Harold Kraft v. Wisdomtree Investments, Inc.

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

HAROLD KRAFT as Trustee of the )
KRAFT FAMILY TRUST, )
)
Plaintiff, )
)
v. ) C.A. No. 10816-CB
)
WISDOMTREE INVESTMENTS, )
INC., a Delaware corporation, )
)
Defendant, )
)
and )
)
TRADEWORX, INC., a Delaware )
corporation, )
)
Nominal Defendant. )

OPINION

Date Submitted: May 5, 2016
Date Decided: August 3, 2016

Stephen B. Brauerman, Vanessa R. Tiradentes and Sara E. Bussiere, BAYARD,
P.A., Wilmington, Delaware; Attorneys for Plaintiff.

Martin S. Lessner and Lakshmi A. Muthu, YOUNG CONAWAY STARGATT &
TAYLOR, LLP, Wilmington, Delaware; Jordan D. Hershman and Michael D.
Blanchard, MORGAN, LEWIS & BOCKIUS LLP, Boston, Massachusetts;
Christopher M. Wasil, MORGAN, LEWIS & BOCKIUS LLP, Hartford,
Connecticut; Attorneys for Defendant.

Kurt M. Heyman, PROCTOR HEYMAN ENERIO LLP, Wilmington, Delaware;
Michael F. Cockson, Adam M. Nodler and Brad W. Engelsma, FAEGRE BAKER
DANIELS LLP, Minneapolis, Minnesota; Attorneys for Nominal Defendant.

BOUCHARD, C.
 In this case, a stockholder of Tradeworx, Inc. seeks a declaration that shares

issued to WisdomTree Investments, Inc. in 2000 are invalid because they were

issued in exchange for services to be provided in the future, which was disallowed

at the time under certain provisions of the Delaware General Corporation Law and

the Delaware Constitution. Those provisions have since been amended to permit

shares to be issued for that form of consideration.

WisdomTree has moved to dismiss the complaint. Its primary argument is

that plaintiff’s claim, which was filed almost fifteen years after the challenged

share issuance, is time-barred. More specifically, WisdomTree argues that

plaintiff’s claim for declaratory relief should be dismissed based on a strict

application of the three-year statute of limitations governing actions “based on a

statute” (10 Del. C. § 8106) or, in the alternative, based on the doctrine of laches

by applying this limitations period by analogy.

These seemingly routine questions are not so easily answered. As discussed

below, the mixture of equitable and legal matters falling within the subject matter

jurisdiction of the Court of Chancery complicates its application of time-bar

principles that originated in equity (laches) and at law (statutes of limitations). In

this opinion, after reviewing the case law in this area to provide a framework for

analysis, I conclude that plaintiff’s claim is barred under the doctrine of laches by

applying the statute of limitations by analogy.

1
I. BACKGROUND

Unless noted otherwise, the facts recited in this opinion are based on the

allegations of the Verified Complaint for Declaratory Judgment filed on March 20,

2015.

A. The Parties

Plaintiff Harold Kraft serves as trustee of the Kraft Family Trust dated

March 30, 2000, and brings this action in that capacity. The Kraft Family Trust

owns approximately 59,055 shares of Series D Convertible Preferred Stock and

1,180,000 shares of Series X Convertible Preferred Stock of Tradeworx, Inc.

(“Tradeworx”). For simplicity, this opinion refers to Mr. Kraft, as trustee, and the

Kraft Family Trust together as “Kraft.” Tradeworx, which is named as a nominal

defendant, is a Delaware corporation headquartered in New Jersey.

Defendant WisdomTree Investments, Inc. (“WisdomTree”), formerly known

as Individual Investor Group, Inc., is a Delaware corporation headquartered in

New York. For simplicity, this opinion refers to defendant at all times as

“WisdomTree” despite its previous name.

B. WisdomTree’s and Kraft’s Investments in Tradeworx

On May 4, 2000, WisdomTree and Tradeworx entered into a Stock Purchase

Agreement under which WisdomTree received 1,045,000 shares of Tradeworx

common stock in exchange for WisdomTree’s agreement to provide certain print

2
and online advertising services to Tradeworx over the following eight quarters,

valued at $1.8 million. These shares are evidenced by a stock certificate dated

May 4, 2000. Shortly after entering into the Stock Purchase Agreement,

WisdomTree publicly disclosed that it was suffering financial problems and sold or

discontinued certain print magazines in which it had agreed to provide advertising

for Tradeworx.

