Moelis & Company v. West Palm Beach Firefighters' Pension Fund

• Court: Supreme Court of Delaware
• Decided: January 20, 2026
• Docket: 340, 2024
• Status: Published

Opinion

IN THE SUPREME COURT OF THE STATE OF DELAWARE

MOELIS & COMPANY, § § No. 340, 2024 Defendant Below, § Appellant, § § Court Below: Court of Chancery v. § of the State of Delaware § WEST PALM BEACH § C.A. No. 2023-0309 FIREFIGHTERS’ PENSION FUND, § on behalf of itself and all other § similarly-situated Class A § stockholders of MOELIS & § COMPANY, § § Plaintiff Below, § Appellee. §

Submitted: October 27, 2025 Decided: January 20, 2026

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

Upon appeal from the Court of Chancery. REVERSED.

John P. DiTomo, Esquire, MORRIS, NICHOLS, ARSHT & TUNNELL LLP, Wilmington, Delaware; William Savitt, Esquire (argued), Anitha Reddy, Esquire, Won S. Shin, Esquire, Daniel B. Listwa, Esquire, WACHTELL, LIPTON, ROSEN & KATZ, New York, New York, for Defendant Below, Appellant Moelis & Company.

Thomas Curry, Esquire (argued), SAXENA WHITE, P.A., Wilmington, Delaware, for Plaintiff Below, Appellee West Palm Beach Firefighters’ Pension Fund.

Ned Weinberger, Esquire, Mark D. Richardson, Esquire, LABATON KELLER SUCHAROW LLP, Wilmington, Delaware; Lori Marks-Esterman, Esquire, Jacqueline Y. Ma, Esquire, OLSHAN FROME & WOLOSKY, New York, New York; Joel Fleming, Esquire, Amanda Crawford, Esquire, EQUITY LIGITATION GROUP LLP, Boston, Massachusetts, for Amici Curiae James An, Lucian A. Bebchuk, Anat Alon Beck, Ilya Beylin, Robert E. Bishop, Joan Heminway, Mark Lebovitch, Michael Klausner, Frank Partnoy, Brian JM Quinn, Usha R. Rodrigues, Robert B. Thompson, Anne Tucker, and Charles Whitehead.

Raymond J. DiCamillo, Esquire, Robert B. Greco, Esquire, RICHARDS, LAYTON & FINGER, P.A., Wilmington Delaware, for Amici Curiae Joseph A. Grundfest, Lawrence A. Hamermesh, Jonathan R. Macey, and Charles R.T. O’Kelley.

2 TRAYNOR, Justice:

In the Court of Chancery, a stockholder sought a declaratory judgment that

certain provisions of a stockholders agreement were facially invalid and

unenforceable because the provisions interfere with the corporate board’s

management of the business and affairs of the corporation as required by 8 Del. C.

§ 141(a). In this opinion, we conclude that (i) to the extent that the challenged

provisions are at odds with § 141(a), they are not void, but voidable, and (ii) the

plaintiff’s challenge is barred by laches.

In 2014, the corporation entered into the agreement with stockholders who are

affiliated with its founder. The plaintiff filed its complaint in the Court of Chancery

almost nine years later. The defendants countered that the agreement was facially

valid but that, in any event, the plaintiff’s challenge to the validity of the agreement

was time-barred expressly by 10 Del. C. § 8106’s three-year statute of limitations or

by analogy under the doctrine of laches.

The Court of Chancery viewed the time-bar defense as an assertion of laches

and rejected it on two grounds. First, the court accepted for the purpose of its

timeliness analysis that the challenged provisions violated § 141(a). For the court,

this meant that the provisions were void and, because equitable defenses such as

laches cannot validate a void act, laches was not an available defense. Second, the

Court held that, even if laches were an available defense, the plaintiff’s delay was

3 excused because it alleged that the existence of the agreement was “an ongoing

statutory violation.” If that be the case, the court concluded, the existence of the

agreement was a continuing wrong such that the court was not bound to follow the

traditional rule governing limitations of actions—that is, that a cause of action

accrues when the essential elements of a claim are in place such that a plaintiff can

seek relief.

As we will explain later, we disagree with the Court of Chancery’s conclusion

that the challenged provisions are void—as opposed to voidable—because they were

adopted in a manner that is at odds with § 141(a). The validity of voidable acts, of

course, can be challenged, but such challenges are subject to equitable defenses,

including laches.

In addition to that, we do not agree that, because the challenged provisions

purportedly constitute an “ongoing statutory violation,” the plaintiff was excused

from challenging them in a timely manner. As we see it, the only wrongful conduct

alleged in the complaint was the execution of the stockholders agreement in 2014.

Despite the plaintiff’s artful pleading, that is the gravamen of its complaint. To be

sure, the plaintiff has alleged in general terms that the ongoing effects and

implications of the stockholders agreement have harmed the corporation. But as we

will develop more fully below, that does not mean that the plaintiff’s cause of action

grounded in the alleged facial invalidity of the agreement accrued as those effects

4 were felt and implications realized. To the contrary, all the elements of the plaintiff’s

claim were present and complete relief was available in 2014. The existence of the

claim was not inherently unknowable then nor was there any impediment to bringing

the claim in a timely manner. Hence, the plaintiff’s claim accrued in 2014 and its

challenge to the facial validity of the challenged provisions is time barred under the

doctrine of laches. We therefore reverse the Court of Chancery’s decision

concluding otherwise.

I

The relevant facts are undisputed. In 2007, Kenneth Moelis, a veteran

investment banker, founded Moelis & Company, an independent investment bank.

The company was immediately successful in securing and performing advisory work

on high-profile M&A transactions. Before long, Moelis & Company had expanded

globally. Kenneth Moelis has served as Moelis & Company’s CEO and chaired its

board of directors since its founding. The advisory business was initially held by

Moelis & Company Holdings LP, a Delaware limited partnership.

A

In 2014, Moelis & Company announced an initial public offering of its Class

A common stock and changed its corporate structure in preparation for the IPO. The

existing limited partnership transferred the company’s advisory business to a new

limited partnership, Moelis & Company Group LP (“Group LP”). An LLC was

5 formed to act as the general partner of Group LP, and the equity interest in that LLC

was transferred to Moelis & Company (“Moelis”), a Delaware corporation formed

to operate as a holding company. Moelis received partnership units representing a

27% economic interest in Group LP. Most of the remaining economic interest in

Group LP was transferred to Moelis & Company Partner Holdings LP (“Partner

Holdings”), an entity controlled by Kenneth Moelis.

Moelis, the publicly traded entity, has two authorized classes of common

stock. Public stockholders hold Class A common stock that carries one vote per

share. Class B common stock carries 10 votes per share so long as five conditions

set forth in the Moelis charter are satisfied. The “Class B Condition” is satisfied if

Kenneth Moelis (1) owns at least 4,458,445 shares of Class A stock; (2) owns at

least 5% of the Class A stock; (3) has not been convicted of a felony in violation of

securities laws or other crime of moral turpitude; (4) is alive; and (5) has not had his

employment agreement with the company terminated because he failed to abide by

a covenant to devote his primary business time and efforts to the company or because

he has suffered an “incapacity.”1 At the time of the IPO, Partner Holdings received

Class B stock that, if the Class B Condition was met, carried approximately a 96%

voting interest in Moelis.

1 App. to Opening Br. at A542.

6 B

In connection with the IPO, Moelis also entered into a stockholders agreement

with Partner Holdings. The agreement grants Partner Holdings—controlled by

Kenneth Moelis—substantial rights concerning Moelis’s governance so long as the

Class B Condition in the Moelis charter and a “Secondary Class B Condition” 2

defined in the agreement are met.

Section 2.1 of the stockholders agreement prohibits the Moelis board from

making a number of fundamental decisions without the consent of Partner Holdings.

