*1 damages: Elting superfluous He not award regardless of misconduct. pute Shawe’s for Elting expenses all of the that because the fees were incurred argues also Thus, compensatory, being recompensed. not he was she is punitive and which process by not its protec- to criminal due did abuse discretion entitled Court awarding Elting her fees. tions. Chancery Elting awarded Court Further, above, explained criminal all of fees related to the attorneys’ her imposed perjury, were sanctions not motion. It
litigation of the sanctions also process argument and Shawe’s due is thus held that: without merit. be- appropriate
An amount is additional sig- cause bad-faith misconduct Shawe’s III. nificantly complicated permeated Chancery The Court did abuse Trial, litigation of the Merits from at on sanctioning discretion Shawe based 2, 2014, the on least December date egregious a clear record of misconduct and Elting sought expedited discovery repeated during litigation. falsehoods later-filed Sanctions Mo- aid her judgment therefore affirm the We tion, period, For that until its conclusion. of Chancery. Court appropriate sanction is to shift percentage Shawe reasonable
attorneys’ expenses Elting fees and in-
curred connection with the Merits
Trial Shawe’s misconduct undu- because
ly complicated up the costs drove proceeding. my deep fa- Based miliarity twists turns Shawe, Philip Shirley R. SHAWE case, approxi- 33% is a reasonable Respondents Below-Appellants, Elting compensate fairly mation v. period.34 that time ELTING, Elizabeth Petitioner Below-Appellee. fixing broad discretion amount attorneys’ fees be awarded. Absent a 423, No. discretion, clear abuse of this Court will Supreme Court of Delaware. not reverse the award.35 The Court of Chancery found that form of “[e]ach Submitted: January Biting’s prejudiced Shawe’s misconduct February Decided: for, ability fully develop the record of, needlessly complicated litigation
Merits Trial. actions also Shawe’s necessi holding evidentiary hearing
tated second address the issues raised the Sanc
tions Motion.”36The Court
did
LLC,
LLC,
Elting
&
In re
In re
&
Shawe
35. Johnston Arbitrium AG, (Del. 1998). Handels 720 A.2d *2 York, York, Respondent Be-
New New low, Appellant Shirley Shawe. Shannon, Esquire, Kevin R. Berton W. Ashman, Jr., Esquire, Christopher N. Kel- ly, Jaclyn Levy, Esquire Esquire, C. *3 Golden, Esquire, A. Potter Mathew LLP, Wilmington, <&Corroon Anderson Kaufman, (ar- Delaware; Philip Esquire S. gued), Greenberg, Esquire, Ronald Jef- S. Trachtman, Marjorie frey Esquire, E. S. Sheldon, Heller, Esquire and Jared I. Es- quire, Levin Kramer Naftalis & Frankel LLP, York; York, Eric New New Alan Stone, Atkins, Esquire, Esquire A. Robert Paul, Harper, Esquire, E. and Gerard Weiss, LLP, Rifkand, & Garrison Wharton York, York, New New Petitioner Be- low, Appellee Elting. Elizabeth STRINE, Justice; Bеfore Chief HOLLAND, VALIHURA, VAUGHN, and SEITZ, Justices, constituting the Court en Banc.
SEITZ, Justice, Majority: for the mother, Philip his Shirley Shawe and Schmidt, Esquire, A. L. Lisa Robert Shawe, interlocutory appeal filed Burns, Esquire and R. Nicholas Rodri- Chancery’s August from the Court of Layton Finger, guez, Esquire, Richards & order, opinion July and and P.A., Delaware; Wilmington, Philip L. orders, appointing a un- related custodian Hardiman, Graham, Jr., Esquire, John L. der 8 Del. C. 226 to sell TransPerfect Shane, Esquire Penny Esquire, Sulli- and Global, Inc., corporation. a Delaware After York, LLP, &van Cromwell New New six-day trial unprecedented filled with York; Kaplan, Esquire Jo- Howard J. and. lengthy seriously dys- of a evidence and Matteo, seph Esquire, Kaplan A. Rice relationship functional own- between the York, LLP, David New New York and B. ers, culminating Philip litiga- Shawe’s Goldstein, Rabinowitz, Esquire (argued), misconduct, of Chancery tion Boudin, Standard, Krinsky & Lieberman opinion 104-page concluding issued a P.C., York, Respon- York for New New warring factions hopelessly were Below, Philip Appellant R. Shawe. dent deadlocked directors. and A, Eicher, Jeremy carefully D. The court three considered alter- Esquire,Thomas Pazze, Uebler, Esquire dysfunction Mark M. Dalle natives address the deadlock, P.A., Esquire, Taylor, Wilming- the end Cooeh and decided Dershowitz, ton, Delaware; required circumstances of case the ap- M. Es- Alan Cambridge, Massachusetts; pointment of a custodian to sell the com- quire (argued), Grant, PC, pany. K. Esquire, Polsinelli Adam appeal, challenge long-standing
On the Shawes do not Court’s rules impor- and the Chancery’s many policy them, the Court of factual find- tant guiding reasons we do dysfunction ings of serious arguments deadlock. consider raised Instead, Philip Shawe for the first claims Shawes for the first appeal. time on Our appeal time on that the court exceeded its dissenting colleague concluded, howev- statutory authority er, when ordered though that even statutory argu- company. sell a solvent Alter- ment was never considered the Court of natively, Shawe contends that less drastic Chancery, it should be addressed measures were available to address Thus, first on appeal. time in response to Shirley has taken a deadlock. dif- dissent, explain why disagree we we tack, argues ferent for the first time with interpretation of the custodian appeal that the custodian’s sale of the statute. *4 company might in an result unconstitution- taking
al of her one share of TransPerfect I. stock. Global Global, (“TPG”) TransPerfect Inc. is a disagree with the affirm We Shаwes and Delaware acts as a First, Chancery’s judgment. the Court of holding company for main operating statute, of under the custodian the Court company, TransPerfect Translations In- Chancery may appoint a when custodian ternational, (“TPI”), Inc. York New are to di- the stockholders unable elect corporation, Both will be re- entities Here, expired. rectors whose terms have to “Company.” ferred as the Com- parties stipulated they were un- translation, pany provides website locali- Further, to do so. able zation, litigation support and services corporation’s appointed when from 92 in 86 It offices worldwide cities. from, with, suffering is threatened 3,500 employees over full-time and irreparable injury be- because divisions 10,000 maintains of over a network directors, and tween the stockholders editors, translators, proofreaders and Here, are unable to terminate division. languages. Elting about 170 different and and stockholder deadlock are director Company, Shawe co-founded the and undisputed, and the Court co-chief officers and board executive factual findings made detailed threat- members. to irreparable ened and actual harm not company ap- which we will disturb on 100 shares of common stock TPG has agree
peal. also with the Court We outstanding, fifty issued and divided that, Chancery’s conclusion in circum- Elting, forty-nine shares to shares this, stances such as when intermediate Shawe, Shirley and one share Shawe. failed, attempted measures were but this Opinion, Philip we refer to Shawe as Chancery properly exercised “Shawe,” Shirley by her full and Shawe company discretion sell the and distrib- Shirley name. The one share allocated proceeds ute the stockhold- deadlocked Shawe to claim the n allowed TPG benefits ers. being majority women-owned busi- Chancery’s Finally, Philip Shirley ness. credit the Court and have We Shawe finding, based on evidence attempted' statutory to raise constitu- introduced and trial, that treated mother’s arguments tional that were not considered Shawe “has his himself as a Chancery. property Under share his own and calls, (includ- Company.”1 phone accessing After a her emails 50% co-owner corporate reorganization in TPG’s privileged thousands communica- provided for a three member bylaws board counsel), entering tions her and her directors, or a different number fixed permission locked office without nu- Elting and Shawe stockholders. sending his merous occasions as well as Compa- directors since the been the “paralegal” so-called there at 4:47 a.m. ny’s reorganization in 2007. on another occasion. personal nature fully appreciate To (cid:127) Compa- co-opted Shawe the services leading to long-running discord Kasowitz) (e.g., ny advisors Gerber and ruling, go Chancery’s we back to advancing him in personal to assist his founding Company’s and troubled agenda against Elting. relationship found- romantic between the busi- Elting ers. co-founded and Shawe (cid:127) unilaterally hired numerous living together in a in 1992 ness while employees .perform Shared Services attending York Uni- dormitory room New Finance) (Accounting functions They en- versity’s were business school. Elting even work man- divisions the mar- gaged called but TRI) (Chris aged Patten in without her riage off As the Court in 1997. knowledge by creating or consent “off found, break-up “Shawe did take arrangements fabricating book” doc- well, say would ‘terrorize’ her uments. *5 husband, things’ Mi- ‘horrendous about her (cid:127) sought Elting to have criminal- Burlant, Shawe chael she married whom 1999,”2 occasions, ly prosecuted by referring to as separate Shawe her his On two crawling responded rejection by un- years ex-fíancée after the fact seventeen refusing to leave.3 Elting’s der and bed filing a “Domestic Re- when Incident port” seemingly a result of a minor as grew, the founders Company As the altercation office. her their suc- were not satisfied financial with cess, brought simmering person- and their (cid:127) disparaged Elting to Shawe and tried Company’s al business discontent into marginalize by Company her within Chancery catalogued The affairs. gratuitously disseminating a memoran- years over serious between clashes (on letterhead) employ- dum Gerber’s to Elting surrogates and their Shawe and accusing ees in her own division her of before, remarkably, during litiga- and improprieties. and financial collusion tion: (cid:127) disparaged Elting publicly by Shawe (cid:127) campaign engaged
Shawe secret unilaterally issuing press spy Elting privacy to on her release and invade mail, by monitoring containing intercepting Company’s her her false name LLC, Elting stayed 1. In re & crawled her there at Shawe bed and for 2015). Aug. Elt- Opening at *2 App, half to Br. least an hour. (Trial Tr.). occasion, at trial Shawe held a demonstrated Elting Ón another share, general proxy for one Mrs. Shawe’s traveling looking was аlone in Buenos Aires consistendy and held himself out the '50% space open for to a new office. She arrived at owner of TPG. Id. her hotel find that Shawe room to had up When she asked showed unannounced. at *3. Id. leave, him he to crawled hotel bed under her stayed there for about half an hour. engagement, and Id. Elting 3. When ended their apartment Shawe refused to leave and misleading Elting and statements.4 in- recounting of Elting’s plane trip to Paris in 2014: just highlights These some of the were 2, 2014, found On December the facts the Court of Chan- Elting boarded cery eye flight after a a red lengthy trial. court also to discovered, Paris and findings surprise, made detailed about continuous her that Shawe was seate d disputes personal acrimonious over across the aisle from her. Shawe claimed expenses, weekly daily not tem- have “no idea” she -would be oh the tantrums, per hostaging” flight. truth, and “mutual be- previously Shawe proposed acquisi- tween founders learned that Elting over would be on the tions, distributions, flight employee stockholder arrangements made to be bonuses, hiring, pay and and office loca- seated next to without her her knowl edge. Elting tions. The court also found that changed Shawe seats. next Elting aligned her, day, bullied those with sent a text message to sev expressing allies, his desire to “create constant eral of his stating: “Was next Liz pain” Elting agreed until she on plane to Paris and she seats;).” plans.5 Shawe’s It switched was common senior of the recipients Two officers to be into their text disputes, message drawn were Nathan Rich who then fir- Campbell, were abused threatened ards and Joe of whom both fines, ings, inappropriate implicated substantial in events concerning emails, by withholding compensation alleged spoliation evidence, Shawe’s which, promotions. subject is the of a motion for sanctions discussed below.
