As noted in our prior blog post, on March 25, 2025, significant amendments to the General Corporation Law of the State of Delaware (the DGCL), were adopted by the Delaware General Assembly and signed into law by Governor Matt Meyer pursuant to Senate Bill 21 (“SB 21” or the “Amendments”).
In the wake of the adoption of SB 21, three similar claims were filed in the Delaware Court of Chancery challenging the constitutionality of the Amendments under Delaware law, including:
- Dropbox. Plumbers & Fitters Local 295 Pension Fund v. Dropbox, Inc., et al., 2025-0354-KSJM (Del. Ch. 2025);
- Acushnet. Roofers Local 149 Pension Fund v. Magnus Holdings Co. Ltd., et al., 2025-0466-PAF (Del. Ch. 2025); and
- Clearway. Thomas Drew Rutledge v. Clearway Energy Group LLC, et al., 2025-0499-LWW (Del. Ch. 2025).
Key aspects of the challenges include:
First, Section 1 of SB 21 (now codified at 8 Del. C. § 144) violates Article IV, Section 10 of the Delaware Constitution of 1897 (the “Delaware Constitution”) because the Amendments divest the Court of Chancery of its historic equitable jurisdiction. Article IV, Section 10 provides that:
The Chancellor and the Vice-Chancellor or Vice-Chancellors shall hold the Court of Chancery. One of them, respectively, shall sit alone in that court. This court shall have all the jurisdiction and powers vested by the laws of this State in the Court of Chancery. In any cause or matter in the Court of Chancery that is initiated by an application to a Judge of that Court, the application may be made directly to the Chancellor or a Vice-Chancellor. Causes or proceedings in the Court of Chancery shall be decided, and orders or decrees therein shall be made by the Chancellor or Vice-Chancellor who hears them, respectively.
Plaintiffs argue there is therefore a constitutional guarantee that the Court can hear equitable fiduciary duty claims and grant equitable relief, and the Amendments to 8 Del. C. § 144 violate this constitutional guarantee. Specifically, when certain criteria are met, a director, officer, controlling stockholder, or member of a control group “may not be the subject of equitable relief, or give rise to an award of damages” (the “Safe Harbor Provision”). In other words, if the new criteria implemented by SB 21 are met, then the Court cannot hear challenges to such acts or transactions, let alone grant equitable relief or damages, depriving the Court of its constitutionally guaranteed jurisdiction.
Second, plaintiffs allege that Section 3 of SB 21 violates Article I, Section 9 of the Delaware Constitution as a due process matter by not allowing causes of action for injuries that accrued or vested prior to SB 21’s enactment (the “Retroactivity Provision”). Article I, Section 9 provides that:
All courts shall be open; and every individual for an injury done to the individual’s reputation, person, or movable or immovable possessions, shall have remedy by the due course of law, and justice administered according to the very right of the cause and the law of the land, without sale, denial, or unreasonable delay or expense. Suits may be brought against this State, according to such regulations as shall be made by law.
Plaintiffs argue that due process therefore preserves a right of action that accrued or vested before the effective date of the Amendments. SB 21 and thus 8 Del. C. § 144 do not afford due process for an injury that has already accrued or vested because the Retroactivity Provision “appl[ies] to all acts and transactions, whether occurring before, on, or after the enactment of this Act,” except that it does not apply to pending or completed lawsuits.
Certification to the Delaware Supreme Court, and governor matt meyer files motions to intervene:
A flurry of Court and plaintiff actions followed procedurally in the above cases, including two motions by Delaware Governor Matt Meyer to intervene in Dropbox and Clearway:
In Dropbox, Chancellor McCormick sent a letter to the parties posing the question: “Do the Safe-Harbor or Retroactivity Provisions violate Article IV § 10 or Article 1 § 9 of the Delaware Constitution or other constitutional principles?” The Chancellor further inquired whether the parties opposed certifying the above-stated question to the Delaware Supreme Court under Rule 41; if so, on what grounds? Thereafter, the Governor moved to intervene, arguing that the State of Delaware has a substantial interest in the constitutionality of 8 Del. C. § 144 and that the existing parties to the case do not adequately represent the State’s interests.
In Acushnet, Vice Chancellor Fioravanti stayed the matter pending the Chancellor’s decision to certify questions of law to the Delaware Supreme Court in Dropbox. The Chancellor, in turn, stayed Dropbox as a result of certain procedural developments in Clearway.
In Clearway, plaintiff capitalized on Dropbox and moved with haste to certify practically the same questions to the Delaware Supreme Court (see below), which Vice Chancellor Will granted on June 6, 2025. The next day, the Governor filed an additional motion to intervene, and the Court granted the Governor’s motion. On June 11, 2025, the Chief Justice of the Delaware Supreme Court accepted the certified questions from Clearway.
Certified questions to the Delaware supreme court:
The certified questions now in front of the Delaware Supreme Court en banc are:
- 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?
On June 17, 2025, the Chief Justice ordered the briefing schedule as follows: the opening brief is due July 31, 2025, the answering briefs are due September 5, 2025, and the reply brief is due September 19, 2025. We will keep you apprised of further updates.