In 2013, WisdomTree made a demand to inspect the books and records of

Tradeworx and asserted that it had been conferred additional Tradeworx shares

through an anti-dilution provision in the Stock Purchase Agreement. The parties

were unable to agree on WisdomTree’s ownership interest in Tradeworx. The anti-

dilution provision and any shares that may have been issued under it are not at

issue in this case.

Kraft was not a stockholder in Tradeworx when WisdomTree and

Tradeworx entered the Stock Purchase Agreement in May 2000. Kraft acquired its

Tradeworx stock in November 2000 and January 2003.1 The complaint alleges

that “until recently” Kraft “was not aware that Tradeworx and WisdomTree

executed the Stock Purchase Agreement, and was not aware that WisdomTree

claimed to own a substantial majority of Tradeworx stock.”2 The complaint does

1
Compl. ¶ 19.
2
Compl. ¶ 20.

3
not specifically allege, however, that Kraft was unaware of WisdomTree’s original

share ownership when Kraft made its initial investments in Tradeworx, and the

record otherwise provides no indication one way or the other.

C. Procedural Posture

On March 20, 2015, Kraft filed this action against WisdomTree. The sole

relief sought is a request for a declaratory judgment that the Tradeworx shares

WisdomTree acquired through the Stock Purchase Agreement are void because

they were issued in exchange for future services, a practice that was prohibited at

the time under Article 9, Section 3 of the Delaware Constitution and Section 152 of

the Delaware General Corporation Law (the “DGCL”).3 Although Kraft names

Tradeworx as a nominal defendant, it brings its claim directly rather than

derivatively.

On April 14, 2015, WisdomTree filed a motion to dismiss the complaint

under Court of Chancery Rule 12(b)(6) for failure to state a claim for relief. On

3
Compl. ¶ 26. In 2000, Article 9, Section 3 of the Delaware Constitution stated: “No
corporation shall issue stock, except for money paid, labor done or personal property, or
real estate or leases thereof actually acquired by such corporation.” Del. Const. art. 9, § 3
(repealed 2004). Similarly, in 2000, Section 152 of the DGCL provided that
consideration for the issuance of stock must be “in the form of cash, services rendered,
personal property, real property, leases of real property or a combination thereof.” 8 Del.
C. § 152 (amended 2004). Today, Section 152 provides, in relevant part, as follows:
“The consideration . . . for subscriptions to, or the purchase of, the capital stock to be
issued by a corporation shall be paid in such form and in such manner as the board of
directors shall determine. The board of directors may authorize capital stock to be issued
for consideration consisting of cash, any tangible or intangible property or any benefit to
the corporation, or any combination thereof.”

4
April 15, 2015, nominal defendant Tradeworx filed an answer submitting itself to

the jurisdiction of the Court of Chancery but providing no other response to the

complaint. After the completion of briefing, oral argument on WisdomTree’s

motion to dismiss was heard on December 15, 2015.

On February 11, 2016, Tradeworx filed a motion for leave to amend its

answer by adding a cross-claim against WisdomTree. The proposed cross-claim

seeks a declaratory judgment that the shares Tradeworx purported to issue to

WisdomTree are either void or voidable. Argument on Tradeworx’s motion for

leave to amend was heard on May 5, 2016.

II. LEGAL ANALYSIS

A. Legal Standard

When considering a motion to dismiss under Court of Chancery Rule

12(b)(6), the Court will “accept all well-pleaded factual allegations in the

Complaint as true” and “deny the motion unless the plaintiff could not recover

under any reasonably conceivable set of circumstances susceptible of proof.”4

Under Court of Chancery Rule 15(a), leave to amend a complaint “shall be

freely given when justice so requires.”5 “A court will not grant a motion to amend,

4
Cent. Mortg. Co. v. Morgan Stanley Mortg. Capital Hldgs. LLC, 27 A.3d 531, 536 (Del.
2011).
5
Ct. Ch. R. 15(a).

5
however, if the amendment would be futile. An amendment is futile if it would not

survive a motion to dismiss under Court of Chancery Rule 12(b)(6).”6

B. The Parties’ Contentions

WisdomTree advances two primary lines of argument in support of its

motion to dismiss: (1) that the complaint is time-barred because it was filed almost

fifteen years after WisdomTree acquired its shares of Tradeworx, and (2) that

WisdomTree’s provision of advertising space to Tradeworx was a valid form of

consideration for the issuance of stock under Article 9, Section 3 of the Delaware

Constitution and Section 152 of the DGCL as those provisions existed in 2000

because the advertising space constituted “property” and was not a promise to

perform “future services.” Because the first issue is dispositive, I do not reach the

second issue.7

With respect to the first issue, WisdomTree argues that the complaint is

time-barred based on a strict application of a statute of limitations on the theory

that Kraft’s claim for declaratory relief based upon the interpretation of a statute

(DGCL § 152) and an analogous constitutional provision is a purely legal claim.