Without Partner Holdings’ consent, the Moelis board may not take any one of 18

actions enumerated in the stockholders agreement. A sample of actions that the

board may not take without approval from Partner Holdings includes: taking on debt

over $20 million; issuing more than a small amount of equity as defined by the

agreement; issuing preferred stock; adopting a stockholder rights plan; amending the

certificate of incorporation or by-laws; entering into a merger, consolidation,

recapitalization, liquidation or sale of the company; removing or appointing

officers; issuing or paying dividends; and adopting the company’s annual budget.3

2 The Secondary Class B Condition is substantively identical to the Class B Condition in the Moelis charter except that it requires that Kenneth Moelis own only 2,229,222 shares of Moelis Class A stock or its equivalent. App. to Opening Br. at A566. 3 See West Palm Beach Firefighters’ Pension Fund v. Moelis & Co., 311 A.3d 809, 825 (Del. Ch. 2024) [hereinafter “Moelis II”]; App. to Opening Br. at A133–34.

7 Section 4.1 of the stockholders agreement provides Partner Holdings with

extensive control over the Moelis board’s composition. Section 4.1(a) permits

Kenneth Moelis—through Partner Holdings—to designate a number of director

nominees equal to a majority of the board. It further mandates that the Board use its

best efforts to maintain a board of directors with no more than 11 seats. Section

4.1(c) compels the Moelis board to recommend that stockholders vote in favor of

Partner Holdings designees for election to the Moelis board. It does so by mandating

that the board include these designees in the slate of nominees it recommends to

stockholders and “use its reasonable best efforts to cause the election of each such

designee to the Board.”4 And Section 4.1(d) compels the Moelis board to fill any

board vacancy arising from the departure or removal of a Partner Holdings designee

with another Partner Holdings designee.

Section 4.2 of the stockholders agreement compels the Moelis board to staff

its committees with Partner Holdings designees proportionate to the number of

Partner Holdings designees on the board as a whole.

The stockholders agreement also has a severability provision, preserving the

applicability of the remainder of the agreement should any provision be found

invalid or unenforceable.

4 Moelis II, 311 A.3d at 827; App. to Opening Br. at A135.

8 C

Moelis and Partner Holdings executed the stockholders agreement on April

15, 2014, the day before Moelis Class A stock began trading on the New York Stock

Exchange. The IPO prospectus disclosed to public stockholders that the voting

power of the Class B stock held by Partner Holdings and the content of the

stockholders agreement with Partner Holdings would give Kenneth Moelis control

of Moelis. The prospectus explained that “[u]pon completion of this offering,

Moelis & Company will be controlled by Mr. Moelis, through his control of Partner

Holdings” and that “Mr. Moelis will control approximately 96.8% of the voting

interest in Moelis & Company.”5 The prospectus further explained that Kenneth

Moelis “will have the ability to elect all of the members of our board of directors

and thereby to control our management and affairs.” 6 Another section of the

prospectus plainly disclosed the Class B Condition and the approval rights held by

Partner Holdings under Section 2.1 of the stockholders agreement. 7 Similar

disclosures have appeared in each of Moelis’s annual form 10-K reports following

the IPO.

Since the IPO, Kenneth Moelis’s voting power has fallen below 50%. And

since April 2021, to ensure compliance with New York Stock Exchange rules for

5 App. to Opening Br. at A455. 6 Id. 7 Id. at A468–70.

9 non-controlled companies, Partner Holdings has partially waived its rights under

Section 4.1 of the stockholders agreement by designating only two director nominees

for election to the company’s board, which currently comprises five members.

Partner Holdings has also waived its right to proportionate board-committee

representation under Section 4.2 of the stockholders agreement.

D

In March 2023, the plaintiff, a Class A stockholder since November 2014,

filed this lawsuit against Moelis claiming that the provisions of the stockholders

agreement were facially invalid because they violate § 141 of the Delaware General

Corporation Law (the “DGCL”). The complaint requested a declaratory judgment

that these provisions are invalid and unenforceable. Moelis answered, arguing that

the plaintiff’s claims were either time-barred or unripe, and that even if they were

justiciable, the challenged provisions were not facially invalid under § 141. Because

there were no factual issues for the Court of Chancery to resolve, cross-motions for

summary judgment followed.

The court resolved the summary judgment motions in two opinions. Its first

opinion addressed Moelis’s argument that the plaintiff’s claim was time-barred

under the equitable defense of laches and, in the alternative, that the plaintiff’s claim

10 was unripe.8 The court concluded that, if the challenged provisions violate § 141(a)

as the complaint alleged, then they are void and thus not subject to equitable

defenses, including laches.9 The court added that, even if laches were an available

defense, the plaintiff’s claim was not time barred because, if the plaintiff was correct

about the statutory violation, the wrong for which it sought a remedy was ongoing

and therefore its claim did not accrue in 2014 as Moelis contended. “For an ongoing

statutory violation,” the court determined, “policy interests support using either the

continuing wrong method or the separate accrual method” under either of which the

plaintiff did not delay unreasonably.10 Addressing Moelis’s ripeness argument, and

citing the Court of Chancery’s opinions in Abercrombie v. Davies,11 Carmody v. Toll

Brothers, Inc.,12 and Moran v. Household International, Inc.,13 the court found that

a facial challenge to governance documents of this nature is ripe for judicial review.14

In its second opinion, the Court of Chancery addressed the plaintiff’s claim

on its merits.15 After an extensive review of Delaware law, the court fashioned a test

to determine whether a contract is an “internal governance arrangement” subject to

8 See West Palm Beach Firefighters’ Pension Fund v. Moelis & Co., 310 A.3d 985 (Del. Ch. 2024) [hereinafter “Moelis I”]. 9 Id. at 994. 10 Id. at 996. 11 123 A.2d 893 (Del. Ch. 1956), rev’d on other grounds, 130 A.2d 338 (Del. 1957). 12 723 A.2d 1180 (Del. Ch. 1998). 13 490 A.2d 1059 (Del. Ch. 1985). 14 Moelis I, 310 A.3d at 1005. 15 See Moelis II, 311 A.3d at 866.

11 the language of § 141, or an “external commercial agreement” not covered by the

statute.16 It concluded that the stockholders agreement was an “internal governance

arrangement” and that therefore the challenged provisions were subject to Section

141. 17 And because some of the challenged provisions limited the managerial

freedom of the Moelis board of directors “in a substantial way,” the court concluded

that they facially violated § 141(a) and declared them void and unenforceable.18 The

court later awarded the plaintiff $6 million in attorney fees.19

This appeal followed. Moelis argues that the Court of Chancery’s conclusion

that the plaintiff’s claims were not time barred by laches was erroneous as was its

determination that the challenged provisions are facially invalid. Moelis also

contends that the Court of Chancery’s award of attorney fees was an abuse of

discretion. Because we agree with Moelis’s timeliness argument, we need not

address its contentions as to the facial validity of the challenged provisions. Our

decision also dictates that the Court of Chancery’s award of attorney fees be vacated.

16 Id. at 828–30. 17 Id. 18 Specifically, the court invalidated the requirements in the stockholders agreement that the Moelis board: seek approval from Partner Holdings when making the various corporate decisions outlined in Section 2.1; recommend Partner Holdings designees to stockholders for election under Section 4.1(c); fill vacancies on the board caused by the departure of a Partner Holdings designee with another Partner Holdings designee under section 4.1(d); keep the size of the board below 11 members under Section 4.1(a); and grant Partner Holdings designees board committee representation proportionate to their board representation under Section 4.2. Id. at 870–77. 19 See West Palm Beach Firefighters’ Pension Fund v. Moelis & Company, C.A. No. 2023-0309 (Del. Ch. July 18, 2024) (TRANSCRIPT).

12 E

A full account of the history of this case and its probable effect on our

corporate law would not be complete without a reference to the prompt legislative

response to the Court of Chancery’s decision. Three months after the court issued

its merits opinion, legislation was introduced in the General Assembly to mitigate—

if not annul—the effects of the court’s opinion. Senate Bill 313, introduced on May

23, 2024, amends § 122 of the Delaware General Corporation law by adding a new

§ 122(18). Read together with the pre-existing statute, § 122(18) now provides, in

relevant part

Every corporation created under this chapter shall have power, whether or not so provided in the certificate of incorporation, to: . . . .

