DealLawyers.com Blog

Shortly after SB 21 was signed into law, John blogged about the possibility of constitutional challenges to the legislation — which soon thereafter became reality. Shortly after that challenge was filed, on May 6, a shareholder plaintiff filed a derivative claim challenging the fairness of an asset purchase transaction that closed in April 2024 between Clearway Energy and its majority stockholder. The transaction was approved by a committee of directors determined to be independent by the company’s board under NYSE listing standards, but not by vote of the shareholders.

In that case, before defendants answered or filed a motion to dismiss, plaintiff moved to certify certain questions of constitutional law to the Delaware Supreme Court, which Vice Chancellor Will granted late last week. The motion was unopposed and stated:

– The Constitutional Questions are of first instance in this State and relate to the constitutionality, construction or application of a statute of this State which has not been, but should be, settled by the Supreme Court . . .

– Answering the Constitutional Questions now will minimize uncertainty for transaction planners seeking to design transactions to take advantage of Senate Bill 21’s revisions to [Section] 144 (the “Safe Harbor Provisions”) and provide clarity for stockholders with potential fiduciary claims affected by Senate Bill 21.

Here are the questions to be addressed by the Delaware Supreme Court if cert is accepted:

– 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?

– 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?

I think (please reach out if you know otherwise!) that this is the first case where cert was granted to address constitutional challenges to SB 21. For those interested, Anthony Rickey of Margrave Law is posting on LinkedIn regularly about SB 21 — and tracking cases involving challenges to the legislation.

– Meredith Ervine