Alternatively, Wisdom Tree argues that even if Kraft sought an equitable remedy,

6
Cartanza v. LeBeau, 2006 WL 903541, at *2 (Del. Ch. Mar. 28, 2006, as revised, Apr.
3, 2006).
7
I also do not reach the question whether Kraft’s claim is derivative, which was first
raised in WisdomTree’s reply brief.

6
the statute of limitations would apply by analogy and bar the claim; and even if the

statute of limitations did not apply at all, the complaint would be barred by laches.

The application of statutes of limitations in the Court of Chancery to address

time-bar defenses has been the source of some confusion. Before analyzing

WisdomTree’s time-bar arguments and how they implicate the relevant statute of

limitations (10 Del. C. § 8601), I review the case law in this area to clarify the

framework for my analysis.

C. The Framework for Analyzing Whether a Claim Is Time-Barred

The Court of Chancery is a court of limited subject matter jurisdiction. It

can acquire subject matter jurisdiction in the first instance by three different

means: “(1) the invocation of an equitable right; (2) a request for an equitable

remedy when there is no adequate remedy at law; or (3) a statutory delegation of

subject matter jurisdiction.”8 A prime example of the third source of jurisdictional

authority is 8 Del. C. § 111, which provides the Court of Chancery with

nonexclusive jurisdiction to interpret, apply, enforce or determine the validity of

certificates of incorporation, bylaws, stock instruments, and other corporate

instruments.9 This provision gives the Court of Chancery jurisdiction over some

8
Duff v. Innovative Discovery LLC, 2012 WL 6096586, at *4 (Del. Ch. Dec. 7, 2012).
9
8 Del. C. § 111(b) (“Any civil action to interpret, apply or enforce any provision of this
title may be brought in the Court of Chancery.”).

7
subject matter that is not inherently equitable to take advantage of the Court’s

special corporate expertise.10 Another example is 8 Del. C. § 145(k), which vests

the Court of Chancery with exclusive jurisdiction to hear and determine

advancement and indemnification claims that previously were brought in the

Superior Court.11

The Court of Chancery also can obtain subject matter jurisdiction over

purely legal claims through its clean-up doctrine. That doctrine, also known as

ancillary jurisdiction, provides the Court of Chancery with jurisdiction to resolve

purely legal causes of action that are before it as part of the same controversy over

10
Donald J. Wolfe, Jr. & Michael A. Pittenger, Corporate and Commercial Practice in
the Delaware Court of Chancery § 2.02[d], at 2-18 (2014) (hereinafter Corporate and
Commercial Practice) (“The premise for the sweeping provision is plainly related more
to Chancery’s special corporate expertise than to traditional notions as to the appropriate
scope of equitable subject matter jurisdiction.”); see also Pot-Nets Coveside Homeowners
Ass’n v. Tunnell Cos., L.P., 2015 WL 3430089, at *3 (Del. Super. May 26, 2015)
(“Possibly the most prominent example [of legislative alterations to jurisdiction] lies in
the Court of Chancery’s jurisdiction over the Delaware General Corporation Law, which,
though encountering several potential equity-based issues, is statutory in nature, and
therefore would ordinarily fall within the court of law’s jurisdiction.”).
11
69 Del. Laws, c. 261 § 2 (June 27, 1994) (adding Section 145(k) to DGCL); see also
Perconti v. Thornton Oil Corp., 2002 WL 982419, at *4 n.24 (Del. Ch. May 3, 2002)
(“Until enactment of Section 145(k) in 1994, the Superior Court was frequently the
appropriate forum for an officer seeking reimbursement by virtue of his right to
indemnification because, by that point, his claim was for a liquidated sum and, thus,
remediable at law.”).

8
which the Court originally had subject matter jurisdiction in order to avoid

piecemeal litigation.12

Laches is an equitable doctrine “rooted in the maxim that equity aids the

vigilant, not those who slumber on their rights.”13 A finding of laches generally

requires the presence of three factors: the claimant’s knowledge of the claim,

unreasonable delay in bringing the claim, and resulting prejudice to the

defendant.14 A party guilty of laches will be prevented from enforcing a claim in

equity.15 As discussed below, a presumption of laches arises in certain contexts

when a plaintiff brings a claim outside of a relevant statute of limitations period.

