CLAUDIO BALLARD, KEITH DELUCIA, GARY KNUTSEN, SHEPHARD LANE, PETER LUPOLI, IRA LEEMON, JOHN KIDD, CELESTIAL PARTNERS, LLC, VEEDIMS, LLC, Defendants Below-Appellants,
JPMORGAN CHASE BANK, N.A., individually, and on behalf of itself and other creditors similarly situated, Plaintiff Below-Appellee.
Submitted: August 8, 2019
Below-Court of Chancery of the State of Delaware, C.A. No.
STRINE, Chief Justice; VAUGHN, and TRAYNOR, Justices.
F. Traynor Justice.
consideration of the notice of interlocutory appeal, the
supplemental notice of appeal, their exhibits, and the Court
of Chancery's order denying Defendants' motion or
certification of an interlocutory appeal, it appears to the
This appeal arises from a Court of Chancery decision granting
in part and denying in part a motion to dismiss filed by Data
Treasury Corporation ("DTC"), its directors, and
certain affiliates (collectively, "Defendants").
The following events preceded this ruling.
June 2, 2015, the United States District Court for the
Eastern District of Texas entered a judgment awarding
JPMorgan Chase Bank, N.A. ("JPMorgan") damages in
the amount of sixty-nine million dollars against DTC for its
breach of a licensing agreement (the "Judgment").
The Judgment was affirmed on appeal but remains unpaid.
JPMorgan filed two complaints in the Court of Chancery in aid
of its efforts to collect on the Judgment. The actions
challenge DTC's payment of dividends, in different years,
as unlawful under Sections 170, 172, 173, and 174 of the
Delaware General Corporation Law. In particular, JPMorgan
alleges that Defendants, knowing that DTC owed JPMorgan a
large refund under the licensing agreement, illegally issued
dividends to stockholders and transferred funds to insiders
and affiliates in an effort to avoid paying JPMorgan.
the first action, JPMorgan seeks to recover under Section 174
for dividends DTC paid in 2011 and 2012. Discovery is
presently underway in that action, and it is not at issue in
the second action, which is the subject of this appeal,
JPMorgan sued Defendants to recover two categories of
distributions that DTC allegedly made unlawfully to evade its
liability to JPMorgan: (i) dividends DTC paid from 2006 to
2010; and (ii) other individual transfers DTC made to
insiders from 2011 to 2013.
Defendants moved to dismiss the complaint, arguing that
JPMorgan lacked standing under Section 174 to challenge the
payments of dividends from 2006 to 2010 because it was not a
creditor at that time. Defendants also argued that
JPMorgan's fraudulent-transfer claims were untimely under
the one-year discovery period applicable to claims filed more
than four years after a challenged transfer under Section
1309(1) of the Delaware Uniform Fraudulent Transfer Act
("DUFTA") and that its unlawful-dividend claims were
untimely under the six-year limitations period in Section
July 11, 2019, the Court of Chancery issued an opinion
granting in part and denying in part Defendants' motion
to dismiss and, on July 19, 2019, entered an implementing
order. The Court of Chancery held that: (i) JPMorgan had
standing to assert a claim as a creditor of DTC under Section
174; (ii) the six-year limitations period in Section 174 is a
statute of repose, to which tolling principles do not apply
and, therefore, JPMorgan's unlawful dividend claim with
respect to dividends that were paid from 2006 to 2010 was
untimely; and (iii) the one-year discovery period in Section
1309(1) begins to run when the fraudulent nature of a
challenged transfer-as opposed to the mere occurrence of the
transfer-is or could reasonably have been discovered and,
therefore, JPMorgan had timely filed claims challenging as
fraudulent the dividends paid from 2006 to 2010 and the
individual payments made to insiders from 2011 to 2013.
June 26, 2019, Defendants asked the Court of Chancery to
certify an interlocutory appeal from the court's opinion
and implementing order. Defendants maintained that the
opinion and order decided a substantial issue of material
importance because they permit JPMorgan's challenge to
Defendants' dividends and other transfers, however old,
to proceed under DUFTA. Defendants further argued that the
following Supreme Court Rule 42(b)(iii) factors weighed in
favor of granting interlocutory review: the opinion decided
an issue of first impression; the Court of Chancery's
interpretation of DUFTA conflicts with the decisions of other
Delaware trial courts; the question of law relates to the
construction or application of DUFTA, which has not been, but
should be, settled by this Court in advance of an appeal from
a final order; review of the interlocutory order may
terminate the litigation; and review of the interlocutory order
may serve considerations of justice. JPMorgan opposed the request
for certification but, in the alternative and in the event
that the court were to certify the appeal, cross-moved for
certification of an interlocutory cross-appeal of the Court
of Chancery's ruling that Section 174 is a statute of
repose and that JPMorgan's Section 174(a) claim was
August 7, 2019, the Court of Chancery denied Defendants'
application for certification of an interlocutory appeal.
Although the Court of Chancery agreed that its decision
decided three substantial issues of material importance-a
threshold consideration under Rule 42(b)(i)-it nevertheless
concluded that interlocutory review was not warranted, a
conclusion the court ...