(18) Notwithstanding § 141(a) of this title, make contracts with 1 or more current or prospective stockholders . . . in its or their capacity as such, in exchange for such minimum consideration as determined by the board of directors (which may include inducing stockholders or beneficial owners of stock to take, or refrain from taking, 1 or more actions); provided that no provision of such contract shall be enforceable against the corporation to the extent such contract provision is contrary to the certificate of incorporation or would be contrary to the laws of this State (other than § 115 of this title) if included in the certificate of incorporation. Without limiting the provisions that may be included in any such contracts, the corporation may agree to: (a) restrict or prohibit itself from taking actions specified in the contract, (b) require the approval or consent of 1 or more persons or bodies before the corporation may take actions specified in the contract (which persons or bodies may include the board of directors or 1 or more current or future directors, stockholders or beneficial owners of stock of the corporation), and (c) covenant that the corporation or 1

13 or more persons or bodies will take, or refrain from taking, actions specified in the contract (which persons or bodies may include the board of directors or 1 or more current or future directors, stockholders or beneficial owners of stock of the corporation). Solely for purposes of applying the proviso in the first sentence of this subsection, a restriction, prohibition or covenant in any such contract that relates to any specified action shall not be deemed contrary to the laws of this State or the certificate of incorporation by reason of a provision of this title or the certificate of incorporation that authorizes or empowers the board of directors (or any 1 or more directors) to take such action.20

Senate Bill 313 was passed by the Delaware Senate and House of

Representatives in mid-June 2024 and was signed by the Governor on July 17, 2024,

with an effective date of August 1, 2024. The original synopsis of the bill left little

doubt that it was drafted and passed in response to the Court of Chancery’s

decision.21 The General Assembly stipulated, however, that the amended statute

“shall not apply to or affect any civil action or proceeding completed or pending on

or before such date.”22 Thus, the enactment of new § 122(18) does not moot this

appeal.

20 8 Del. C. § 122(18). 21 The synopsis states that “[n]ew § 122(18) provides bright-line authorization for contractual provisions addressing the matter listed [in the amended statute], and therefore would provide for a different rule than the portion of the Moelis decision in which the Court held that contract provisions of this nature must be included in the certificate of incorporation to be valid.” S.B. 313, 152nd Gen. Assemb. (Del. 2024). 22 S.B. 313, 152nd Gen. Assemb. § 6 (Del. 2024). It could be argued that the General Assembly’s adoption of Senate Bill 313 clarified or announced the public policy of Delaware, but the synopsis quoted in footnote 21 and this limitation on the application of Section 122(18) require us to ignore that public policy. This is a curious circumstance, but we have not considered the implications of Senate Bill 313 in deciding that laches bars the plaintiff’s facial challenge.

14 II

We review the Court of Chancery’s decision to grant summary judgment de

novo.23 Summary judgment is appropriate where there are no disputed issues of

material fact, and the moving party is entitled to judgment as a matter of law.24 Here,

there are no disputed facts. Our review of the Court of Chancery’s “interpretation

and application of legal precepts” and its application of the doctrine of laches is de

novo.25

III

When a plaintiff advances a legal claim and seeks relief that would be

available from a court of law, a court will apply the relevant statute of limitations to

determine the timeliness of the claim.26 But “the limitations of actions applicable in

a court of law are not controlling in equity.” 27 “A court of equity moves upon

considerations of conscience, good faith, and reasonable diligence[,]”28 so, when a

plaintiff advances an equitable claim or a legal claim seeking equitable relief, the

Court of Chancery will instead apply the doctrine of laches to determine the

23 Salzberg v. Sciabacucchi, 227 A.3d 102, 112 (Del. 2020). 24 Id. 25 Levey v. Brownstone Asset Mgmt., LP, 76 A.3d 764, 768 (Del. 2013). 26 See Reid v. Spazio, 970 A.2d 176, 183 (Del. 2009). 27 Id. 28 Id.

15 timeliness of the claim. 29 In other words, in equity, “[l]aches is an affirmative

defense that the plaintiff unreasonably delayed in bringing suit after learning of an

infringement of his or her rights.”30

Laches has three elements: “first, knowledge by the claimant; second,

unreasonable delay in bringing the claim; and third, resulting prejudice to the

defendant.”31 “In determining whether an action is barred by laches, the Court of

Chancery will normally, but not invariably, apply the period of limitations by

analogy as a measure of the period of time in which it is reasonable to file suit.”32

Absent unusual circumstances, a plaintiff who files a claim within the analogous

limitations period has presumptively filed within a reasonable time, while a plaintiff

who files after the expiration of the analogous limitations period has presumptively

29 See 2 Donald J. Wolfe, Jr. & Michael A. Pittinger, Corporate and Commercial Practice in the Delaware Court of Chancery § 15.07[d] (2d ed. 2021) [hereinafter “Wolfe & Pittinger”]. 30 Levey, 76 A.3d at 769. 31 Homestore, Inc. v. Tafeen, 888 A.2d 204, 210 (Del. 2005) (citation omitted). We note that this Court in Levey v. Brownstone Asset Management LP and the Court of Chancery in numerous decisions quoting Levey, including this case, have adopted a two-element formulation of the doctrine of laches under which a defendant must show “(i) unreasonable delay in bringing a claim by a plaintiff with knowledge thereof, and (ii) resulting prejudice to the defendant.” Levey, 76 A.3d at 769. As a practical matter, a court’s analysis under this formulation of the doctrine is identical to the analysis under the three-element formulation described in Homestore because the requirement that a claimant have knowledge of its claim is simply incorporated into the first element of the two-element formulation. For the sake of consistency in our caselaw, however, we adopt here and reaffirm the three-element formulation of the doctrine as it possesses the superior historical pedigreein this Court and the Court of Chancery. Leading treatises on Delaware law also cite the three-element formulation of the doctrine. See, e.g., 2 Wolfe & Pittinger § 15.07[a][1]; Edward P. Welch, Edward B. Micheletti, Peter B. Morrison & Stephen D. Dargitz, Mergers & Acquisitions Deal Litigation under Delaware Corporation Law § 1.01[B] (2022 supplement). 32 Levey, 76 A.3d at 769.

16 delayed unreasonably.33 Before we reach this analysis, however, we must determine

whether the equitable defense of laches is available to Moelis at all.

B

As mentioned, the Court of Chancery concluded that, “[if] the Challenged

Provisions violate § 141(a), then they are void” and that “[e]quitable defenses,

including laches, cannot validate void acts.”34 The premise of this conclusion—that

a corporate action taken in a manner that is at odds with the DGCL is necessarily

void rather than voidable—is inconsistent with our cases that draw a distinction

between void and voidable contractual provisions.

But before discussing the cases we deem most helpful in untangling the knotty

distinction between void and voidable contracts, we stress that, by drawing this

distinction—one that has long vexed courts and legal scholars alike—we are not

assessing the enforceability of the challenged provisions. Both void and voidable

contracts are unenforceable to one extent or another.35 Having thus qualified the

scope of our inquiry, we turn to whether the challenged provisions are void and

immune from equitable defenses or merely voidable and thus subject to equitable

defenses.

33 Id. 34 Moelis I, 310 A.3d at 994. 35 Restatement (Second) of Contracts §8 cmt a. (1981) (“Voidable contracts might be defined as one type of unenforceable contract.”)

17 i

Our analysis proceeds from the premise that not all contracts that conflict with

positive law are void.36 As one treatise observes, “[t]here are degrees of evil and

illegality. Some bargains are said to be malum in se, while others are malum

prohibitum.”37 Those that are malum in se—that is, “so malignantly bad that any

party to it deserves no help from the law”38—are generally said to be void ab initio,

while those that are merely malum prohibitum “(relating to regulation) . . . are often

treated as voidable.”39

This distinction is implicit in our decisions that differentiate void from

voidable contracts in the corporate-governance context. From those cases, we

conclude that, to determine whether a contract is void as ultra vires or against public

policy, courts should focus on the subject matter of the contract. This principle was

followed in CompoSecure, L.L.C. v. CardUX, LLC, in which we noted that “[t]he

common law rule is that void acts are ultra vires and generally cannot be ratified,

but voidable acts are acts falling within the power of a corporation, though not

properly authorized, and are subject to equitable defenses.” 40 We derived this

36 XRI Inv. Hldgs. LLC v. Holifield, 283 A.3d 581, 652 n.60 (Del. Ch. 2022) (hereinafter “XRI I”) (holding that “[n]ot all contracts that exceed the bounds of law are void ab initio.”). 37 3 Eric M. Holmes, Corbin on Contracts, § 9.27 (Joseph Perillo ed., rev. ed 1996). 38 Id. 39 Jesse A. Schaefer, Comment, Beyond a Definition: Understanding the Nature of Void and Voidable Contracts, 33 Campbell L. Rev. 193, 200-01 (2010). 40 206 A.3d 807, 816–17 (Del. 2018).