Specific operations, Company’s I find Shawe’s characterization of days the Court of heard testi- attempt incident as an leading findings to extend olive mony that: not to branch be credible. He (cid:127) did pay litigation refused counsel deny telling Elting that “no he had idea” significant ongoing defend in- patent flight, she would be which was fringement litigation. *6 true, not smiley-face the emoticon at (cid:127) professionals, Shawe real fired estate message the end of his text suggests he public professionals, relations refused to by yet was opportunity amused another leases, execute interfered the to Elting, harass who Shawe knew full Company’s payroll processes. well presence would welcome his (cid:127) to engage Shawe refused an annual flight.6 the expense up, true and interfered with the Company’s annual finan- review II. process.
cials and its audit
(cid:127) Shawe falsified
to
corporate records
While
and Elting
to
Shawe
continued
by Elting.
avoid review
other,
harass each
interfere with the busi-
ness,
Chancery
captured
The Court of
best
employees, they
and demoralize the
lengths
go
the
that
to
against
Shawe would
filed four lawsuits
harass
each other.7 The
LLC,
8, 2014,
Elting
May
Elting
In re Shawe &
conflict § requirement, 8 Del. C. 226 to that the second the stock- ing’s petition appoint a custodian inability deadlock and to break the director declare holders’ deadlock, stip- to sell TPG. parties’ was satisfied the ulation of deadlock. court dedicated enormous resources hearings, It dispute. held twelve to the Turning requirement, final harm to the motions, and decided sixteen conducted business, Chancery the Court decision, six-day trial. its final Before Compa- profitability considered Chancery step took the measured Court ny, also made the commonsense ob- but to appointing a custodian serve contemplates that the statute servation try Elting to assist Shawe and to mediator appointment profitable of custodians for disputes. The court also and settle their which, corporations like distressed com- post-trial decision for two delayed panies, can suffer be threatened with parties’ ongoing ef- months to await the injury. irreparable then cata- controversy. to After the forts resolve many examples of ac- logued some failed, many attempts at settlement irreparable injury tual and threatened to 104-page issued its de- Company: finding presented “the evidence cision that (cid:127) (Senior Kevin Vice President Obarski appointment trial warrants of a Sales) “biggest called the feud the Company to resolve custodian sell faces, Company business issue” the Elt- the deadlocks between Shawe and “crazy arbitrary bemoaned ing.” coming out of it was stuff’ “the number First, found go 1 reason leave to people work at Elting requirements satisfied the had competitors.” 226(a)(1) appoint (cid:127) (Vice Michael Sank President Cor- parties stockholder deadlock because the porate Development) agreed: “it’s so ob- stipulated they were un- divided and viously biggest problem compa- Next, successor directors. able elect ny faces.” Elting court held satisfied the three (cid:127) (Chief Officer) Ng Information Yu-Kai 226(a)(2) requirements of for appoint- Company goal as a identified of a ment custodian due director dead- Avengers meeting wake requirement, lock. first As the exis- way need find Shawe and deadlocks, tence the court reviewed im- together negatively to work “without painstaking many detail its factual find- *7 pacting everyone else.” ings, undisputed on appeal, support- now (cid:127) (Chief Hagerty Technology its conclusion that the distrust Mark Offi- cer) Elting for and have each other testified that the conflict “hurts “strikes palpable dysfunction company the heart morale” and “is detrimental to governance Compa- company.” exists complaint equitable filed a verified in the of TPG the court’s dissolution Chancery individually derivatively and on be- powers. *18. Id. at asserting against Elting half of TPG claims for waste, fiduciary duty, unjust breach of enrich- 8. Id. ment, contract, breach of and indemnifica- 23, 2014, May Elting petition tion. On filed a LLC, Elting 2015 WL 9. In re Shawe & Chancery seeking appoint- in the Court of 4874733, at *27. Company, ment of a custodian to sell the and (cid:127) (former Robert DeNoia Vice President on agree acquisitions been unable to Resources) expressed generally of Human his accounted between 16.5-20% “pervasive Company’s frustration with the and con- of the annual revenue and 8- inap- tinuous hostile environment where 14% of its annual profit. net Company morale, propriate no impacts acquisitions behavior made since 2013. As well-being myself health the Court of Chancery and and the held: staff.” [Although it is true that Company is (cid:127) (Chief Officer), Roy Trujillo profitable and has Operating enterprise been date, governance in a letter its drafted submission to a structure is irre- special trievably dysfunctional. appointed master the New The Company action, already York dysfunc- has suffered from this attributed the “mass exo- and, viеw, tion Accounting my dus” in and Finance “the threatened with ongoing much disputes grievous and stressful more harm to long- environ- its prospects dysfunction ment created it.” He further term stated is not that “[ejmployees are addressed.12 resigning and leaving departments these at unprece- scope When came to the of the custo rates,” dented that “[t]he morale and authority, dian’s the Court of likely spread,” retention issue will and First, considered three alternatives. company’s reputation “[t]he is tak- do nothing could and par “leave the ing beating, internally externally.” ties their own devices.”13 The court (cid:127) (an Accounting Kai Chu employee), at- rejected this option “manage because the “plummeting” tributed the morale and ment of the Company complete one employees loss of in Accounting to the dysfunction and utter causing that is “diametrically opposed” orders that had suffer threatens it with been from Elting. received Shawe and irreparable notwithstanding prof harm (cid:127) (a Fiona employee) Asmah itability Finance to date.”14 The Chancellor “found testified that disputes conflicting Elting’s justified” distrust Shawe to be directives have caused her and others to pall have “Shawe’s actions cast a middle,” “caught feel in the created prospect party have that a pay third would “unhealthy environment,” work fair price for her shares.”15 The court thus have employee “affected morale.”10 against nothing” option decided the “do “equity wrong will not suffer because acknowledged poten- Shawe himself “the remedy.”16 without a grievously harming” tial for Company Second, his feuding Elting.11 continued whether to the court considered major appoint also found that third custodian to serve as a clients competitive who are free to use capacity director or act some break services expressed concerns about the ties between the factions. He re- two dispute, Elting Shawe and have also jected option because: (internal omitted). LLC, Id. at *29 citations & re Shawe 4874733, at *31. (internal omitted). Id. at *15 citation *8 UOP, Inc., (quoting Weinberger 16. Id. v. 1985 12. at *30. Id. 1985), (Del. 30, WL at *9 Jan. Ch. 13. Id. at *31. (Del. aff'd, 497 A.2d 1985 WL 1985) (TABLE)). 14. Id. and, by dysfunction be to enmesh an outsider must excised safe- [I]t would extension, Company.21 of in- guard the Court into matters governance for an ex- corporate ternal Elting and III. period
tensive time. Shawe sep- relatively young. Absent a are both on primary argument apрeal is Shawe’s aration, and co- their tenure as directors au- statutory the court exceeded its that Company continue could CEO’s thority when it ordered the custodian to It sensible decades. company. Alternatively, a sell solvent essentially perpetual Court to exercise that, argues statutory even if the Shawe affairs of the oversight over the internal authority to existed authorize the custodi- Company.17 Company, Chan- an to sell the the Court of cery should have tried other measures This left the Court of with resorting the deadlock before to a address option “appoint final sell — find, however, Company. sale We Elting Company so Shawe and statutory failed to raise his Shawe enterprise separated can be and can be argument Chancery, in the and dysfunctional from protected their rela- appeal. it for cannot raise the first time recognized tionship.” The court of Chancery also find that the Court We “unusual,” remedy was be im- “should approach dispute, took measured only plemented last resort and with to sell ordered the custodian reviewing caution.”19 But extreme after Company attempting after less intrusive law, the statute and case the court deter- measures, reasonably concluding other the Court of mined “has not be less intrusive measures would effec- appointed custodians resolve deadlocks appoint court’s tive. The decision cus- involving profitable corporations and au- supported to sell the was Company todian thorized them conduct a sale of the trial, permit- the facts found after was Further, corporation.”20 the Chancellor statute, by the thus not an ted was held: abuse discretion.22 trial, Having six-day conducted decid- motions, ed at least sixteen held numer- A. lengthy hearings, ous and considered statute, 226(a), documentary carefully pro evidence 8 Del. C. credibility along Chancery, upon of the witnesses “[t]he vides submissions, parties’ any stockholder, may ap application extensive custodians, painfully persons 1 or more point obvious conclusion is that be and, insolvent, Elting separated if the to be Shawe and need receivers, management any corporation from each other of and for [ ].” Company good. contemplates, for its this prefatory language own Their As LLC, WL Id. 21. In re & 17. 4874733, at *31. Id. Corp., Giuricich v. Emtrol Id. (Del. 1982) (applying abuse of discretion Haseotes, (citing Id. Bentas v. 769 A.2d standard). (Del. 2000) 73 n. 3 and Fulk v. Wash. Assocs., Inc., *2 Serv. 21, 2002)). Ch. June *9 appointed corpo- custodians solvent challenge are for Shawe the Court does rations, appointed Chancery’s appointment receivers are a custodian un- 226(a)(2), § corporations. insolvent der claiming that the court misapplied requirement that the court pathways appoint There are three irreparable find injury to the corporation, custodian for a solvent two corporation. Shawe, According to First, which are relevant to this case. court improperly relied on case law defin- may custodian appointed be when: ing irreparable injury temporary in the (1) At meeting the election held context, injunction instead of applying a
of directors the stockholders are so supposedly
rigorous
more
“imminent cor-
they
divided that
have failed to elect porate
§
paralysis” standard under
successors to directors
terms
whose
argues
applying
wrong
Shawe
expired
expired
or
have
would
“trivializes
standard
and undermines Sec-
upon
qualification
their successors
judicial
tion 226” because
intervention is
....23
permitted
“extreme
circum-
stances.”
Or, a
may
appointed
also be
First,
argument
is academic because
when:
agreed
Chancery
Shawe
(2) The
business of the
appoint
was
authorized
custodian un-
suffering
irrep
is threatened
226(a)(1).
§
Elting
der
need not show ir-
injury
arable
because the directors
reparable injury
part
under
first
so
man-
respecting
are
divided
Further,
statute.27
agement
corpo
the affairs
did
misapply
not
or actual
threatened
required
ration that the
vote for ac
irreparable
injury requirement. As the
by the
cannot
tion
directors
board
observed,
“irreparable injury” is “a
be obtained and the
principle”
familiar equitable
which takes
unable
terminate
division
into account
corpo-
factors
“harm a
like
....24
reputation, goodwill,
ration’s
customer re-
Shawe does not
lationships,
employee
contest
the Court of
morale.”28
Chancery’s ruling
describing
that a custodian
as
Whether
the standard
226(a)(1)
did,
appointed
§
due
as imminent corporate
under
the Chancellor
paralysis,
stockholder deadlock
Shawe
is a distinction
between
without
dif-
Court Giuricich v. Emtrol
Elting,
inability
and their
to elect succes-
ference.
