Delaware legislative, court and special updates

UCC
HV JVCO I, LLC v. Open on Sunday, LLC, C.A. No. N22C-12-237, decided April 20, 2026. In a case involving a dispute between two creditors over the rights to music royalties, the Delaware Superior Court held that under Florida’s UCC law, which applied because the individual debtor was a resident of Florida, the plaintiff had a superior right to the royalties because the defendant failed to perfect its security interest in the royalties while the plaintiff perfected its security interest. Florida’s Article 9 requires that if the debtor has a driver’s license, the UCC-1 must use the name exactly as it appears on the driver’s license. The defendant did not use the name exactly as it appeared on the driver’s license. The court further noted that Florida strictly applies the debtor name rule with no exception based on whether the UCC-1 would be found if a search using the correct name reveals the UCC-1 with the incorrect name.

Stockholder Inspection of Records
Paramount Global v. Rhode Island Office of the General Treasurer, on Behalf of the Employees’ Retirement System, No. 129, 2025, decided March 25, 2026. The Delaware Supreme Court held that the general rule is that when a stockholder seeks relief under Sec. 220 of the General Corporation Law, it will be limited to evidence identified in the demand and the information available to the stockholder when the demand was made. But under exceptional circumstances, the Court of Chancery may, in the exercise of its sound discretion, consider post-demand evidence that is material to the court’s credible-basis inquiry and not prejudicial to the corporation.

Breach of Acquisition Agreement
Fortis Advisors, LLC v. Krafton, Inc., C.A. No. 2025-0805, decided March 16, 2026. The Delaware Chancery Court held that an acquiror breached the acquisition agreement by terminating key employees without cause in order to avoid an earnout payment owed them. Of particular interest in this case was the court’s discussion of the acquiror’s CEO’s using an artificial intelligence chatbot in determining his strategy to avoid the earnouts.

S.B. 21 Amendments to GCL Sec. 144 Upheld
Rutledge v. Clearway Energy Group LLC, No. 248, 2025, decided February 27, 2026. The Delaware Supreme Court held that the amendments enacted by Senate Bill 21 to GCL Sec. 144 regarding the safe harbors for breach of fiduciary duty claims against controlling stockholders did not violate Delaware’s Constitution. The Chancery Court had certified two questions to the Delaware Supreme Court. The first asked if the statutory elimination of the Chancery Court’s ability to grant equitable relief or damages when the safe harbor provisions were proven, violated the state Constitution by divesting the Chancery Court of its equitable jurisdiction. In answering that in the negative, the Delaware Supreme Court stated that S.B. 21 changed the Chancery Court’s analysis of a breach of fiduciary duty claim against a controlling stockholder but did not divest the court of jurisdiction. The second question was whether the fact that S.B. 21 applied the safe harbors to actions arising and transactions occurring before S.B. 21 was enacted violated the state Constitution by eliminating causes of action that had already accrued or vested. In answering that question in the negative, the court noted that the retroactivity of S.B. 21 was a clear statement of the legislature’s intent, supported by a legitimate legislative purpose, and did not wrest a property right away from the plaintiff.

Chancery Court Jurisdiction
Hash Asset Management Ltd. v. DMA Labs, Inc., C.A. No. 2025-0374, decided February 9, 2026. The Delaware Chancery Court held that it lacked subject matter jurisdiction over claims brought by the plaintiff – an investor in cryptocurrency issued by a foundation – against the Delaware corporation that wrote the code for the foundation and several individuals who purportedly controlled or were employed by those entities, alleging claims for fraud, breach of contract, conversion, breach of fiduciary duty, and piercing the corporate veil. The court found the plaintiff failed to allege facts showing a fiduciary relationship between the defendants and the plaintiff or any basis for piercing the corporate veil. As those were the only claims that would give the chancery court subject matter jurisdiction, the action was dismissed with leave to transfer the legal claims to the Superior Court.

Stockholder’s Agreement
Moelis & Company v. West Palm Beach Firefighters’ Pension Fund, No. 340, 2024, decided January 20, 2026. The Delaware Supreme Court held (1) that certain provisions of a stockholders’ agreement that granted the stockholder substantial rights concerning the management of the corporation were voidable and not void, (2) that the equitable defense of laches applies, (3) that the plaintiff’s suit seeking a declaration that the provisions were invalid and unenforceable because they interfered with the board of director’s management of the corporation in violation of Sec. 141(a) was barred by laches because it was brought more than three years after the stockholder’s agreement was entered into, and (4) that the delay in filing was not excused because the existence of the stockholder’s agreement was not an ongoing statutory violation. The court therefore reversed the Chancery Court’s judgment that concluded otherwise on all four issues.

