C.A. No. 3017-CC (Del. Ch. May 15, 2009)
On May 15, 2009, Chancellor Chandler issued a four-page order in Fisk Ventures, LLC v. Segal, et al. addressing a motion for injunction or stay of the judicial dissolution of Genetrix, LLC pending appeal by Dr. Andrew Segal. Segal was appealing the January 13, 2009 Memorandum Opinion and the March 10, 2009 Order and decree of judicial dissolution of Genitrix, LLC.
Delaware Supreme Court Rule 32(a) provides that “a motion for stay pending an appeal to the Supreme Court must be made in the Court of Chancery and that this Court has discretion to grant or deny such application.” Article IV, Section 24 of the Constitution of the State of Delaware provides that there “shall be no stay of proceedings in the court below unless the appellant shall give sufficient security to be approved by the court below or by a judge of the Supreme Court.” Delaware Courts construe these provisions “liberally.”
In exercising its discretion according to Delaware law, the Court of Chancery must examine four factors and must “balance all of the equities involved in the case together.” Here, the Court granted Segal’s motion to stay pending appeal and held that three of the four factors, on balance, favored granting Segal’s motion. Under the second factor, Segal had to demonstrate that “without a stay he and Genitrix would suffer irreparable harm.” The Court found that Segal met his burden, since unwinding an entity could be costly and Segal and Genitrix would “suffer a significant and perhaps unrecoverable loss.”
With respect to the third factor, the Court considered whether “any interested party [would] suffer substantial harm if the stay [was] granted.” Here, the Court stated that there was deadlock and no hope for any future business decisions or actions, the dissolution of Genitrix would take time, and the “condition of Genitrix [was] static and [would] not further deteriorate with delay.” Therefore, it held that granting the stay would cause “little economic harm” for any interested party.
Finally, because the Court also found that the stay would not create any harm to the public interest and would not impact public policy favoring finality of judgments, it held that the equities pointed in favor of granting the stay and ultimately granted Segal’s motion for a stay pending appeal of the March 10, 2009 Order. Further, given that Genitrix was being managed by a liquidating receiver, the Court found “little economic harm that could befall petitioner by delay,” and therefore, the Court waived the requirement that Segal post a bond to secure petitioner’s interests pending Segal’s appeal.
The full opinion is available here.