Court Opinion

ID: 8211314
Source: CourtListenerOpinion
Date Created: 2022-10-03 15:01:36.517225+00
Date Added: 2024-06-11T16:42:02.599617
License: Public Domain

IN THE SUPREME COURT OF THE STATE OF DELAWARE

    HAUPPAUGE DIGITAL INC.,                   §
                                              §
        Defendant Below,                      §   No. 338, 2022
        Appellant,                            §
                                              §   Court Below—Court of Chancery
        v.                                    §   of the State of Delaware
                                              §
    JAMES RIVEST,                             §   C.A. No. 2019-0848
                                              §
        Plaintiff Below,                      §
        Appellee.                             §

                             Submitted: September 15, 2022
                              Decided: October 3, 2022

Before SEITZ, Chief Justice; VALIHURA and VAUGHN, Justices.

                                          ORDER

       After consideration of the notice of interlocutory appeal and the exhibits

attached thereto,1 it appears to the Court that:

       (1)     On October 24, 2019, plaintiff below-appellee, James Rivest, filed a

complaint under 8 Del. C. § 220 to inspect the financial statements of defendant

below-appellant, Hauppauge Digital Inc. (“the Company”). In a post-trial report

dated January 24, 2022, the Master recommended that the Court of Chancery enter

judgment in favor of Rivest and order inspection of the Company’s annual and

1
  We have not considered the appellant’s September 29, 2022 letter arguing why the Court
should accept this interlocutory appeal. Supreme Court Rule 42(d) specifies the documents to be
filed in an interlocutory appeal and does not provide for additional argument by the appellant.
quarterly financial statements from 2016 through 2020, subject to a confidentiality

provision protecting financial information less than two years old. The Company

did not file any exceptions to the report, but Rivest filed an exception to the

imposition of confidentiality restrictions on the financial statements.

       (2)    After briefing and oral argument, the Court of Chancery issued its

opinion on September 1, 2022 (“the Opinion”).2 No one filed any exceptions to the

Master’s finding that Rivest sought books and records for the proper purpose of

valuing his Company shares, so the court adopted that finding as a ruling of the

court.3 As to the confidentiality restrictions, the court conducted a de novo review

and considered the implications of this Court’s decision in Tiger v. Boost Apparel,

Inc.4 The court held “that the Company did not make a persuasive showing of harm

that is sufficient to outweigh Rivest’s interests or support imposing a two-year

confidentiality restriction on financial statements for closed periods.”5 Finally, the

court directed the parties to do one of the following within ten days: (i) submit a

proposed form of final order, or (ii) if any issues remained to be resolved at the trial

level, submit a joint letter identifying those issues and proposing a schedule to

resolve them.6

2
  Rivest v. Hauppauge Digital, Inc., 2022 WL 3973101 (Del. Ch. Sept. 1, 2022).
3
  Id. at *1.
4
  214 A.3d 933, 935 (Del. 2019) (holding there is no presumption of confidentiality for
inspections under Section 220).
5
  Rivest, 2022 WL 3973101, at *27.
6
  Id.
                                                2
          (3)    On September 12, 2022, the Company filed an application for

certification of an interlocutory appeal. The Company argued that the Opinion

determined a substantial issue, established a legal right, and satisfied multiple Rule

42(b)(iii) criteria. Specifically, the Company contended that the Opinion involved

a question of law resolved for the first time in this State (Rule 42(b)(iii)(A)), there

were conflicting trial court decisions on the question of law (Rule 42(b)(iii)(B)), the

question of law related to the construction or application of a statute that should be

settled in advance of a final order (Rule 42(b)(iii)(C)), the Opinion reversed or set

aside a prior decision of the trial court (Rule 42(b)(iii)(E)), and review of the Opinion

would serve considerations of justice (Rule 42(b)(iii)(H)).

          (4)    On September 13, 2022, the Court of Chancery denied the motion,

finding it unnecessary for Rivest to incur the cost of responding. The court ruled

that this was “not the stage of the case for an interlocutory appeal” and “[a]n

interlocutory appeal at the end of a case is a contradiction in terms.”7 The court

emphasized that the Company could appeal as of right from the final order that the

court had directed the parties to prepare.

          (5)    The Company then filed this interlocutory appeal. A review of the

Court of Chancery docket reflects that the parties submitted, after prodding by the

Court of Chancery, a joint letter on September 21, 2022 identifying the remaining

7
    Denial of Application to Certify, Ex. C to Notice of Interlocutory Appeal.
                                                  3
issues to be resolved (the form of final judgment, whether Rule 54 costs and

attorneys’ fees should be awarded to either party, and whether the documents should

be produced and any fees and costs paid before the time to appeal ran). Briefing on

these issues will be complete by November 14, 2022.

        (6)     Applications for interlocutory review are addressed to the sound

discretion of the Court.8 In the exercise of our discretion and giving due weight to

the trial court’s view, we have concluded that the application for interlocutory

review does not meet the strict standards for certification under Supreme Court Rule

42(b). As the Court of Chancery recognized, this case is close to a final judgment

that the Company may appeal as a matter of right. The Company’s desire to avoid

briefing on fee-shifting it views as premature and unmerited does not constitute

exceptional circumstances meriting interlocutory review of the Opinion.9 Nor do

the potential benefits of interlocutory review outweigh the inefficiency, disruption,

and probable costs caused by an interlocutory appeal at this stage of the

proceedings.10

8
  Supr. Ct. R. 42(d)(v).
9
  Supr. Ct. R. 42(b)(ii).
10
   Supr. Ct. R. 42(b)(iii).
                                         4
    NOW, THEREFORE, IT IS ORDERED that the interlocutory appeal is

REFUSED.

                                   BY THE COURT:

                                   /s/ Karen L. Valihura
                                   Justice

                               5