18 statement from two earlier cases, Klaassen v. Allegro Development Corp. 41 and

Michelson v. Duncan.42 In Klaassen, we held that board action—removal of the

company’s CEO—“taken in violation of equitable principles is voidable, not void,

because ‘[o]nly voidable acts are susceptible to . . . equitable defenses.’” 43 The

Klaassen court, recognizing “the well-established distinction between void and

voidable corporate actions[,]” quoted Michelson:

The essential distinction between voidable and void acts is that the former are those which may be found to have been performed in the interest of the corporation but beyond the authority of management, as distinguished from acts which are ultra vires, fraudulent or gifts or waste of corporate assets.44

Michelson noted that “[t]he practical distinction . . . is that voidable acts are

susceptible to cure by shareholder approval while void acts are not.”45 It also bears

repeating that Michelson recognized the difference between actions that are beyond

the authority of corporate fiduciaries to take from actions that are ultra vires the

corporation—that is, beyond the corporation’s power to take. In this regard, it is

equally important to remember that, although ultra vires acts can in some contexts

41 106 A.3d 1035 (Del. 2014). 42 407 A.2d 211 (Del. 1979). 43 Klaassen, 106 A.3d at 1046 (quoting Boris v. Schaheen, 2013 WL 6331287, at *15 (Del. Ch. Dec. 2, 2013)). Admittedly, the claim in Klaassen—that the CEO’s removal was a violation of “generally accepted notions of fairness”—is distinguishable from the plaintiff’s claim of statutory invalidity in this case. We cite it here because of its articulation of the difference between void and voidable acts. 44 Id. (quoting Michelson, 407 A.2d at 218–19). 45 Michelson, 407 A.2d at 219 (citation omitted).

19 be defined broadly, “[i]n the context of defining void acts, ultra vires acts fall under

a much more narrow definition which includes acts specifically prohibited by the

corporation’s charter, for which no implicit authority may be rationally surmised, or

those acts contrary to basic principles of fiduciary law.”46

In Nevins v. Bryan,47 the Court of Chancery applied these principles, and this

Court affirmed. In Nevins, the court addressed a claim that, because the notice of a

special meeting of members was faulty, actions taken at the meeting were not only

invalid—an assertion the court deemed correct—but “void rather than voidable.”48

After quoting the same excerpt from Michelson that we have quoted above, the court

explained further

Void acts are not ratifiable because the corporation cannot, in any case, lawfully accomplish them. Void acts are illegal acts or acts beyond the authority of the corporation. In contrast, voidable acts are ratifiable because the corporation can lawfully accomplish them if it does so in the appropriate manner.49

Because all the disputed actions taken at the meeting could have been

accomplished lawfully by the defendants had they done them in the proper manner—

46 Solomon v. Armstrong, 747 A.2d 1098, 1114 n.45 (Del. Ch. 1999), aff’d, 746 A.2d 277 (Del. 2000). 47 885 A.2d 233 (Del. Ch. 2005), aff’d, 884 A.2d 512 (Del. 2005). 48 Nevins, 885 A.2d at 245. 49 Id. (footnotes and quotation marks omitted). This analysis might differ in the alternative entity context where parties receive even greater leeway in private ordering, and we have held that an entity’s constituent documents may provide that certain actions taken by the entity or its management are incurably void. See Holifield v. XRI Inv. Hldgs., LLC, 304 A.3d 896, 924–26 (Del. 2023) (hereinafter “XRI II”); CompoSecure, 206 A.3d at 817.

20 that is, with proper notice—the actions were deemed voidable, not void, and

therefore subject to the equitable defenses of laches and acquiescence.

ii

The question to be answered under this framework for distinguishing between

void and voidable acts then is not whether the method actually chosen by the Moelis

board to implement the challenged provisions was valid under the DGCL. Instead,

we evaluate whether the plaintiff has demonstrated that there are no lawful means

by which Moelis could accomplish its desired governance arrangements, making the

challenged provisions susceptible to cure and therefore voidable. This framework

appropriately considers whether the arrangements agreed to in a challenged contract

are themselves contrary to public policy instead of whether the means by which they

are agreed to are at odds with public policy.

Yet the Court of Chancery did not consider the distinction between void and

voidable acts as drawn in CompoSecure, Klaassen, Michelson, and Nevins. 50

50 This is not a criticism of the Court of Chancery. Despite the issue’s centrality to the court’s eventual determination that equitable defenses to the plaintiff’s claims were not available because the Challenged Provisions were void, it was afforded scant treatment in the parties’ briefs in the Court of Chancery. Indeed, when Moelis invoked § 8106’s three-year limitations period in its motion for summary judgment, the plaintiff’s response focused on accrual principles, relying heavily on Collis, Ebix, and Politan Management discussed in Section III(C). Only in passing did the plaintiff cite Price Dawe and the Court of Chancery’s decision in XRI I in support of a conclusory assertion that the challenged provisions were void ab initio. App. to Opening Brief at A1135. In its reply brief Moelis, in turn, pointed out that XRI I refuted the plaintiff’s assertion. XRI I, Moelis noted, recognized that courts are “reluctant” to find contracts void ab initio and that “[n]ot all contracts that exceed the bounds of the law are void ab initio.” Id. at A1626 (quoting XRI I, 283 A.3d at 652 & n.60). It further cited XRI I’s recognition of the distinction between

21 Instead, the court pointed to our decision in PHL Variable Insurance Co. v. Price

Dawe 2006 Insurance Trust, 51 which involved a stranger-initiated life insurance

policy that lacked an insurable interest. This Court held that such a policy “is void

ab initio because it violates Delaware’s clear public policy against wagering.” 52

That the subject matter of the wager was the life expectancy of the insured added to

the unseemliness of the scheme under which the policy was originated.

Extrapolating from this refusal to enforce a contract whose subject matter was

illegal, the Court of Chancery devised a categorical rule that renders void—as

opposed to voidable—any contractual provision adopted in a manner that exceeds

the board’s or management’s authority even if the provision could be ratified or

enacted in an authorized manner. That rule is, in our view, inconsistent with our

precedent and the general principles discussed above.

In its later opinion addressing the facial validity of the challenged provisions,

but not in its opinion addressing the timeliness of the plaintiff’s complaint, the Court

of Chancery acknowledged that Kenneth Moelis “could have accomplished the vast

contracts that are malum in se and those that are malum prohibitum. At oral argument on the summary judgment motions, the discussion of this issue was equally brief, with both sides agreeing that the malum in se/malum prohibitum dichotomy was apt, but with each side claiming that it favored their position. For Moelis, the stockholders agreement was not “an affront to public policy,” id. at A1706, and therefore not malum in se while the plaintiffs said the opposite, id. at A1750. 51 28 A.3d 1059 (Del. 2011). 52 Id. at 1067–68. This Court relied upon the quoted language in XRI I. 283 A.3d at 651.