This
Corp.
Nor
interchange-
sor directors.
could he. Shawe
used the samе words
Elting stipulated
ably.29
properly
the stockholder dead-
The Court
required by
applied
lock
the words of the
and set-
statute.25
statute
LLC,
226(a)(1).
23. 8 Del.
28. In re Shawe
§
&
C.
4874733, at *28.
226(a)(2).
§Id.
29. (describing "immi
n.13
App. Opening
(Stipula-
Br. at 3181-85
equivalent
corporate paralysis”
nent
to "ir
Order).
tion and
considering
reparable
when
harm”
whether
26. Opening
Br. at 29.
irreparable
required
appoint
harm is
before
226(a)(1)).
of custodian
ment
Giuricich,
(irreparable
tied
threatened
evaluate the likelihood
Having
the Court of
decided
Company’s
irreparable injury
actual
Chancery
exercised its discretion
properly
business.
appoint
226 to
a custodian
primary
ton to
ar
Company, we
Shawe’s
trivializing
irreparable
in-
Far from
ap
gument
raised for the first
time on
Chancery
jury
the Court of
requirement,
statute does not
peal
—that
Company was
accepted the fact that
authorize the court to order the custodian
recognized
also
the ex-
profitable, but
Company
to sell the
the stockholders’
over
relationship
tremely dysfunctional
between
also
objection.
argues
instruct
on all of the
and its effect
founders
ing
to sell the
is an
Company
the custodian
per-
Company’s operations.
If allowed
not
remedy,
extreme
and should
have been
sist,
likely
Company was
to continue
imposed
attempting
without first
less-dras
path
plummeting employee
mo-
on
remedies,
using
tic
such as
the custodian
rale, key employee departures,
customer
ongoing
as a third director
to break the
uncertainty,
damage
Company’s
to the
deadlocks between the founders.
fun-
public reputation
goodwill,
and a
important
expressed
For the
reasons
inability
grow
Company
damental
Opinion,
requires
of this
our Court
Part IV
through acquisitions.
arguments
first
be considered
We will not disturb these factual find-
by
trial
appellate
instance
court before
trial
ings
appeal.
amply
on
The
record
closely
review.31
scrutinized
We
Chancery’s finding
supports the Court
record citations where he claims
Shawe’s
dysfunction
below,
statutory
that the deadlock and
between
his
argument was raised
causing
unconvincing
threatened
and find each
his citations
founders
irreparable injury
Company.30
supporting
opposite
conclusion.32
actual
Chancery
myriad
raises
de-
The Court of
addressed a
30. Shawe also
an unclean hands
firms,
fense,
including
сlaiming
Elting’s
by
obstructionist
issues raised
eleven law
litigation
statutory
appointment of a
Shawe’s
misconduct. The
conduct barred the
custodi-
fairly
argument
argument
presented
interpretation
was not one of them.
an. The
was not
statutory
argument
Chancery,
interpretation
and will not be consid-
"credi-
Court of
appeal. Supr.
bly
never
for
time
Ct. R.
can be avoided” because
was
ered
the first
on
presented
presented
Chancery,
("Only questions fairly
to the Court of
and the
to the trial
review;
may
presented
provided,
positions
Shawes took
in the Court of
Chan-
however,
justice
cery contrary
to those offered
the dissent
that when the interests of
so
appeal.
require,
for the first
See Dissent
consider and deter-
time
any question
presented.”).
n.3.
mine
not so
(Shawe
32. App.
Opening
Supr.
Br. at 3786-91
Ct. R. To avoid Rule
the dissent
Brief) (Court
argument
statutory
Shawe’s
Post-Trial
should
concludes that
appoint
fairly encompassed
general
a custodian to sell the
was
within his
argument
"discourages
because the
made below—that
the Court of
statute
dissolution”
and "Delaware courts refuse to
their
should not order a
under Sec-
exercise
sale
companies
tion
8 not
discretion to dissolve solvent
226. Dissent at
n.3. But Rule is
by attempting
ap-
where other measures ‘milder’ than dissolu
satisfied
to anchor serious
available.”) (emphasis
original);
pellate arguments
shifting
tion
in the
sands
(Shawe Answering
general arguments
As the follow-
id. at 3836
Post-Trial
below.
made
demonstrates,
Brief)
("Elting
very high
has not met the
footnote
Shawe not
appointment
argument
of a custodian to
statutory
failed to
in the
standard
raise the
Company under Section
positions
he
inconsis-
dissolve and sell the
Chancery,
took
last,
re
interpretation
226”
“Dissolution is a
not first
with the dissent's
of 226.
tent
argument
argu
waived. Even
all corporations agree to
all provi-
make
us,
part
sions of the
properly
was
before
we find that
DGCL
of their
ment
charters.
express language
Under the
arguments
upon
the custodi-
relied
the' dissent
*11
statute,
an
Chancery
the Court of
has the
appeal
first
time on
lack merit.33
authority to “otherwise order” the custodi-
226(b)
provides
of the statute
an
“liquidate
Company’s]
[the
affairs
that:
and distribute its assets”
than
rather
“con-
appointed
A custodian
under this section
tinue the
corporation.”35
business
shall
all
powers
and title of a
words,
other
duty
custodian’s default
is
appointed
§
receiver
under
291 of this
to continue the
сorporation,
title,
authority
but the
of the Chancery
but the Court of
displace
can
to continue
corpo-
is
the business of the
duty by ordering
default
compa-
that
ration,
to liquidate
its affairs
ny’s
liquidated.
affairs be
assets, except
and distribute its
when
Several sources confirm the Court of
order,
the Court shall otherwise
ex-
Chancery’s
authority
broad
the stat-
under
arising
in cases
paragraph
under
cept
ute,
ordering
which includes
a sale. As the
(a)(3)
352(a)(2)
§
of this section or
noted,
the Court of
has
this title.34
previously
authorized
custodian to sell a
Section 394
company
Delaware General
when faced with stockholder
(“DGCL”)
Corporation
provides
Law
that
deadlock.36 This Court has
recognized
also
sort.”);
(Shawe Answering
id. at 3850
Post-
Id.
Brief) (“There
precedent
Trial
is no
for order
ing dissolution because of one failed election
Bentas,
36. See
(ordering
provides the custodian read (cor- 226(a)(3) § appoint- powers and title of receiver circumstances similar them busi- Although porations we have cau- that have abandoned ed under 291.”37 (custodians ness) 352(a)(3) for close normally custodian’s au- tioned that kept corporations). a minimum” and thority “should as the “should be exercised insofar problems interpre require,” ...
goals justice fairness apparent. tation of the statute observed' that court’s we have also *12 attempts change plain to the mean dissent authority to a set receiver’s duties broad ing statutory language by invoking of the § to same conclusion 291 leads the under statutory interpretation. rules of But 226(b): § authority for a custodian’s under unambiguous, statute is clear “the [226(b)] this as section interpret We plain meaning statutory language of the statutory setting the maximum forth unambig This “[a]n controls.”40 is because powers of the custodian. limits on the precludes judicial uous the need for statute 226(b) 291, specifical- § to which interpretation.” refers, of ly “the the states: powers be shall contin- 226(b), § such and plain reading [receiver] shall the Under shall ue so as the Court deem long powers of a receiver custodian has Thus, 291, §§ necessary.” § under under his are to duties continue of Chancery may determine unless the Court otherwise appointment orders, and the duration cir- except special under the to specific powers upon be conferred cumstances businesses and abandoned custodian.38 interpretation corporations. close Rules plain to contort the should not be invoked does not take issue dissent language of a statute in a manner inconsis- exрress language the statute plain meaning. tent with its powers all of custodian has receiv- Further, Nonetheless, appears interpretation § to also under 291. it dissent’s er empowered ignores conjunctive argue is not words “and ex- cept.” reasonably powers to exercise the of a when The statute cannot receiver express exceptions that a dead- read to the three as a “otherwise orders” Instead, company of similar locked solvent Accord- series events. when be sold.39 dissent, except” given meaning, lan- though even words “and reasonably to list three guage as the shall statute is read “except otherwise directly phrase coming exceptions order” distinct to the custodian’s de- modifies the liquidate to maintain the business —“ex- duty before it—“not to its affairs and fault by or- cept is followed the Court shall otherwise distribute its assets”—and when der;” “except arising ar- in cases except” the words “and dissent —the n.12; 172-73, Chancery’s 39. Dissent at n.63. exercise its broad discretion appropriate remedy to resolve fashion deadlock, Mall, Inc., Independence 940 A.2d 40. LeVan v. (Del. 2007) (quoting 932-33 Eliason v. (Del. 1999)). 226(b), Englehart, § 733 A.2d 37. C. Del. Giuricich, Id. 449 A.2d (a)(3). section;” paragraph their owners cannot take fundamental ac 352(a)(2) “§ of this title.”42 tion to elect a new board. That the Chan guidance cellor looked to the remedies § points also dissent a sec- entered cases under 273 was not error permitting tion of the DGCL dissolution Instead, part. his it suggests that the joint corporations venture when two 50% court understood TPG’s economic reality owner-stockholders are deadlocked. deadlock, identical to a 50-50 and that instances, many that statute has been em- the tools to sensibly used address those ployed through to break a deadlock a sale deadlocks would inform his discretion un auspices' under the § der the Court of fiduciary and a appointed by it for purpose.43 Con- It is also not convincing to characterize trary contends, what the dissent it is method chosen the Chancellor as unprecedented no means for the Court of somehow for purposes different Chancery to have address the fate of a because it involves sale corpora- solvent corporation by setting up Delaware stock, tion’s rather underlying than its as- process a fair going sold as a sets. Stockholders corpora- Delaware сoncern, necessary when that outcome tions are rights entitled *13 protect
to best
its constituencies.
stock,
come
their
rights
with
and those
are
observed,
As the Chancellor
this case
subject to the Court of Chancery’s power
§
a
“was within
whisker”
273.44 The
§
under statutes like
Many
226.45
Dela-
only novelty here
that this
is
case arises
statutes,
ware
including
dealing
those
with
§
under
because the economic and
mergers, subject
certain
stockholders to
reality
functional
of the deadlock does not giving up their shares over
objection.
their
But,
precisely
§
fall
consistent
design
buys
with
flexible and efficient
aWhen
stockholder
in a
stock
De-
DGCL, § 226
corporation,
allows the Court of Chan
laware
it
that
stat-
knows
our
cery to
by using
provides
Chancery
address
situation
its
ute
the Court of
broad
power to
authority
corporate
deal with cases on
situational
to address
deadlocks
kinds,
key language
authority
basis. Rather than read the
that
various
well
“except
ownership
when the
shall otherwise
affect
Court
interests.
fundamental
having
order” as
no
significance,
buy
corpo-
we read
stock
Stockholders
Delaware
consistently
design
gain
underlying opera-
with
overall
rations
from
statute, and its intention
corporation.
our
It
allow
tions
therefore
Chancery
practical
Court
the discretion to
efficient
deal
inconsistent with
and
DGCL,
sensibly
corporations
design
with
in the
corporate
that
unable
law
governance
liquidations, simply
move forward with
require
because
asset sales
226(b).
§
company's]
possible
42. Del. C.
... all of
out
[the
public
standing
be sold at a
auc
shares will
tion.”).
