Delaware Supreme Court Reverses and Vacates Moelis Ruling on Time-Barred Claims
The Delaware Supreme Court has reversed and vacated a controversial ruling regarding Moelis & Associates, determining that claims challenging certain provisions in a stockholder agreement were time-barred under the doctrine of laches. The decision, issued en banc on January 20, 2026, effectively ends one chapter of the “DExit” saga, referring to the departures of Delaware-incorporated companies to other jurisdictions.
Background of the Case
The case stemmed from a dispute over provisions in a stockholder agreement between a public company and its founder. The Delaware Court of Chancery had previously ruled that these provisions were unenforceable under Section 141(a) of the Delaware General Corporation Law (DGCL). However, the Supreme Court did not address the validity of these provisions.
Key Findings of the Supreme Court
Instead, the Supreme Court focused on procedural grounds, holding that:
- The provisions were at most voidable, meaning they were subject to equitable defenses like laches.
- The plaintiff’s claim was time-barred because it fully accrued upon the adoption of the provisions nine years before the complaint was filed, exceeding the three-year limitations period under the “continuing-wrong doctrine.”
Legislative Response and Section 122(18)
The trial court’s initial decision sparked significant public backlash, prompting the Delaware General Assembly to adopt Section 122(18) of the DGCL. This section retroactively authorized corporate governance provisions in stockholder agreements entered into before August 1, 2024. However, the recent legislation did not affect litigation that was completed or pending before that date.
Implications of the Ruling
The Supreme Court’s decision avoids addressing the merits of the controversial trial court ruling, a matter already addressed by the Delaware General Assembly. The ruling underscores the importance of the laches doctrine in Delaware corporate law and provides clarity on the timing of accrual for claims challenging stockholder agreements.
Legal Representation
The article was authored by partners Colin Davis, Jonathan Fortney, Julia Lapitskaya, and Jason Mendro, of counsel Mark Mixon, Jr., and associate Russell Shapiro of Gibson Dunn.
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