22 majority of what he wanted through the Company’s certificate of incorporation.”53

The court also posited that the Moelis board could have used its blank check

authority to issue Moelis preferred stock conveying voting and director-appointment

rights. The certificate of designations for this preferred stock would become part of

the certificate of incorporation by operation of law under § 104 of the DGCL. Put

differently, the court recognized that the challenged provisions were not beyond the

power of the corporation to enact so long as the method of enactment did not run

counter to the DGCL.54

We grant that the court’s discussion of alternative methods that Moelis might

employ to accomplish the governance arrangements established in the stockholders

agreement did not provide a ringing endorsement of those methods as to each and

every governance provision. But that appears to be the product of the plaintiff’s

failure in the trial court to engage in any meaningful way with the distinction

53 Moelis II, 311 A.2d at 822. See also 8 Del. C. § 102(b); CCSB Fin. Corp. v. Totta, 302 A.3d 387, 399 (Del. 2023) (quoting Williams v. Geier, 671 A.2d 1368, 1381 (Del. 1996)) (noting that “[t]he DGCL ‘is a broad enabling act which leaves latitude for substantial private ordering, provided the statutory parameters and judicially imposed principles of fiduciary duty are honored.’”). 54 In a footnote, the Court of Chancery qualified its acknowledgement that Kenneth Moelis “could have accomplished the vast majority of what he wanted through the Company’s certificate of incorporation.” Moelis II, 311 A.2d at 822. The court noted that “[Kenneth] Moelis may not be able to get everything he wanted” and that “[e]ven a charter provision cannot override a mandatory feature of the DGCL.” Id. at 822 n.19. The court then speculated as to whether certain charter provisions restricting a board’s powers might not be viable but stopped short of saying that any of the challenged provisions in this case would not be viable if included in Moelis’s charter. For the court, “those issues are for another day.” Id.

23 between void and voidable acts. For the plaintiffs, that the challenged provisions

violate § 141 was enough, and the Court of Chancery agreed; we do not.

iv

The DGCL provides broad authority, albeit subject to certain mandatory

terms, for private ordering.55 As the plaintiff here emphasizes, it is true that, under

§ 141(a), “[t]he business and affairs of every corporation organized under this

chapter shall be managed by or under the direction of a board of directors, except as

may be otherwise provided in this chapter or in its certificate of incorporation.” Even

so, § 102(b) permits charter provisions “for the management of the business and for

the conduct of the affairs of the corporation . . . creating, defining, limiting and

regulating the powers of the corporation, the directors and the stockholders . . . if

such provisions are not contrary to the laws of this State.” Hearkening back to

Sterling v. Mayflower Hotel Corp.,56 then-Vice Chancellor Strine observed in Jones

Apparel Group, Inc. v. Maxwell Shoe Co., Inc. that “‘contrary to the laws of this

State’ has a narrow and historically accepted meaning.” 57 Under that meaning,

charter provisions may not “transgress a statutory enactment or a public policy

55 For a discussion of the limits of private ordering, see Jill E. Fisch, Stealth Governance: Shareholder Agreements and Private Ordering, 99 Wash. U. L. Rev. 913, 923–26 (2021); see also In re Appraisal of Ford Hldgs., Inc. Preferred Stock, 698 A.2d 973, 976 (Del. Ch. 1977) (noting that modern corporation law is enabling in character containing few mandatory terms and listing certain of the DGCL’s mandatory terms). 56 93 A.2d 107 (Del. 1952). 57 883 A.2d 837, 843 (Del. Ch. 2004).

24 settled by the common law or implicit in the General Corporation [Law] itself.”58 A

provision would “transgress” in the sense used in Sterling if it “vitiates or

contravenes . . . a mandatory rule of our corporate code or common law.”59

v

Here, it was the plaintiff’s burden to demonstrate that the challenged

provisions were void. 60 In the Court of Chancery, as previously mentioned, the

plaintiff’s response to Moelis’s contention that the provisions were, if anything,

voidable but not void, was cursory. And in its answering brief in this Court,

plaintiff’s argument relied almost exclusively on Price Dawe and its holding that

stranger-originated life insurance policies—wagers on human life—are void ab

initio. But the illegality in Price Dawe, as we have previously explained, is different

in kind than the alleged violation of § 141(a) at issue here.

Unsatisfied with the parties’ treatment of the issue and to shed light on

whether the challenged provisions could be lawfully implemented by a means other

58 Id. (quoting Sterling, 93 A.2d at 118). 59 Id. at 846. 60 Citing Salzberg v. Sciabacucchi, 227 A.3d 102, 113, (Del. 2020), the Court of Chancery cited the burden of persuasion that applies to facial challenges. “To succeed on a facial challenge,” the court wrote, “the plaintiff must show that the Challenged Provisions cannot operate lawfully ‘under any circumstances.’” Id. The court did not address the burden applicable to a claim that a contractual provision is void as against public policy. Nor have we found any Delaware precedent explicitly addressing this point. But courts from other jurisdictions place the burden on the party claiming voidness. See, e.g., Wash. Capitols Basketball Club, Inc. v. Barry, 419 F.2d 472, 477 (9th Cir. 1969) (“[T]he party who asserts the illegality of the contract bears the burden of proof on that point.”); Colburn Fam. Found. v. Chabad’s Child of Chernobyl, 739 F. Supp. 2d 614, 618 (S.D.N.Y 2010) (“The party seeking to void a contract bears the burden of proving that the contract violates public policy.”).

25 than a stockholders agreement, we requested supplemental briefing and asked the

parties to “[i]dentify the challenged provisions of the Moelis stockholders agreement

that are within the power of the corporation to adopt so long as the method of

adoption is not prohibited by the DGCL.”61

In response, Moelis asserted, among other things, that each of the challenged

provisions “could have been lawfully implemented through the certificate of

incorporation under § 102(b)(1) and § 141(a) of the DGCL.” 62 The plaintiff

countered with an array of reasons why the provisions might operate inequitably

under certain circumstances. But the plaintiff failed to identify any mandatory

provision of the DGCL or other Delaware law that would stand in the way of the

adoption of the challenged provisions by charter amendment or other method.

Consequently, we conclude that the plaintiff has not carried its burden of

establishing that the challenged provisions are void. We thus conclude that, to the

extent that they are at odds with § 141(a), they are voidable, not void. Hence, the

plaintiff’s claim that the provisions are facially invalid is subject to equitable

defenses, including laches.

61 Letter from Clerk to Counsel Requesting Suppl. Briefing, Aug. 5, 2025, D.I. 37. 62 Suppl. Opening Br. at 1.

26 C

We turn next to the Court of Chancery’s determination that, “[a]ssuming

laches could apply, the plaintiff did not wait too long to sue.”63 As we mentioned

before, in determining whether a plaintiff has delayed unreasonably in bringing an

equitable claim, our courts consult the statutory limitations period for bringing an

analogous legal claim. According to Moelis, the analogous statutory limitations

period is found at 10 Del. C. § 8106, under which covered actions must be brought

within three years “from the accruing of the cause of such action[.]” The plaintiff

does not argue otherwise. Instead, the plaintiff argues that the challenged provisions

did not “accrue” in 2014 when the challenged provisions were adopted. If the claim

accrued in 2014, there would be little doubt that the plaintiff’s delay in filing suit

was unreasonable. The plaintiff avoided that unhappy result by persuading the Court

of Chancery that it should not view the adoption of the challenged provisions in 2014

as the point in time when the plaintiff’s claim arose. Instead, the plaintiff

successfully argued below that the court should apply what is known as the

“continuing wrong” method for determining when its cause of action accrued.

A cause of action accrues—and, thus, the statute of limitations begins to run—

upon the commission of the wrongful act giving rise to the cause of action.64 Moelis

63 Moelis I, 310 A.3d at 992. 64 ISN Software Corp. v. Richards, Layton & Finger, P.A., 226 A.3d 727, 732–33 (Del. 2020); see also Walmart Stores, Inc. v. AIG Life Ins. Co., 820 A.2d 312, 319 (Del. 2004).

27 contends that, because the plaintiff’s claims attack the facial validity of the

stockholders agreement and its grant of contractual control rights that conflict with

§ 141(a) of the DGCL, the allegedly wrongful act giving rise to those claims was the

execution of the stockholders agreement in April 2014. Under this view, the

plaintiff’s complaint—filed nine years later—was untimely.

The plaintiff countered that the stockholders agreement resulted in “the

ongoing management of the corporation in an unlawful manner.”65 Citing the Court

of Chancery’s opinion in Lebanon County Employees’ Retirement Fund v. Collis,66

the plaintiff urged the court to conceive this state of affairs “as a continuing wrong

for which ‘the limitations period does not begin to run, until the continuing wrong

ceases’ or, alternatively, ‘as a sequence of wrongful acts, each of which gives rise to

a separate limitations period.’”67 The Court of Chancery agreed with the plaintiff

and determined in consequence that the plaintiff had not delayed unreasonably in

bringing this action.

