Tension Nothing New Between Del. Chancery, Supreme Court

The Delaware Supreme Court’s decision to publicly rebuke Delaware Court of Chancery Chancellor Leo E. Strine Jr. has reminded some court watchers of previous tension between the two institutions. Although the two courts have battled before, some say the Supreme Court’s criticism of Strine was more barbed than it has been in previous conflicts.

In a per curiam opinion issued earlier this month in Gatz Properties v. Auriga Capital, the Supreme Court sharply criticized Strine for using 11 pages of his 75-page post-trial opinion in the case to espouse his view that Delaware’s Limited Liability Company Act does impose default fiduciary duties upon an LLC’s managers and controllers when the LLC agreement is silent on such matters. Strine had concluded that under the statute, LLC managers have the same fiduciary duties as heads of traditional equity groups unless both parties specifically write in the LLC agreement that such duties do not apply. The Supreme Court affirmed Strine’s opinion in Gatz, but called his interpretation of the LLC Act an “issue that the trial court should not have reached or decided” and declared his opinion on the matter “as dictum without any precedential value.”