In late March (as discussed here), and as part of its effort to try to stem the flow of corporate departures from the state, the Delaware legislature enacted S.B. 21, which made a number of significant revisions to the state’s corporations code. As I noted in a prior post, a number of parties in lawsuits pending in the state’s courts have raised constitutionality challenges to S.B. 21. Late last week, a Vice Chancellor certified two questions to the state’s Supreme Court. Earlier this week, the Supreme Court agreed to take up the questions, apparently on a fast-track basis. The certification of the questions and the Supreme Court’s response ensure that the constitutionality questions will be quickly reviewed.

Background

S.B. 21 does a number of things, but as a general matter, the bill specifies safe harbor procedures for corporate transactions with conflicted controlling shareholders or conflicting directors and officers, and imposes restrictions on shareholder books and records inspection rights.

Claimants in a number of pending lawsuits have challenged S.B. 21’s constitutionality. Among the lawsuits in which these challenges have been raised is the Delaware Chancery Court action involving Clearway Energy. In that derivative lawsuit, a shareholder has challenged the fairness of an $117 million April 2024 asset purchase transaction between Clearway and its majority shareholder. The plaintiff in the Clearway action filed a motion to certify to the Delaware Supreme Court questions of constitutional law regarding S.B. 21. The motion was unopposed.

The Chancery Court Order

In a June 6, 2025, order (here), Vice Chancellor Lori Will granted the motion, certifying the constitutionality questions to the Delaware Supreme Court. In granting the motion, VC Will, citing the relevant procedural rule, stated that there “is an important and urgent reason for an immediate determination” of the questions. She added that certification is warranted “in these unique circumstances” because “Delaware courts, corporations, litigants, and transaction planners alike will benefit from the Supreme Court resolving the questions posed.” She said that she believed “the benefits outweigh the attendant costs.”

These are the questions that VC Will certified to the Supreme Court:

  1. Does Section 1 of Senate Bill 21, codified a 8 Del C. Section 144 – eliminating the Court of Chancery’s ability to award “equitable relief” or “damages” where the Safe Harbor Provisions are satisfied – violate the Delaware Constitution of 1897 by purporting to divest the Court of Chancery of its equitable jurisdiction?
  2. Does Section 3 of Senate Bill 21 – applying the Safe Harbor Provisions to plenary breach of fiduciary claims arising from acts or transactions that occurred before the date that Senate Bill 21 was enacted – violate the Delaware Constitution of 1897 by purporting to eliminate causes of action that had already accrued or vested?

The Supreme Court’s Order

On June 11, 2025, the Delaware Supreme Court entered an order accepting the certified questions. A copy of the order can be found here. In accepting the questions, the Supreme Court, in an order signed by Chief Justice Collins J. Seitz, Jr. for a unanimous court, said that it agreed with the Chancery Court and found that there are “important and urgent reasons for an immediate determination of the questions.

Discussion

According to Law360 (here), similar or related constitutionality questions have been raised in at least four other pending Delaware cases; those cases apparently have all now been stayed while the Supreme Court considers the questions in the Clearway Energy case.

VC Will and the Supreme Court both emphasized the importance of these constitutionality questions. Indeed, the importance of the issues raised is underscored by the fact that Delaware Governor Matt Meyer has sought to intervene in the Clearview Energy action (as well as others of the cases raising the constitutional challenges to S.B. 21); Law360 reports that the Governor’s motion has been granted. Counsel acting on the Governor’s behalf can be expected to submit briefs in the Supreme Court proceedings. Meyer not only signed S.B. 21 into law but actively supported its passage, so he can be expected to defend the statute’s passage.

The Supreme Court proceedings will be interested to watch. The statute was enacted in an effort by the state’s political and legal leaders in an effort to address what they perceived as increased numbers of corporate departures from Delaware in favor of other jurisdictions, including in particular Nevada and Texas. It will be interested to see the extent to which these kinds of concerns play into the Court’s consideration of the certified questions.

In its order accepting the certified questions, the Supreme Court emphasized that there are “urgent reasons” for “immediate determination,” which seems to reflect the Court’s intent to fast track its consideration of the questions. We may not have to wait long to learn the answers to the Chancery Court’s questions.  

It is interesting to note that there are already at least five cases in which these constitutionality issues have been raised. The fact that these issues are involved in a number of cases underscores the fact that the Delaware legislature’s recent revisions to the state’s corporations code could have a significant impact on litigation in the state. The Supreme Court’s determination of the questions could not only affect whether many of these cases will go forward in the state, but could also have a huge impact on corporate litigation generally in the state.

Special thanks to the loyal reader who sent me a copy of VC Will’s Order.

Interview of The D&O Diary Author: In March, I sat for an interview (in Paris!) with Arturo Luna of Generali. Arturo runs the D&O Training Hub. Earlier this week, Arturo posted an excerpt from the interview on LinkedIn. In the excerpt, I discuss the origins and early days of The D&O Diary. Some readers of this blog may find the excerpt to be interesting. The excerpt can be found here.