Opinion ID: 2011277
Heading Depth: 1
Heading Rank: 5

Heading: appointment of a custodian

Text: Subsequent to oral argument in the Court of Chancery concerning Stella's reimbursement, John moved for an appointment of a custodian pursuant to 8 Del.C. § 226. John asserted that Sunview's ownership is equally held by John and Demos, and that owing to the family feud, they will be deadlocked and unable to elect successor directors or make important business decisions. The Court of Chancery denied John's motion, finding that (1) the motion was untimely filed; (2) there was only one major business decision to be made during the relevant time period and thus no deadlock existed; and (3) Stella and Demos agreed not to enter into any business transactions outside of the ordinary course of business. John argues that the Court of Chancery erred in that it failed to consider that an actual deadlock exists, and due to the timing of the suits and decisions, he was forced to wait to file his motion. [T]he appointment of a custodian is discretionary under [8 Del.C. ] § 226(a)(1). Accordingly, this Court may reverse the Court of Chancery's decision only if there is an abuse of discretion. Giuricich v. Emtrol Corp., Del.Supr., 449 A.2d 232, 240 (1982) (citing Pitts v. White, Del.Supr., 109 A.2d 786, 788 (1954)). Given the scope of review  abuse of discretion  John's claim must fail. There is nothing here that indicates that the Court of Chancery abused its discretion in refusing to appoint a custodian. It correctly followed the leading case on the issue, Giuricich, 449 A.2d at 238, applied it to the facts, and found that there is no deadlock requiring appointment of a custodian. Since Demos and Stella have agreed not to undertake any business transaction outside of the scope of ordinary business, appointing a custodian is unnecessary. [6] Should Demos and Stella fail to follow their agreement, John may then bring an action seeking appropriate relief. Therefore, it does not appear that John has shown an abuse of discretion.