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Chancery Denies Stay Pending Appeal of Decision Requiring Disclosure of Limited Partners' Names

By Francis G.X. Pileggi

Brown Investment Management, L.P. v. Parkcentral Global, L.P., C.A. No. 5248-VCL (May 24, 2010), read letter decision here. This short ruling by letter followed a decision from the bench after a one-day trial in which a limited partner sought the names and addresses of fellow limited partners of a defunct hedge fund. The Court's letter explains why the motion to stay the decision pending appeal was denied.

Key Basis For Court's Ruling 

The Court explained that: "Investors in Delaware business entities have a statutory right to access a list of their fellow investors. Delaware public policy favors the prompt production of the list." See 6 Del. C. Section 17-305 and DGCL Section 220(b).

Additional Reasoning

The Court also added that "Fabian tactics should not be rewarded". That is, the delay tactics used by the company, without apparent justification for not providing the requested data, would be exacerbated by imposing a stay of the Court's decision pending appeal. [The term Fabian strategy refers to the Roman General of that name in about 200 B.C. who used delay tactics to defeat Hannibal's attack on Italy, which took advantage of Fabian's superior supplies and Hannibal's difficulty in obtaining supplies far from home. Fabian prolonged the conflict by using evasive tactics and by avoiding direct battles with Hannibal's superior calvary. Eventually, Hannibal was defeated in part because he ran out of supplies. Many litigators will recognize these tactics that still prevail among many defendants in lawsuits today.]

The Court applied the criteria for a stay pending appeal as outlined in Supreme Court Rule 32(a); Court of Chancery Rule 62(d) and the factors outlined in Kirpat, Inc. v. Del. Alcoholic  Beverage Control Comm'n, 741 A.2d 356, 357-58 (Del. 1998).

The Court also distinguished the 2006 Chancery decision in Wynnefield Partners v. Niagara Corp., based in part on the fact that the company involved in the instant case was a defunct entity and no harm would follow to the entity by a release of the limited partners' names.

 

 

Full post as published by Delaware Corporate and Commercial Litigation Blog on May 24, 2010 (boomark / email).