Rescission of Compensation Plan
In Re Tesla, Inc. Derivative Litigation, No. 534, 2024; Nos. 10, 11, 12, 2025, decided December 19, 2025. The Delaware Supreme Court reversed the Chancery Court’s rescission of a CEO’s compensation plan. The court held that rescission was not appropriate or reasonable in this case because all the parties to the transaction could not be restored to their status quo ante.

Stockholder Inspection of Records
Roberta Ann K.W. Wong Leung Revocable Trust U/A Dated 03/09/2018 v. Amazon.com, Inc., No. 487, 2024, decided July 28, 2025. The Delaware Supreme Court reversed the Chancery Court’s denying a stockholder’s request to inspect books and records for the purpose of investigating possible wrongdoing and mismanagement by the corporation. The court found that the evidence, in particular a complaint filed by the FTC for alleged antitrust laws that survived a motion to dismiss, established the credible basis from which the court could infer possible wrongdoing. The court also held that the Chancery Court erred by concluding it was unnecessary to reach the credible basis analysis because the scope of the purpose was facially improper and the purpose was thus not lucid. According to the court, denying an inspection based on a facial evaluation of the scope of the purpose without considering whether the evidence established a credible basis for the purpose is not the framework used by the court in evaluating a Sec. 220 demand.

Delaware Supreme Court Certifies Challenge to Senate Bill 21
Rutledge v. Clearway Energy Group LLC, No. 248, 2025. On June 10, 2025, the Delaware Supreme Court accepted two questions certified by the Delaware Court of Chancery concerning the constitutionality of the safe harbor provisions enacted this year by Senate Bill 21. The certified questions are as follows:

a. Does Section 1 of Senate Bill 21, codified at 8 Del. C. § 144—eliminating the Court of Chancery’s ability to award “equitable relief” or “damages” where the Safe Harbor Provisions are satisfied—violate the Delaware Constitution of 1897 by purporting to divest the Court of Chancery of its equitable jurisdiction?

b. Does Section 3 of Senate Bill 21— applying the Safe Harbor Provisions to plenary breach of fiduciary claims arising from acts or transactions that occurred before the date that Senate Bill 21 was enacted—violate the Delaware Constitution of 1897 by purporting to eliminate causes of action that had already accrued or vested?

Reincorporation
Maffei v. Palkon, No. 125, 2024, decided February 4, 2025.  The Delaware Supreme Court held that the decision by the directors and controlling stockholder of two Delaware corporations to convert from being Delaware corporations to being Nevada corporations had to be analyzed under the business judgment rule and that the Chancery Court erred in applying the stricter entire fairness standard. The plaintiffs, minority stockholders in the corporations, alleged the defendants breached their fiduciary duties by approving the conversions. They alleged the conversions were self-interested transactions designed to insulate the directors and controlling stockholder from liability because Nevada law provides more protections from liability than Delaware law and that this was a non-ratable benefit. The Chancery Court held that curtailing the stockholders’ litigation rights triggers entire fairness and found that the plaintiffs’ complaint sufficiently alleged that the conversion was not entirely fair. The Delaware Supreme Court, in reversing, stated that the hypothetical impact of Nevada law on unspecified corporate actions that may or may not occur in the future is too speculative to constitute a material, non-ratable benefit that triggers entire fairness. In the absence of any allegations that the conversion decisions were made to avoid any existing or threatened litigation or that they were made in contemplation of any particular transaction, the plaintiffs failed to adequately plead facts showing the defendants received a material non-ratable benefit. Therefore, the business judgment rule applied.

Apparent Authority
Caribbean Sun Airlines Inc. v. Halevi Enterprises LLC, No. 199, 2024, decided January 21, 2025. The Delaware Supreme Court reversed a confessed judgment against two corporations, finding that the Superior Court applied an incorrect standard in finding the corporations gave an individual who was not an officer and who lacked actual authority to act on the corporations’ behalf, had apparent authority to bind the corporations. That individual obtained a $7 million loan and included the corporations in the loan agreement. The corporations were unaware of the loan until the lender sought to enforce the confessed judgment against it. The Superior Court found for the lender, holding that the individual borrower had apparent authority based mainly on a site visit where he had access to the corporations’ facility, employees, records and bank accounts, and documents, which proved fraudulent, that named the individual borrower as an officer.