Statutes of limitations exist at law and serve to bar claims brought after the

limitations period set forth in the statute has expired. Statutes of limitations

traditionally do not apply directly to actions in equity, although courts of equity

12
See Corporate and Commercial Practice § 2.04 at 2-78 to 2-80 (“[T]he Court of
Chancery’s authority to decide the entire controversy before it, including matters that
otherwise would not be part of the Court’s jurisdiction if standing alone, generally serves
to avoid piecemeal litigation . . . .”).
13
Whittington v. Dragon Gp., L.L.C., 991 A.2d 1, 8 (Del. 2009); see also Lehman Bros.
Hldgs. Inc. v. Spanish Broad. Sys., Inc., 2014 WL 718430, at *7 & n.43 (Del. Ch. Feb.
25, 2014) (noting that the maxim is a special form of the general principle that “he who
seeks equity must do equity”), aff’d, 105 A.3d 989 (Del. 2014) (TABLE).
14
Whittington, 991 A.2d at 8.
15
Gen. Video Corp. v. Kertesz, 2008 WL 5247120, at *30 (Del. Ch. Dec. 17, 2008).

9
may apply them by analogy in determining whether a plaintiff should be time-

barred under the equitable doctrine of laches.

The mixture of equitable and legal matters falling within the jurisdiction of

the Court of Chancery complicates its application of time-bar principles that

originated in equity and at law. The role of statutes of limitations in suits brought

in the Court of Chancery historically depended on the type of claim and type of

relief a plaintiff seeks. In an effort to provide clarity on this topic, I discuss below

three different contexts implicating statutory limitations periods. I consider first

the Court’s approach to purely legal matters brought in Chancery, then the

treatment of purely equitable matters, followed by cases in which the claim and the

requested relief constitute some combination of legal and equitable subject matter.

1. Legal Claims Seeking Legal Relief

Legal claims seeking legal relief—for instance, a breach of contract claim

requesting money damages—ordinarily would fall outside the jurisdiction of this

Court. But other sources, such as the equitable cleanup doctrine or DGCL § 111,

sometimes provide this Court with jurisdiction over such claims. In such a case,

would the statute of limitations apply strictly because the suit is purely legal in

nature, or would it only apply by analogy to the equitable doctrine of laches

because the claim is brought in the Court of Chancery?

10
 Our case law does not offer a clear answer. Some cases suggest that a legal

claim seeking only legal relief is subject to the statute of limitations, even if it is

brought in the Court of Chancery.16 Indemnification and advancement cases that

are contractual in nature but statutorily subject to this Court’s jurisdiction 17 are

notable examples. In Cochran v. Stifel Financial Corporation, then-Vice

Chancellor Strine considered which statute of limitations to apply to an

indemnification claim, but appeared to apply the statute of limitations analysis

strictly rather than by analogy, and made no mention of laches.18 The Supreme

16
See, e.g., Stifel Fin. Corp. v. Cochran, 809 A.2d 555, 559 (Del. 2002) (holding that
indemnification claims brought in Court of Chancery are contractual rights subject to the
statute of limitations defined in 10 Del. C. § 8106); Scharf v. Edgcomb Corp., 2004 WL
718923, at *6 n.18 (Del. Ch. Mar. 24, 2004) (noting that Stifel foreclosed the argument
that delay in filing indemnification claim should be judged under laches instead of statute
of limitations), rev’d on other grounds, 864 A.2d 909 (Del. 2004); Stevanov v. O’Connor,
2009 WL 1059640, at *7 (Del. Ch. Apr. 21, 2009) (comparing laches for equitable
claims, statutes of limitations for ancillary legal claims, and analogous statutes of
limitations for concurrent jurisdiction equitable claims) (“When exercising ancillary
jurisdiction over legal claims, however, this Court will apply the applicable statute of
limitations found at law.”); Corporate and Commercial Practice § 11.06[c] at 11-73
(2014) (“Moreover, the Court of Chancery may apply a statute of limitations in
connection with purely legal claims that are before the Court under its ancillary
jurisdiction.”).
17
8 Del. C. § 145(k) (“The Court of Chancery is hereby vested with exclusive
jurisdiction to hear and determine all actions for advancement of expenses or
indemnification brought under this section . . . .”).
18
Cochran v. Stifel Fin. Corp., 2000 WL 286722, at *5, *9 (Del. Ch. Mar. 8, 2000), aff’d
in part, rev’d in part on other grounds, 809 A.2d 555 (Del. 2002).

