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Delaware Supreme Court Interprets Delaware's Escheat Statute Regarding Escheated Shares in Company

By Francis G. X. Pileggi, Esq.

A. W. Financial Services, S.A. v. Empire Resources, Inc., No. 55, 2009, (Del. Supr.,  Sept. 15, 2009), read opinion here. This Delaware Supreme Court decision addressed rather esoteric issues involving the Delaware Escheat Statute, so I will merely highlight in a short blurb two aspects that may have some passing interest to those who follow Delaware business litigation.

This case came to Delaware's High Court via certified questions, presented pursuant to Supreme Court Rule 41, from the U.S. District Court for the Southern District of New York. The suit was instigated when stock owned by the plaintiff escheated to the state, under ambiguous circumstances, but in any event prior to the applicable statutory period.

Among the four issues decided by the Court, the two I will cursorily underscore in this short blurb are:

1. Does the new three year period of dormancy in the amended Delaware escheat law at 12 Del. C. section 1198(9), apply retroactively in civil actions involving stocks that were escheated prior to June 30, 2008? Answer: No.
2. When are allegations sufficient to plead that a party did not act in "good faith"--and thus is not entitled to immunity--under section 1203(b) of Title 12 of the Delaware Code?     Answer: "Good faith" under 12 Del .C. section 1203(b) is an affirmative defense, the substantive elements of which (defined in 12 Del. C. section 1203(d)), must be pleaded and proved by the defendant that claims immunity.

The opinion in this case is 35 pages long and provides a thorough analysis to explain the rationale that supports the answers to the issues addressed, though I suspect a fuller treatment of the opinion would be of limited interest to regular readers of this blog.

 

 

Full post as published by Delaware Corporate and Commercial Litigation Blog on September 15, 2009 (boomark / email).