Newark Property Association v. State of Delaware

Opinion

COURT OF CHANCERY OF THE STATE OF DELAWARE LORI W. WILL LEONARD L. WILLIAMS JUSTICE CENTER VICE CHANCELLOR 500 N. KING STREET, SUITE 11400 WILMINGTON, DELAWARE 19801-3734

November 4, 2025

Ashley R. Altschuler, Esquire Max B. Walton, Esquire Kevin M. Regan, Esquire Michael J. Hoffman, Esquire Anna F. Martin, Esquire Matthew F. Boyer, Esquire McDermott Will & Schulte LLP Grace E. Best, Esquire 1000 N. West Street, Suite 1400 Connolly Gallagher LLP Wilmington, Delaware 19801 267 East Main Street Newark, Delaware 19711

Nicholas J. Brannick, Esquire Ballard Spahr LLP 919 N. Market Street, 11th Floor Wilmington, Delaware 19801

Michael P. Stafford, Esquire Mary F. Dugan, Esquire Michael A. Laukaitis, II, Esquire Alpa V. Bhatia, Esquire Young Conaway Stargatt & Taylor, LLP 1000 N. King Street Wilmington, Delaware 19801

RE: Newark Property Association et al. v. State of Delaware et al., C.A. No. 2025-1031-LWW

Dear Counsel:

On October 30, I issued an opinion upholding the lawfulness of House Bill

242. New Castle County plans to promptly implement the statute. The plaintiffs, a C.A. No. 2025-1031-LWW November 4, 2025 Page 2 of 14

group of property and business associations, now ask that I enjoin the County from

doing so while they appeal my decision. The defendants, which include the State of

Delaware, New Castle County officials, and various school districts, argue against

any pause. As explained below, the plaintiffs’ request is denied.

I. BACKGROUND

The background of this action is detailed in my October 30, 2025 post-trial

opinion.1 At a high level, the case is a challenge to House Bill 242 (HB242), a

temporary tax law passed by the Delaware General Assembly on August 12, 2025.

HB242 was enacted in response to public outcry over property tax increases that

resulted from a separate, court-ordered county-wide property reassessment. The law

permitted New Castle County school districts—for the 2025-2026 tax year only—to

create a split-rate tax system. School districts set a higher tax rate on non-residential

properties (such as apartment buildings and hotels) and a lower rate on residential

properties, which shifted a portion of the tax burden off homeowners. The plaintiffs,

1 The defendants are the State of Delaware; Governor Matt Meyer; Marcus Henry, New Castle County Executive; David Del Grande, Acting Chief Financial Officer of New Castle County; and several school boards: Appoquinimink School District Board of Education, Brandywine School District Board of Education, Christina School District Board of Education, Colonial School District Board of Education, New Castle County Vocational Technical School District Board of Education, and Red Clay Consolidated School District Board of Education. C.A. No. 2025-1031-LWW November 4, 2025 Page 3 of 14

four associations representing non-residential property owners,2 sued to block

HB242, arguing that it was unconstitutional and illegal on six grounds.

After an expedited trial on a paper record, I found in favor of the defendants.

I ordered the County to include with its tax bills a notice of any property

reclassification and a description of the policy for disputing reclassifications.

Otherwise, I denied the plaintiffs’ requests for declaratory and injunctive relief.3

Later that day, the plaintiffs moved for a stay pending appeal.4 They seek to

prevent enforcement of my judgment until their expedited appeal to the Delaware

Supreme Court is resolved.5 The practical effect of the motion, if granted, would be

to prevent the defendants from issuing revised school district property tax bills.6 The

plaintiffs also ask that I waive the requirement to post a bond, which would otherwise

2 The plaintiffs are Newark Property Association, Delaware Apartment Association, First State Manufactured Housing Association, and Delaware Hotel & Lodging Association. 3 Post-Trial Op. (Dkt. 112) (“Op.”) 58; see also Final Order and Entry of J. (Dkt. 114). 4 Pls.’ Mot. for a Stay Pending Appeal (Dkt. 115) (“Mot.”). 5 Mot. ¶¶ 14, 33; see Newark Prop. Ass’n v. State, No. 449, 2025 (Del. Nov. 1, 2025) (ORDER). 6 See Mot. ¶¶ 2, 29. C.A. No. 2025-1031-LWW November 4, 2025 Page 4 of 14

cover any losses the defendants suffer from a delay in tax collection.7 The

defendants opposed the motion on November 3.8

II. ANALYSIS

The court’s authority to grant a stay pending appeal is governed by several

provisions. Court of Chancery Rule 62(d) states that “[s]tays pending appeal and

stay and cost bonds shall be governed by” Delaware Supreme Court rules and Article

