Chancery granted partial final judgment after the Delaware Supreme Court remanded, directing SeeCubic to transfer the Legacy Stream Assets (including 1,000 Technovative shares) back to Stream (the Transfer Obligation) and enjoining SeeCubic and those acting in concert from using or transferring the assets outside ordinary course (the Post-Remand Injunction).
- SeeCubic delayed compliance and argued creditor rights might allow Hawk (a secured creditor) to seize assets; Hawk sought clarity and SeeCubic sought to defer enforcement actions.
- After the court denied Hawk’s requested modification of the Post-Remand Injunction, SeeCubic caused Technovative’s stock ledger to reflect a transfer of the shares to Stream on Sept. 30, 2022, but had pre-notified Hawk that Hawk should enforce remedies when Stream was listed.
- Within minutes, coordinated communications among SeeCubic, Hawk, and Stastney (who controlled SeeCubic and Technovative and had ties to Stream’s secured creditor SLS) resulted in Hawk being recorded as the holder of the shares and exercising control, preventing Stream from exercising any interim rights the Partial Final Judgment contemplated.
- The court found SeeCubic, Hawk, and Stastney acted in concert to evade the Partial Final Judgment and the Post-Remand Injunction, constituting contumacious conduct, and ordered as remedies: (1) divestiture of Hawk’s nominal title and vesting legal title to the shares in Stream; and (2) a limited injunction (ten days) enjoining SeeCubic, Hawk, Stastney, and their collaborators from interfering with Stream’s ownership or rights in the shares.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether SeeCubic, Hawk, and Stastney violated the Partial Final Judgment/Post-Remand Injunction (contempt) | They orchestrated a choreographed transfer to deprive Stream of the interim use and control of the shares the court intended; this is contempt. | Actions were legitimate exercises of secured-creditor rights; Hawk merely asserted collateral rights once title appeared in Stream's name. | Court held they acted in concert to evade the orders and committed contumacious conduct. |
| Whether intent is required for contempt adjudication | Stream: willfulness not required; the coordinated scheme shows knowing violation. | SeeCubic/Hawk: lack of wrongful intent; acted to protect creditor rights. | Court: intent not required; knowledge of orders and meaningful disobedience suffice; coordinated timing shows planning. |
| Appropriate remedial relief for the contempt (divestiture/vesting) | Divest Hawk and vest title in Stream to recreate the state approximating fall 2020 and to remedy the evasion. | Vesting title in Stream is unnecessary because Hawk is only nominal holder; Stream remains an equitable owner and can participate in any Article 9 sale. | Court ordered Hawk divested and legal title vested in Stream to effectuate the Partial Final Judgment and remedy the change in facts. |
| Whether and for how long to enjoin secured creditors from acting | Stream sought an indefinite injunction to prevent creditors from immediately exercising remedies and to rebuild. | Hawk proposed clear guidance or a status-quo order but argued it had to avoid breach of its contractual rights and could act promptly. | Court granted a limited injunctive stay of 10 days—enough to give Stream a narrow window to assert control but not to place Stream in a better position than in fall 2020. |
Key Cases Cited
- DiSabatino v. Salicete, 671 A.2d 1344 (Del. 1996) (recognizing the Court of Chancery's inherent contempt authority).
- United Mine Workers of Am. v. Bagwell, 512 U.S. 821 (1994) (Supreme Court discussion of civil vs. criminal contempt and contempt powers).
- Young v. United States ex rel. Vuitton et Fils S.A., 481 U.S. 787 (1987) (noting contempt power is essential to administration of justice).
- Del. State Bar Ass'n v. Alexander, 386 A.2d 652 (Del. 1978) (distinguishing civil and criminal contempt purposes).
- In re Rinehardt, 575 A.2d 1079 (Del. 1990) (discussing sanctions for failure to obey court orders).
- Rittenhouse Assocs. v. Frederic A. Potts & Co., Inc., 382 A.2d 235 (Del. 1977) (discussing remedial powers of chancery courts).
- Modern Dust Bag Co., Inc. v. Com. Tr. Co., 91 A.2d 469 (Del. Ch. 1952) (equity can grant relief even where precedent is lacking if circumstances demand).
- Wilmont Homes, Inc. v. Weiler, 202 A.2d 576 (Del. 1964) (equity's broad and flexible remedial powers to shape relief).