See,
Fulk,
*2,
e.g.,
2002 WL
10;
Inc.,
of Bermor,
Matter
Tr.)
(Trial
App.
Opening Br. at 2911
(Del.
9, 2015) (appointing
at *5
Feb.
Ch.
re
(“It’s interesting,
is within
this case
a whisker
ceiver);
Bermor, Inc.,
In re
50. & In re Shawe Shawe claims that 4874733, premium” will receive a that she at *25. "control contract, through only such as could receive 51. Id. buy-sell agreement. of Court reasoning correctly rejected argument, this 52. Id. at *31. provisions General that "the of the Delaware Law, Corporation including those afforded 53. Id. default," 226, apply by and thus section premium of a control shared existence 54. Id. analy- all the is irrelevant arguments ap- claims that the 55. Shawe makes two other on sis. Id. at *32. Shawe also First, rulings We peal, privilege were erroneous. which we find without merit. court’s 168 of requiring review the interests error
IV.
applied
been
This standard has
justice.”58
appeal,
on
first time
Shir
For the
criminal and civil cases.59 We have
both
argument
that
ley
novel
Shawe raises a
previously refused
review constitutional
authori
lacked the
the Court
arguments
for the first
time
raised
Specifically,
sale.
she
ty to order TPG’s
appeal.60
alleges
possibility
she would
Takings
violates the
her share
have
sell
error,
reviewing
plain
“When
Process Clauses
United
and Due
clearly
be so
complained
‘the error
must
Shirley
Constitutions.
and Delaware
States
rights
jeop
to substantial
prejudicial
not properly
that she did
admits
Shawe
integrity of the
the fairness and
ardize
before the Court
present
this issue
”61 “Furthermore,
process.’
the doc
trial
Chancery.56
trine of
error is
to material
plain
limited
8,
which are
on the face
apparent
Gourt
Supreme
Under
Rule
defects
record;
basic,
pre
which are
serious
questions fairly
Court
considers
character,
in their
which
pro
court.57 The rule
to the trial
fundamental
sented
clearly deprive
“if
an accused
a substantial
exception
[this Court]
a narrow
vides
clearly
or
manifest
plain
right,
court committed
which
show
in-
the trial
finds
Smith,
Chancery's
(applying plain error
will review issue not representing eleven different law firms in the court raised below. This rule is litigation, in Shawes’ interests this fail on principle based that it is funda- Shirley assess takings Shawe’s novel argu- mentally unfair to fault trial court ment, we consider the argu- constitutional failing correctly to rule on an issue it ments waived for failure raise them first given was never opportunity to con- Chancery. in the Court Furthermore, sider. it is unfair to allow party to choose to remain silent in the Finally, Shirley argues Shawe error, taking trial court in the face of of Chancery Court when erred outcome, prejudice on a chance favorable and sub- dismissed with the derivative brought against Elting. claims sequently error on appeal assert Shawe has appealed not prejudice. the dismissal with in the trial unfavora- outcome agree of Chancery We with Court that ble.63 Shirley participation Shawe’s active in two Opponents should have fair chance to of the three functionally “coordinated and arguments address at the trial court. It is consolidated” actions before the Court prudent development for the of the law Chancery put her on notice that the claims appellate courts have benefits could be dismissed based Shawe’s un come with a full input and from record clean hands. The court also found that Thus, judges. presenta- learned trial fair functionally represented Shirley Shawe tion process by facilitates the which the ownership Shawe’s Compa interest of rights in an individual application case Thus, ny. she is bound the dismissal society affects others other cases .prejudice claims derivative general. brought by Shawe. Shirley urges this to con- Shawe Court V. argument
sider her new the inter- justice exception ests of ruling because the Chancery’s August The Court of significant implications will have for future order, opinion July exactly why cases. that is But we orders, should related affirmed. argument. not her The record is address VALIHURA, Justice, dissenting: largely undeveloped, judge trial did not opportunity thoughtful make a Chancery generally The Court of ruling, Shirley Shawe’s briefs in fashioning equi broad discretion certain cursorily address issue. Because this might sug table remedies.1 this Although complex Court takes such constitutional gest that should defer Wainwright; express findings post-trial A.2d át 1100. there were See, duty. there were no breaсhes of fiduciary (2016) LLC, Appellate 63. 5 2d e.g., Elting Am.Jur. Review 618 re Shawe & WL (citations omitted).. 13, 2015) (“In Aug. at *34 sum, the commit asserted misconduct acts discretion, 1. The Court has broad ted has identified —al example, fashioning remedy though disturbing contrary expected for a violation, fiduciary propriety very and the of such norms of establish behavior —do remedy ordinarily high fiduciary resulting reviewed for abuse of level of misconduct (in Berger Corp., Company discretion. See v. Pubco harm to the or its stockholders (Del. 2009) (en banc). But, stockholders) here, capacity necessary their *17 170 Accordingly, respectfully “no.” I of the most DISS
Chancellor who one ordered of ENT.3 possible remedies sale a extreme —a corporation
financially
over the
successful
with a question
Given
faced
we
objections of
more of
three
one or
permissible
limits of
of
as
the Court
of the Court
stockholders —our
of
review
226,
Chancery’s power under Section
Chancery’s
of
requires
order
construction
flexibility typically
of
afforded the Court
Del,
(“Section
statute,
§
8
226
namely,
a
C.
Chancery
fashioning equitable
remedies
226”).
remedy
in this choice of
Embedded
specific
yield
principles
must
to the more
question
court-appoint
of whether a
is
underlying
statutory provi-
the relevant
power to
ed custodian has the
force the
interpreting
and common law
sions
these
sale of a
stock absent
stockholder’s
provisions.4
principle
The first
concerns
interpretation
that,
DGCL,
stockholder’s consent.
fact
in the
the uncontested
of a
is a
of law which
question
“personal property”
statute
we
is
is gener-
stock
analysis
de
My
ally subject
property
review
novo.2
statu
pol-
to traditional
law
Generally,
tory
suggests
favoring
scheme
the answer is
icies
free alienation.5
dissolution.”).
remedy
argument merely
impose
equitable
is
an
reason in
of
additional
Instead,
below,
urged
of
was fashion
support
proposition
of a
is
there
226,
ing remedy pursuant
to Section
where
why
acceptable
no
reason
in the interest of a
Court has held that
intrusion into the
speedy
litigation
argument
end to
should
kept
be
to a
(citation omitted) (inter-
must
not be considered.”
Corp.,
minimum. See
v. Emtrol
449
omitted)).
Giuricich
quotation
nal
marks
232,
1982).
(Del.
A.2d
240
See, e.g.,
Surgical
Waggoner,
STAAR
Co. v.
N.Y.,
Corp.
v.
Co.
Corvel
Homeland Ins.
of
1130,
(Del. 1991) ("Again,
588 A.2d
1137 n.2
863,
(Del. 2015);
112 A.3d
868
see also N.
emphasize
we
that our
courts must act
Co.,
Safety Appliances
River Ins. Co. v. Mine
grаnting equitable
caution
restraint
when
2014)
("[W]e
105
380-81
A.3d
do
derogation
principles
relief in
of established
legal
not
court on
defer
the trial
embedded
corporate
(citing
By-Prods. Corp.
law.”
Ala.
(cita
them de
conclusions
review
novo."
Neal,
(Del. 1991))).
v.
588
258
Even
omitted)),
(Nov.
2014).
tions
as revised
under an
"abuse
discretion” standard
review, the trial court’s discretion is not un-
Majority Opinion
addresses
Much
See,
Dobbs,
e.g.,
limited.
1 Dan B.
Law Chancery's power
appoint
custo-
Damages-Equity-Restitution
Remedies:
proposition
seriously
not
con-
dian—a
(2d
1993) ("With
equitable remedy,
ed.
Rather,
anyone
tested
is tire
here.
Modi-
injunction
plaintiff
restore
should
provisions
fied
that are
Auction’s forced sale
entitlement, more,
less.”).
her
no
no
issue,
chiefly
issue.
at
As to that main
key
Majority
formally
declines to
address the
Drexler,
Sparks,
5. See
Black &
Delaware
statutory arguments
grounds
of waiver.
Corporation
Law
22.01
22-2
and Practice
at
Instead, they
pages
pure
offer
dicta
several
(2015) ("[Cjorporate
personal proper
stock
statutory argu-
I
on the issue.
believe that
ty,”
alienability
personal
free
”[t]he
encompassed
fairly
ments are
within Shawe’s
property
property
is a
valuable attribute
explicit argument
the Court of
below—that
ownership worthy
protection by
should
order
sale under Sec-
courts.”);
Cyc.
Corps.
12 Fletcher
Clearly,
proper
tion
and its
2016) ("The
shares,
(Sept.
owner of
scope
along.
all
have been a central focus
personal property,
the case
other
has an
fact,
statutory
I
Given that
do not
how
see
right,
absolute and inherent
as an
See,
incident of
e.g.,
analysis credibly
be
N.
can
avoided.
River,
ownership,
his or her
to sell or transfer the
(rejecting
105 A.3d
382-83
Rule
will, except
right may
shares at
insofar as the
challenge
allowing
reasoning
additional
incorporation,
be restricted
the articles of
presented'
support
"broader
shareholders,
raised);
bylaws,
agreement among
Mundy
had
Hol-
issue” that
den,
been
v.
(Del. 1964) ("[Wjhen
corporation.”).
204 A.2d
between shareholders and the
*18
possibility
They
of defeasance
in
where
contend that
order to avoid this
stock
occur
stockholder’s
over
potential
problem,
constitutional
Section
objection,
stockholder’s
those restraints on 226 ought to
narrowly
be construed more
transferability
free
and alienation of stock in
implementation
favor of the
of less dras-
in
expressly
sеt forth
the relevant
“takings” argument
tic remedies. The
strongly suggests
fact
statute. That
presents novel issues
first impression,
broadly
226 should not be so
read
Section
which I would not reach.
for a
allow
forced sale
other
A holistic
reading
supports
the DGCL
of a stockholder’s stock
divestiture
view
divestiture of a stockholder’s
implication.
principle
mere
The second
stock may occur over the stockholder’s
longstanding,
common law
uncontested
objection in
a number
situations —but
principle that the involvement of the Court
only when the relevant
expressly
statute
court-appointed
custodi-
provides.8 Examples
so
where a stockhold-
corporation’s
ans in a
affairs
business and
er is
to give up
forced
her
kept
long-
should be
to a minimum.6 This
shares have one
in
in
standing
thing
common law view is reflected
statutory
common—the relevant
parties
point
fact that the
cannot
here
provisions expressly contemplate that situ-
in
single
history
to a
case
of our Sec-
ation
provide
fair notice that it may
jurisprudence
tion 226
a court
where
Here,
occur.
Section 226 contains no such
company
ordered a custodial sale of a
over
express provision or
poten-
notice
such
objections.
specific
stockholder’s
These
tial
I
forced divestiture.
know no situa-
analytical
policies
point
should be the
focal
tions in the
where a
DGCL
forced sale of
construing
permissi-
Section 226 and the
notice,
stock can occur absent fair
and the
power.7
ble limits
the trial court’s
Majority cites to
none.
absence of
statute,
authority grounded in the
con-
the.
appellants
gloss
add a constitutional
absence of
similar
ceded
cases under
below,
on
appeal
was
raised
name-
our
strong
common law’s
they
ly,
contend that a forced sale of their
preference for the least intrusive remedies
might
stock
well constitute an unconstitu-
involving court-appointed
cases
custodi-
“taking” of
personal property
tional
their
suggest
ans
that the Chancellor
too
went
violation
the Fifth Amendment
ordering
far too
fast in
Modified Auc-
of Article
United States Constitution and
I,
of the
tion.