IV, Section 24 of the Delaware Constitution.9 The relevant Supreme Court rule,

Rule 32(a), requires that a “motion for stay . . . be filed in the trial court in the first

instance[,]” giving this court wide latitude to decide the motion.10 Article IV,

Section 24 establishes a key condition, stating that there “shall be no stay of

proceedings in the court below unless the appellant or plaintiff in error shall give

sufficient security to be approved by the court below or by a judge of the Supreme

Court.”11

7 Id. ¶¶ 34-35. 8 Defs.’ Opp’n to Pls.’ Mot. for a Stay Pending Appeal (Dkt. 199) (“Opp’n”). 9 Ct. Ch. R. 62(d). 10 Supr. Ct. R. 32(a). 11 Del. Const. art. IV, § 24. C.A. No. 2025-1031-LWW November 4, 2025 Page 5 of 14

When reviewing a request for a stay pending appeal, this court is guided by

the four Kirpat factors: (1) “a preliminary assessment of likelihood of success on the

merits of the appeal”; (2) “whether the petitioner will suffer irreparable injury if the

stay is not granted”; (3) “whether any other interested party will suffer substantial

harm if the stay is granted”; and (4) “whether the public interest will be harmed if

the stay is granted.”12 No single factor is dispositive.13 The plaintiffs “bea[r] the

burden of showing [such relief] is warranted.”14 Here, the analysis is “particularly

complex” because the requested stay is effectively an injunction, and the “‘entry of

an injunction pending an appeal’ that would mimic . . . the request for relief already

rejected ‘is an unusual occurrence.’”15

The first Kirpat factor—likelihood of success—is not interpreted literally. As

the Delaware Supreme Court has recognized, a strict reading would “lead most

probably to consistent denials of stay motions . . . because the trial court would be

12 Kirpat, Inc. v. Del. Alcoholic Beverage Control Comm’n, 741 A.2d 356, 357 (Del. 1998). 13 Id. at 358. 14 In re AMC Ent. Hldgs., Inc. S’holder Litig., 2023 WL 5165606, at *42 (Del. Ch. Aug. 11, 2023); see Frankino v. Gleason, 1999 WL 1063071, at *1-2 (Del. Ch. Nov. 12, 1999). 15 Rosenbaum v. CytoDyn Inc., 2021 WL 4890876, at *1 (Del. Ch. Oct. 20, 2021) (citation omitted). C.A. No. 2025-1031-LWW November 4, 2025 Page 6 of 14

required to first confess error in its ruling.”16 The other three factors are typically

assessed before the court turns to whether the movant has presented a “fair ground

for review by our Supreme Court.”17 I take that approach here, and begin with the

second factor.

A. Irreparable Injury (Factor 2)

The second Kirpat factor requires the plaintiffs to demonstrate they will suffer

“irreparable injury” absent a stay.18 To meet this standard, the alleged harm must be

imminent and concrete. It cannot “adequately be compensated by a monetary award

alone.”19

The plaintiffs argue that they meet this standard. They claim that issuing new,

split-rate tax bills will “drastically increase [their] members’ costs, trigger[] the

acceleration of loan repayment obligations,” and divert “funds away from

operations.”20 They fear that these increased costs will cause their members to

“permanently lose new business opportunities” and even “lose their properties to

16 Kirpat, 741 A.2d at 358. 17 CytoDyn, 2021 WL 4890876, at *1. 18 Kirpat, 741 A.2d at 357. 19 Bali v. Christiana Care Health Servs., Inc., 1999 WL 413303, at *4-5 (Del. Ch. June 16, 1999). 20 Mot. ¶ 30. C.A. No. 2025-1031-LWW November 4, 2025 Page 7 of 14

foreclosure.”21 Such harms, they contend, could not be “unscramble[d]” if they

prevail on appeal.22

These arguments are unpersuasive for two reasons.

First, the harm is not imminent. The Delaware Supreme Court is scheduled

to hear oral argument on the appeal on November 10.23 The defendants have

confirmed the earliest new tax bills could be issued is November 18.24 Thus, no

adverse effects from the issuance of the bills will occur before the appeal is heard.

