Opinion
C.A. No. 18749-NC
Submitted: August 10, 2001
Decided: August 24, 2001
Peter J. Walsh, Jr., Esquire, Michael A. Pittenger, Esquire Potter, Anderson Corroon.
Neal C. Belgam, Esquire, Blank, Rome, Comisky McCauley, LLP.
Collins J. Seitz, Jr., Esquire, Samuel D. Brickley, II, Esquire, Connolly, Bove, Lodge, Hutz, LLP.
Lawrence C. Ashby, Esquire, Phillip Trainer, Jr., Esquire, Carolyn S. Hake, Esquire, Ashby Geddes.
J. Travis Laster, Esquire, Richards, Layton, Finger.
Richard H. Morse, Esquire, Young, Conaway, Stargatt, Taylor, LPP.
Paul M. Lukoff, Esquire, Prickett, Jones, Elliott.
Brett D. Fallon, Esquire, Morris, James, Hitchens Williams.
Dear Counsel:
On July 16, 2001, the Court issued a Memorandum Opinion that granted Petitioner Explorer Pipeline Company ("Explorer") partial summary judgment. In substance, the Court, through construction of Explorer's corporate charter, concluded that Explorer had demonstrated that it was entitled to the declaratory relief that it had sought, subject to certain affirmative defenses or counterclaims which the Court expressly refrained from addressing. The efficacy of those affirmative defenses and counterclaims is currently being briefed. At the end of the Memorandum Opinion, the Court asked counsel to confer and agree on a form of order to implement the opinion. The parties have agreed upon language to reflect the Court's decision, and an order containing that language is being entered. Explorer, however, has petitioned the Court to enter that order as a final judgment under Court of Chancery Rule 54(b). Respondents Marathon Oil Corn any, CITGO Pipeline Investment Company and Sun Pipe Line Company of Delaware (the "Opposition Respondents") have opposed the application. This constitutes the Court's decision on Explorer's Rule 54(b) motion.
Explorer's complaint, filed on March 21, 2001, named all of its shareholders as respondents. Explorer, on an expedited basis, sought a determination that a supermajority provision in its certificate of incorporation did not preclude it from financing a major expansion project through an operating lease format. Although final documents were not available, the Court, in granting partial summary judgment to Explorer, concluded that the supermajority provision was not applicable in the context of the proposed transaction.
The Opposition Respondents have asserted various affirmative defenses or counterclaims. In general, the counterclaims are equitable in nature and raise issues addressing either the sufficiency of the transaction documents or the process by which the corporate decision to undertake the project through an operating lease format was reached. Explorer, together with some of its shareholder-respondents who support the expansion project, has moved to dismiss the affirmative defenses and counterclaims or for summary judgment as to them. Briefing of this motion will be completed shortly.
Explorer seeks to make the order granting partial summary judgment a final judgment so that the Opposition Respondents' appeal period will commence. Explorer asserts that the parties to the proposed transaction desire the certainty afforded by either expiration of the appeal period or appellate approval of this Court's construction of the corporate charter. Explorer also observes that the Court has granted it all of the relief that it sought in its Amended Complaint and an appeal would not result in some of Explorer's issues being on appeal while some of its issues remain here. Furthermore, Explorer properly notes that the remaining issues are not intertwined with the Court's construction of the corporate charter.
Court of Chancery Rule 54(b) provides in part:
When more than 1 claim for relief is presented in an action, whether as a claim, counterclaim, cross-claim, or third-party claim, the Court may direct the entry of a final judgment upon 1 or more but fewer than all of the claims or parties only upon an express determination that there is not just reason for delay and upon an express direction for the entry ofjudgment.
