Court Opinion

ID: 9370620
Source: CourtListenerOpinion
Date Created: 2023-02-14 14:02:08.890007+00
Date Added: 2024-06-11T17:16:22.714666
License: Public Domain

COURT OF CHANCERY
                                    OF THE
                              STATE OF DELAWARE
     LORI W. WILL                                          LEONARD L. WILLIAMS JUSTICE CENTER
    VICE CHANCELLOR                                           500 N. KING STREET, SUITE 11400
                                                             WILMINGTON, DELAWARE 19801-3734

                                   February 13, 2023

Gregory V. Varallo, Esquire
Daniel E. Meyer, Esquire
Bernstein Litowitz Berger &
 Grossman LLP
500 Delaware Avenue, Suite 901
Wilmington, Delaware 19801

          RE:    In re Lordstown Motors Corp.,
                 C.A. No. 2023-0083-LWW

Dear Counsel,

          I have reviewed your letter on behalf of the stockholder plaintiffs (the

“Plaintiffs”) in the action captioned In re Lordstown Motors Corp. Stockholder

Litigation (the “Consolidated Action”).1 The letter avers that “overlapping issues”

between the Consolidated Action and the above-referenced action pursuant to

8 Del. C. § 205 (the “Section 205 Action”) prompted the Plaintiffs to appear as

1
 In re Lordstown Motors Corp. S’holder Litig., Consol. C.A. No. 2021-1066-LWW
(Del. Ch.).
C.A. No. 2023-0083-LWW
February 13, 2023
Page 2 of 6

“interested parties” in the latter.2 You also express a belief that an “adversarial”

process in the Section 205 Action will “assist the Court in examining the factors set

forth in Section 205(d)” and “request” that the court allow the Plaintiffs to “take

targeted discovery” in the Section 205 Action “on an expedited basis.”3

          The Plaintiffs—like any Lordstown stockholder—are welcome to appear and

be heard at the hearing scheduled in the Section 205 Action on February 20, 2023.

The Form 8-K filed by Lordstown to give notice of the February 20 hearing also

explains the process for filing a written submission in advance of the hearing.4 As

the notice describes, stockholders may appear at the hearing or file a written

submission to express a position on the Section 205 Action.

          Beyond that, there are several problems with your request.

          First, as a technical matter, it was made in a letter rather than a formal motion.

“Requests for judicial action are to be made by motion.”5

2
 Ltr. from Gregory V. Varallo, Esq. to The Hon. Lori W. Will, In re Lordstown Motors
Corp., C.A. No. 2023-0083-LWW (Del. Ch.) (Dkt. 6) (“Ltr.”).
3
    Id. at 2.
4
    Aff. of Kevin M. Gallagher, Esq. (Dkt. 7) Ex. A.
5
  Binns v. Johnson, C.A. No. 2022-0505-PAF, at 2 (Del. Ch. Feb. 6, 2023) (first citing Ct.
Ch. R. 7(b)(1) (“An application to the Court for an order shall be by motion . . . .”); and
then citing Cowan v. Furlow, 2022 WL 3269982, at *2 (Del. Ch. Aug. 11, 2022) (“[A]ny
request for relief must be made by motion, not letter, under Court of Chancery Rule
7(b).”)).
C.A. No. 2023-0083-LWW
February 13, 2023
Page 3 of 6

          Your letter also does not identify any “overlapping issues” between the

Section 205 Action and the Consolidated Action.6 None of substance are apparent

to me. The outcome of the Section 205 Action will not meaningfully affect the

Consolidated Action, which asserts breach of fiduciary duty claims in connection

with a de-SPAC transaction. The converse is also true.