And as the defendants note, no one will “lose their property to foreclosure in less

than two weeks.”25 Foreclosure proceedings “normally take months, not days,” by

which point a final decision on the appeal will likely have been rendered.26

21 Id. 22 Id. ¶ 29 (citing Police & Fire Ret. Sys. of Detroit v. Bernal, 2009 WL 1873144, at *2 (Del. Ch. June 26, 2009)). 23 Newark Prop. Ass’n v. State, No. 449, 2025 (Del. Nov. 1, 2025) (ORDER). 24 Opp’n ¶ 17. 25 Id. ¶ 4. 26 Id. ¶ 17; see Lechliter v. Del. Dep’t of Nat. Res. & Envt’l Control, 2013 WL 5718888, at *3 (Del. Ch. Oct. 22, 2013) (“Harm is not . . . imminent where . . . it is months from arising.”). C.A. No. 2025-1031-LWW November 4, 2025 Page 8 of 14

Second, the alleged adverse effects are indefinite. Vague claims of potential

future injuries cannot, by themselves, establish irreparable harm.27 Here, the effects

of increased property taxes for one year are highly individualized. Beyond lost

dollars—remediable by damages—the downstream effects of higher taxes involve a

confluence of intervening factors, including the plaintiffs’ members’ own financial

situations and business decisions.28

Because the plaintiffs have not shown they will suffer harm that is both

imminent and non-speculative, the second Kirpat factor is unmet.

B. Substantial Harm and the Public Interest (Factors 3 and 4)

The third and fourth factors of the Kirpat analysis ask whether “any other

interested party will suffer substantial harm” and “whether the public interest will

27 See Lechliter, 2013 WL 5718888, at *3 (explaining that “attenuated and speculative” harms cannot show “irreparable harm to the [p]laintiff’s interests” (citing Alpha Builders, Inc. v. Sullivan, 2004 WL 5383570, at *5 (Del. Ch. Nov. 5, 2004))). Contra Kirpat, 741 A.2d at 358 (“It is undisputed on this record that, if a stay is not granted, then Kirpat will suffer the seizure of its inventory, loss of its customer base, and loss of its employees.”). 28 See, e.g., Dkt. 2 (declarations from plaintiffs). C.A. No. 2025-1031-LWW November 4, 2025 Page 9 of 14

be harmed” if the stay is granted.29 In this case, the factors are intertwined. They

weigh against granting the motion.

The plaintiffs argue that the public interest favors a stay because “substantial

public confusion” would ensue if tax bills are issued now “only to have the Supreme

Court reverse that action later.”30 But the confusion the plaintiffs wish to avoid is

hypothetical. The injury a stay would inflict is immediate and substantial.

The “public” affected by this case includes over 200,000 taxpayers who have

already “faced uncertainty over whether they will receive new tax bills, when they

might receive those new tax bills, and whether they should pay their old tax bills.”31

This litigation has pushed the billing schedule to its limit.32 A stay would exacerbate

the problem.

A stay would also inflict significant financial harm on certain defendants. The

delayed bills are depriving the County and school districts of approximately $549

29 Kirpat, 741 A.2d at 357, 359. 30 Mot. ¶ 33. 31 Opp’n ¶ 18. 32 The General Assembly could choose to extend the payment deadline until after the appeal is resolved. But the General Assembly is a non-party in this suit. Whether it may take up an extension is both unknown and outside my purview. See id. ¶ 19. C.A. No. 2025-1031-LWW November 4, 2025 Page 10 of 14

million in revenue.33 Because those defendants earn interest on the funds they

collect, the delay is causing a loss of investment income that exceeds an estimated

$8 million over a 60-day period.34 This is not an abstract loss but a direct financial

blow to public entities on which residents and students rely.

The tangible financial harm to the defendants is heightened by the plaintiffs’

request to waive the bond requirement. The plaintiffs assert that they need not post

a bond because there is “no money judgment” and “no risk that [the d]efendants will

be harmed.”35 Not so. As explained, the defendants face a quantifiable financial

loss. Yet the plaintiffs ask to enjoin the collection of public funds while refusing to

post security for the multimillion-dollar losses the stay itself would inflict.36

The plaintiffs’ concern about public confusion from a potential reversal of my

decision—a concern mitigated by the Supreme Court’s expedited appeal schedule—

33 Id. ¶ 29. 34 Id. ¶ 30. This 60-day period “ru[ns] from entry of the [final order] until the County and School Districts might reasonably expect to collect the tax revenue suspended due to this litigation.” Id. ¶ 32. 35 Mot. ¶ 35. 36 See Fisk Ventures, LLC v. Segal, 2009 WL 1478490, at *2 (Del. Ch. May 15, 2009) (“The primary purpose of a bond is to protect the appellee from losing the benefit of the judgment through the delay or ultimate non-performance by appellant.”). C.A. No. 2025-1031-LWW November 4, 2025 Page 11 of 14

does not outweigh the harm a stay would impose on the defendants and County

residents. The public interest lies in resolving this uncertainty, not extending it.

