IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

IN RE CARVANA CO. 

STOCKHOLDERS LITIGATION

)

)

CONSOLIDATED

C.A. No. 2020-0415-KSJM

ORDER DENYING APPLICATION OF ERNEST GARCIA II 

FOR CERTIFICATION OF INTERLOCUTORY APPEAL

1. Defendant Ernest Garcia II (“Garcia Senior”) is the co-founder and 

controlling shareholder of Carvana Co. (“Carvana” or the “Company”). In this action, a

Carvana stockholder alleges that Garcia Senior and his son, Company CEO Ernest Garcia

III (“Garcia Junior”), breached their fiduciary duties in connection with a $600 million sale 

of common stock at $45 per share to investors whom the Garcias handpicked (the “Direct 

Offering”). The Garcias purchased $50 million of common stock in the Direct Offering. 

The public stockholders were excluded from the Direct Offering.

2. Garcia Senior moved to dismiss the claims against him for lack of personal 

jurisdiction. The court denied Garcia Senior’s motion in a Memorandum Opinion dated

August 31, 2022 (the “Opinion”),

1 holding that Garcia impliedly consented to jurisdiction 

when he, as Carvana’s controlling shareholder, caused Carvana to adopt a Delaware forum 

selection provision in Carvana’s certificate of incorporation.

2

1 C.A. No. 2020-0415-KSJM, Docket (“Dkt.”) 101 (“Opinion”) (In re Carvana Co. 

S’holder Litig., 2022 WL 3923826 (Del. Ch. Aug. 31, 2022)).

2 Garcia Senior also moved to dismiss the complain under Court of Chancery Rule 12(b)(6). 

The court denied that motion in the Opinion based on reasoning set out in a Memorandum 

Opinion dated June 30, 2022. See Opinion at 14 (2022 WL 2932826, at *7); Dkt. 92, 

Memorandum Opinion dated June 30, 2022 (In re Carvana Co. S’holder Litig., 2022 WL 

2352457 (Del. Ch. June 30, 2022)).
2

3. Garcia Senior seeks certification of interlocutory appeal of the Opinion 

Pursuant to Supreme Court Rule 42 (the “Application”).

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4. Supreme Court Rule 42 established a two-step test for determining whether 

to certify interlocutory appeal. The court must first determine whether “the order of the 

trial court decides a substantial issue of material importance that merits appellate review 

before a final judgment.”4

 If the substantial-issue requirement is met, this court will then 

analyze eight factors concerning whether “there are substantial benefits that will outweigh 

the certain costs that accompany an interlocutory appeal.”5 Rule 42 cautions that 

“[i]nterlocutory appeals should be exceptional, not routine, because they disrupt the normal 

procession of litigation, cause delay, and can threaten to exhaust scarce party and judicial 

resources.”6

 This language of Rule 42 serves as an interpretive principle, requiring that 

the court interpret the factors such that interlocutory appeals are the exception and not 

routine.7

3 Dkt. 102 (“Application”).

4 Supr. Ct. R. 42(b)(i).

5 Id. 42(b)(ii); see id. 42(b)(iii)(A)–(H). 

6 Id. 42(b)(ii).

7 See also id. 42(b) (stating that “[i]f the balance is uncertain, the trial court should refuse 

to certify the interlocutory appeal”); Donald J. Wolfe, Jr. & Michael A. Pittenger, 

Corporate and Commercial Practice in the Delaware Court of Chancery § 18.04[c] (2d 

ed. 2021) [hereinafter Wolfe & Pittenger].
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5. As commonly articulated, the substantial-issue requirement is met when a 

decision speaks to the merits of the case.8 In practice, however, the Supreme Court has 

accepted interlocutory appeals of non-merits-based questions that implicate significant 

issues under Delaware law.9

 This practice suggests that the definition of a “substantial” 

issue extends more broadly than the definition of a “merits” issue. Put differently, a merits 

issue is necessarily a substantial issue; a substantial issue is not necessarily a merits issue.

