The Delaware Supreme Court, in a decision affirming a ruling by Delaware Court of Chancery Chancellor Leo E. Strine Jr., scored the chancellor for unnecessarily pontificating on statutory law and inserting personal views into his decision.
In a per curiam opinion issued Wednesday in Gatz Properties v. Auriga Capital, the justices ruled that Strine correctly found that the defendant, William A. Gatz, breached his fiduciary and contract duties to an LLC, dubbed Peconic Bay LLC, which was formed to own a golf course on Long Island, N.Y. However, the court criticized Strine for taking a portion of his 75-page opinion to ruminate on whether Delaware’s Limited Liability Company Act imposes default fiduciary duties upon an LLC’s managers and controllers. Strine concluded that such duties are imposed by default unless both parties specifically write in the LLC agreement that such duties do not apply.
The Supreme Court called it “one issue that the trial court should have not reached or decided” and declared Strine’s opinion on the matter “as dictum without any precedential value.”
The court said Strine’s interpreting a Delaware statute was a “cause for concern” because it was not germane to the case at hand and the power to construe state legislation ultimately rests with the state Supreme Court. It said that Strine including his views on the LLC Act was “improvident and unnecessary.”
In particular, the court was concerned about Strine’s language when he wrote in the opinion, “a judicial eradication of the explicit overlay in the LLC Act could tend to erode our state’s credibility with investors in Delaware entities.”
“Such statements may be interpreted to suggest (hubristically) that once the Court of Chancery has decided an issue, and because practitioners rely on the court’s decisions, this court should not judicially ‘excise’ the Court of Chancery’s statutory interpretation, even if incorrect,” the high court said.
In addition, the high court rebuked Strine for inserting his personal worldviews into his opinion.
“The court’s excursus on this issue strayed beyond the proper purview and function of a judicial opinion,” the justices said.
“We remind Delaware judges that the obligation to write judicial opinions on the issues presented is not a license to use those opinions as a platform for which to propagate their individual worldviews on issues not presented,” the court continued. “A judge’s duty is to resolve the issues that the parties present in a clear and concise manner. To the extent Delaware judges wish to stray beyond those issues and, without making any definitive pronouncements, ruminate on what the proper direction of Delaware law should be, there are appropriate platforms such as law review articles, the classroom, continuing legal education presentations and keynote speeches.”
Read more about it in Friday’s Legal.