C. Likelihood of Success on Appeal (Factor 1)

Having found that the second through fourth factors weigh against a stay, I

now address the first factor: likelihood of success on appeal. I must determine “as

objectively as possible”37 whether the appeal “presents a substantial question that is

a fair ground for litigation and . . . more deliberative investigation.”38

This standard may be met if the case involves a “novel issue” or “unsettled

areas of Delaware law.”39 Here, the plaintiffs have focused their appeal on two

issues: the Uniformity Clause (Count I) and revenue neutrality (Count V). Both

counts present novel questions that warrant appellate review.40

Count I concerns whether the Uniformity Clause prohibits the General

Assembly from classifying residential and non-residential property for purposes of

37 Wynnefield P’rs Small Cap Value L.P. v. Niagara Corp., 2006 WL 2521434, at *1 (Del. Ch. Aug. 9, 2006) (citation omitted). 38 Kirpat, 741 A.2d at 358 (quoting Wash. Metro. Area Transit Comm’n v. Holiday Tours, Inc., 559 F.2d 841, 844 (D.C. Cir. 1977)). 39 Huntington Way Assocs., LLC v. RRI Assocs. LLC, 2023 WL 5664115, at *3 (Del. Ch. Sept. 1, 2023) (citation omitted). 40 Counts I and V are the only two counts of six that the plaintiffs have appealed. See Mot. ¶¶ 17, 18, 24. C.A. No. 2025-1031-LWW November 4, 2025 Page 12 of 14

setting different tax rates.41 My conclusion that the classification was permissible

rested on established Delaware precedent holding that the test is the “reasonableness

of the classification” and that classifications will be disturbed only if “clearly

arbitrary.”42 But the Delaware Supreme Court has not spoken on this precise issue

of property classification.43 The plaintiffs argument, though I rejected it, raises a

constitutional question that is a “fair ground” for “more deliberative investigation.”44

Count V presents a novel question of statutory interpretation: whether the

reclassification of properties after the school boards set rates violated HB242’s

revenue-neutrality requirement.45 My ruling was based on the plain meaning of

“projected,” following settled principles of statutory interpretation. 46 But the

41 Id. ¶¶ 17-23. 42 See Op. 18-19 (citing, inter alia, Wilm. Med. Ctr., Inc. v. Bradford, 382 A.2d 1338, 1344 (Del. 1978) (stating that the test of constitutionality is “the reasonableness of the classification”), and Aetna Cas. & Sur. Co. v. Smith, 131 A.2d 168, 177-78 (Del. 1957) (stating that classifications drawn by the General Assembly will only be disturbed if “clearly arbitrary”)). 43 The Court of Chancery has endorsed the view that the “inherent differences” in the nature, character, or use of real property are “sufficient” to draw classifications between different property types under the Uniformity Clause. Phila., B. & W. R. Co. v. Mayor & Council of Wilm., 57 A.2d 759, 765-66 (Del. Ch. 1948). This proposition predates HB242. See Op. 6; see also Mot. ¶ 2. 44 Kirpat, 741 A.2d at 358. 45 Mot. ¶ 24. 46 Op. 55. C.A. No. 2025-1031-LWW November 4, 2025 Page 13 of 14

General Assembly enacted HB242 in August 2025, and my opinion is the first and

only judicial interpretation of the statute.47

Because both issues on appeal are novel and present substantial legal

questions, the first Kirpat factor favors a stay.

* * *

The Kirpat analysis requires the court to “balance all of the equities involved

in the case together.”48 The second through fourth factors favor the defendants; the

first factor supports the plaintiffs. Viewed collectively, they weigh decisively

against a stay.49 The relevant public interests—taxpayer certainty and County

financial stability—bolster that result.50

47 Id. at 6; see also Mot. ¶ 2. 48 Kirpat, 741 A.2d at 358 (Del. 1998). 49 See id. (stating that “[i]f . . . three factors strongly favor interim relief, then a court may exercise its discretion to reach an equitable resolution” and vice versa); see also Gleason, 1999 WL 1063071, at *2 (declining to stay a judgment because “three factors of the inquiry weigh against” the relief). 50 See State Ins. Dep’t v. Remco Ins., 1986 WL 3419, at *2 (Del. Ch. Mar. 18, 1968) (explaining that where the relief sought is non-monetary, the court must be “sensitive to the particularities of the various interests impacted by the judgment”). C.A. No. 2025-1031-LWW November 4, 2025 Page 14 of 14

III. CONCLUSION

For the above reasons, the plaintiffs cannot be relieved of the judgment against

them pending their appeal. The motion is denied. Because the motion fails, the

plaintiffs’ request to waive the bond requirement is moot.51

IT IS SO ORDERED.

Sincerely yours,

/s/ Lori W. Will

Lori W. Will Vice Chancellor

51 See Mot. ¶¶ 34-35; Opp’n ¶¶ 26-33.