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Chancery Rejects Jurisdiction Over Compensation Claim

By Francis G. X. Pileggi, Esq.

In Testa v. Nixon Uniform Co., (Del. Ch., Nov. 18, 2008), the Chancery Court rejected an argument that it had equitable or other jurisdiction over a claim that in essence, was for a form of compensation but  importantly that compensation claim did not give the departing employee any right to stock, despite an effort to use DGCL Section 111 for that purpose. Thus, the case had to be transferred to the Delaware trial court of general jurisdiction, the Superior Court. 

The Chancery Court reasoned as follows:

Although Testa has an arguable position, I believe that the defendants are correct when they contend that [ DGCL] § 111(a)(2) only addresses contracts where corporations grant rights to receive stock upon the occurrence of certain conditions. The phrase "rights or options respecting stock" used in § 111(a)(2) has a specific meaning in Delaware statutory law, a meaning derived from 8 Del. C. § 157, which bears that phrase as its title. Section 157(a) is a specific grant of power

 The court also explained why the request for a constructive trust was not a trigger to keep the case.

Full post as published by Delaware Corporate and Commercial Litigation Blog on December 01, 2008 (boomark / email).