In the latest installment of a long-running dispute, Vice Chancellor J. Travis Laster recently issued a memorandum opinion denying a motion to dismiss and granting a partial motion for summary judgment in expedited proceedings pursuant to Section 225 of the Delaware General Corporation Law in Hawk Investment Holdings v. Stream TV Networks, C.A. No. 2022-0930-JTL (Del. Ch. Nov. 29, 2022). As discussed below, one of the defendants’ primary challenges to the plaintiff’s claims was their argument that Hawk, a secured creditor of Stream TV, was not a real party in interest, and therefore was without standing to bring this action seeking court-confirmation of its actions (taken pursuant to a series of interrelated lending documents and pledge agreements) in voting the equity of Stream TV to elect a sole member to the board of directors of Stream TV’s subsidiary, Technowave Media, Inc. Stream TV also moved for dismissal pursuant to Delaware Court of Chancery Rule 12(b)(6), asserting several theories including disputing that the loan agreements with Hawk were valid or whether a default had occurred such that Hawk would have had the contractual right to vote the equity of Stream TV to elect a director to Technowave’s board. Hawk countered by arguing that such matters had been resolved against Stream TV in prior proceedings.

Proceedings under Section 225 seeking to obtain a ruling on the correct composition of a corporate board are considered summary in nature, and therefore early dispositive motions are typically disfavored. Here, however, the court recognized “the scope of the case would expand dramatically if the parties litigated the validity of the loan documents and the existence of defaults …” and set an early hearing on dispositive motions. The court’s ruling was issued just over a month after the initial filing of the litigation. This note focuses on the court’s discussion and rulings on the defendants’ arguments that Hawk was not a real party in interest, and therefore was without standing to prosecute this matter, and the court’s holding that “any party with statutory standing [pursuant to Section 225] can litigate the validity and exercise of voting rights, even if they are not the party that exercised or would benefit from a favorable determination.”