Chancery Pulse

Addresses an objection by Peter Sheeran to the receiver's decision to allow Thomas Braziel — a previously removed, faithless fiduciary — to participate in a sale process for company assets. Sheeran argued Braziel's informational advantage would chill bidding.

Holding: Sheeran has standing to challenge the sale process, but the court applies an abuse-of-discretion standard (analogous to the business judgment rule) to the receiver's decision. The court analyzes auction theory — common vs. private value auctions, the winner's curse, and informational asymmetry — to evaluate whether Braziel's participation would impair value maximization.

Key Reasoning: When a court-appointed private receiver makes business-oriented decisions (as opposed to legal determinations), the standard of review should be "at least as deferential" as would apply to a board in the same context. The court also discusses the 2025 Safe Harbor Amendments to Delaware corporate law, noting they provide remedial immunity for fiduciaries within safe harbors while pre-amendment standards continue for aiding-and-abetting claims.

Post-trial opinion in an LLC dispute involving a rogue manager (Soberal, co-CEO of Bitwise Industries) who engaged in fraud, unauthorized loans, and forgery. The defendant (StarTop/Hardcastle) attempted to enforce claimed security interests arising from loans the rogue manager executed without authority. Before trial, the court found that StarTop's principals destroyed thousands of documents — texts, emails, and data room files.

Holding: The court imposes an adverse inference sanction that the plaintiffs' agent did not have authority to enter the loans and that the defendant knew it. Plaintiffs are entitled to an injunction against enforcement of the claimed security interests.

Key Reasoning: The court escalates spoliation sanctions from initial burden-shifting to a full adverse inference, finding that intentional evidence destruction severely prejudiced the plaintiffs. The "archaeological dig" metaphor frames the challenge of adjudicating a case where the documentary record has been deliberately degraded. The opinion also addresses fee-shifting under Rule 88.

Resolves a fee-shifting request following sanctions for violating a confidentiality order. The Sullivan Parties designated an expert witness (Benjamin Urcia) who had previously represented the opposing party, and disclosed over 300 pages of confidential material to him months before he executed the required undertaking.

Holding: The court awards the full $39,831 in fees and costs, finding the blended $1,059 hourly rate reasonable for specialized patent and professional responsibility work. The court stays enforcement pending final judgment.

Key Reasoning: Applies Rule 1.5 factors for reasonableness of fees. Rejects the $345/hour counterproposal as unreasonably low. Notes that interlocutory fee awards from discovery disputes are generally not appealable until final judgment, so enforcement is stayed.

A Delaware corporation filed a declaratory judgment action against a California minority stockholder who demanded books and records under California law. The corporation argued its forum selection bylaw conferred personal jurisdiction over the stockholder. The stockholder moved to dismiss for lack of personal jurisdiction.

Holding: Motion to dismiss granted. The forum selection bylaw applies to claims brought by stockholders against the corporation — not the reverse. Stock ownership alone is insufficient for personal jurisdiction under Shaffer v. Heitner. No express or implied consent to jurisdiction exists.

Key Reasoning: Delaware courts interpret bylaws using standard contract principles. The bylaw's enumerated categories (derivative actions, fiduciary duty claims, DGCL claims) all contemplate stockholder-initiated actions. The court declines to stretch the bylaw beyond its plain text to cover corporation-initiated suits against stockholders.

Plaintiffs sought to confirm a KPMG determination on a purchase price dispute as an arbitration award under 10 Del. C. § 5713. The APA explicitly designated KPMG as "an expert (and not an arbitrator)" with a narrow mandate to resolve specified accounting disagreements.

Holding: Dismissed for lack of subject matter jurisdiction. The KPMG determination was an expert determination, not an arbitration award. Section 5713 does not apply, and the Court of Chancery otherwise lacks jurisdiction over what is a legal claim seeking legal relief. Transfer to Superior Court permitted within 60 days.

Key Reasoning: Follows ArchKey and Terrell v. Kiromic frameworks. Labels are not dispositive, but "expert not arbitrator" language "strongly signals" an expert determination. The narrow scope of the mandate, the choice of an accountant as decisionmaker, and the absence of arbitral rules all confirm the mechanism is an expert determination. Notably, the Engagement Letter's reference to the FAA was insufficient to override the agreement's clear structure.

Investment funds (Diem entities) invested in Maisonette, a children's e-commerce startup, through a convertible note and preferred stock. Maisonette later restated its financials, revealing the financial information provided during fundraising was inaccurate. The company also concealed that a director was a defendant in multiple federal securities lawsuits. Plaintiffs assert nine claims including fraud, breach of fiduciary duty, aiding and abetting, and statutory securities violations.

Holding: Motions to dismiss largely denied. The court finds the fraud claims adequately pled under Rule 9(b), the fiduciary duty claims survive as to the director defendants, and the aiding and abetting claims against the controlling stockholder (NEA 15) state a claim. Some claims are narrowed or dismissed as to specific defendants.

Key Reasoning: The court applies the Corwin and MFW frameworks in assessing the fiduciary duty claims, and conducts an extended analysis of fraud pleading standards — including scienter, reliance, and loss causation in the startup investment context. The opinion is notable for its length (59 pages) and its treatment of a claim under the Florida Securities and Investor Protection Act.