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A Delaware Chancery Court judge Monday blocked a fast-track appeal of his decision last month to green light derivative claims for insider trading by the directors of Fitbit, stemming from the technology company's initial public offering in 2015.

In a 12-page order, Vice Chancellor Joseph R. Slights III stood by his Dec. 14 opinion, which found that two of Fitbit's outside directors could potentially face liability for suspicious stock sales made by venture capital funds under their control. According to the lawsuit, the transactions came after the board learned of possibly catastrophic problems with Fitbit's leading products, which accounted for about 80 percent of the company's revenue.

Slights' finding paved the way for a ruling that a majority of the board likely stood to personally benefit from allegedly improper stock sales ahead of the IPO and helped the plaintiffs to avoid early dismissal of their claims. At the time, Slights acknowledged that “no Delaware court” has considered whether to impose liability under the 1949 case Brophy v. Cities Service on directors for trades they didn't personally make, and he declined to craft a “hard and fast” rule.

The Fitbit directors argued in a Dec. 24 petition for interlocutory appeal that the opinion departed from a consistent line of Delaware cases and raised a novel issue of law. The maneuver, rarely granted in Delaware, would have sent the case directly to the state Supreme Court for review.

According to defense counsel from Morrison & Foerster and Young Conaway Stargatt & Taylor, Brophy claims must be premised on breaches by a fiduciary that worked “to his own profit.” But the trades in question, the lawyers said, were carried out by investment funds that were merely affiliated with Jonathan Callaghan and Steven Murray—and not the directors themselves. Nowhere in the complaint, they said, had the plaintiffs alleged that Callaghan and Murray had received any personal benefits.

“Holding that two directors who did not personally execute any trades are exposed to Brophy liability unsettles the bedrock corporate law principle that a corporation and its owners and directors are separate actors,” attorneys said in the brief.

Last week, lawyers representing the Fitbit investors argued that their clients were entitled at the pleading stage to an inference that Callaghan and Murray had profited from trades made by funds under their control and pointed to multiple allegations in the complaint that Callaghan and Murray had acted with the key element of scienter, or knowledge of their supposed wrongdoing.

On Monday, Slights said that the allegations would need to be fleshed out more in discovery. However, he stood behind the basic principle underlying his decision.

“I am satisfied that it is not particularly novel or controversial as a matter of Delaware law to declare that a fiduciary may not share inside information with a fund he controls so that the fund, in turn, can trade on that inside information as a means to avoid Brophy liability,” he wrote. “Surely defendants are not sponsoring this kind of end-run around insider trading liability.”

Slights also noted that he had gone “out of my way” in the original opinion to explain that he was not making a final determination on the merits of the case, but only providing the plaintiffs with the “liberal pleading stage inferences to which they are entitled.”

“The opinion does not decide a substantial issue of material importance that merits appellate review before a final judgment,” he said. “Specifically, it does not conflict with existing jurisprudence or involve a substantial issue of first impression. Although review of the appeal could terminate the litigation, this alone is insufficient to warrant certification of the appeal.”

Peter D. Andrews, a partner with Andrews & Springer who represented the plaintiffs, declined Monday to comment on the ruling, citing the pending nature of the case. An attorney for the directors did not immediately respond to a call requesting comment.

The plaintiffs are represented by Andrews & Springer in Wilmington, Kahn Swick & Foti in New Orleans, Schubert Jonckheer & Kolbe in San Francisco and Shapiro Haber & Urmy in Boston. The Wilmington firm Rosenthal, Monhait and Goddess is also acting as Delaware counsel in the case.

The Fitbit directors are represented by Morrison & Foerster in San Francisco and Young Conaway in Wilmington.