On March 31, 2022, Vice Chancellor Joseph R. Slights III of the Delaware Court of Chancery granted the motion of CorePower Yoga, LLC and CorePower Yoga Franchising, LLC (together, “defendant”) to stay the Court’s judgment in favor of plaintiff Level 4 Yoga, LLC pending defendant’s appeal. Level 4 Yoga, LLC v. CorePower Yoga, LLC, C.A. No. 2020-0249-JRS (Del. Ch. Mar. 31, 2022). As discussed in our prior post, the Court of Chancery previously (i) found that defendant breached the parties’ asset purchase agreement (“APA”) at the outset of the COVID-19 pandemic when defendant failed to close on the acquisition of plaintiff’s yoga studios, and (ii) issued a decree of specific performance directing defendant to complete the transaction. “Balanc[ing] all of the equities” and highlighting that defendant “is at risk of suffering irreparable harm,” the court issued the stay.

The Court evaluated the four factors for assessing the appropriateness of such a stay under Kirpat, Inc. v. Del. Alcoholic Beverage Control Comm’n, 741 A.2d 356 (Del. 1998). First, as to the “likelihood of success on the merits of the appeal,” the Court explained that this factor cannot be read literally because that would require a court to first “confess error in its ruling before it could issue a stay.” Instead, the Court indicated that the consideration is whether the appeal raises a “substantial question that is a fair ground for litigation.” The Court determined that—although most of its findings were factual and entitled to deferential review—its construction of the parties’ APA would be subject to de novo appellate review and the appeal thus presents a “fair ground for further review.”

Second, and “more importantly,” the Court found that defendant was at risk of “irreparable harm” if the appeal were to be successful, but defendant was required to pay for and receive thirty-four yoga studios—for which it would have to assume leases and contractual obligations—in the interim. As the Court explained, it will be “difficult, if not impossible, to unwind those obligations or to determine an amount of damages.” Third, the Court found that neither party will suffer substantial harm if the stay is granted. Fourth, the Court noted that harm to the public interest was not a factor implicated here in a private dispute that does not invoke significant public policy interests. Accordingly, the Court issued the stay, subject to the posting by defendant of a supersedeas bond (in the amount of $40,459,398) accounting for the judgment itself as well as the “projected post-judgment delay damages during the pendency of the appeal” as presented—essentially unrebutted—by plaintiff’s damages expert.