The Delaware Supreme Court noted that apparent authority can never be based on the actions of the agent. Apparent authority must be reasonable and it must be traceable to a manifestation of the principal. Here, apparent authority could not be based on the site visit as corporations often grant such access to persons not authorized to bind them and the corporations gave no other manifestations that the individual had authority to act for them. In addition, relying on the false documents provided by the individual indicating he was an officer was not reasonable. There were red flags indicating a need for further investigation. The lender could have obtained a copy of the corporate documents from the Florida and Delaware Secretaries of States that listed the actual officers. Thus, the individual borrower did not have apparent authority to bind the corporations.

Reincorporation by Conversion
Gunderson v. The Trade Desk, C.A. No. 2024-1029, decided November 8, 2024. The Delaware Chancery Court held that a majority vote was required to approve a conversion under Sec. 266 that would reincorporate a corporation from Delaware to Nevada and not a supermajority vote that was required by a provision of the corporation’s certificate of incorporation for amendments that would be inconsistent with certain provisions of the certificate of incorporation. The court applied the doctrine of independent legal significance and also noted that previous cases detailed how to draft charter provisions altering statutory default voting that the corporation failed to follow.

Advance Notice Bylaws
Kellner v. AIM Immunotech Inc., No. 3, 2024, decided July 11, 2024. The Delaware Supreme Court held that in a challenge to the adoption, amendment, or enforcement of a Delaware corporation’s advance notice bylaws that is ripe for judicial review, the court should consider the following: first, if contested, whether the advance notice bylaws are valid as consistent with the certificate of incorporation, not prohibited by law, and address a proper subject matter; and second, whether the board’s adoption, amendment, or application of the advance notice bylaws were equitable under the circumstances of the case.

Derivative Suit
In re Cognizant Technology Solutions Corporation Derivative Litigation, No. 22-3027, decided May 3, 2024. The U.S. Court of Appeals, Third Circuit, held that a district court’s decision to dismiss a derivative action for failure to plead demand futility is to be reviewed de novo. The court therefore overruled previous Third Circuit precedent, including Blasband v. Rales and its progeny, that provided that the court must review such dismissals for an abuse of discretion.

Disclosure Violations
City of Dearborn Police and Fire Revised Retirement System v. Brookfield Asset Management Inc., No. 241, 2023, decided March 25, 2024. The Delaware Supreme Court reversed the Chancery Court’s dismissal of plaintiffs’ suit challenging a squeeze-out merger that had been approved by a special committee, finding that the defendants’ failure to disclose in the proxy statement certain conflict of interests involving the special committee’s advisers resulted in the minority stockholders not being adequately informed, and that therefore the transaction was not eligible for analysis under the business judgement rule. The Chancery Court had resolved the disclosure issues by applying the gross negligence standard in determining whether the special committee breached its duty of care. However, according to the Supreme Court, it should have resolved the issue by asking whether a reasonable stockholder would consider the information regarding the conflicts of interest important in deciding how to vote. And it was reasonably conceivable that from the viewpoint of a stockholder the conflicts would be material in deciding how to vote.

Limited Partnership
Cantor Fitzgerald, L.P. v. Ainslie, No. 162, 2023, decided January 29, 2024. The Delaware Supreme Court upheld the “forfeiture for competition” provisions of a limited partnership agreement that authorize the LP to withhold distributions otherwise owed to a partner who withdraws from the LP if he engages in specified activities in competition with the partnership. The court stated that the common law’s disfavor of forfeitures does not extend to limited partnership agreements. In addition, Sec. 17-306 of the LP law permits partnership agreements to contain consequences that would be unavailable in a standard commercial contract, most notably penalties and forfeitures. Thus the court disagreed with the Court of Chancery’s conclusion that the forfeiture-for-competition provisions at issue here were restraints of trade subject to review for reasonableness. When sophisticated parties agree in a limited partnership agreement that a partner, who voluntarily withdraws from, and then competes with, the partnership, will forfeit contingent post-withdrawal financial benefits, public-policy considerations weigh in favor of enforcing that agreement.

