IN THE SUPREME COURT OF THE STATE OF DELAWARE
ROBERT A. DAVIDOW and § HOWARD MARKS, § § No. 464, 2024 Plaintiffs Below, § Appellants, § Court Below—Court of Chancery § of the State of Delaware v. § § C.A. No. 2019-0150 DOV SEIDMAN, LEE FELDMAN, § and MATS LEDERHAUSEN, § § Defendants Below, § Appellees. §
Submitted: November 12, 2024 Decided: December 19, 2024
Before SEITZ, Chief Justice; LEGROW and GRIFFITHS, Justices.
ORDER
Upon consideration of the notice of interlocutory appeal, the supplemental
notice, and the exhibits attached thereto, it appears to the Court that:
(1) This interlocutory appeal arises from complications in consummation
of a class action settlement. In 2019, Robert A. Davidow, a stockholder of LRN
Corporation, filed a class action complaint alleging breaches of fiduciary duty by
LRN directors Dov Seidman, Lee Feldman, and Mats Lederhausen (“the
Defendants”) in connection with a 2017 tender offer. Another LRN stockholder,
Howard Marks, intervened in 2020. After mediation in May 2022, the parties
executed a settlement term sheet in November 2022 and filed a settlement stipulation in May 2023. At the September 7, 2023 settlement hearing, the Court of Chancery
ruled that Davidow and Marks (“the Original Plaintiffs”) were inadequate class
representatives because Davidow had engaged in spoliation of evidence and Marks
had published false pleadings and then used his representative status to negotiate the
release of a personal defamation action filed against him (“the Adequacy Ruling”).
(2) On September 13, 2023, the Original Plaintiffs moved for enlargement
of the time to file an application for certification of an interlocutory appeal while
they evaluated whether a new class member could become a class representative.
The court enlarged the time to ten business days after the court declined to (i) grant
a motion to join a new lead plaintiff, (ii) certify a new class representative, (iii)
certify a class, or (iv) approve the settlement, if a class was certified, whichever date
was later.
(3) Class members Kevin Boylan, Stephen Paluszek, and Marc Rapaport
(“the New Plaintiffs”) then moved to lift the stay in place since the parties had
pursued mediation and to intervene so that they could pursue certification as class
representatives, class certification, and approval of the settlement. The Defendants
opposed intervention as well as class certification and sought confirmation from the
court that they could make settlement offers to individual class members. On June
5, 2024, the court granted the New Plaintiffs’ motion and declined to consider the
Defendants’ request.
2 (4) On August 10, 2024, the Original Plaintiffs and the New Plaintiffs
moved to enforce the settlement stipulation and for issuance of a rule to show cause
based on the Defendants’ alleged breaches of the settlement stipulation. The
Defendants opposed the motion. On October 9, 2024, the court denied the motion
in a bench ruling (“Enforcement Ruling”).
(5) On October 21, 2024, the Original Plaintiffs filed an application for
certification of an interlocutory appeal from the Adequacy Ruling. The Original
Plaintiffs and New Plaintiffs filed an application for certification of an interlocutory
appeal from the Enforcement Ruling. The Defendants opposed both applications.
(6) On November 6, 2024, the Original Plaintiffs filed this interlocutory
appeal from the Adequacy Ruling. On November 12, 2024, the Court of Chancery
denied both applications for certification.
(7) In denying certification of the Adequacy Ruling, the Court of Chancery
first found that the fact-specific determination concerning whether the Original
Plaintiffs were adequacy class representatives was procedural and did not decide a
substantive legal right. The court next considered the Rule 42(b)(iii) criteria,
focusing on the criteria identified by the Original Plaintiffs as supporting
certification. As to Rule 42(b)(iii)(G) (review of the interlocutory order may
terminate the litigation), the court rejected the Original Plaintiffs’ contention that
review of the Adequacy Ruling would terminate the litigation. The court found that
3 it would still have to consider whether the other requirements of class certification
had been satisfied, noting that it had questioned numerosity and commonality at the
September 7, 2023 hearing. The court would also have to decide whether the
settlement was fair, including the release of the defamation action against Marks.
(8) Turning to Rule 42(b)(iii)(H) (review of the interlocutory order may
serve considerations of justice), the court acknowledged the risk to innocent class
members if the settlement payment and the efficiencies of a class structure were lost.
But the court recognized that the Defendants had previously expressed their intent
to make the same pro rata settlement offer each class member (except Marks) and
concluded that the Original Plaintiffs had not shown that review of the Adequacy
Ruling would serve considerations of justice. After the court denied the applications
for certification, the Defendants notified the court that they did not presently intend
to make a settlement offer to any of the class members.