Like the plaintiff, the Court of Chancery relied on its discussion of accrual

principles in Collis. In that case, the court identified three methods our courts have

used to determine when claims for breach of fiduciary duty accrue. In its opinion

65 App. to Opening Br. at A1751. 66 287 A.3d 1160 (Del. Ch. 2022). 67 App. to Opening Br. at A1133 (quoting Collis, 287 A.3d at 1179).

28 here, the court labeled those methods as the “discrete act” method, the “continuing

wrong” method, and the “separate accrual” method. In Collis, the court recognized

that “[t]he discrete act method applies in the vast majority of cases[]” and that,

correspondingly, the other two methods apply “more rarely.”68 For various reasons,

in this case the court rejected the usual approach in favor of its application of the

more rarely applied “continuing wrong” method. Our task is to discern whether this

choice was appropriate.

The Court of Chancery observed—accurately, in our view—that “[t]he

discrete act method applies when a claim arises at a distinct point in time and is

effectively complete as of that date, even if it has ongoing effects or implications.”69

The plaintiff’s claim in this case appears to fit neatly within this framework. The

Company entered into the challenged stockholders agreement in 2014 and, later that

year, the plaintiff acquired its Class A common stock in the Company. These are

distinct points in time. To be sure, the plaintiff alleges that the Moelis board’s entry

into the stockholders agreement exceeded its statutory authority and clashed with §

141(a), thereby begetting an ongoing statutory violation. But this suggests nothing

68 Collis, 287 A.3d at 1178. See also TRW Inc. v. Andrews, 534 U.S. 19, 37 (2001) (Scalia, J. concurring) (observing that the statement that a statute of limitations begins to run when the right of action is complete is “unquestionably the traditional rule”). 69 Moelis I, 310 A.3d at 994.

29 more than that the purportedly unlawful act—the execution of the stockholders

agreement—has ongoing effects or implications.

The Court of Chancery saw it differently; for it, the existence of the

stockholders agreement constitutes an ongoing statutory violation. The court viewed

the essence of the plaintiff’s claim to be that “the on-going existence of the

Challenged Provisions violates § 141(a) . . . [such that] [e]very moment that the

Company’s board operates under the constraints of the Challenged Provisions

interferes with the directors’ authority.”70 This, in the court’s eyes, weighed in favor

of employing either the continuing-wrong method or the separate-accrual method to

determine when the plaintiff’s claims accrued. This move loosed the plaintiff’s

claims from the bonds of what otherwise appeared to be a case-ending time bar. Our

review of case law from this jurisdiction and generally accepted claim-accrual

principles persuades us that the Court of Chancery erred on this point.

We begin our critique of the Court of Chancery’s accrual analysis with a

review of a trio of Court of Chancery opinions that apply a more defensible approach

to claim accrual under circumstances similar to those in this case. After that, we

explain why the cases upon which the Court of Chancery and the plaintiff have relied

are either distinguishable or unpersuasive.

70 Id. at 996.

30 In Kahn v. Seaboard Corp.,71 the Court of Chancery addressed a statute-of-

limitations defense in a derivative action in which the plaintiff alleged that the

defendants used their control over the corporation to require the corporation to enter

into numerous transactions with one of the defendants (Seaboard Flour Corporation)

to its benefit and the corporation’s detriment. The contract underlying the

transactions was a ten-year charter entered into in 1986, which required the

corporation to pay management fees and other costs to Seaboard Flour in the years

ahead. The fees were paid in 1986 and 1987, but the plaintiff did not sue until 1990,

outside § 8106’s three-year statute of limitations. When the defendants moved to

dismiss the complaint, the plaintiff resisted, contending that “the wrongs allegedly

arising from the 1986 time charter [were] continuing wrongs that are not barred by

applicable limitation provisions in any event.”72

Chancellor Allen rejected the plaintiff’s continuing-wrong theory in clear terms: The facts alleged, if they constitute a wrong, do not, in my opinion, constitute a continuing wrong for purposes of analyzing a limitations bar. The wrong attempted to be alleged is the use of control over Seaboard to require it to enter into a contract that was detrimental to it and beneficial, indirectly, to the defendants. Any such wrong occurred at the time that enforceable legal rights against Seaboard were created. Suit could have been brought immediately thereafter to rescind the contract and for nominal damages which are traditionally available in

71 625 A.2d 269 (Del. Ch. 1993). 72 Id. at 270–271.

31 contract actions. Complete and adequate relief, if justified, could be shaped immediately or at any point thereafter.73 The court noted further that, unlike the typical continuing-wrong claim, “the

only liability matter to be litigated involves defendants’ 1986 actions in authorizing

the creation of these contract rights and liabilities.” 74 Put differently, the

corporation’s performance under the contract was not a continuing wrong, even if

the manner in which the contract was created might have been wrongful.

Here, the Court of Chancery chose not to follow this reasoning despite its

seeming applicability to the accrual issue before it. The court distinguished Kahn

and other similar cases, 75 observing that they “involve as-applied fiduciary duty

challenges to the decision to enter into the contract [][,] and [n]one involved statutory

challenges and assertions of ongoing illegality.” 76 The court did not address,

however, the gravamen of the plaintiff’s claim, which focuses more on the manner

in which the challenged provisions were adopted—that is, by contract rather than by

charter, preferred stock designations, or other permitted device—than on any

wrongful acts committed by the defendant within the three-year limitations period.

Nor did the court grapple with the fact that complete and adequate relief was

73 Id. at 271. 74 Id. 75 HUMC Holdco, LLC v. MPT of Hoboken TRS, LLC, 2022 WL 3010640 (Del. Ch. July 29, 2022); In re Sirius XM S’holder Litig., 2013 WL 5411268 (Del. Ch. Sept. 27, 2013); Kahn v. Seaboard Corp., 625 A.2d 269 (Del. Ch. 1993); Tchrs.’ Ret. Sys. Of La. v. Aidinoff, 900 A.2d 654 (Del. Ch. 2006). 76 Moelis I, 310 A.3d at 998.

32 available to the plaintiff during the three years following the execution of the

stockholders agreement.

The Court of Chancery was equally unpersuaded by Moelis’s reliance on

Kraft v. WisdomTree Investments, Inc.,77 a 2016 Court of Chancery decision in a

declaratory judgment action in which the plaintiff alleged that a stock issuance from

15 years earlier was void for failing to comply with § 152 of the DGCL. Chancellor

Bouchard applied § 8106’s three-year statute of limitations period “by analogy” and

dismissed the plaintiff’s claim, noting that the three-year limitations period “begins

to run from the time of the wrongful act,”78 which took place when the stock was,

according to the complaint, wrongfully issued 12 years before suit was filed. Here,

the Court of Chancery found Kraft unpersuasive because the Kraft defendants cited

cases about voidable acts and, after Kraft was decided, more recent precedent,

including XRI II, clarified that equitable defenses such as laches “cannot validate

void acts.”79 In light of our conclusion above that the court erroneously categorized

the challenged provisions as void, instead of voidable, the court’s rationale for

sidestepping Kraft loses whatever force it may otherwise have had.

77 145 A.3d 969 (Del. Ch. 2016). 78 Id. at 989. 79 Moelis I, 310 A.3d at 999 (citing XRI II, 304 A.3d at 916).

33 Which brings us to Kerns v. Dukes, 80 a 2004 Court of Chancery opinion,

which neither the parties nor the court cited in this case. In Kerns, the plaintiffs filed

an action challenging Sussex County’s expansion of a sanitary sewer system. The

plaintiffs alleged that the County’s action circumvented the requirements of 9 Del.