11
Court agreed, noting that “because indemnification is essentially a contractual

right, the three year statute of limitations is applicable to indemnification claims.” 19

This Court’s decision in Lehman Brothers supports this proposition from a

different angle.20 In that case, which fell within the Court’s subject matter

jurisdiction under DGCL § 111,21 the Court distinguished between legal and

equitable relief, noting that “a limitations period analogous to the statute of

limitations will presumptively bar equitable relief, and conclusively bar legal

relief.”22 The Court refused to apply the doctrine of laches to bar the claim of a

plaintiff who had filed a breach of contract claim for damages within the statutory

limitations period, but arguably had delayed unreasonably nonetheless. The Court

noted that the equitable maxim “he who seeks equity must do equity” does not

apply to plaintiffs seeking purely legal relief and thus that “a plaintiff who

unreasonably delays will not be barred from seeking legal relief if the action is

brought within the analogous limitations period.”23

19
Stifel, 809 A.2d at 559 (citing Scharf v. Edgcomb Corp., 1997 WL 762656, *5 (Del.
Ch. 1997)).
20
Lehman Bros., 2014 WL 718430 (Del. Ch. Feb. 25, 2014), aff’d, 105 A.3d 989 (Del.
2014) (TABLE).
21
Id. at *7 n.46.
22
Id. at *7.
23
Id. at *7-8.

12
 The Court in Lehman Brothers found this result was intuitive because “it

would make little sense for a plaintiff in the Court of Chancery, under the clean-up

doctrine, or, as here, by statute, to be placed in a worse position than if she had

filed in a Delaware court of law where laches would not bar suit.”24 This concept

is equally sensible in the reverse: a plaintiff vindicating a purely legal action in the

Court of Chancery as a result of ancillary jurisdiction or some other jurisdictional

source should not be placed in a potentially better position to seek to avoid a

statute of limitations than if she had filed in a Delaware court of law by invoking

the more flexible doctrine of laches.

This view has not been universally held. For instance, in O’Brien v.

IAC/Interactive Corporation, this Court declined to apply the statute of limitations

inflexibly to an indemnification claim despite its contractual nature. 25 In doing so,

24
Id. at *7. In its order affirming Lehman Brothers, the Supreme Court expressly
declined to take a view on the question whether the doctrine of laches should have
applied. Lehman Bros. Hldgs. Inc. v. Spanish Broad. Sys., Inc., 2014 WL 7010807, at *1
(Del. Dec. 11, 2014) (ORDER) (“In so affirming, however, we do not imply any
agreement or disagreement with the Court of Chancery’s determination that the doctrine
of laches itself did not bar Lehman from proceeding.”).
25
O’Brien v. IAC/Interactive Corp., 2009 WL 2490845, at *7-9 (Del. Ch. Aug. 14,
2009), aff’d, 26 A.3d 174 (Del. 2011); see also Acierno v. Goldstein, 2005 WL 3111993,
at *5 (Del. Ch. Nov. 16, 2005) (noting that for a “purely legal claim” brought under the
Court’s ancillary jurisdiction that fell outside of the statutory limitation period, the
claimants should not benefit from a full-fledged laches inquiry, but nonetheless opining
that they may still attempt to “bear the burden of proving that imposition of the legal
limitations period would be unjust in the circumstances of this case” rather than be
conclusively barred).

13
the Court noted defendant’s argument that the indemnification action was a legal

right seeking a legal remedy but declined to classify the claim either way, instead

concluding that the Court’s exclusive jurisdiction to hear indemnification actions

demonstrated a legislative intent to have them decided by a court of equity, and

that the claims were therefore “more appropriately examined under the doctrine of

laches, which guides this Court’s determinations of timeliness and serves the

independent purposes of equity.”26 The Court did not invoke tolling, instead using

a laches analysis.27

In affirming the decision, the Supreme Court in IAC did not address whether

the action was inherently legal, due to its contractual nature, or equitable, due to

the legislature’s decision to give the Court of Chancery exclusive jurisdiction over

