DealLawyers.com Blog

Vice Chancellor Laster’s 2024 decision in West Palm Beach Firefighters v. Moelis & Company is one of the most consequential decisions to come out of the Chancery Court in the last decade.  In addition to spurring the Delaware General Assembly to adopt significant & controversial amendments to the DGCL, the decision also provided impetus to the “DExit” movement (such as it is).

The defendants in Moelis promptly appealed the Chancery Court’s decision to the Delaware Supreme Court, and yesterday, the Court issued its decision dismissing the case.  While the Chancery Court’s decision raised several substantive issues about the board’s ability to contractually limit its statutory authority, the Supreme Court resolved the case on procedural grounds.

In light of the legislative changes addressing the substantive issues in the case – which the Court noted in its opinion – that’s probably not surprising.  Still, it’s a little disappointing to those of us who were perhaps hoping for some additional insight into the merits of the case. Instead, the introductory paragraph of Justice Traynor’s opinion summarizes what we got:

In the Court of Chancery, a stockholder sought a declaratory judgment that certain provisions of a stockholders agreement were facially invalid and unenforceable because the provisions interfere with the corporate board’s management of the business and affairs of the corporation as required by 8 Del. C. § 141(a). In this opinion, we conclude that (i) to the extent that the challenged provisions are at odds with § 141(a), they are not void, but voidable, and (ii) the plaintiff’s challenge is barred by laches.

The Court’s 43-page opinion addresses the distinction between void and voidable contracts & analyzes the application of the laches doctrine to equitable claims, but it doesn’t do much more than that. So, if you were hoping for some more substantive insights into the issues presented by Moelis, I’m afraid you’re out of luck.

The Delaware Supreme Court focus on procedural issues doesn’t mean that its decision is free from controversy.  At least one member of the plaintiffs’ bar has already expressed concern about the potential implications of the Court’s approach to the laches defense in this case.

– John Jenkins