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Chancery Grants Motion To Intervene in Contested Stock Issuance Case

By Francis G. X. Pileggi, Esq.

Noe v. Kropf, 2008 Del. Ch. LEXIS 148 (Oct. 15, 2008), is a Chancery Court decision that discusses the factors under Chancery Court Rule 24  applicable to a motion to intervene. This case involved a shareholder who sought to intervene because the original plaintiff was requesting from the Court a declaration that the stock owned by the intervenor and issued by a contested board was void. The intervenor/shareholder was Turnaround Advisors, LLC.

The Court observed that Rule 24 provides for both discretionary and mandatory intervention. This case fell into Rule 24(a) because intervention was warranted as a matter of right. In order to be eligible for either mandatory or discretionary intervention,  however, one must first have standing. The Court reasoned that even though the intervenor 's shares were issued after the date that the contested board was elected, the intervenor should have standing to allow it to establish the legitimacy of the board that issued its shares in order for it to prove that its shares were validly issued by the board. In addition, the Court was concerned that no other party would be representing the interests of the intervenor if intervention was denied.

The original complaint sought relief under DGCL section 225 (to determine whether the election of a board was valid) and section 227 (to determine the votings rights of those who claim to own stock).

The Court also granted a motion to vacate a prior order to expedite the proceedings to allow time for the intervenor to engage in discovery, but the Court expected the parties to agree to a new accelerated  timetable in light of a Section 225 case being an expedited proceeding.

Full post as published by Delaware Corporate and Commercial Litigation Blog on October 27, 2008 (boomark / email).