Although the decision to make an otherwise interlocutory order final is committed to the Court's discretion, it is strong public policy that piecemeal appeals should not be presented to the Delaware Supreme Court. This Court's authority under Court of Chancery Rule 54(b) has been characterized as a "discretionary power to afford a remedy in the infrequent harsh case." Indeed, a "Rule 54(b) order should not be entered unless the moving party can show `some danger of hardship or injustice through delay which would be alleviated by immediate appeal.'" In sum, the party moving under Court of Chancery Rule 54(b) bears "the burden of showing that his or her situation is the infrequent case that threatens harsh results and therefore merits the favorable exercise of discretion."
Curtiss-Wright Corp. v. Gen. Elec. Co., 446 U.S. 1, 9 (1980).
Emerald Partners v. Berlin, Del. Ch., C.A. No. 9700, Steele, V.C., mem. op. at 7 (June 25, 1996).
In re Tn-Star Pictures, Inc., Litig., Del. Ch., C.A. No. 9477, Jacobs, V.C., letter op. at 3 (Sept. 26, 1989), quoting Panichella v. Pennsylvania R.R. Co., 252 F.2d 452, 455 (3d Cir. 1958).
In re Tri-Star Pictures, Inc., Litig., letter op. at 4, quoting Ansam Asso., Inc. v. Cola Petroleum, Ltd., 760 F.2d 442, 445 (2d Cir. 1985), quoting Campbell v. Westmorland Farm, Inc., 403 F.2d 939, 942 (2d Cir. 1968).
DONALD J. WOLFE, JR. MICHAEL A. PITTENGER, CORPORATE AND COMMERCIAL PRACTICE IN THE DELAWARE COURT OF CHANCERY § 14-3, at 14-4 (2000) (noting that "litigants in the Court of Chancery have been largely unsuccessful in appealing interlocutory rulings under the guise of Rule 54(b)").
With this interpretive guidance, the Court now turns to consideration of the specific requirements of Rule 54(b): (i) that the action involves multiple claims or parties; (ii) that at least one claim or the rights and liabilities of at least one party have been finally decided; and (iii) that there is no just reason for delaying an appeal.
In re Tri-Star Pictures, Inc., Litig., letter op. at 3.
Because Explorer has satisfied the first two criteria, the Court necessarily focuses on whether "there is no just reason for delaying an appeal." In order for Explorer to demonstrate that there is no just reason for delaying an appeal, it must show some danger of hardship that would result from the delay of an appeal by others. The only hardship that Explorer has been able to identify is a lack of certainty resulting from the "litigation cloud" and the potential impact on the availability of funds to implement the operating lease transaction. Its allegation of harm is carefully phrased as "may" injure the parties to the lease transaction. It is important to note that this is not a situation where the Court has made a ruling adverse to Explorer which paralyzes it until it can obtain appellate review. Indeed, Explorer does not seek relief under Rule 54(b) to allow it to appeal; instead, it seeks relief under Rule 54(b) in order to start the running of the appeal period.
Explorer's Motion for Entry of Order and Final Judgment Pursuant to Rule 54(b), ¶ 8.
Implicit in Explorer's argument is the view that, since this Court has expedited these proceedings, it should also allow Rule 54(b) to come into play at this stage because the same need for prompt judicial review is present. The simple answer is that the factors that lead to a decision to expedite a proceeding in this Court are not identical to (or are not given the same weight as) those factors that must be present to support entry of a final judgment under Rule 54(b). Moreover, Explorer has recently moved for summary judgment (in addition to its motion to dismiss) on the remaining issues, thereby indicating its view that no material facts are in dispute and that it is entitled to judgment as a matter of law. Given this procedural posture and the advanced stage of briefing, Explorer is not confronted with the likelihood that this matter will languish.
In sum, while the Court understands Explorer's desire to bring finality to questions involving the construction of its corporate charter, its application under Rule 54(b) does not offer a sufficient showing of potential hardship to warrant the exercise of the Court's discretion in favor of the application.
Accordingly, Explorer's Motion for Entry of Order and Final Judgment pursuant to Rule 54(b) is denied except to the extent that the Court has entered paragraph 1 of the proposed order without opposition as to the form of that order.
IT IS SO ORDERED.