Section 8
Delaware Constitution.
See,
Giuricich,
(Section 253),
e.g.,
merger
short form
statute
[and]
I. *19 business has failed within a rea- and Statutory Suggests that the Scheme dissolve, steps time to take to sonable the Pow- of Lacked or liquidate distribute its assets.9 to Sell er to Order Stockholders Their Shares deadlock, In of the case shareholder as here, appoint to a decision custodian “[t]he form, 226(a) per- Section its current [ejourt’s ... is the committed to discre- of Chancery appoint mits to a require showing tion” and of does of event stockholder the dead- custodian irreparable injury to corporation.10 the lock, deadlock, or of abandonment director corporation: the 226(b) authority of Section sets forth the Chancery, upon application The Court of the and states that the custodian custodi- stockholder, may appoint or any of authority an’s is to continue the business and, if persons to be more custodians corporation liquidate of not to the and its insolvent, is corporation the be receiv- its affairs and distribute assets: ers, any for corporation of when: and A appointed under this section (1) meeting At for the elec- any held powers shall all of the and title tion of the are directors § appointed receiver under 291 of this they so have failed divided title, authority of but the custodian elect directors whose successors corpo is to continue business of expired or have ex- terms have would liquidate ration and not to its affairs suc- upon qualification of their pired assets, and except distribute its when cessors; or the Court shаll otherwise and ex order (2) corporation of is The business cept arising paragraph cases under irrepa- suffering or is with threatened (a)(3) 352(a)(2) § of this or of section injury rable because the directors this title.11 respecting management so divided liquidation, In the of event a court-ordered corporation. the affairs custody required by custodian takes the assets vote action corporation cannot be
board of obtained stockhold- directors —not (which per- er’s stock stockholders are unable to is stockholder’s and the. division; property).12 or sonal 159 the DGCL terminate defend, 226(a). corpo- 9. 8 cute and name C. Del. otherwise, suits, ration or all claims or Miller, 554920, at *3-4 v. Miller them, agent agents appoint an under and 10, 2009), (Feb. Ch. Feb. as revised might by to do all other acts which be done 2009). corporation be neces- which sary proper. powers the receivers added). 226(b) (emphasis Sec- 11. Del. C. long be continue so shall such and shall as governs tion insol- receivers for necessary. the Court shall deem corporations, provides: vent §Id. 291. insolvent, be Whenever shall Section'226(b), Chancery, liquidation application 12.In the Court of on the thereof, any may, corporation's property is sold. The or stockholder stockhold- creditor shares, time, persons corpora- to be to own appoint 1 or ers continue but the more concern, longer going corporation, to tion is its receivers of take no estate, assets, effects, charge operating replaced Liq- assets are with its cash. affairs, outstanding order and and to collect the uidation available when claims, business, debts, belong- coiporation property due and abandoned insolvent, prose- up corporation, power or needs wind its affairs— Assembly stock in al provides permit “[t]he shares ev- intended to a stock- ery corporation personal shall deemed personal holder’s fundamental property provided property and transferable rights to be abridged implication. mere 8 of I of Title 6.”13 Article subtitle This permit Where the so DGCL does restric- Alteon,14 v. Court, Grimes stated that tions the stockholder’s free transferabil- stock are n species proper- “[s]hares ity stock, and alienation of her including importance that is of ty right’ ‘foundational dispositions forced and transfers of stock ”15 system.’ to our economic ownership, it does expressly. so Examples *20 of Although powers the the custodian 251(c) include Section (permitting approval by Section 226 are under defined reference mergers by stockholders, of majority a of stated, to as Court has Section this such that dissenting stockholders are di- 226 powers Section not as “are unlimited subject vested of ap- their stock to powers appointed of a as the receiver un- 262); praisal rights under Section Section general powers equitable der the of the (authorizing 273 joint dissolution' of a ven- court, or pres- under the forerunner the by stockholders); ture owned two 50% 226(a)(1).”16 ent Nor does [Section] Sec- 303(a) (involving may Section actions that grant power tion 291 the receiver over the taken in be bankruptcy proceedings that personal stockholders, -of property the al- are deemed be unanimous actions of the though property a receiver sell the of stockholders). corporation the certain circum- under stances.17 As to first the of these the examples, statutory contemplates DGCL the of
Review the relevant scheme conversion that suggests unlikely that it is the corporations merge.18 Gener- shares when Sec- deed, unquestionably statutory present obligation the circumstances default under Thus, disagree Majority's I here. with the Section 226 is to the continue business and case, "in liquidate statement that the context of this not to affairs or its distribute making liquidation Majority, focusing distinction between assets. The on the refer- practical Majority Op. no sale has real effect." powers ignores ence to Section that, suggests Majority at 166. further power the limitation on that which immedi- remand, after could ately follows that reference —which is “but liquidated through order TPG’s assets a sale authority custodian is to continue process proceeds and distribute 226(b). § Del. business ....” 8 C. I ad- stockholders. Id. at It further contends statutory exceptions dress the that default (citing much.” "Shawe Id. that concedes rule in footnote 52. 18-19). Opening Philip Br. of Shawe at R. fairly be Shawe’s statements cannot viewed as § See 8 Del. C. 297. liquidation option concession was that an party during appeal No here. this has even 251(c) § ("If majority 18. Id. outstand- of entitled to suggested liquidation that either or a sale of corporation stock vote option. assets an adoption thereon shall be for the votеd of the [merger] agreement, fact shall be certi- Del. 13. 8 C. 159. agreement by secretary fied on or secretary corporation, provid- assistant (Del. 2002). 14. 804 256 A.2d agreement bn ed that such certification merger required shall not be if a certificate of (internal removed) at Id. omission filing or in lieu of consolidation is Kamkin, filed Inc., (quoting Kalageorgi v. Victor agreement. agreement so be shall 1999)). If adopted by and certified each constituent cor- Giuricich, 237; poration, be be- shall and shall 449 A.2d at see also id. at then filed effective, (holding powers come accordance case with limited”). added)). sharply (emphasis custodian “shall be In- title.” surviving resulting corpora- or mergers. governs DGCL tion 251 251(b) (c) tion[.]”19 forth re- set Subsections merger agreement quirements 251(c) requires merger 251(b)(5), for exam- satisfy. Section must (b) agreement required subsection merger agreement that a ple, provides annual to the stockholders an submitted shall state: meeting “for the special purpose acting agreement.”20 on the It also sets manner, any, converting if requirements. notice Because the forth corpo- of each of the constituent shares merge power expressly conferred or other into shares securities rations statute, every of Delaware stockholder resulting from the shares corporation accepts his or her consolidation, cancelling or of merger or Though provisions. of these a stock- notice shares, and, any some or such all might pursue apprais- be able holder corpora- of the constituent shares al to ensure he or she has received action outstanding, are not remain tions *21 or cannot adequate compensation,21he she solely shares or other into be converted merger proceeding from on prevent the surviving resulting or securities Impor- of the basis of absence consent.22 cancelled, cash, corporation or to be the express from the words of tantly, is clear any or of oth- rights securities property, possibili- that this the statute outcome is entity corporation or which the hold- er ty.23 to receive of such shares are ers for, upon or conversion of such exchange applies joint 273 ventures Section any and the surrender certifi- shares equal parts by two stockholders owned cash, them, prop- evidencing cates expressly allоws for dissolution over and or other erty, rights objection purpose securities of them.24Its one entity may by or be addition is to alleviate a “fundamental deadlock” corporation obtaining a “removing the need for unani to or in or other securities lieu shares 251(b)(5). expressly provide legislative synopsis fair notice to stock- The statutes 19. Id. 251(b)(5) may holders that this occur. 2003 to Section amendment states: 251, 252, 253, Majority acknowledges that this case 24.The to Sections The amendments 254, 255, 256, 257, precisely clarify fall [Section] 263 264 “does 273[,]” presumably Company or constituent has shares other interests because joint entity corporation merger to a three stockholders and is not venture. other converted, may Majority Op. Being be cancelled consolidation at "within a whisk- 165. merger. by ignores principle or unaffected er” of Section 273 the core (2003). syn., legislative body presumed 84 142d Gen. Assem. Del. S.B. "[t]he every provision have inserted for some useful 251(c). 8 Del. C. construction, purpose when different parts of a statute it terms are used various § 262. 21. See id. that a distinction is reasonable to assume Giuricich, the terms was intended.” between Assuming merger was otherwise be- (internal quotation A.2d at 238 marks reproach. yond (citation omitted). omitted) For the same rea- son, broadly that, read it is unreasonable Majority "[mjany states Delaware statutes, "except or- including dealing when the Court shall otherwise those with certain language affording mergers, subject giving up in Section 226 as stockholders to der” employ objection.” Majority discretion to Section their shares over trial court broad their Op. Majority Majority Op. agree. point provisions. I 273’s remedial See at 165. completely fails to address is that all of these may provide relief “contemplates “Accordingly, Section 273 vote[.]”25 mous (1) corporation will enforce an to if a shareholder or, only (2) assets agreed-upon disposition two 50% shareholders who are may (3) agreement, joint absent such prosecuting a venture who of the vent compulsory order dissolution agree discontinuing joint unable to Thus, per expressly Section ure.”26 The Majority’s attempt venture.”29 joint if of a venture even mits dissolution bring this case within ambit of Section objects. legislature one owner “The 50% ignores significance sepa- of that to provide speedy enacted Section point acknowledged rate statute —а by dissolving joint corpo method venture Chancellor, who agreed that Section 273 ration when its two shareholders are 50/50 did not apply.30 273(a) in deadlock.” provides, Section 303(a) provides that corporate part: relevant actions pursuant taken orders of the If the stockholders of a bankruptcy courts in proceedings federal State, having only 2 stockholders may by be taken further “without action each which own 50% the stock corporation’s] [the or stockhold- directors therein, shall engaged in prosecu- authority power “[s]ueh ers” and joint tion of a venture and if such stock- ap- be exercised” a representative holders shall agree upon be unable to pointed by the court “with like effect as desirability discontinuing such exercised and taken unanimous action joint disposing venture and of the assets of the directors and stockholders of the venture, in such used either stockholder *22 corporation.”31 may These actions allow may, unless provided otherwise in the corporation, for to: example, incorporation corpo- certificate of of of incorporation, amend its certificate ration or in agreement a written be- any stockholders, and in its change capital
tioeen the
make
or
with
file
stock,
amendment,
capital
any
of
or
Chancery petition
other
stating
alteration,
change,
provision,
it
or
or
joint
desires to
au-
discontinue such
ven-
dissolved,
chapter;
ture
this
dispose
and
thorized
be
the assets used in
assets,
such
or part
merge
venture in
transfer all
plan
accordance with a
agreed
or
upon by
to be
permitted by
chap-
both
consolidate as
that,
ter,
case,
or
plan
however,
agreed
no such
shall
in
be
no stock-
stockholders,
upon by both
corpora-
any
holder
statutory right
shall have
tion be
appraisal
dissolved....28
of such stockholder’s stock
487941,
Chips,
Chang,
(citing
In Arthur Treacher’s
re
Fish &
WL
Wah
at *3
(Del.