such claims. Instead, the Supreme Court found that “the trial court’s deviation

26
O’Brien, 2009 WL 2490845, at *7 n.39. If the Court of Chancery’s postulation is
correct that indemnification claims should be treated as claims in equity because the
Court of Chancery has exclusive jurisdiction to hear them, then its holding arguably
would not contradict the theory that purely legal claims should be strictly subject to
statutes of limitations. Rather, the rationale for not applying the statute of limitations
strictly in that circumstance would be that the legislature determined, in essence, to
convert indemnification claims into equitable actions by placing “exclusive jurisdiction”
for such claims in the Court of Chancery when it enacted 8 Del. C. 145(k). This theory,
however, has not been universally embraced. See Yuen v. Gemstar-TV Guide Int’l, Inc.,
2004 WL 1517133, at *3 (Del. Ch. June 30, 2004) (“This court’s statutory authority
under 8 Del. C. § 145(k) to make determinations regarding advancement does not turn an
advancement claim into a claim for equitable relief.”).
27
See O’Brien, 2009 WL 2490845, at *8 (“Although statutes of limitations that are
exceeded always operate to bar actions at law absent applicability of a tolling doctrine,
they are not controlling in equity.”).

14
from the applicable statute of limitations in applying the doctrine of laches” was

warranted by the “unusual circumstances presented.”28 The Supreme Court noted

that “[t]here is no precise definition of what constitutes unusual conditions or

extraordinary circumstances” but identified several factors “that could bear on the

analysis” including:

1) whether the plaintiff had been pursuing his claim, through litigation
or otherwise, before the statute of limitations expired; 2) whether the
delay in filing suit was attributable to a material and unforeseeable
change in the parties’ personal or financial circumstances; 3) whether
the delay in filing suit was attributable to a legal determination in
another jurisdiction; 4) the extent to which the defendant was aware
of, or participated in, any prior proceedings; and 5) whether, at the
time this litigation was filed, there was a bona fide dispute as to the
validity of the claim.29

In Levey v. Brownstone Asset Management, the Supreme Court applied its

decision in IAC outside the context of an indemnification claim to hold that the

statute of limitations did not bar a plaintiff’s claim for entitlement to cash

distributions based on his alleged ownership interest in two entities.30 The

Supreme Court did not analyze whether the statute of limitations should be applied

strictly, but instead assessed whether to apply the statute by analogy and declined

to do so. Citing IAC as “controlling authority,” the Supreme Court noted the

28
IAC/Interactive Corp. v. O’Brien, 26 A.3d 174, 175-76 (Del. 2011).
29
See id. at 178.
30
See Levey v. Brownstone Asset Mgmt., LP, 76 A.3d 764, 767-68, 770-72 (Del. 2013).

15
presence of four of the five “unusual conditions and extraordinary circumstances”

it had identified in IAC that justified deviating from the limitations period and

avoiding a finding of laches.31

In sum, tension seems to exist between Stifel and certain Court of Chancery

cases on the one hand, and IAC and Levey on the other, as to whether statutes of

limitations are to be applied strictly to purely legal claims. There is, in my view,

logical force for strictly applying statutes of limitations in this situation because a

plaintiff pressing a purely legal claim in the Court of Chancery should not be able

to avoid the statute of limitations by invoking the doctrine of laches when the

limitations period would have conclusively barred the same claim had it been

brought in a court of law. Nonetheless, as the Supreme Court’s precedents in

Stifel, IAC, and Levey reflect, there is not currently a clear answer on this issue and,

in certain circumstances yet to be fully defined, the Supreme Court has left open

the possibility of avoiding a strict application of a statute of limitations to a purely

legal claim where “unusual conditions and extraordinary circumstances” exist,

such as those identified in IAC.

31
Id. at 770-72. The Supreme Court also held in the alternative that the statute of
limitations was tolled in any case. Id. at 772-73.

16
 2. Equitable Claims Seeking Equitable Relief

The next context to consider concerns equitable claims seeking equitable

remedies—for instance, a request for an injunction based on a breach of fiduciary

duty. Statutes of limitations do not strictly bind the Court of Chancery when it

addresses such purely equitable matters, because “actions in equity are time-barred

only by the equitable doctrine of laches.”32 In such cases, however, this Court will

still look to comparable statutes of limitations at law, and give the analogous

limitations period “great weight in deciding whether the claims are barred by

laches.”33 Sometimes, the application of a limitations period to an equitable claim