6. It is true, as the plaintiff argues, that multiple Delaware courts have held that 

denying a motion to dismiss for lack of personal jurisdiction is not a “substantial issue” per 

8 See, e.g., Sprint Nextel Corp. v iPCS, Inc., 2008 WL 2861717, at *1 (Del. Ch. July 22, 

2008) (stating that “[t]he substantial issue requirement is met when an interlocutory order 

decides a main question of law which relates to the merits of the case, and not to collateral 

matters” (internal quotation marks and citation omitted)); see generally Wolfe & Pittenger

§ 18.04[b] (2021) (listing issues over which the Supreme Court has accepted interlocutory 

appeal).

9 See, e.g., Genuine Parts Co. v. Cepec, No. 528,2015, at 2 (Del. Oct. 12, 2015) (Order)

(accepting interlocutory appeal when trial court asserted personal jurisdiction over a 

foreign corporation pursuant to registration statute because it “raises an important issue 

regarding the application of the law of personal jurisdiction”); Daskin v. Knowles, 193 A.3d 

717, 719 (Del. 2018) (accepting interlocutory appeal in divorce proceeding where 

petitioner alleged, in part, the Family Court lacked subject matter jurisdiction over the 

claim); Sanders v. Sanders, 570 A.2d 1189, 1190 (Del. 1990) (accepting “interlocutory 

appeal to consider whether the Family Court has jurisdiction to hear a petition to rescind a 

property division agreement not merged into a divorce decree”); Am. Appliance, Inc. v. 

State, 712 A.2d 1001, 1001 (Del. 1998) (accepting interlocutory appeal to resolve a dispute 

over whether a statutory consumer fraud claim fell within the Superior Court’s subject 

matter jurisdiction); Loc. Union 199, Laborers’ Inter’l Union of N. Am. v. Plant, 297 A.2d 

37, 38 (Del. 1972) (accepting interlocutory appeal of a ruling that “established jurisdiction 

over the parties and the subject matter, i.e., the right of the plaintiff to sue the defendant in 

the Superior Court”); see also Wolfe & Pittenger § 18.04[b] (stating that “[t]he 

amendments to Rule 42 in 2015 did not alter prior law generally finding such matters not 

to rise to the level of a substantial issue and the Delaware courts have continued to rely on 

pre-amendment case law addressing this issue”).
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Rule 42(b)(i) because the exercise of personal jurisdiction does not affect the merits of the 

case.10 And Delaware courts have reached this conclusion where the basis for personal 

jurisdiction is a forum selection clause.11 

7. Still, multiple decisions of the Delaware Supreme Court have granted

interlocutory appeal of decisions concerning the exercise of personal jurisdiction over nonresident fiduciaries of Delaware entities. In Armstrong v. Pomerance, for example, the 

Supreme Court accepted interlocutory appeal to determine the constitutionality of 

Delaware’s implied consent statute, codified at 10 Del. C. § 3114, which conferred personal 

jurisdiction over individuals serving as directors of a Delaware corporation.12 In Hazout 

v. Tsang Mun Ting, the defendant challenged the constitutionality of the trial court’s

holding that § 3114 could be used to assert personal jurisdiction even in cases that did not 

allege breach of fiduciary duty.

13 In granting the interlocutory appeal, the Supreme Court 

noted that the trial court’s novel interpretation of § 3114 constituted a “substantial issue.”14

10 TowerHill Wealth Mgmt., LLC v. Bander Family P’ship, L.P., 2008 WL 4615865, at *2 

(Del. Ch. Oct. 9, 2008); see also Curran Composites, Inc. v. Total Hldgs. USA, Inc., 984 

A.2d 123, 2009 WL 4170395, at *1 (TABLE) (Del. 2009) (affirming the Court of 

Chancery’s denial of application for certification of interlocutory appeal “on the grounds 

that the denial of a motion to dismiss for lack of personal jurisdiction does not establish a 

legal right or determine a substantial issue under Rule 42, and the interlocutory ruling is 

consistent with prior Delaware precedent”).

11 See, e.g., Olivieri v. Aveta, Inc. 957 A.2d 2, 2008 WL 4216352, at *1 (TABLE) (Del. 

2008).

