The Delaware Court of Chancery has cleared the way for trial in an investor challenge to a deal that handed control of medical device company Halt Medical Inc. to a private equity firm in 2014.

Vice Chancellor Sam Glasscock III denied competing motions for summary judgment from American Capital Ltd. and a group of shareholders managed by Halt's founder Edward F. Calesa on Wednesday, saying that important questions of fact still needed to be decided in the nearly four-year-old case.

“Because I find that the issues for which judgment is sought are either factually contested or would benefit from development at trial, the motions are denied,” Glasscock said in a brief letter opinion addressed to attorneys from both sides.

The ruling followed Glasscock's memorandum opinion in February 2016, which denied American Capital's bid to escape the lawsuit and touched off nearly a year of discovery. In that ruling, Glasscock found reason to believe the Bethesda, Maryland-based private equity firm was exercising control of Halt at the time of a disputed merger, despite owning just a 26 percent stake in the company. By the time the deal closed, American Capital's equity interest in Halt jumped from 26 percent to 66 percent, according to court documents.

In a 29-page ruling, Glasscock said it was reasonably conceivable that at least four of the seven Halt board members were either interested in the transaction or lacked the ability to exercise independent business, barring dismissal in the early stages of litigation.

In its motion for summary judgment, the plaintiffs argued the entire fairness standard of review should apply to the case, saying that American Capital had used Halt's debts to force the board to enter the merger under duress while promoting its own interests. A majority of the directors, they argued, were beholden to American Capital and could not be considered independent or disinterested in the transaction, which unfairly diluted the stockholders' interest in the company.

Glasscock, however, said American Capital's ability to influence board decisions derived at least in part from its contractual rights, and the standard of review would ultimately depend on the facts produced at trial.

“The extent to which [American Capital] exerted control in a way that must imply fiduciary duties, or exerted control over a majority of directors, requires an intensely factual analysis,” he wrote.

“I note that record evidence exists indicating that Calesa, at least, considered it the board's responsibility to prevent [American Capital] from becoming a controller at the time the transaction was negotiated. Consequently, a final determination of the standard of review is appropriate on a post-trial record.”

American Capital, meanwhile, said it was protected by the equitable defenses of waiver, acquiescence and estoppel because Calesa had negotiated the deal, in which the plaintiffs had signed waivers in connection with their consents.

But in his letter opinion, Glasscock credited assertions from the plaintiffs that American Capital had withheld material information and used its supposed controller status in such a way that prevented a finding on summary judgment that they had freely waived their right to challenge the transaction.

“Accordingly, this issue remains for decision after trial,” he said.

A date for the trial has not yet been set.

Attorneys from both sides were not immediately available to comment on Thursday.

Thaddeus J. Weaver, Joseph H. Jacovini and Thomas S. Biemer of Dilworth Paxson are representing the plaintiff shareholders.

The defendants are represented by Gregory V. Varallo, Robert J. Stearn Jr., Richard P. Rollo, Robert L. Burns and Sarah A. Clark of Richards, Layton & Finger.

The case is captioned Calesa Associates v. American Capital.