C. Ch. 65 governing sanitary and water districts and thereby violated the procedural

and substantive due-process rights of Sussex County residents. The complaint

alleged due-process violations under both the United States and Delaware

constitutions and under 42 U.S.C. § 1983 and § 1988 when the County created the

sewer district by resolution in March 1990. The plaintiffs also brought a claim based

on the County’s alleged Title 9 violation. Although the Sussex County Council

adopted the resolution establishing the sewer district in 1990, it did not begin mailing

capitalization fee bills and complete construction of the first two phases of the

district until 1995. The plaintiff filed suit in the federal district court on March 4,

1996.81

80 2004 WL 766529 (Del. Ch. Apr. 2, 2004). 81 The Kerns case in federal court was dismissed on federal-state comity and federal subject-matter jurisdiction grounds. See Kerns v. Dukes, 944 F. Supp. 1214, 1216 (D. Del. 1996). On appeal to the United States Court of Appeals for the Third Circuit, that court certified a question of law to this Court concerning the jurisdiction of Delaware’s trial courts to hear the case. Kerns v. Dukes, 707 A.2d 363, 365 (Del. 1998), overruled in part by Scion Breckenridge Managing Member, LLC v. ASB Allegiance Real Estate Fund, 68 A.3d 665 (Del. 2013). We determined that the Court of Chancery had subject-matter jurisdiction encompassing the plaintiff’s claims. Kerns, 707 A.2d at 365. Following our decision, the Court of Appeals for the Third Circuit affirmed the dismissal of the case in federal court, and the plaintiffs brought their case anew in the Court of Chancery. See Kerns v. Dukes, 153 F.3d 96, 98 (3d Cir. 1998).

34 The County moved to dismiss, arguing that the plaintiffs’ civil rights claims

were barred by the two-year statute of limitations found in 10 Del. C. § 8119. In

considering the County’s motion, the court identified “[t]he critical issue for

purposes of the application of the statute of limitations”:82 whether the plaintiffs’

injury accrued when the County passed the resolution “expanding” the sewer district

in March 1990 or not until the residents were assessed costs in July 1995.

The plaintiffs sought to defeat the County’s motion by arguing that the

County’s creation of and assessment for the expanded sewer district were continuing

wrongs. The Court of Chancery made short work of that argument:

Not surprisingly, Plaintiffs seek to save their cause of action by arguing that the creation of and assessments for the WRE were continuing wrongs. If there is a continuing wrong, the cause of action is timely so long as the last act evidencing the continuing wrong falls within the limitations period. That is, the cause of action does not accrue until the last act of the continuing wrong. Generally, all the elements of a cause of action must be present before the cause of action will accrue. However, where suit can be brought immediately and complete and adequate relief is available, a cause of action cannot be tolled as a continuing violation. The only element missing from Plaintiffs’ cause of action at the time the Resolution passed was significant money damages giving Plaintiffs an incentive to bring their action. Injunctive relief, however, was available to prevent or reduce any damages. The [existence of the sewer district] is not a continuing wrong. The wrong, if any, was the Sussex County Council’s adoption of the Resolution to create the [sewer district] on March 22, 1990, and its failure to classify it as a new district and hold an election six months thereafter.

82 Kerns, 2004 WL 766529, at *4.

35 On their face, Plaintiffs’ civil rights claims are time barred.83

In reaching this conclusion, the court relied on Kahn and an opinion of the

Third Circuit Court of Appeals, Cowell v. Palmer Township, 84 a § 1983 action

alleging that a township’s imposition of two municipal liens violated the Takings

Clause and the Due Process Clause of the United States Constitution, as well as

various state laws. The liens were imposed in 1992 and 1993, but the plaintiffs did

not file their complaint until 1999. Conceding that the applicable statute of

limitations for their § 1983 claims was two years, the plaintiffs argued that the

continuing-violations doctrine should apply to toll the limitations period “because

the defendants engaged in a ‘continuing campaign of affirmative acts’ that interfered

with their substantive due process rights.”85 The Third Circuit Court of Appeals

rejected the plaintiffs’ argument, explaining—relevant to our analysis here—that

“[a] continuing violation is occasioned by continual unlawful acts, not continual ill

effects from an original violation.”86

In our view, the three Court of Chancery opinions discussed above point in a

decidedly different direction than the one taken by the Court of Chancery here on

the issue of when the plaintiff’s cause of action accrued. We turn next to an

83 Id. at *4–5. 84 263 F.3d 286 (3d Cir. 2001). 85 Id. at 292 (citation omitted). 86 Id. at 293 (quoting Ocean Acres Ltd. v. Dare Cnty. Bd. of Health, 707 F.2d 103, 106 (4th Cir. 1983)).

36 examination of the court’s reasons for taking the path it did, starting with the earlier

Court of Chancery decisions it relied upon, followed by the policy concerns the court

identified as weighing in favor of its accrual analysis.

The cases the Court of Chancery cited in support of its application of the

continuing-wrong doctrine are less than compelling. For instance, it does not appear

as though the court in Abercrombie v. Davies87 was confronted with a laches defense.

And in Politan Capital Management, LP v. Masimo Corp., 88 a bench ruling

announced contemporaneously with this case, the court’s laches analysis was

conducted based on the allegations in the complaint at the motion to dismiss stage.

As the Politan court noted, laches is “‘not ordinarily well-suited for treatment’ on a

motion to dismiss”89 because the court may only dismiss the complaint if, based on

the facts alleged in the complaint, “it is not possible that [the claim] could be

untimely.”90 Put another way, the Politan court was faithfully applying our guidance

in Reid that “[u]nless it is clear from the face of the complaint that an affirmative

defense exists and the plaintiff can prove no set of facts to avoid it, dismissal of the

complaint based upon an affirmative defense is inappropriate.”91 Additionally, the

87 123 A.2d 893 (Del. Ch. 1956). 88 C.A. No. 2022-0948-NAC (Del. Ch. Feb. 3, 2023) (TRANSCRIPT). 89 Id. at 186 (quoting Reid, 970 A.2d at 183). 90 Id. 91 Reid, 970 A.2d at 183–84.

37 complaint in Politan alleged that the challenged agreement—in that case an

employment agreement containing a provision that was alleged to be ultra vires or

corporate waste, claims the court deemed reasonably conceivable—had been

amended twice since its inception, and, according to the court, it was reasonably

conceivable that these amendments could have “made the provision even more

troubling.”92 Although the Politan court did consider the agreement’s continued

existence to be relevant to its laches analysis and suggest that the application of an

alternative accrual doctrine might be warranted, the opinion’s appropriate reluctance

to dismiss a claim on the grounds of an affirmative defense under Court of Chancery

Rule 12(b)(6) limits its persuasive value.

Finally, the laches analysis in both this case and in Politan relied on In re

Ebix, Inc. Stockholder Litigation.93 In that case, the court held that a challenge to

the adoption of a corporate contract that the plaintiffs alleged was an unreasonable

anti-takeover device was barred by laches. It did, however, allow the plaintiffs to

pursue their breach-of-fiduciary duty claim based on the defendant’s ongoing

improper maintenance of the contract as an anti-takeover device. The opinion makes

no mention, however, of the continuing-wrong doctrine, the separate-accrual

method, or any other measure for determining when the plaintiffs’ cause of action

92 Politan, C.A. No. 2022-0948-NAC, at 188. 93 2014 WL 3696655 (Del. Ch. July 24, 2014).

38 accrued beyond the statement that “[t]his claim is timely because the alleged injury

is ongoing.”94 The authority supporting the Ebix court’s conclusion was a single

case: this Court’s opinion in Moran v. Household International, Inc.95 At issue in

Moran was the validity of the adoption of a stockholder rights plan. This Court

determined that the adoption of the plan was protected by the business judgment rule

but noted that

[w]hile we conclude for present purposes that the Household Directors are protected by the business judgment rule, that does not end the matter. The ultimate response to an actual takeover bid must be judged by the Directors’ actions at that time, and nothing we say here relieves them of their basic fundamental duties to the corporation and its stockholders. Their use of the Plan will be evaluated when and if the issue arises.96

This language, in our view, stands only for the proposition that where board action

is properly taken, as was the case in Moran, or where a challenge to that board action

is otherwise unavailable, later as-applied challenges are possible and those causes of

action may accrue separately based on subsequent board action. Moran did not

address the doctrine of laches or the claim-accrual principles at issue here.

In short, on the issue we are now addressing, Abercrombie, Politan, and Ebix

provide an insufficient counterweight to the accrual principles enunciated in Kahn,

Kraft, and Kerns.