(9) Initially, we note that that this interlocutory appeal appears to be
untimely. Rule 42(d)(i) requires the appellant to file a notice of appeal from an
interlocutory order “within 30 days after the entry of the order from which the appeal
is sought to be taken.”1 The Court of Chancery ruled that the Original Plaintiffs
were inadequate class representatives on September 7, 2023, but the Original
1 Super. Ct. R. 42(d)(i). See also Supr. Ct. R. 6(a)(i) (requiring that a notice of appeal be filed within 30 days after entry upon the docket of the judgment or order from which the appeal is taken). 4 Plaintiffs did not file their notice of interlocutory appeal from this ruling until
November 6, 2024.
(10) The Original Plaintiffs state in their notice of appeal that no order
implementing the Adequacy Ruling was entered, but the Court of Chancery did not
direct the parties to submit a form of order for the Adequacy Ruling. In addition,
the Original Plaintiffs recognized that September 7, 2023 was the relevant date for
purposes of Rule 42 when they moved for enlargement of the ten-day time period to
file their application for certification on September 13, 2023.2 Rule 42 allows the
trial court to enlarge the ten-day time period for filing an application for certification,
but does not authorize the trial court to extend the thirty-day time period to file an
interlocutory appeal in this Court.3
(11) Assuming that this interlocutory appeal is timely, the Court will not
accept it. Applications for interlocutory review are addressed to the sound discretion
2 Id. 42(c)(i) (providing that the application for certification shall be filed in the trial court “within 10 days of the entry of the order from which the appeal is sought or such longer time as the trial in court, in its discretion, may order for good cause shown”). 3 Id. 42(d)(i) (“The notice of appeal may be filed at any time after the filing of the application for certification in the trial court, except that it shall be the obligation of appellant to serve and file in this Court a notice of appeal of an interlocutory order within 30 days after the entry of the order from which the appeal is sought to be taken.”).
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IN THE SUPREME COURT OF THE STATE OF DELAWARE
ROBERT A. DAVIDOW and § HOWARD MARKS, § § No. 464, 2024 Plaintiffs Below, § Appellants, § Court Below—Court of Chancery § of the State of Delaware v. § § C.A. No. 2019-0150 DOV SEIDMAN, LEE FELDMAN, § and MATS LEDERHAUSEN, § § Defendants Below, § Appellees. §
Submitted: November 12, 2024 Decided: December 19, 2024
Before SEITZ, Chief Justice; LEGROW and GRIFFITHS, Justices.
ORDER
Upon consideration of the notice of interlocutory appeal, the supplemental
notice, and the exhibits attached thereto, it appears to the Court that:
(1) This interlocutory appeal arises from complications in consummation
of a class action settlement. In 2019, Robert A. Davidow, a stockholder of LRN
Corporation, filed a class action complaint alleging breaches of fiduciary duty by
LRN directors Dov Seidman, Lee Feldman, and Mats Lederhausen (“the
Defendants”) in connection with a 2017 tender offer. Another LRN stockholder,
Howard Marks, intervened in 2020. After mediation in May 2022, the parties
executed a settlement term sheet in November 2022 and filed a settlement stipulation in May 2023. At the September 7, 2023 settlement hearing, the Court of Chancery
ruled that Davidow and Marks (“the Original Plaintiffs”) were inadequate class
representatives because Davidow had engaged in spoliation of evidence and Marks
had published false pleadings and then used his representative status to negotiate the
release of a personal defamation action filed against him (“the Adequacy Ruling”).
(2) On September 13, 2023, the Original Plaintiffs moved for enlargement
of the time to file an application for certification of an interlocutory appeal while
they evaluated whether a new class member could become a class representative.
The court enlarged the time to ten business days after the court declined to (i) grant
a motion to join a new lead plaintiff, (ii) certify a new class representative, (iii)
certify a class, or (iv) approve the settlement, if a class was certified, whichever date
was later.
(3) Class members Kevin Boylan, Stephen Paluszek, and Marc Rapaport
(“the New Plaintiffs”) then moved to lift the stay in place since the parties had
pursued mediation and to intervene so that they could pursue certification as class
representatives, class certification, and approval of the settlement. The Defendants
opposed intervention as well as class certification and sought confirmation from the
court that they could make settlement offers to individual class members. On June
5, 2024, the court granted the New Plaintiffs’ motion and declined to consider the
Defendants’ request.
2 (4) On August 10, 2024, the Original Plaintiffs and the New Plaintiffs
moved to enforce the settlement stipulation and for issuance of a rule to show cause
based on the Defendants’ alleged breaches of the settlement stipulation. The
Defendants opposed the motion. On October 9, 2024, the court denied the motion
in a bench ruling (“Enforcement Ruling”).
(5) On October 21, 2024, the Original Plaintiffs filed an application for
certification of an interlocutory appeal from the Adequacy Ruling. The Original
Plaintiffs and New Plaintiffs filed an application for certification of an interlocutory
appeal from the Enforcement Ruling. The Defendants opposed both applications.
