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Tuesday
Oct312017

Corporation’s Motion for Reargument Denied for Failure to Show Court Misapprehended Case

In Nguyen v. View Inc., No. 11138-VCS, 2017 BL 258186 (Del. Ch. July 26, 2017), the Court of Chancery of Delaware denied View, Inc.’s (“View”) motion for reargument.  In an earlier decision, the court  had concluded that Paul Nguyen (“Nguyen”) alleged sufficient facts to support a reasonable inference that Series B Financing (“Financing”) completed by View was void. 2017 WL 2439074 (Del. Ch. June 6, 2017.  The court denied the motion for reargument, finding that View had failed to identify any overlooked decision or principle that would have affected the outcome.   

According to the allegations, View pursued a round of Financing in 2009.  Nguyen, then the majority shareholder, initially consented to the Financing as consideration for settling various claims brought against View, but then timely exercised revocation option in the settlement agreement. View, however, closed the Financing prior to the expiration of the revocation option and contested Nguyen’s right to revoke his consent.  An arbitrator found the revocation valid and the closing of the Financing void and invalid. View then took steps to ratify the Financing and various charter amendments. Nguyen filed a complaint alleging View’s Financing was improper and sought a declaration of invalidity. View asserted that the actions had been ratified.  See DGCL 204. 

DGCL permits the ratification of “defective corporate” acts.  DGCL 204. The phrase included transactions “within the power of a corporation”.  Id.  The court, however, rejected View’s argument that the close of Financing was a defective corporate act.  Instead, the court characterized the action as unauthorized since Nguyen had revoked his consent prior to the closing.  As a result, the company lacked the power to act.  Id. (“Section 204 makes clear that the defective corporate acts that a corporation purports to ratify must be within the corporation's power a’t the time such act was purportedly taken.’”). 

View moved for reargument on the grounds that the court misapplied applicable law.  The court will deny a motion for reargument “unless the Court has overlooked a decision or principle of law that would have a controlling effect or the Court has misapprehended the law or the facts so that the outcome of the decision would be affected.” Stein v. Orloff, 1985 WL 21136, at *2 (Del. Ch. Sept. 26,1985).

View argued the court misapprehended Section 204.  The “power to act” was not limited to a corporation’s ability to act “at the time of the defective corporate act.”  Instead, the right to ratify applied to any “type of act that corporations are authorized to take”.  The court, however, found the Chancery had previously considered, and rejected this argument.

View also argued the Chancery inappropriately carved out “rejected” acts from acts that were invalid due to a “failure of authorization.” The court found View repeatedly made this argument and it was explicitly addressed in the Chancery’s opinion, therefore it was not a proper ground for reargument.

Because View failed to identify any law or facts the court misapprehended or failed to consider, the court denied the motion for reargument.

The primary materials for this case may be found on the DU Corporate Governance website.

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