1, 1980).
Assocs.,
July
Inc.,
WL
at *3-4
Ch.
In re
....32 refers) and “should be interpreted light of the relevant Code definitions.”35 above, provisions contrast each language sug- 226 contains no Although generally Delaware courts that a court-ordered custodian gests have been reluctant to re- invalidate stock compel a disposition power forced strictions,36 this approach is “consistent (stock). personal property a stockholder’s general principle with the that Delaware provisions of the Relatedly, other DGCL corporate enabling, law is not and does on transfers address restrictions stock on market impose choices participants.”37 clear that make restrictions must and also public policy generally empow- “Delaware clearly. For exam- expressly be stated them- participants to ers market decide closely are often utilized ple, restrictions re- contracts selves whether enter into protect corporations order held stricting right their their shares.”38 sell tax treatment. Section utilization of certain transfer, But a forced untethered requirements forth valid sets authorization, ab- express statutory restriction the transfers securities. defeasance, possible notice such sent conspicu- The restriction must be “noted divestiture, transfer, is counter certificate, ously” on the stock general principles of free alienation. The corporation’s certificate imposed enabling broadly view the DGCL is Also, bylaws.33 incorporation “[u]nless that Sec- conclusion does undercut the conspicuously” on stock certifi- noted narrowly by ought tion 226 to be construed cate, ex- are “ineffective such restrictions sale of a court to bar a custodian’s actual cept against person knowl- Rather, consent. stockholder’s stock absent edge Notably, of the restriction.”34 implies enabling aspect of the DGCL “actual conspicuously” “noted knowl- structuring an element consensual edge” phrases are from the Uni- derived concerning the rele- (the “UCC”) corporate contract form Commercial Code (to adopted participants.39 159 vant Delaware which Section (citations 303(b). minority.” profit would 32. Id. the sale omitted)). 202(a)-(b). 33. Id. *23 219650, Miller, *16 Agranoff WL at 38. v. 1999 202(a). 202(c) § 34. Id. Section describes vari- 12, 1999) (Del. (citing Apr. 8 Del. C. 530, Ch. types ous of on transfers of restrictions securi- 202), modified, § 737 A.2d 1999 as aff'd permissible ties which Section. are under that (Del. 28, 1999) (TABLE). July WL 636634 Folk, 26, (list- supra § 35. note 202.06 at 6-19 See, e.g., Apparel Grp., Jones Inc. v. Max 39. Del, following provisions: UCC 6 C. 837, (Del. Co., 883 845 well Shoe 1-201(10) ("conspicuous”) § 6 Del. C. and 2004) "widely (noting re that the DGCL (definitions "notice,” § 1-202 "knowl- in garded as the most flexible the nation be etc.)). edge,” corporate parties to the cause it leaves the stockholders) (managers with contract and Cos., Armour, Grp. Capital 36. WL v. Inc. relations, leeway great to structure their sub 678564, (Del. 15, 2005). at *9 Ch. Mar. constraints”); statutory relatively ject to loose 26, 202,6, Folk, supra § 6-20 37. Id. This is clear a number of see note at in different also See, argument (observing e.g., Curtiss-Wright "[t]he contexts. n.58 Bershad v. 1987) 840, ("Stock- may imposed Corp., without 535 A.2d restriction consent, upon a reserved corporations right based holders in Delaware have a stockholder's corporation’s general power to amend the to control and vote shares in their own their certificate, rejected” (citing B & H has been Clearly, is under interest.... a stockholder no Warehouse, Lines, Inc., duty holdings corporation, Inc. Van to sell its in a even v. Atlas 1974))). (5th shareholder, 825-26 Cir. majority merely if it is F.2d because importance To further at- statutory illustrate fair notice stockholders of DGCL, tributed fair notice in the a possibility. such Grimes, Court identified one of This narrower construction of Section policies Corporation fundamental “two 226 is by further supported examining the ensuring “certainty in Law” the instru- special provisions corporations for close upon corporation’s capital ments Sections 352 embody which also repeated structure is Court based.”40 This consent, concepts of need for statutory “strict notice and as well adherence aas formality relating to statutory drastic, matters the issu- preference for less inter of capital ance stock” and noted that “De- im remedies to address deadlock situa statutory implements laware’s structure example, tions. For Sections 352 and 353 policies through easily these a 'clear and expressly provide provisional directors legal followed roadmap’ statutory provi- in deadlock situations. 352 empow Section 41There, rejected sions.” this Court a claim Chancery, ers the addition to validity of an promise oral made to a Section to appoint a custodian for by stockholder percent the CEO to sell ten corporation close in two scenarios. The corporation’s private future stock “[pjursuant first is where 351 of this offering to the This stockholder. title the business and of the corpo affairs 152, 153, 157, 161, held Sections by ration are managed DGCL, together, when read they are so divided “contemplate approval board and a written corporation suffering or is threat instrument relevant evidencing the trans- irreparable with injury any ened rem actions stock affecting issuance edy respect to such deadlock provided corporation’s capital structure.”42 incorporation in the bylaws . certificate case, factually distinguish- instant although or in written agreement the stock able, the same “[cjertainty need for holders has failed[.]”44 second occurs expectations”43 suggests investor a court “right where has the stockholder to the should not power stockhold- order dissolution of corporation pro sell under a party ers to their stock a third over least, objections without, incorporation their vision of the advance certificate — Grimes, (citing Kalageorgi, by 804 A.2d at 260 rather than board of di- 538-39). rectors!)]” A.2d at provisión and the existence of the conspicu- on the be "noted certificate must 538). ously every (quoting Id. on the stock Kalageorgi, 750 A.2d at face back certif- corporation.” icate issued Id. such satisfied, If requirements these such cor- example, Id. at 261. "re- porations calling lating required avoid stockholder meet- formalities stock directors, ings all subscriptions, provides to elect stockholders are subscription *24 directors, agreements against default considered all are not enforceable the stock- writing signed by "subject subscriber holders are to all unless liabilities of di- the subscriber.” Id. rectors.” Id. TransPerfect is not a Because managed by corporation close is a board and, directors, apply of Section does Id. at 266. likewise, possibility the neither does of seek- pursuant appointment 352(a)(1). of a custodian manage- § Del. C. To invoke However, 352(a)(1). Section the General As- by pursuant ment the to Section sembly’s approach to the context corporation corpora- deadlock the be a close must relevant, tion, particularly of incorporation corporations is its certificate of must close "provide corporation of the since three TransPerfect has stockhold- ers, managеd by be shall the stockholders of the affairs that the ration’s business and § of this title.”45 Nota permitted by by of for action the board required votes of a a stockholder bly, under Section with the cannot be obtained right of directors not have corporation does close af- the business and consequence that right provided unless that dissolution longer can no corporation fairs of the Again, the con corporation’s charter. the advantage of the stock- conducted consent are ex cepts of fair notice and generally.47 holders Subsec forth in the pressly set statute. (c) 355(b) provide:
tions 352(b) Additionally, expressly “Section (b) incorporation the [cjourt opt for the less intru- the invites If certificate of provi- contain a originally does not director as remedy provisional of a sive filed (a) by of sion authorized subsection [cjourt if the by authorized Section 353 section, may be amended the certificate that such an order concludes alternative by adopted provision such include corpo- be in the of the would best interests if all the vote the holders [cjourt Accordingly, the author- ration. of affirmative stock, or not outstanding the whether and, by provision, virtue of this mild- ized— vote, the certifícate entitled unless ly encouraged resort to that consider —to incorporation specifically authorizes remedy petition more limited even such an a vote which amendment application makes no for such re- itself of all the shall be not less than 2/3 lief.” outstanding or not enti- stock whether provides Delaware law also for both tled to vote. statutory equitable dissolution of De- (c) any corpo- Each stock certificate may corporations, either of which laware incorporation ration whose certificate involuntary divestiture cause pei’mitted authorizes dissolution as personal property interests. stockholders’ conspicuously note on this section shall Subchapter X of the DGCL details pro- the existence face thereof for dissolution.49 Section 275 procedures conspicuously vision. Unless noted part: provides, relevant certificate, pro- stock face (a) If it be deemed advisable in should vision is ineffective.46 judgment of the board directors appointing As an a custo- alternative any corporation should be dis- dian, 353(a) provides: solved, board, adoption after the of a by majority Chancery may appoint a resolution to that effect
[T]he meeting called provisional corpora- for a close whole board director for that shall notice purpose, tion if re- cause are so divided directors adoption of the resolution and management corpo- specting the added). 355(b)-(c) 352(a)(2). (emphasis § permits § 46. 8 C. 45.Id. Section 355 Del. corporation provide close in its certificate incorporation of ers, that one or more stockhold- 353(a). § Id. stockholders, percentage or a 355(a). force Id. to dissolve. Wolfe, J. Jr. & Michael A. Pitten- 48. Donald provision be effective unless each will not ger, Corporate and Commercial Practice in corporation’s certificates "con- stock 8.09[e][l], Chancery § at 8- Delaware Court of provi- spicuously the existence of note[s]” 2014) (footnote (Matthew & Co. Bender Fletcher, 355(c). supra note sion. Id. Cf. *25 omitted). ("[Statutory provisions judicial §at for 8035 corporations strictly con- dissolution §§ 49. 8 Del. C. 271-85. strued.”). meeting of stockholders to take action only will occur if a majority of stockholders either upon the resolution to be vote in mailed each favor of the dissolution or consent all stockholder stockholders to entitled vote thereon as the dissolu- tion However, is in writing. obtained of the record much determining date like merger DGCL, a under the a dissent- entitled notice stockholder be involuntarily di- meeting. vested his her property interest even (b) At meeting a vote shall be taken if he or she votes against majority.51 upon proposed dissolution. a ma- If The dissolution statutory scheme contem- jority outstanding stock plates both relinquishment of an interest corporation entitled to vote thereon in personal property and protective dissolution, proposed shall vote a mechanism of a stockholder vote. certification of dissolution shall be filed At argument, oral there sugges- was a Secretary with the pursuant State tion that Ms. Shawe conceded her Reply (d) subsection of this section. Brief that the had the (c) Dissolution of a corporation may also power to order liquidation dissolution or be authorized without action of the di- that, fortiori, here and the Court could rectors all the stockholders entitled to if have ordered a sale of company. thе entire vote thereon shall writing consent I did not read Ms. Reply Shawe’s Brief a certificate of dissolution shall be concede that either liqui- dissolution or Secretary filed with the pursu- State here, dation appropriate and, would be (d) ant to subsection of this section.50 indeed, at oral argument her counsel process The dissolution contemplated by strongly contended references voluntary Section 275 is in that Reply dissolution her Brief were apply intended to Farms, Inc., (Del. 50. Id. 163 A.2d Ch. 1960)); Projects see also VTBBank v. Navitron (Del. Corp., 2014 WL Chancery’s power Apr. 51. The Court of at *5 Ch. to order 28, 2014) ("Where solvent, equitable company support dissolution also is does not 'strong showing’ argument necessary power [the court has broad to invoke remedy equitable appointment to order corporation a custodian to sell a over of a receiver, objections should which] of stockholders in cir 'not be resorted to if these give milder equitable plaintiff, cumstances. Under measures will the doctrine of wheth dissolution, shareholder, equity "may adequate protec er creditor or a court of order ” (footnotes omitted) (cita rights.’ company tion for his ap dissolution of solvent and the omitted)); pointment Hldg. tions ‘only Corp. of a custodian or receiver Theodora v. Henderson, (Del. 1969) upon showing gross mismanagement, Ch. ("It think, officers, positive plain, we corporate misconduct that for a court to trust, liquidation order a dissolution or breach of or extreme of a solvent circumstances showing corporation, proponents danger great show ... imminent loss to the must which, otherwise, disregard corporation minority’s rights, fraudulent pre cannot be ” Hallinan, or some other vented.' Carlson v. fact indicates an immi 925 A.2d (Del. 2006) danger great resulting nent (quoting Chapman Ch. loss from v. Inc., (ci mismanagement.” Fluorodynamics, fraudulent or absolute at *4 omitted) (internal 20, 1970)). quotation tations Mar. marks "exercise[] Courts omitted)). power Chancery expressly to dissolve The Court of a solvent ‘great equitable found that upon 'strong restraint’ and dissolution was not war ” (citations omitted). Further, showing.’ ranted here "the Id. because record does not among corporate engaged show self-dealing “[m]ere dissension that Shawe stock seldom, ever, justifies financially holders appoint Company’s enriched himself at the LLC, expense.” ment of a receiver for corporation.” Elting, a solvent In re & (quoting Id. Hall v. John S. Isaacs & Sons WL 4874733 at *34. *26 insolvenfy-ra statutory requirement.52 No express is situa- that company only a when I present not here. that a seriously appeal tion one unquestionably argued suggestion, in disagree that dissolution, sale, with is liquidation or a an asset event, 226(b) explicitly estab- Section since Majority acknowledges an option.53 The overarching requirement that lishes the. “[njeither nor Shawe want that to “the of the custodian is contin- authority sale,” in says result which could asset corporation and not the ue the business consequences!!.]”54 “ruinous its its and distribute to affairs liquidate involuntary Other outside divestitures under the circum- assets.” dissolution A support concept corporate the arena the be inconsistent with here would stances 226(b) 52.Moreover, obligation language has no to the business the in continue Section unreasonable, then, "exceptions” creating corporation. to to three circumscribed the It is general requirement a custodian empowering that exception as read the first corporation remedy wholly "continue business fashion a .., liquidate its its affairs and distribute not assets,” exceptions. incongruous other the two with reasonably read to author- cannot Therefore, exception, as the first second corporation to solvent ize the forced sale a third, only reasonably be read to can objections of its stock- party a third over the only for a similar discontinuation allow 226(b) exceptions al- in The Section holders. (e.g., liquidation, distribution of as- general from rule low deviation that dissolution). sets, or only continue the custodian must the business 226(b) short, exceptions in Section otherwise order and "when Court shall do authorize a forced sale of this solvent not (a)(3) except arising paragraph in cases objec- corporation party a third over 352(a)(2) section or this title.” this Perhaps why tions of stockholders. 226(b). First, "exception” lan- Del. C. mightily equate Majority endeavors guage provide express notice of a not does proposed of TransPerfect forced auction ownership possible of one's inter- defeasance contemplated by the ex- one of the scenarios other statutes which ex- est stock—unlike 226(b) (which ceptions in Section contem- defeasance, plicitly contemplate whether vol- business) liq- plate discontinuation —a possibility. Nor untary involuntary, a or as dissolution, uidation, a or a distribution of 226's reference to Section 291 does Section problem that lies in fact assets. The possible of such provide notice sufficient thriving that a sale or auction of a business is defeasance, since, among things, Sec- other dissolution, cry liquidation, a far from corpora- applies tion 291 to insolvent remedy of sale The distribution assets. altogeth- Majority point The avoids this tions. liquidation, contemplate, do disso- does not er. assets, lution, winding and distribution Second, necessarily exceptions the three Thus, up corporation’s business. obligation modify custodian’s default 226(b) empowers a limited extent that Section corporation business of the continue the liquidation, to undertake a dissolu- its liquidate not to affairs or distribute tion, assets, power or distribution of does exceptions sim- assets. The second and third not, fortiori, a custodian to auction allow (cid:127) ply provide circumstances limited objections corporation of its over the obligation does which default a custodian’s stockholders. corporation has apply namely, where a — (as its business abandoned 226(a)(3)) sug- Majority's that I have statement in a close where stockholder gested remedy "a lesser like asset sales right, corporation pursuant has the acceptable be more would dissolution” incorpo- corporation’s close certificate wrong. just plain perplexing and remedies ration, the close dissolution suggest Majority Op. do I at 166. Nowhere (as 352(a)(2)). in Section they or that stock- are "lesser remedies” ("except exception when the Court first prefer companies of solvent would holders order”) logically should be shall otherwise these remedies. second third read the context exceptions explicitly identify of which —both a custodian limited Id. circumstances
181 statutory express present authorization is nate a concurrent interest in the for a needed court-ordered forced sale property same so that each may owner “[ejquity example, occur. For courts have possess enjoy and his or her interest historically upheld right of a tenant severalty.”58 rule, As general a co-own partition personal common seek a right partition er’s seek of jointly owned property.”55 partition of property real absolute, propеrty is “almost since the 721(a), § contemplated by is 25 Del. C. right an is incident common owners provides: which hip.”59 Importantly, remedy part this any persons 2 When or more lands hold statutory of a expressly scheme that con joint and tenements within this State as templates relinquishment or of some common, or tenants or as tenants interests, all of co-owners’ property includ parceners the intestate laws ing by a court-ordered sale.60 State, any this persons when hold Chancery’s The Court of ap decisions possession
interest
in re-
either
pointing
accepting
mainder in
and
lands
tenements within
State,
1 or
Custodian’s
...
more of them
recommendation with respect
... may present
petition
to the
Auction
Modified
contain no textual
petition
.... The
shall
analysis
statutory
the relevant
scheme.
facts,
state the
describe the
Instead,
lands
the Chancellor
relied on two
held,
pray
tenements so
partition
cases,
distinguishable
are
due to the
among
parties
thereof
the several
enti- presence of stockholder consent
tled to such
and tenements accord-
lands
sales in both of those
In
cases.
Bentas v.
respective
to their several and
inter- Haseotes,61
parties agreed
that liqui
ests.56
necessary
disagreed
dation
but
was
method that
would “maximize stockholder
“Partition
severance of inter
means
pur
Washington
value.”62
Fulk v.
ests which are concurrent.”57
Service
“The
Associates, Inc.,63
partition
of a
pose
proceeding
parties
is to elimi
“endorse[d]”
JFL,
Corp.,
WL
equita
Inc. v. NJE
1988
ed circumstances in which courts
Aircraft
58274,
1988);
(Del.
2,
bly
right
*2
deny
partition). Similarly,
at
Ch. June
see
Carradin,
10015,
provides
equitable
1980 WL
at *2
Carradin v.
Delaware law
for the
divi
(Del.
1980) ("A
31,
distribution,
seeking parti
sion,
Ch. Jan.
bill
assignment
of marital
personal property
unquestionably
tion of
property
proceedings
divorce or
for
annul
jurisdiction
equity
within the
1513(a).
historical
§
13
See Del. C.
ment.
courts[.]”).
733;
729,
Fox,
§§
Del. C.
60. See 25
Libeau v.
721(a);
(confer-
§
25
see
Del. C.
id.
751
1068,
2006) (“If
(Del.
physi
892
1071
A.2d
ring
Chancery "general equity
on the Court of
property
cal division
would be detri
powers”
partition).
to effect
interests,
mental to
co-owners'
Chancery may
property
order
Robinson,
(Del.
636
57. Peters v.
A.2d
proceeds
public
sold at
auction and the
divid
1994) ("Such types
contemporaneous co-
co-owners.”).
among the
ed
ownerships
usually
joint
either
tenancies
common.”).
or tenancies in
(Del.
WL
61. 2003
Ch. Mar.
2003),
(citations omitted).
58. Id.
parties'
(describing
compet-
*2-3
Id. at
Hamilton,
Hamilton v.
ing plans
liquidation).
(Del.
1990) (citing
Fam. Ct.
68 C.J.S. Partition
[30]) (additional
omitted);
citation
also
see
(Del.
Cornett,
WL
*2-4
63. 2002
June
Chalfant v.
Ch,
25, 1996) (discussing
limit
Mar.
2002).
plan
a custodian’s
II.
“support[ed]”
corporation pursuant
to Section
sale of
The Common Law Rule of Judicial Re-
closing
273, objecting
certain
Regarding
straint
Custodial Powers
terms.64
Suggests
Remedy
a More Limited
answer,
Moreover,
it is no
as Ms.
*28
Similarly,
policies
judicial
of
all
re-
suggests,
provides
that Section 394
straint embedded in our common
law un-
corporations agree
provisions
make all
226)
derlying Section
suggest
226
part of their re-
the Mod-
(including Section
Auction
provision
ified
Order’s forced sale
argu-
This is a circular
spective charters.65
goes too far. Historically, “the common
question here is what are the
law
ment.66The
limits,
generally
power
judicial
disdained
relief of
any,
of the court’s
under
statutory
respect
with
226? Our
scheme should kind
to a solvent but
Section
dead-
Reading
corporation.”68
harmoniously.67
Though
pre-
the statu-
locked
be read
tory
harmoniously compels
iteration of
scheme
1967
Section 226
in the
vested
per-
Chancery
ap-
of
conclusion
Section
does
Court
the discretion
Chancery
cor-
upon point
mit
Court
to confer
receivers of and for deadlocked
power
porations,
to sell a
the court was hesitant to inter-
a custodian the
in the
objection
of its shareholders.
fere
business
deadlocked but
over
Thus,
ob-
companies.69
that the
solvent
This Court has
I believe
Court
Assembly’s
intent
by ordering the Modified Auction.
served
General
erred
-(2000)
Statutory
§
Construction
46:05
64. Id. at *6.
(“[E]ach part or
should
[of
statute]
section
(“This chapter
all
65. 8 Del. C.
and
every
in
with
other
be construed
connection
part
thereof shall be a
amendments
part
produce
or section so as to
a harmonious
incorporation
every
charter
certificate
(alterations Grimes))).
whole.”
corporation except
so far as the same
objects
inapplicable
inappropriate to the
and
48,
Pittenger,
supra
Wolfe &
note
corporation.”).
Majority suggests
8-203;
8.09[b],
Corp.
see Salnita
v. Wal
buy
that when stockholders
stock in a Dela-
74,
(Del.
1933)
Hldg. Corp.,
ter
168 A.
Ch.
corporation,
they should
ware
understand
("A court should never wrest control of a
broad au-
that the "Court of
has
from the hands of those who have
thority
corporate deadlocks”
to address
well,
ability manage
their
demonstrated
sensibly
Majori-
corporations!?]”
to “deal
with
course,
no
unless it be satisfied that
short of
sensible, though,
ty Op. at 165.
is
is that
What
one,
open
violent
is
as a corrective to
expect
able to
courts
investors should be
harm.”).
great and imminent
statutory
and common law
will adhere
map respecting capital stock. The words
road
Coils, Inc.,
adequate
"otherwise order” do not constitute
See Paulman v.
