David B. Perkins and Hatteras Investment Partners, LP (f/k/a Hatteras Funds. LP) v. Young Women's Christian Association of Rochester and Monroe County

Supreme Court of Delaware

David B. Perkins and Hatteras Investment Partners, LP (f/k/a Hatteras Funds. LP) v. Young Women's Christian Association of Rochester and Monroe County

Supreme Court of Delaware·Decided July 7, 2026·No. 172, 2026·Published

Opinion

IN THE SUPREME COURT OF THE STATE OF DELAWARE

DAVID B. PERKINS and § HATTERAS INVESTMENT § PARTNERS, LP (F/K/A HATTERAS § No. 172, 2026 FUNDS, LP), § § Court Below—Court of Chancery Defendants Below, § of the State of Delaware Appellants, § § C.A. No. 2024-1264 v. § § YOUNG WOMEN’S CHRISTIAN § ASSOCIATION OF ROCHESTER § AND MONROE COUNTY, § § Plaintiff Below, § Appellee, § § and § § HATTERAS MASTER FUND, L.P. § and HATTERAS CORE § ALTERNATIVES TEI § INSTITUTIONAL FUND, L.P. § § Nominal Defendants-Below §

Submitted: May 5, 2026 Decided: July 7, 2026

Before SEITZ, Chief Justice; TRAYNOR and LEGROW, Justices.

ORDER

After consideration of the notice and supplemental notice of appeal from an

interlocutory order and the exhibits attached thereto, it appears to the Court that: (1) This interlocutory appeal arises from the Court of Chancery’s denial of

a motion to dismiss a double-derivative action under Court of Chancery Rule 23.1.

The Young Women’s Christian Association of Rochester and Monroe County (the

“YWCA”) is an investor in a feeder fund, Hatteras Core Alternatives TEI Institutional

Fund, L.P. (the “TEI Institutional Feeder Fund”). The TEI Institutional Feeder Fund,

a Delaware limited partnership, is one of four feeder funds that raise capital to invest

in Hatteras Master Fund, L.P. (the “Hatteras Master Fund”), a Delaware limited

partnership. Under a diversification policy, the Hatteras Master Fund cannot invest

more than 25% of its assets in the securities of one issuer without supermajority

unitholder approval.

(2) The Hatteras Master Fund and each feeder fund have the same board of

directors (the “Board” or “Directors”) and substantially identical limited partnership

agreements. An affiliate of Hatteras Investment Partners, LP, formerly known as

Hatteras Funds, LP, (the “Hatteras Investment Manager”) serves as the general partner

of each fund, delegating its managerial authority to the Board. David B. Perkins owns

a majority of the Hatteras Investment Manager’s equity and serves as its President

and CEO. The limited partnership agreements provide that the directors owe the same

fiduciary duties as directors of a Delaware corporation and preserve their liability for

gross negligence.

(3) After the Hatteras Master Fund’s assets under management fell by half,

the Hatteras Investment Manager decided to wind down the Hatteras Master Fund and 2 start a new fund. In a transaction approved by the Board, the Hatteras Master Fund

sold all of its assets to a start-up advisory firm (the “Buyer”) in exchange for preferred

units in the Buyer. The Board did not seek unitholder approval of the sale or departure

from the diversification policy. Eighteen months after the sale, the Buyer completed

a de-SPAC transaction that converted the preferred units into publicly traded common

stock valued at $8 per share. The stock price dropped to pennies after the Buyer wrote

off most of its good will.

(4) The YWCA filed a double-derivative action asserting claims that arose

from the asset sale. The defendants moved to dismiss under Court of Chancery Rule

23.1. They argued that: (i) the YWCA lacked standing to assert double-derivative

claims because the TEI Institutional Feeder Fund held less than a majority interest in

the Hatteras Master Fund; and (ii) the YWCA failed to plead demand futility because

the outside Directors constituted a supermajority of the Board and could properly

consider a demand.

(5) The Court of Chancery denied the motion to dismiss (“Rule 23.1

Opinion”). 1 The court rejected the defendants’ argument that the YWCA could not

assert double-derivative claims because the TEI Institutional Feeder Fund only held a

48% interest in the Hatteras Master Fund. The court held that there were two ways,

1 Young Women’s Christian Assoc. of Rochester & Monroe Cnty. v. Hatteras Funds, LP, 2026 WL 874818 (Del. Ch. Mar. 31, 2026).

3 neither of which required majority ownership, to plead double-derivative standing: (i)

pleading demand futility at both the first-tier entity level and the second-tier entity

level; or (ii) pleading demand futility at the first-tier entity level when the first-tier

entity controls the second-tier entity. Finding that a majority of the Directors faced a

substantial risk of liability on the YWCA’s claims, the court concluded that the

YWCA had pleaded demand futility as to both the Board of the TEI Institutional

Feeder Fund and the Hatteras Master Fund.

(6) The Hatteras Investment Manager and Perkins (the “Movants”) applied

for interlocutory certification of the Rule 23.1 Opinion. The Movants argued that the

Rule 23.1 Opinion decided a substantial issue of material importance—a threshold

inquiry under Rule 42—because it determined that an investor of a parent entity can

sue on behalf of the parent’s subsidiary even when the parent does not own or control

the subsidiary. The Movants identified another substantial issue as whether a plaintiff

in a double-derivative action on behalf of a less-than-wholly-owned subsidiary is only

required to plead demand futility at one level as the Movants claimed the Court of

Chancery had done. As to the Rule 42(b)(iii) criteria, the Movants argued that factors

A (question of law resolved for the first time), B (conflicting trial court decisions), D

(the interlocutory ruling as sustained the controverted jurisdiction of the trial court),

G (review may terminate the litigation), and H (review may serve considerations of

justice) weighed in favor of granting the application for certification.

4 (7) In its opposition to the application, the YWCA asserted that the

substantial-issue requirement of Rule 42 was unmet because the court did not rule on

the merits of the YWCA’s claims. The YWCA also disputed the Movants’ contention

that the Rule 42(b)(iii) criteria weighed in favor of certification. As to Factor A, the

YWCA contended that the Rule 23.1 Opinion was based on well-settled principles of

derivative litigation and did not resolve a question of law for the first time. The

YWCA also challenged the Movants’ characterization of the Rule 23.1 Opinion as

holding that a plaintiff is not required to show demand futility at the parent and

subsidiary levels. In fact, the court only conducted the demand futility analysis once

because the same directors served on the TEI Institutional Feeder Fund and the

Hatteras Master Fund boards. The YWCA further contended that there were no

conflicting trial court decisions, the Court of Chancery’s jurisdiction was not

controverted, interlocutory review was more likely to result in remand than

termination of the litigation, and interlocutory review would not serve considerations

of justice.

(8) The Court of Chancery denied the Movants’ application. The court found

that the Rule 23.1 Opinion was based on well-settled principles of double-derivative

standing and did not present a substantial issue of material importance. The court also

rejected the Movants’ characterization of the Rule 23.1 Opinion as casting doubt on

whether a plaintiff must plead demand futility at the parent and subsidiary levels.

5 Finally, the court concluded that none of the Rule 42 factors weighed in favor of

certification.

(9) Applications for interlocutory review are addressed to the sound

discretion of the Court. 2 In the exercise of our discretion and giving due weight to the

Free access — add to your briefcase to read the full text and ask questions with AI