Guggenheim Funds Investment Advisors, LLC v. JB and Margaret Blaugrund Foundation

• Court: Supreme Court of Delaware
• Decided: March 30, 2023
• Docket: 88, 2023
• Status: Published

Opinion

IN THE SUPREME COURT OF THE STATE OF DELAWARE

GUGGENHEIM FUNDS § INVESTMENT ADVISORS, LLC, § RANDALL C. BARNES, ANGELA § No. 88, 2023 BROCK-KYLE, THOMAS F. § LYDON, JR., RONALD A. § Court Below—Court of Chancery NYBERG, SANDRA G. SPONEM, § of the State of Delaware RONALD E. TOUPIN, JR., and§ AMY J. LEE, § C.A. No. 2021-1094 § Defendants Below, § Appellants, § § v. § § JB and MARGARET BLAUGRUND § FOUNDATION, § § Plaintiff Below, § Appellee. §

Submitted: March 20, 2023 Decided: March 30, 2023

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

ORDER

Upon consideration of the notice of interlocutory appeal, the supplemental

notice of interlocutory appeal, and the exhibits, it appears to the Court that:

(1) This interlocutory appeal arises from the Court of Chancery’s denial of

a motion to dismiss. Plaintiff Below-Appellee JB and Margaret Blaugrund

Foundation (“Plaintiff”), a former stockholder of Fiduciary/Claymore Energy

Infrastructure Fund (“the Fund”), filed an amended complaint asserting direct and derivative claims against Defendant Below-Appellee Guggenheim Funds

Investment Advisors, LLC, the Fund’s investment advisor, and the individual

defendants below-appellees, who were members of the Fund’s Board of Trustees

(collectively, “Defendants”). Plaintiff alleged that Defendants’ reckless

management of the Fund resulted in the Fund losing approximately 80% of its net

assets in February and March 2020 and adjusting its net asset value down by more

than 40% in November 2020 because of a tax error.

(2) After the Fund issued supplemental disclosures regarding a merger and

merged into another investment fund, Plaintiff had only one remaining claim—that

Defendants breached their fiduciary duties by failing to obtain any value for the

derivative claims as part of the merger. Defendants moved to dismiss, arguing that

Plaintiff’s claim was barred by the fully informed and uncoerced stockholder vote

approving the merger under Corwin v. KKR Fin. Holdings LLC1 and failed to state

a claim.

(3) In a bench ruling, the Court of Chancery held that, even assuming

Corwin applied, it was reasonably conceivable at the pleading stage that based on

the unusual facts of the case the merger vote was structurally coerced. Without a

cleansing vote, the court found that it was reasonably conceivable entire fairness

1 125 A.3d 304 (Del. 2015).

2 applied to the merger and that it was reasonably conceivable Defendants breached

their fiduciary duties of care and loyalty. The court therefore denied Defendants’

motion to dismiss.

(4) On March 6, 2023, Defendants filed an application for certification of

an interlocutory appeal. Plaintiff opposed the application. On March 17, 2023, the

Court of Chancery denied the application for certification.

(5) In denying certification, the court first found that the interlocutory order

did not decide a substantial issue of material importance because it did not adjudicate

the merits of Plaintiff’s breach-of-fiduciary claim. The court next considered the

Rule 42(b)(iii) criteria that Defendants relied upon. As to Rule 42(b)(iii)(A) (a

question of law resolved for the first time), the court rejected Plaintiff’s

characterization of the interlocutory order and found that the order simply applied

settled precedent to unusual facts. The court also rejected Plaintiff’s reliance on

Rule 42(b)(iii)(B) (conflicting trial court decisions on the question of law) because

the outcome of the order was the result of the unusual fact pattern, not the application

of different legal standards. The court recognized that interlocutory review could

terminate the litigation under Rule 42(B)(iii)(G), but that was the case with every

order denying a motion to dismiss and was insufficient by itself to justify

interlocutory review. As to Rule 42(B)(iii)(H) (review of the interlocutory order

may serve of considerations of justice), the court found that interlocutory review of

3 the fact-intensive, pleading stage analysis in the order would not clarify the law for

business and legal communities as Defendants contended.

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

discretion of the Court.2 In determining whether to accept an interlocutory appeal,

this Court may consider all relevant factors, including the trial court’s decision about

whether to certify an interlocutory appeal.3 We agree with the Court of Chancery

that the Rule 42(B)(iii) criteria, with the exception of Rule 42(B)(iii)(G), do not

weigh in favor of interlocutory review and that the potential benefits of interlocutory

review do not outweigh the inefficiency, disruption, and probable costs caused by

an interlocutory appeal.

NOW, THEREFORE, IT IS ORDERED that the interlocutory appeal is

REFUSED.

BY THE COURT:

/s/ Gary F. Traynor Justice

2 Supr. Ct. R. 42(d)(v). 3 Id. 4