Radiant
Kritzer
1958) ("Plain-
notice that a stockholder could be forced to
272-74
holdings
sell her
in a forced auction of a
go
emphasize
tiffs
that this deadlock can
thriving company.
indefinitely, which is true. But such a conse-
necessarily implicit
quence
in the
is
arithme-
circularity
argument
Elting’s
Ms.
holdings. In
is not
tic of stock
itself it
example,
apparent. For
she contends that
appoint
sufficient reason to
a receiver under
Company
interest
has
"[Ms. Shawe's]
law.”);
Hall,
present
see also
163 A.2d at
always
subject
provisions
been
to all the
(“Under
some circumstances courts of
[DGCL], including [S]ection
which
equity
appoint liquidating
will
receivers for
integral
Compa-
part
of [the
constitutes
corporations,
power
solvent
but
to do so
ny’s]
charter
authorizes
court-ordered
great
always
exercised with
restraint and
Answering
sale at issue.”
Br. at 4.
mismanage-
only upon
showing
gross
Grimes,
ment,
corporate
positive misconduct
67. See
But even
this Court has determined
involved situations
where
that “[t]he involvement of the
consented
For example,
sale.73
Chancery and its
corpora
Fulk,74
sought
a stockholder
relief under
tion’s business
affairs
kept
should be
and a court-appointed custodi
ato minimum
and should be exercised
an recommended a sale process in which
goals
insofar as
justice,
fairness
*29
Giuricich],
one stockholder
buy
as
would
the
require.”71
fifty
stated
other’s
[in
Con
percent
sentiment,
share.75
the exception
sistent with this
With
at least
cer
since
revisions,
details,76
tain
parties
point
parties
1967
“endorse[d]”
“support[ed]”
ed to no case in
plan.77
which the Court of Chan
the custodian’s
Like
cery
wise,
has
power
Bentas,78
exercised its
under Section
the Court of Chancery
226 to
company
order that a
be sold over
ordered that a corporation be auctioned
objection.72 Although
stockholder
cases ex
after two stockholder factions submit
showing
danger
great
stances
imminent
stated that “it is more
which, otherwise,
corporation
loss to the
likely
unlikely
can-
than
up
will
[c]ourt
a
end
prevented.”).
not be
appointing
liquidate
corpora-
a receiver to
a
stockholders,
tion where there are but two
Giuricich,
(footnote
449
at 238-39
both of
corporation’s
whom own
of the
50%
omitted).
pre-1967
This
stated that
shares,
they
agree
when
unable to
"general
applying
equitable
cases
principles”
Brown,
7638,
anything.”
1981 WL
This
at *5.
addressing
or earlier statutes
stockholder
language,
by
which has never been cited
an-
governing
deadlock are “neither
persua-
nor
court, appears
other
in dictum at the end of
applications
sive” in
of the modem version of
resolving
discovery dispute
court’s order
a
However,
Section 226.
at
Id.
the com-
parties.
between the
Id.
against
backdrop
today’s
mon law
Sec-
helpful
understanding
tion 226
evolved
(Del.
74.
Stockholder
be
to “break
term
material deadlocks”
remedy
in-
on the extent to which
fect
stockholders,
equal
the two
“resolve
tween
upon
corporation’s business and
trudes
deadlocks[,]”
operational
to re
and “seek
of consent
stock-
affairs. The existence
*30
of’ the
impasse
solve the
over the future
dynamic
to a
the
with
holders
sale alters
corporation.87 It
the
explicitly instructed
Chancery’s
respect
to
exer-
corpo
not
custodian
to “sell or divide” the
in
cise of its
those cases. Almost
discretion
ration’s assets.88
definition,
consent,
if there is
there is
“intrusion.”83
less
Chancery’s
in
The Court of
decisions
principle
the
that
the
in
Bentas89 illustrate
Cases which the
in the
corpo
for solvent
court should minimize its intrusion
appointed custodians
tailored,
actually
corporation
narrowly
a
incre
the
support
rations
—and
(not
reject)
power.
attempt
merely
consider and
approach
mental
custodian’s
Custodian,
court-imposed
buy-out
Appointing
EB Trust
result
a
stockholder
79. Order
v.
Inc.,
Servs.,
(Del.
parties had
contracted.”
Mgmt.
Ch.
for which the
No.
Info.
17, 2014) (ORDER).
Nixon,
83. See
Black's
Law
226).
(citing
*5
8 Del. C.
Id. at
2014) (defining
per-
"intrusion” as "[a]
ed.
entering
permission”).
son’s
In Nixon
without
Id. at *4.
Blackwell,
(Del. 1993),
v.
posed by the two purpose, for what the Court market a viable determine “whether First, options.105 three it believed it had (or any of of busi- [cjompany its lines request deny Siting’s for a could custodian ness) exists, a sale of the whether altogether parties “and leave the their bids that generate will [cjompany entire not The court did find this own devices.”106 intrinsic value.”102 [cjompany’s reflect however, viable, because it found option that, should the auc- The court indicated ..., any bidders tion attract management “fail[ ] that TransPerfect’s was [cjourt approve is free to decline of “completе dysfunc and utter state sale, assets and to order division tion[,J” unjust and “it would be to leave plan, or according to the defendants’ some Elting except with no recourse to sell her Thus, court plan.”103 although the other Company.”107 par 50% interest of a an auction solvent ordered ticular, Elting that the court remarked Bentas, by degrees, exhausting it did so difficulty selling her shares for would Further, first. less intrusive all remedies price” a “fair due Shawe’s actions.108 agreed liquidation that was necessary Company could Second, recognized the court that existing in its form. continue as a “appoint could serve applying The case law there- tie-breaking form of third director some supports view the sale fore governance of the Com- mechanism the consent, Company, absent stockholder measure, pany.” appointment trial would com- too drastic Such implementation should consider court plete the full board contem- directors on an basis.104 remedies incremental plated by bylaws, TransPerfect’s provide three directors.110 The III. believed, however, doing so “would Above, In View extension, and, by enmesh an outsider Chancery’s Remedy Was, Here at a [cjourt corporate into of internal matters Minimum, Too Extreme and Was period governance for an extensive by the Not Authorized Statute Noting time.”111 106. Id. 101. Id. at *4. *32 Id. 107.
102. Id. 108. Id.
103. Id. 109. Id. Majority suggests 104. The that "less-intrusive were measures” or “intermediate measures Global, 155, Majority Op. By-Laws Inc. attempted failed.” at of TransPerfect but 110. See 160, II, 2(a), perplexing. A B2857-67. 166-67. This is mediation at Art. available at occurred, no but inter- and settlement efforts “attempted and LLC, mediate measures were Elting 2015 WL & 111. In re Shawe failed.” above at The cases discussed *31. Chancery suggest had in- that the Court of LLC, periods of extended volvement them for Elting, 2015 WL 105. re Shawe & time. at *31. “relatively young” pany could continue required be to sell his or her positions in their with TransPerfect “for shares.119The court also directed the cus- decades[,]” the court that it felt was “not todian, interim,” “[i]n “serve as a [cjourt sensible for the to exercise essen- third director with the authority vote on tially perpetual oversight over the internal any matters on which Elting Shawe and Company.”112 affairs agree cannot and which rise to the level
Third, the court appointing considered that [the Custodian] signifi- deems be custodian to sell company, an alterna- to managing cant Company’s tive that thе court recognized was “unusu- and affairs.”120 but, view, al” in its not unprecedented.113 view, In my Chancery However, above, as noted the cases relied failed to narrowly tailor scope on the Chancellor support of his authority, custodian’s contemplates Bentas,114 decision were in which the court the possibility that each stockholder be a resort, ordered a sale aas last seller. The court Fulk,115 could appointed have Section 273 case which the director, parties provided third agree corpo- “had come for in the com- ration to be needed pany’s bylaws, dissolved.”116 similar appointments made in Miller and Bentas. Although the
The Court of
appointed
thus
Chancellor
option
considered
ap-
this
previously
custodian who had
served as
pointed the custodian as an “interim” tie-
parties.117
mediator
di-
breaker until the Modified Auction could
rected the custodian to
a judicial-
“oversee
completed,
be
ly
rejected
he
Company.”118
ordered sale
solution out
accompanying
Order
concern that
demonstrates
the court would be involved
purchasing
stockholder not
the Com-
TransPerfect’s affairs
long.121
for too
limitation,
Id.
percent
without
the sale of 100
112.
Company’s
party,
stock to a third
or the
Id. The Chancellor
stated that the Court
113.
sale
one or more of the stockholders’
Chancery "occasionally
appointed
cus-
Company
shares
stock in the
to another
involving
todians to
profit-
resolve deadlocks
third-party
stockholder
investor who
and/or
corporations
able
them
authorized
conjunction
has bid for such
shares
(citing
corporation.”
conduct
sale of the
Id.
stockholder”).
existing
II,
n.3;
III,
769 A.2d
Bentas
at 73
Bentas
1711856; Fulk,
2003 WL
2002 WL
LLC,
Elting
120. In re
&
2015 WL
Shawe
*2).
at
II,
(citing
at *32
Bentas
188 objections possi- party not to a third over the consider the a sale did Chancellor potential permissible of is a period for a bility of appointing outcome, thriving Board to include even for a business. This of expanding time “judicially less now accom- If these dras- created notice” independent directors.122 failed, in other plishes expressly tic custodian could what is stated remedies for more relief as of the and other statutes petition provisions drastic DGCL consent, however, I Bentas. property rights in absent of is where defeasance But stockholders, however, statutorily possible. ap- forced sale is a believe a These do not unanticipated option. pear authorized be stuck with outcome.123 IV. conclusion, my construction Section property rights account takes I process protections because believe
due the rele- concepts
these embedded framework. This is evident statutory
vant express statement that 159’s Section BEAL, D. Defendant Ronald property, and in oth- personal is stock Below-Appellant, statutory provisions er our framework provide express clear and notice v. prop- of that situations where defeasance why, That erty right might occur. Delaware, STATE Plaintiff reading statutory harmonious- our scheme Below-Appellee. imply not power
ly, compelling 584, No. can an order that issue Court rights over result in of these defeasance Supreme Court Delaware. cases objections the owners. In object, then where the stockholders do Submitted: December infringement potential there is no such February Decided: so limited in fash- the court would not be ioning remedy invokes a sale Superior Court Below— reading of This transfer their shares. Delaware, ID State Cr. long- Section 226 is consistent with the DISMISSED. standing strictly limiting pow- policy court-appointed ers of custodians. Majority Opinion puts now stock- notice, prospectively, at least
holders custo- deadlock situations where a appointed pursuant
dian is Shawe, shares, agree- example, suggests proposed 123. Ms. shareholder A3186-93; A3274-78; A3169-80; arguments See ment. her were not raised constitutional A3329-65. prior to trial because unforeseeable unprecedented in- nature the Chancellor’s LLC, See & WL In re Shawe terpretation Reply See of Section 226. Br. *32; Miller, at Shirley Shawe at 5. *5.