Thank You For Submiting Feedback!
Delaware courts only hear disputes that are ripe for judicial determination. A ripe dispute is one where litigation sooner rather than later appears to be unavoidable, and one in which the material facts are static. Delaware courts have repeatedly refused to rule on proposed-but-untaken actions of boards consistent with a reluctance to issue advisory or hypothetical opinions. Without any allegation that the corporation has entered or will enter into contracts binding upon the corporation, a determination of the legal sufficiency of a "claim," which is not ripe for adjudication, would amount to an impermissible advisory opinion.
Plaintiff, eBay Domestic Holdings, Inc. ("eBay"), was the sole outside and minority stockholder of Craigslist, Inc., the online classifieds service company, which was majority-owned and directed by defendants, Craig Newmark and James Buckmaster. On December 17, 2007, Newmark and Buckmaster, as the Craigslist Board, approved the new form of indemnification agreement; however, the agreement was not executed. Moreover, Craigslist has not paid or advanced anything to anyone pursuant to the proposed new indemnification form. Plaintiff filed suit against the defendants, alleging that the latter breached their fiduciary duty by self-dealing when they approved new indemnification agreement forms, and committed waste by using corporate assets to prepare and defend the new indemnification agreements. The defendants filed a motion for partial summary judgment as to the breach of fiduciary duty and waste counts, alleging that the claims were not ripe for judicial determination.
Were the plaintiff’s claims ripe for judicial determination, thereby warranting the exercise of judicial review?
The court held that Delaware courts had refused to rule on proposed-but-untaken actions of boards consistent with a reluctance to issue advisory or hypothetical opinions. No indemnification agreement had been executed and no funds had been expended under the new proposed form of indemnification agreement. Without an actual agreement there was no contract or transaction for the court to examine under self-dealing or waste claims. Not only was the plaintiff’s argument speculative in that the parties might enter the agreement at some future date, it was now moot in light of the defendants’ unrebutted affidavits confirming, under oath, no intent to ever enter the indemnification agreements, now or in the future. Without an executed contract or a completed transaction, the plaintiff’s claims for breach of fiduciary duty and waste were not ripe for review.