Title: Barbey v. Young

State: delaware

Issuer: Delaware Supreme Court

Document:

IN THE SUPREME COURT OF THE STATE OF DELAWARE 
 
KELLY BARBEY and THE 
BERMUDA HESED FOUNDATION, 
a Bermuda Trust, 
 
 
Plaintiffs Below, Appellants, 
 
v. 
 
KENNETH YOUNG, 
 
Intervenor Below, Appellee.  
§ 
§  No. 391, 2023 
§ 
§  Court Below—Court of 
§  Chancery of the State of  
§  Delaware 
§   
§  C.A. No. 2022-0107 
§ 
§ 
§ 
 
 
 
 
 
  Submitted:  April 19, 2024 
 
 
 
 
 
  Decided:  June 11, 2024 
 
Before VALIHURA, TRAYNOR, and LEGROW, Justices. 
 
ORDER 
 
(1) 
After consideration of the parties’ briefs and the record on appeal, we 
affirm the judgment of the Court of Chancery in this action under 8 Del. C. § 225 on 
the basis of and for the reasons stated in the court’s September 29, 2023 
memorandum opinion.  In the unusual and troubling circumstances of this case, 
Kellog “Kelly” Barbey could ultimately retain a seat on the board only if the Court 
of Chancery unwound the inversion.  That result would require factual development 
and an application of Japanese law that was not sufficiently presented to the Court 
of Chancery.   
(2) 
As the Court of Chancery recognized, in a Section 225 proceeding the 
court may adjudicate issues that are necessary to the determination of who holds a 
2 
 
corporate office.1 Thus, the Court of Chancery has “resolved, among other things, 
the validity of stock issuances, stock transfers, stock conversions, and stock 
acquisitions in Section 225 actions in order to determine which votes should be 
counted in ascertaining proper board composition.”2  But the scope of a Section 225 
action does not permit the court to “go further and actually rescind a transaction 
procured through . . . unlawful behavior or award money damages to those harmed 
by that behavior.”3  “That type of ultimate relief can only be obtained in a plenary 
action in a court that has in personam jurisdiction over any necessary or 
indispensable parties.”4  It appears that Barbey could be restored to the board only 
by unwinding the stock swap, which would require an analysis of Japanese corporate 
law and which might affect the rights of hundreds of stockholders5 that are not 
 
1 See Genger v. TR Investors, LLC, 26 A.3d 180, 199 (Del. 2011) (“A Section 225 proceeding is 
summary in character, and its scope is limited to determining those issues that pertain to the 
validity of actions to elect or remove a director or officer.  In determining what claims are 
cognizable in a Section 225 action, the most important question that must be answered is whether 
the claims, if meritorious, would help the court decide the proper composition of the corporation’s 
board or management team.  If not, then those claims are said to be collateral to the purpose of a 
Section 225 action and must be raised in a separate plenary action.” (internal quotations, footnotes, 
and alterations omitted)). 
2 Southpaw Credit Opportunity Master Fund, L.P. v. Roma Restaurant Holdings, Inc., 2017 WL 
4570612, at *3 (Del. Ch. Oct. 13, 2017) (citations omitted). 
3 Genger, 26 A.3d at 200 (internal quotations omitted). 
4 Id. 
5 See Appendix to Opening Brief at A133 (stating that 139 of the total 191 Cerego stockholders 
agreed to swap their shares); id. at A485-87 (listing stockholders and their preferred and common 
stock holdings); id. at A601 (listing nineteen “major shareholders”); see also Barbey v. Young, 
C.A. No. 2021-0900, Docket Entry No. 17, Transcript of Oct. 21, 2021 Argument on Motions for 
Temporary Restraining Order and Expedited Proceedings, at 18 (Del. Ch.) (defendants’ counsel 
stating that Cerego “has a little under 200 investors”). 
3 
 
parties, in a representative capacity or otherwise, to this action.  Although the 
ongoing plenary action might provide a path to such relief, we conclude that this 
Section 225 action does not, in the circumstances of this case. 
NOW, THEREFORE, IT IS ORDERED that the judgment of the Court of 
Chancery be AFFIRMED. 
 
 
 
 
 
 
BY THE COURT: 
 
 
 
 
 
 
/s/ Gary F. Traynor 
 
 
 
 
 
 
Justice