Delaware Law Updates
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Weir v. JMACK, Inc., et al., C.A. No. 3263-CC (Del. Ch. Sept. 23, 2008) (Chandler, C.)


JMACK is a Delaware corporation owned by a majority stockholder and two minority stockholders. Both the majority stockholder and petitioner, one of the minority stockholders, were involved in running a restaurant operated by JMACK, and each accuses the other of regulatory and tax misconduct, although JMACK is not currently threatened by regulatory investigations or legal claims. On the basis of this alleged misconduct, the petitioner moved for summary judgment to appoint a receiver and allow equitable dissolution of JMACK. After noting that such a remedy would be granted only where there exists “gross mismanagement, positive misconduct by corporate officers, breach of trust, or extreme circumstances showing imminent danger of great loss to the corporation which, otherwise, cannot be prevented" (Carlson v. Hallinan, 924 A.2d 506 (Del. Ch. 2006), the Court went on to find that the petitioner had failed to demonstrate that relatively minor actions of regulatory or tax misconduct were sufficient to warrant the radical remedy of appointing a receiver to dissolve a solvent corporation, particularly where the petitioner could identify no threatened or actual harm suffered by the corporation and where the corporation was in the midst of its most successful year financially. Concluding that it could not grant dissolution of a solvent company when the law and facts simply did not warrant it, the Court granted summary judgment sua sponte in favor of respondents.

The full opinion is available here