In re Baker Hughes, A GE Company, Derivative Litigation

• Court: Supreme Court of Delaware
• Decided: February 1, 2024
• Docket: 169, 2023
• Status: Published

Opinion

IN THE SUPREME COURT OF THE STATE OF DELAWARE

IN RE BAKER HUGHES, A GE § COMPANY, DERIVATIVE § No. 169, 2023 LITIGATION § § Court Below–Court of Chancery § of the State of Delaware § § C.A. No. 2019-0201

Submitted: December 13, 2023 Decided: February 1, 2024

Before SEITZ, Chief Justice; VALIHURA, TRAYNOR, LEGROW, and GRIFFITHS, Justices constituting the Court en banc. ORDER

This 1st day of February, 2024, after consideration of the parties’ briefs, the

argument of counsel, and the record on appeal, it appears to the Court that:

(1) The Court of Chancery granted the defendant special litigation

committee’s motion to terminate derivative litigation filed by two Baker Hughes

Class A stockholders.1 The court’s ruling followed its consideration of the parties’

briefs and oral argument at which the special litigation committee presented live

testimony from its sole member.

(2) In this appeal, the derivative plaintiffs have challenged the Court of

Chancery’s decision on various grounds, including that it “violated the summary

1 In re Baker Hughes, a GE Co., Deriv. Litig., 2023 WL 2967780 (Del. Ch. Apr. 17, 2023). judgment standard by weighing evidence and making credibility determinations”2

based on the live testimony taken at oral argument. This, according to the plaintiffs,

“violated ‘Rule 56 standards,’”3 which are applicable to motions to terminate

derivative litigation under this Court’s decision in Zapata Corp. v. Maldonado.4

(3) The plaintiffs’ argument overlooks two salient points. First, Zapata

explicitly held open the possibility that the Court of Chancery, when considering a

special litigation committee’s motion to terminate derivative litigation, might hold

“a discretionary trial of factual issues . . . .”5 Second, the special litigation

committee’s counsel notified the plaintiffs’ counsel and the Court of Chancery that

the committee intended to call Mr. Ebel as a witness to testify at the December 19,

2022 hearing “about his independence, investigation, and conclusions.”6 Despite

receiving this notice, the plaintiffs did not object before or during the hearing to

Ebel’s testimony as being beyond the scope of permissible inquiry under Zapata;

instead, they cross-examined Ebel extensively.

(4) To be sure, given that Zapata envisions only limited discovery, holding

an evidentiary hearing where the credibility of witnesses will be weighed poses a

risk of procedural unfairness. Moreover, credibility determinations do not sit

2 Opening Br. at 27. 3 Id. at 28 (quoting Zapata Corp. v. Maldonado, 430 A.2d 779, 786 (Del. 1981)). 4 430 A.2d 779 (Del. 1981). 5 Id. at 778 n.15. 6 App. to Answering Br. at B349–50. 2 comfortably with the application of the summary-judgment standard. But the time

for addressing such issues is when they arise in the Court of Chancery, which, in the

words of Zapata, exercises its “independent discretion” in these matters. Here, in

the face of the plaintiffs’ acquiescence to Ebel’s live testimony, the Vice Chancellor

did not abuse her discretion by relying on that testimony, including its credibility, in

reaching her decision.

(5) For this reason and on the basis of the other reasons stated in the Court

of Chancery’s April 17, 2023 Memorandum Opinion, we affirm the judgment of the

Court of Chancery.

NOW, THEREFORE, IT IS ORDERED that the judgment of the Court of

Chancery be AFFIRMED.

BY THE COURT:

/s/ Gary F. Traynor Justice