          As such, this Section 205 Action is quite different from the In re Mullen

Automotive, Inc. Stockholder Litigation matter cited in your letter. There, the

plaintiffs filed an action seeking declaratory relief because the results of common

stockholders’ vote on a charter amendment were allegedly mistabulated. 7 Some

expedited discovery ensued. The company subsequently determined that it would

file a Section 205 petition to validate the charter amendment in question. 8 The

stockholder plaintiffs appeared at the Section 205 hearing to support the relief sought

6
    Ltr. at 1.
7
 Verified S’holder Deriv. Compl., In re Mullen Auto. Inc. S’holder Litig., C.A. No.
2022-1131-LWW (Del. Ch.) (Dkt. 1).
8
 Order, In re Mullen Auto. Inc. S’holder Litig., C.A. No. 2022-1131-LWW (Del. Ch.)
(Dkt. 38).
C.A. No. 2023-0083-LWW
February 13, 2023
Page 4 of 6

in the petition and presented relevant evidence obtained through discovery in the

plenary action.9

          This Section 205 Action, however, was not born of the Consolidated Action.

Rather, a decision in an unrelated matter prompted Lordstown to seek certainty that

a charter amendment and shares of common stock issued in reliance on that

amendment are valid.10 Lordstown is one of many companies pursuing similar relief

in this court.

          Moreover, I do not require the Plaintiffs’ assistance to determine whether this

court’s equitable authority under Section 205 should be exercised. Your letter notes

“the important function of adversarial litigation in the validation process,”11 relying

upon a leading treatise’s observation that the “Court may, in its discretion, appoint

special counsel” to oppose an unopposed petition under Section 205.12 The treatise

cites to a letter filed in In re Baxter International Inc., where the court expressed

9
  See Pls.’ Br. in Resp. to Section 205 Pet., In re Mullen Auto., Inc., C.A. No.
2023-0041-LWW (Del. Ch.) (Dkt. 6); In re Mullen Auto. Inc. S’holder Litig., C.A. No.
2022-1131-LWW, at 25-37 (Del. Ch. Jan. 23, 2023) (TRANSCRIPT).
10
     See Garfield v. Boxed, Inc., 2022 WL 17959766 (Del. Ch. Dec. 27, 2022).
11
     Ltr. at 2.
12
  1 R. Franklin Balotti & Jesse A. Finkelstein, The Delaware Law of Corporations and
Business Organizations § 6.33 (4th ed. 2023-1 Supp.) (noting that the court may appoint
special counsel to oppose unopposed Section 205 petitions).
C.A. No. 2023-0083-LWW
February 13, 2023
Page 5 of 6

“concern that Baxter’s application [fell] outside the scope of matters the Court may

adjudicate under 8 Del. C. § 205 . . . .”13 The court in Baxter remarked that the

“particular nature of the application in th[at] case” supported the appointment of

counsel to provide “opposing views on the application.”14 But unlike in Baxter—

where the court questioned whether the company posed “an interpretative question

for which an advisory opinion was being sought”15—the Section 205 Action plainly

concerns a historical corporate act.

           Thus, I do not believe that expedited discovery is warranted here. If the

Plaintiffs have obtained discovery in the Consolidated Action that they believe might

bear on the court’s analysis in the Section 205 Action, they may present such

evidence at the February 20 hearing. The Plaintiffs may also raise any specific

concerns with the assertions in Lordstown’s Section 205 petition or the relief sought.

13
  Ltr. to Counsel at 1, In re Baxter Int’l Inc., C.A. No. 11609-CB (Del. Ch. Oct. 28, 2015)
(Dkt. 7).
14
     Id.
15
  See In re Baxter Int’l Inc., C.A. No. 11609-CB, at 13 (Del. Ch. Oct. 26, 2015)
(TRANSCRIPT).
C.A. No. 2023-0083-LWW
February 13, 2023
Page 6 of 6

The filing of a Section 205 petition does not, however, license stockholders to fish

for potential deficiencies in the validation process.16

      To the extent that the Plaintiffs’ request for expedited discovery is properly

before me for decision, it is DENIED.

                                        Sincerely yours,

                                        /s/ Lori W. Will
                                        Lori W. Will
                                        Vice Chancellor

cc:   All counsel of record (by File & ServeXpress)

16
   I note that granting expedited discovery here—and potentially in the multiple other
Section 205 actions presently pending before this court—would impose needless burdens
in matters where efficiency is paramount.