(6) On November 6, 2024, the Original Plaintiffs filed this interlocutory
appeal from the Adequacy Ruling. On November 12, 2024, the Court of Chancery
denied both applications for certification.
(7) In denying certification of the Adequacy Ruling, the Court of Chancery
first found that the fact-specific determination concerning whether the Original
Plaintiffs were adequacy class representatives was procedural and did not decide a
substantive legal right. The court next considered the Rule 42(b)(iii) criteria,
focusing on the criteria identified by the Original Plaintiffs as supporting
certification. As to Rule 42(b)(iii)(G) (review of the interlocutory order may
terminate the litigation), the court rejected the Original Plaintiffs’ contention that
review of the Adequacy Ruling would terminate the litigation. The court found that
3 it would still have to consider whether the other requirements of class certification
had been satisfied, noting that it had questioned numerosity and commonality at the
September 7, 2023 hearing. The court would also have to decide whether the
settlement was fair, including the release of the defamation action against Marks.
(8) Turning to Rule 42(b)(iii)(H) (review of the interlocutory order may
serve considerations of justice), the court acknowledged the risk to innocent class
members if the settlement payment and the efficiencies of a class structure were lost.
But the court recognized that the Defendants had previously expressed their intent
to make the same pro rata settlement offer each class member (except Marks) and
concluded that the Original Plaintiffs had not shown that review of the Adequacy
Ruling would serve considerations of justice. After the court denied the applications
for certification, the Defendants notified the court that they did not presently intend
to make a settlement offer to any of the class members.
(9) Initially, we note that that this interlocutory appeal appears to be
untimely. Rule 42(d)(i) requires the appellant to file a notice of appeal from an
interlocutory order “within 30 days after the entry of the order from which the appeal
is sought to be taken.”1 The Court of Chancery ruled that the Original Plaintiffs
were inadequate class representatives on September 7, 2023, but the Original
1 Super. Ct. R. 42(d)(i). See also Supr. Ct. R. 6(a)(i) (requiring that a notice of appeal be filed within 30 days after entry upon the docket of the judgment or order from which the appeal is taken). 4 Plaintiffs did not file their notice of interlocutory appeal from this ruling until
November 6, 2024.
(10) The Original Plaintiffs state in their notice of appeal that no order
implementing the Adequacy Ruling was entered, but the Court of Chancery did not
direct the parties to submit a form of order for the Adequacy Ruling. In addition,
the Original Plaintiffs recognized that September 7, 2023 was the relevant date for
purposes of Rule 42 when they moved for enlargement of the ten-day time period to
file their application for certification on September 13, 2023.2 Rule 42 allows the
trial court to enlarge the ten-day time period for filing an application for certification,
but does not authorize the trial court to extend the thirty-day time period to file an
interlocutory appeal in this Court.3
(11) Assuming that this interlocutory appeal is timely, the Court will not
accept it. Applications for interlocutory review are addressed to the sound discretion
2 Id. 42(c)(i) (providing that the application for certification shall be filed in the trial court “within 10 days of the entry of the order from which the appeal is sought or such longer time as the trial in court, in its discretion, may order for good cause shown”). 3 Id. 42(d)(i) (“The notice of appeal may be filed at any time after the filing of the application for certification in the trial court, except that it shall be the obligation of appellant to serve and file in this Court a notice of appeal of an interlocutory order within 30 days after the entry of the order from which the appeal is sought to be taken.”). See also San Del Packing Co. v. Garrison, 1999 WL 591845, at *1 (Del. July 12, 1999) (recognizing that the ten-day time period to file application for certification can be enlarged, but stating that the 30-day time period to appeal “is jurisdictional and may not be enlarged by this Court absent unusual circumstances which are not attributable to the appellant or the appellant’s counsel”); Arvida/JMB Partners, L.P., 1997 WL 537284, at *1 (Del. Aug. 19, 1997) (“This thirty day time period [to file an interlocutory appeal] is jurisdictional and may not be enlarged by the Court absent unusual circumstances that are not attributable to appellant or appellant’s counsel.”). 5 of this Court.4 In the exercise of its discretion and giving due weight to the Court of
Chancery’s analysis, the Court has concluded that the application for interlocutory
review does not meet the strict standards for certification under Rule 42(b). None
of the Rule 42(b)(iii) criteria weigh in favor of certification. Exceptional
circumstances that would merit interlocutory review of the Court of Chancery’s
decision do not exist in this case,5 and the potential benefits of interlocutory review
do not outweigh the inefficiency, disruption, and probable costs caused by an
interlocutory appeal.6
NOW, THEREFORE, IT IS ORDERED that this interlocutory appeal is
REFUSED.
BY THE COURT:
/s/ N. Christopher Griffiths Justice
4 Supr. Ct. R. 42(d)(v). 5 Id. R. 42(b)(ii). 6 Id. R. 42(b)(iiii). 6