12 Armstrong v. Pomerance, 423 A.2d 174 (Del. 1980).

13 Hazout v. Tsang Mun Ting, No. 353,2015 (Order) (Del. Aug. 6, 2015).

14 Id. at 5; see also LaNuova D & B, S.p.A v. Bowe Co., Inc., 513 A.2d 764 (Del. 1986)

(accepting interlocutory appeal to resolve a constitutional question as to whether an Italian
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8. Like Armstrong and Shaffer, the Opinion addresses this court’s exercise of 

personal jurisdiction over non-resident fiduciaries of Delaware entities—here, controllers. 

The Opinion, therefore, raises a substantial issue sufficient to meet the threshold inquiry of 

Rule 42.

9. Because the substantial-issue requirement is satisfied, the analysis moves to 

the second step of determining whether there are substantial benefits outweighing the costs 

of an interlocutory appeal.15 Although the Opinion addresses a substantial issue, it does 

not follow that the issue must be resolved by the Supreme Court at an interlocutory as 

opposed to final stage. Rule 42 supplies eight factors to consider when conducting the 

second-step balancing analysis.16 Garcia Senior relies on only five of the Rule 42 factors—

(A), (B), (D), (G), and (H). Garcia Senior effectively concedes that the other three factors 

do not weigh in favor of certifying interlocutory appeal by failing to advance arguments to 

that effect in his application. Of the five factors on which Garcia Senior relies, only one

provides clear support. The others weigh against interlocutory appeal or are neutral.

a. Factor (A) considers whether the Opinion involves a novel question 

of law in the state’s jurisprudence. Although Garcia Senior contends that personal 

jurisdiction has not previously been asserted on the exact facts present here, his 

narrow view ignores the well-settled rule of law that implicit consent can serve as a 

corporation could be sued in a Delaware court based on its shipment of products and 

corresponding warranties to Delaware).

15 See Supr. Ct. R. 42(b)(ii); id. 42(b)(iii)(A)–(H). 

16 Id. 42(b)(iii).
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basis for personal jurisdiction.17 “The mere application of long-held precedent to 

new facts does not make an order worthy of appeal.”18 Factor A does not support 

Garcia Senior’s Application.

b. Factor (B) asks the court to consider whether the Opinion conflicts 

with other trial court decisions. Garcia Senior contends that the Opinion is 

inconsistent with the “longstanding Delaware precedent holds that purchasing or 

owning shares of stock in a Delaware corporation, standing alone, is not enough to 

enable a Delaware court to exercise personal jurisdiction over a non-consenting 

party, even in cases of sole ownership.”19 The Opinion is not inconsistent with this 

longstanding precedent. It was not Garcia Senior’s status as majority stockholder, 

standing alone, that rendered him subject to personal jurisdiction in Delaware. 

Rather, Garcia Senior implicitly consented to personal jurisdiction in this court by 

using his majority voting control to cause Carvana to adopt a Delaware forum 

selection provision in Carvana’s certificate of incorporation requiring stockholders 

to bring claims for breach of fiduciary duty against him in Delaware courts. Factor 

B does not support Garcia Senior’s Application.

17 Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 n.14 (1985); Petrowski v. HawkeyeSec. Ins. Co.m 350 U.S. 311, 316 (1956); Genuine Parts Co. v. Cepec, 137 A.3d 123, 130 

(Del. 2016); see also In re Pilgrim’s Pride, 2019 WL 1224556, at *10–15 (Del. Ch. March 

15, 2019) (holding that a parent company defendant impliedly consented to jurisdiction in 

Delaware when it caused its controlled subsidiary to adopt an exclusive forum bylaw 

designating Delaware as the appropriate forum for breach of fiduciary duty claims against 

controlling stockholders).

18 Ryan v. Gifford, 2008 WL 43699, at *6 (Del. Ch. Jan. 2, 2008).

19 Application at 11 (quoting Pilgrim’s Pride, 2019 WL 1224556, at *14 n.9).
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c. Factor D looks to whether the Opinion sustains the controverted 

jurisdiction of the trial court. The Opinion held that this court’s exercise of personal 

jurisdiction over Garcia Senior is appropriate. This factor is accordingly satisfied. 