94 Id. at *11. 95 500 A.2d 1346 (Del. 1985). 96 Id. at 1357 (emphasis added) (internal citations omitted).

39 D

Although we have concluded that the challenged provisions are voidable,

permitting Moelis to raise the equitable defense of laches, and that the plaintiff’s

claim accrued in 2014, these conclusions do not complete our analysis. We must

also evaluate whether Moelis would be prejudiced were it forced to defend this

lawsuit.

Under the principles identified earlier, 97 the plaintiff has presumptively

delayed unreasonably in bringing its claim against Moelis by filing it well outside

the analogous limitations period of § 8106. Typically, after the analogous statute of

limitations has run, “defendants are entitled to repose and are exposed to prejudice

as a matter of law by a suit by a late-filing plaintiff who had a fair opportunity to file

within the limitations period.” 98 The Court of Chancery did not consider this

presumption. The court concluded instead that, even if this case had been filed after

an unreasonable delay, Moelis could not suffer prejudice if required to defend this

case because the facts are undisputed and thus there has been no “loss of evidence

or faded memories.”99 Although the defendant raising an affirmative defense bears

97 See supra Section III.A. 98 Sirius XM, 2013 WL 5411268, at *4. See also Stone & Paper Invs., LLC v. Blanch, 2021 WL 3240373, at *33 (Del. Ch. July 30, 2021), aff’d, 312 A.3d 1155 (Del. 2024), and aff’d sub nom, Skinner v. Stone & Paper Invs., LLC, 319 A.3d 270 (Del. 2024); Kraft, 145 A.3d at 979 (“The Court also may presume prejudice if the claim is brought after the analogous limitations period has expired.”). 99 Moelis I, 310 A.3d at 1000.

40 the burden of satisfying each element of that defense,100 it does not follow that, to

invoke the doctrine of laches, a defendant must in all cases show that its defense of

the claim at issue would be hampered by loss of evidence, faded memories, or some

substantive change in the situation of the parties or property at issue.

It is an established rule that, “[u]nder ordinary circumstances, equitable claims

‘will not be stayed for laches before, and will be stayed after, the time fixed by the

analogous statute of limitations at law.’”101 Under this rule, “the Court will afford

significant weight to an analogous statute of limitation and will presumptively bar

an action filed after the limitations period.”102 The Court of Chancery’s assertion

that the presence of a complete record precludes a laches defense long after the

analogous limitations period has run clashed with this rule.

This is not to say that the presumption that an action is barred by laches if it

is filed after the analogous statute of limitations has elapsed is irrebuttable. Such an

inflexible rule would be at odds with the very nature of equitable defenses, our

precedent addressing “unusual conditions or extraordinary circumstances” 103 that

might justify setting aside the analogous statute of limitations in a laches analysis,

100 Hudak v. Procek, 806 A.2d 140, 154 (Del. 2002). 101 2 Wolfe & Pittinger § 15.07[d] (quoting Reid, 970 A.2d at 183). 102 Id. (quoting Kraft, 145 A.3d at 979) (internal quotation marks omitted). 103 Levey, 76 A.3d at 771 (quoting IAC/InterActiveCorp. v. O’Brien, 26 A.3d 174, 178 (Del. 2011)).

41 and our precedent addressing the various tolling doctrines. 104 But the equally

inflexible standard applied by the Court of Chancery in this case runs counter to the

maxim that “[e]quity aids the vigilant, not those who slumber on their rights.”105

Our law does not permit the maintenance of lawsuits where the plaintiff has no

excuse for delay merely because the status quo of the parties or property involved

has stayed the same and an adequate evidentiary record is available.

On the facts of this case, we do not believe that setting aside the analogous

statute of limitations or declining to enforce the related presumption that Moelis

would suffer prejudice is warranted. The “unusual conditions and extraordinary

circumstances” discussed in our cases tend to focus on whether the plaintiff had been

pursuing the claim during the relevant limitations period and whether there were

extraneous factors such as a material change in the plaintiff’s personal or financial

circumstances or ongoing legal proceedings in other jurisdictions that prevented the

plaintiff from bringing suit within the limitations period.106 On this record, these

factors weigh against deviating from the analogous statute of limitations. Nothing

in the record suggests that the plaintiff had taken any action to pursue this claim

104 See 2 Wolfe & Pittinger § 15.07[e][2]–[4]. An irrebuttable presumption that an action filed beyond the limitations period is time-barred is also incompatible with the related notion that equity may dictate that the Court of Chancery bar a presumptively timely lawsuit filed within the analogous limitations period. See, e.g., Houseman v. Sagerman, 2015 WL 7307323, at *8 (Del. Ch. Nov. 19, 2015). 105 Reid, 970 A.2d at 182 (citation omitted). 106 IAC, 26 A.3d at 178.

42 during the limitations period. Nor does the record indicate any material change in

the plaintiff’s financial position, ongoing legal proceedings in other jurisdictions, or

the existence of any other proceedings between the parties that would render an

application of the analogous statute of limitations inequitable.

None of the tolling doctrines apply either.107 The plaintiff was indisputably

on notice of its rights before it purchased its Moelis stock because Moelis had

described its governance structure in detail in its IPO prospectus as well as in

numerous public filings subsequently required by federal securities law. For good

reason, there is no allegation in the complaint that Moelis acted affirmatively to

conceal the facts of its governance structure.

In the laches context, “[t]he length of delay is less important than the reasons

for it.”108 Here, there is no explanation for a total delay of around nine years—six

years past the analogous statute of limitations. That being the case, we see no reason

to depart from the analogous period set in § 8106 and associated presumption that

Moelis would suffer prejudice if forced to defend this lawsuit.

107 See 2 Wolfe & Pittinger § 15.07[e][2]–[4] (describing various tolling doctrines, all of which require that a plaintiff lack constructive knowledge of its claim). See also In re Tyson Foods, Inc., 919 A.2d 563, 585 (Del. Ch. 2007) (“[N]o theory will toll the statute beyond the point where the plaintiff was objectively aware, or should have been aware, of facts giving rise to the wrong.”). 108 IAC, 26 A.3d at 177 (citation omitted).

43 E

Finally, we take seriously the Court of Chancery’s concern that requiring a

plaintiff who mounts a facial challenge to a stockholders agreement that clashes with

a corporate board’s duties under § 141(a) to do so within three years of the execution

of the agreement will “insulate illegality from review.”109 But our decision today

does no such thing. As a general matter, such agreements are not immune from

facial challenges within the applicable limitations period. And as we have discussed,

under certain circumstances that are not present here, the applicable limitations

period may also yield to the demands of equity or be subject to tolling. Beyond that

period, as-applied challenges may be advanced after the period for bringing facial

challenges has expired. Indeed, Moelis has explicitly conceded, and we agree, that

“holding plaintiff’s claims of facial statutory invalidity to be time-barred does not

prevent Moelis stockholders from bringing as-applied claims against the companies

or its fiduciaries, based on specific circumstances that may arise in the future,

challenging the enforceability of the Stockholders Agreement in those

circumstances.”110

To summarize, the plaintiff’s claims for declaratory relief accrued in 2014.

The plaintiff’s lengthy delay in filing its complaint outside the analogous limitations

109 Moelis I, 310 A.3d at 996. 110 Opening Br. at 22 (emphasis in original). See also Moelis I, 310 A.3d at 998.

44 period was presumptively prejudicial, and the record does not support a finding that

this presumption has been rebutted. In consequence, the Court of Chancery’s denial

of Moelis’s motion for summary judgment was erroneous.111

For the reasons discussed above, we reverse the Court of Chancery’s

judgment as reflected in its February 12, 2024 Opinion Addressing Defendant’s

Motion for Summary Judgment on the Basis of Laches and Ripeness and vacate its

March 4, 2024 Order Implementing the Court’s Rulings on the Parties’ Cross-

Motions for Summary Judgment and its July 18, 2024 Order Granting Plaintiff’s

Motion for an Award of Attorneys’ Fees and Expenses.

111 Because we have concluded that the plaintiff’s complaint is barred by laches, we need not address the parties’ respective contentions—and offer no opinion—as to the facial validity of the challenged provisions of the stockholders agreement. And because our decision eliminates the purported corporate governance benefits upon which the Court of Chancery’s attorney fee award rests, we need not address Moelis’s challenge to that award.