32
Whittington, 991 A.2d at 9 (internal quotation marks omitted).
33
Id. How much weight should be afforded the statute of limitations has varied, but
changes in the Court’s language suggest that it has increased over time. At this point,
some view it as a presumption rebuttable only by tolling exceptions that also would apply
at law. This was not always the case. Consider the following sequence of cases, listed in
reverse chronological order: In re Sirius XM S’holder Litig., 2013 WL 5411268, at *4
(Del. Ch. Sept. 27, 2013) (addressing primarily equitable remedies for an equitable
fiduciary duty claim) (“[A] plaintiff in equity cannot file beyond the statute of limitations
unless a tolling doctrine exists that would justify an equally late filing in a court of law.);
Vredenburgh v. Jones, 349 A.2d 22, 36 (Del. Ch. 1975) (giving “considerable weight” to
the limitations period in the absence of special mitigating circumstances); Bay
Newfoundland Co. v. Wilson & Co., 4 A.2d 668, 671 (Del. Ch. 1939) (“In the absence of
some special circumstances, in determining whether the complainant’s rights have been
lost by laches, a Court of Equity will, perhaps, usually follow the analogy of the Statute
of Limitations governing somewhat similar rights in a Court of Law; but whether that
rule will be applied necessarily depends on the facts of the particular case.”) (citations
omitted); Wright v. Scotton, 121 A. 69, 73 (Del. 1923) (“Under ordinary circumstances, a
suit in equity . . . will be stayed after[] the time fixed by the analogous statute of
limitations at law; but, if unusual conditions or extraordinary circumstances make it
inequitable to . . . forbid its maintenance after a longer period than that fixed by the
statute, the Chancellor will not be bound by the statute, but will determine the
extraordinary case in accordance with the equities which condition it.”) (quoting 4

17
is explicitly attributed to the “unreasonable delay” element of laches.34 The Court

also may presume prejudice if the claim is brought after the analogous limitations

period has expired.35 Where no analogous limitations period exists, “the legal

statute of limitations cannot apply by analogy,” and instead the Court relies

entirely on the traditional principles of laches.36 In short, in purely equitable

actions, the Court will afford significant weight to an analogous statute of

limitations when one exists and will presumptively bar an action filed after the

Pomeroy on Equity Jurisprudence 1441); Perkins v. Cartmell, 4 Del. 270, 270 (Del.
1845) (“[Statutes of limitations] do not in terms extend to courts of equity, but these
courts approve of the principle, and apply it to analogous cases.”).

Other jurisdictions also have grappled with the question of how much force an analogous
statute of limitations should have. See Dan B. Dobbs, Law of Remedies § 2.4(4), at 78
(2d ed. 1993) (“When courts look to an analogous statute of limitations for guidance, and
that statute has run, they may (1) presume unreasonable delay and prejudice, but permit
the plaintiff to rebut the presumption; (2) treat the statute as one element ‘in the congeries
of factors to be considered.’ Some authority has gone beyond either of these rules by
holding that equity will follow the law and (3) give the statute conclusive effect.”).
34
See, e.g., Osborn v. Kemp, 991 A.2d 1153, 1162 (Del. 2010) (“While the doctrine of
laches does not prescribe a specific time bar to determine reasonableness, we traditionally
have taken into account the legal statute of limitations when assessing whether the party
unreasonably delayed bringing suit.”); Whittington v. Dragon Gp. L.L.C., 2010 WL
692584, at *6 (Del. Ch. Feb. 15, 2010), aff’d and remanded on other grounds, 998 A.2d
852 (Del. 2010) (TABLE).
35
See In re Sirius, 2013 WL 5411268, at *4 (“After the statute of limitations has run,
defendants are entitled to repose and are exposed to prejudice as a matter of law by a suit
by a late-filing plaintiff who had a fair opportunity to file within the limitations period.”).
36
See Kirby v. Kirby, 1989 WL 111213, at *5 (Del. Ch. Sept. 26, 1989).

18
limitations period, absent tolling or unusual circumstances that would make it

inequitable to do so.

3. Matters Involving Legal and Equitable Elements

The final context to consider involves some combination of legal and

equitable elements. A suit may consist of a legal claim seeking equitable relief—

for instance, a breach of contract claim demanding specific performance. Or a

claim may sound in equity but request legal relief—a breach of fiduciary duty

action seeking monetary damages. Although it was not always the case, both of

these categories now generally require application of the statute of limitations by

analogy. This change appears to be the result of a weakening definition of the

Court’s concurrent jurisdiction over time.