Stockholder Voting Rights
In re Fox Corporation/Snap Inc. Section 242 Litigation, Nos. 120 & 121 (Consolidated), decided January 17, 2024. The Delaware Supreme Court held that Sec. 242(b)(2) of the GCL did not provide the members of classes of stock without voting rights with the right to vote on an amendment to the corporations’ charters to exculpate the corporations’ officers. Sec. 242(b)(2) requires a separate class stockholder vote to amend a corporate charter if the amendment would “alter or change the powers, preferences, or special rights of the shares of such class so as to affect them adversely.” The powers, preferences, or special rights of class shares referred to in Sec. 242(b)(2) are those authorized for a class by Section 151(a) and expressed in the charter as required by Sections 102(a)(4) and 151(a). The ability to sue directors or officers for duty of care violations is an attribute of the companies’ stock, but not a power, preference, or special right of the classes’ common stock under Section 242(b)(2) and was not a power expressed in the corporations’ charters.

Officer’s Duty of Oversight
Segway, Inc. v. Hong Cai, C.A. No. 2022-1110, decided December 14, 2023. The Delaware Chancery Court held that the high bar to plead a Caremark claim of breach of the oversight duty is not lowered when the claim is brought against an officer instead of a director. In this case the plaintiff failed to meet the pleading standard where it attempted to hold the officer accountable for unexceptional financial struggles and failed to show bad faith.

Indemnification
Intermune, Inc. v. Harkonen, CA 2021-0694, decided May 10, 2023. The Delaware Chancery Court held that the defendant, the founder and former CEO of a Delaware corporation who was convicted of wire fraud, was not entitled to indemnification because he received a pardon from then president Trump. The court stated that under Sec. 145 of the General Corporation Law a presidential pardon does not render a corporate officer successful on the merits. Success in a criminal action is anything other than a conviction. The defendant was convicted, so he was not successful.

Attachment of Stock Certificate
Long Deng v. HK XU Ding Co., Limited, C.A. No. N21J-04630, decided May 8, 2023. The Delaware Superior Court held that Sec. 324(a) of the General Corporation Law, which authorizes attachment and sale of corporate stock, requires that to attach certificated shares and obtain an order to sell the security to satisfy a judgment, the officer making the attachment must actually seize the certificate. In this case, where the certificate for 8 million shares of a Delaware corporation was in Chinese police custody and could not be physically seized by the person charged with conducting the sale, the Superior Court commissioner erred in ordering the sale of the stock and the order was vacated.

Breach of Revlon Duties
In re Mindbody, Inc. Stockholder Litigation, CA No. 2019-0442, decided March 15, 2023. The Delaware Chancery Court held that the CEO of a corporation that was acquired by a PE buyer was liable for breaching his duties under Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc. The court held the plaintiffs adequately pled that the CEO was conflicted because he had an interest in near-term liquidity and an expectation that he would receive post-merger employment and equity-based incentives; that he skewed the process in the PE buyer’s favor by driving down the stock price and providing the PE buyer with informational and timing advantages; and that he withheld material information from the board of directors. The court also found that the Corwin v. KKR Financial Holding LLC cleansing defense did not apply because the plaintiffs sufficiently pled that the stockholder vote was not fully informed.

Officer’s Duty of Oversight
In re McDonald’s Corporation Stockholder Derivative Litigation, C.A. No. 2021-0324, decided January 26, 2023. The Delaware Chancery Court held that corporate officers owe a duty of oversight. According to the court, the same policies that motivated the recognition of the duty of oversight for directors apply equally, if not to a greater degree, to officers. The Delaware Supreme Court has held that under Delaware law, corporate officers owe the same fiduciary duties as corporate directors, which logically include a duty of oversight.

The case involved a stockholder derivative suit brought against an executive officer of a Delaware corporation, alleging he breached his fiduciary duties, including his duty of oversight, by allowing a corporate culture to develop that condoned sexual harassment and misconduct. The defendant moved to dismiss, contending that Delaware does not impose a duty of disclosure on officers. The court denied the motion, holding he owed a duty of oversight. He had an obligation to make a good faith effort to put in place reasonable information systems so that he obtained the information necessary to do his job and report to the CEO and the board, and he could not consciously ignore red flags indicating that the corporation was going to suffer harm.