Although Factor D is satisfied, it is not dispositive. In Energy Transfer Equity, L.P. 

v. Twin City Fire Insurance Co.,

20 for example, Factor D was satisfied, but the trial 

court denied certification because the remaining factors weighed against 

interlocutory appeal.21 The Supreme Court also denied interlocutory review.22 

d. Factor G consider whether interlocutory appeal may terminate the 

litigation. Without citing any case law, Garcia Senior contends that this factor has 

been satisfied because reversal of the Opinion would terminate the litigation in this 

Court “as to him.”23 This is true, but to the extent Factor G looks to judicial and 

administrative efficiency, it is irrelevant. As noted in Twin City Fire Insurance, 

“successful interlocutory appeal would not necessarily terminate the litigation in its 

entirety” because other defendants would remain in the action even if the applicant 

were not subject to the trial court’s personal jurisdiction.24 Similarly, in Hitachi 

Koki, the Supreme Court affirmed the trial court’s denial of certification when the 

trial court noted that “there are still other defendants remaining in this action,” and 

20 2020 WL 6112299 (Del. Super. Oct.16, 2020).

21 Id. at *3.

22 Twin City Fire Ins. Co. v. Energy Transfer Equity, LP, 244 A.3d 682, 2020 WL 7861340, 

at *2 (TABLE) (Del. 2020).

23 Application at 12.

24 Twin City Fire Ins. Co., 2020 WL 7861340, at *1.
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thus certification would not promote the efficient resolution of the case.25 Where, 

as here, the litigation against another litigant will continue regardless of the status 

of interlocutory appeal Factor G weighs against certification (or at best stands 

neutral on the issue).

e. Factor H asks whether interlocutory review of the Opinion may serve 

considerations of justice. Garcia Senior contends that interlocutory review will 

“avoid unnecessary expenditures of Delaware’s scarce judicial resources and 

attendance burden on its citizenry,” without providing any basis for this 

contention.

26 Garcia Senior argues that, under the logic of the Opinion, a 

corporation could use a forum selection provision to litigate against any stockholder, 

not just controllers.27 This argument ignores the fact that the Forum Provision 

applies in actions “asserting a claim of breach of a fiduciary duty owed by any . . . 

stockholder of the Corporation to the Corporation or the Corporation’s 

stockholders.”28 As noted in the Opinion, only controlling stockholders owe 

fiduciary obligations under Delaware law.29 Accordingly, the Forum Provision does 

not truly apply to claims against “any” stockholder, and instead only applies to 

25 Cardona v. Hitachi Koki Co., Ltd., 2019 WL 956779, at *2 (Del. Sup. Ct. Feb. 25, 2019), 

aff’d, Hitachi Koki Co., Ltd. v. Cardona, 207 A.3d 1128, 2019 WL 1716054 (TABLE) 

(Del. 2019).

26 Application at 13.

27 Id. at 10 n.4.

28 Opinion at 5. 

29 Id. at 8. 
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controlling stockholders sued for breach of fiduciary duties. Further, Garcia 

Senior’s contention that interlocutory review will allow him to avoid the length and 

cost of discovery is unpersuasive—as a participant in the challenged Direct 

Offering, Garcia Senior will likely be subject to discovery regardless. Factor H does 

not support the Application.

10. Beyond the listed factors, Rule 42(b)(iii) requires that an applicant 

demonstrate the benefits of review outweigh the probable costs. Although Garcia Senior 

argues that reversal could narrow the claims of this litigation, the parties would continue 

litigating substantially the same claims against Garcia Junior concerning the same Direct 

Offering. Garcia Senior also contends that the parties could waste substantial resources in 

the interim if the Supreme Court later reverses. This concern is not unique to Garcia 

Senior’s application and would otherwise warrant certification after nearly every trial court 

decision even in cases lacking “exceptional” circumstances. Meanwhile, the original 

derivative complaint was filed in May 2020, and further delay at this still-early stage would 

only extend the resolution of this dispute to the plaintiff’s detriment.

11. For the foregoing reasons, Garcia Senior’s Application for Certification of 

Interlocutory Appeal is denied.

/s/ Kathaleen St. J. McCormick 

Chancellor Kathaleen St. J. McCormick

Dated: October 3, 2022