DealLawyers.com Blog

I don’t usually delay blogging about Chancery Court decisions, but I did last week after working my way through Vice Chancellor Laster’s opinion in Seavitt v. N-Able, (Del. Ch.; 7/24). The case is the latest in the series of post-Moelis cases challenging governance provisions in stockholders’ agreements working their way through the Chancery Court.

Since the case was decided under pre-market practice amendments law, you probably won’t be surprised to learn that the challenged provisions didn’t fare well. That being said, parts of the decision are pretty interesting – such as the discussion of the extent to which a charter provision may be dependent on “facts ascertainable outside of the document” and what constitutes “facts” in this context. I think I may blog about that aspect of the decision later this week.

So, my delay in blogging wasn’t because I didn’t find the opinion interesting. Instead, my problem is the same one that it appears VC Laster had with the case – aside from the impact on the parties involved, most of it seemed like a waste of time. That’s because when the Delaware General Assembly adopted this year’s amendments, it provided that Section 122(18)’s Moelis fix wouldn’t apply to pending cases.  As the Vice Chancellor put it, that created a “donut hole”:

It seems likely that the proponents of the Market Practice Amendments did not want to appear to be affecting pending lawsuits and therefore created the donut hole. Speaking for myself, I would have preferred the Market Practice Amendments without the donut hole. Once a decision has been made to change the law retroactively, there is no reason to force the courts to apply the superseded law to a smattering of cases. That is a waste of judicial resources. It also risks creating confusion because there will be more extant decisions addressing issues where the Market Practice Amendments could lead to a different result.

But maybe I jumped the gun on concluding that there’s not much to be gleaned from the opinion for post-market practice amendment cases. On Friday, I found a thread over on X in which Ann Lipton pointed out that in addressing the enforceability of the various governance provisions challenged in this case, Vice Chancellor Laster may have provided some hints on how he’d come out on these issues under the new regime established by Section 122(18).

– John Jenkins