Kahn v. Seaboard explains the Court of Chancery’s shifting definition of

concurrent jurisdiction and its approach to applying the statute of limitations to

such cases. In Kahn, Chancellor Allen noted that in the Court’s early

jurisprudence, it would determine whether to apply an analogous statute of

limitations by looking to the plaintiff’s claim, as opposed to the requested

remedy.37 When a plaintiff requested an equitable remedy for a claim that was

legal in nature, the action would fall within the Court’s concurrent jurisdiction, and

37
Kahn v. Seaboard Corp., 625 A.2d 269, 272-73 (Del. Ch. 1993) (Allen, C.).

19
the Court would apply the statute of limitations by analogy. 38 This rule prevented

plaintiffs from circumventing a statute of limitations that would bar their legal

claim by requesting equitable relief instead.39

38
See id. Adding further complexity, the meaning of “concurrent jurisdiction” has been
the subject of some debate. Compare Corporate and Commercial Practice § 2.03[b], at
2-23 to -24 (lamenting the confusing nomenclature of “concurrent jurisdiction” and
giving example of an injunction for a breach of contract), and Kahn, 625 A.2d at 272
(listing specific performance of a contract as example of concurrent jurisdiction), with 1
John Norton Pomeroy, A Treatise on Equity Jurisprudence §§ 138-39 (5th ed. 1941)
(noting that a suit to compel specific performance of a contract is under exclusive equity
jurisdiction, but that concurrent jurisdiction involves legal claims seeking relief that is
technically equitable but closely resembles legal relief), § 170 (describing wholly
equitable remedies that can be used to enforce legal rights but nonetheless constitute part
of equity’s exclusive jurisdiction), and § 175 (detailing the required similarity to legal
relief in order for concurrent jurisdiction to attach). See also id. § 180 n.7 (noting that
some cases erroneously referring to concurrent jurisdiction in fact belong to exclusive
jurisdiction due to the purely equitable remedy sought); Artesian Water Co. v. Lynch, 283
A.2d 690, 692 (Del. Ch. 1971) (seeming to agree with Pomeroy’s definition of concurrent
jurisdiction by noting that it exists “where the relief sought in equity in a so-called
complaint for an accounting is actually the mere recovery of money, as is the case here,
an action for such type of relief is analogous to an action at law for the same or
equivalent relief.”); Harman v. Masoneilan Int’l, Inc., 442 A.2d 487, 497-98 (Del. 1982)
(describing scholarly disagreement about definition of concurrent jurisdiction); Int’l Bus.
Machs. Corp. v. Comdisco, Inc., 602 A.2d 74, 78 n.6 (Del. Ch. 1991) (noting that
exclusive and concurrent jurisdiction are used different ways by different commentators).
39
This rationale was particularly apt when the Court’s concurrent jurisdiction was limited
to legal claims seeking equitable remedies that were the functional equivalent of legal
ones. See supra note 38. In such cases, a plaintiff could have brought the same claim
and sought a nearly identical remedy in a court of law, increasing the risk that a plaintiff
would bring a claim in Chancery solely for the purpose of avoiding a limitations defense.
See Kirby, 1989 WL 111213, at *5 (“. . . in cases of concurrent jurisdiction, it would
thwart the legislative purpose to allow plaintiffs to circumvent the statutory bar simply by
filing in Chancery . . . .”); Bovay v. H.M. Byllesby & Co., 29 A.2d 801, 803 (Del. Ch.
1943) (“[Courts of equity], apparently, take the view that it would be unjust to permit a
litigant, having a legal right, to evade the statute, barring its enforcement, by seeking the
aid of another court, having concurrent jurisdiction, merely because it could give more
adequate and complete relief.”); Bush v. Hillman Land Co., 2 A.2d 133, 134 (Del. Ch.

20
 Over time, the Court expanded its application of statutes of limitations to

include the opposite circumstance—an equitable claim requesting a legal remedy,

such as damages for a breach of fiduciary duty. As Chancellor Allen noted in

Kahn, as the Court’s understanding of concurrent jurisdiction weakened, its use of

limitations periods widened:

The workability of this doctrinal structure is dependent upon an
understanding of the “nature” of various sorts of jurisdiction that the
English Court of Chancery and, by adoption, our own court,
possesses. As decades passed, however, this knowledge evolved from
every day practical knowledge of lawyers to professional exotica. By
the mid-twentieth century, judges were beginning to grow less
comfortable with those old concepts of concurrent and exclusive
chancery jurisdiction. In 1934 Chancellor Wolcott applied the old
learning in an easy case, Cochran v. F.H. Smith & Co., 20 Del. Ch.
159, 174 A. 119 (1934). The case was easy because the right asserted
was not of equitable origin (the claim was common law fraud). It
could have been brought in the Superior Court. Thus, it plainly was a
concurrent jurisdiction case to which the statute should apply by
analogy and it was so applied. But in reaching its decision to apply the
statute of limitations by analogy to bar the action, the court noticed
that “the bill does not seek any remedy peculiar to equity.” Id. 174 A.
at 121. The comment reflects, I think, a weakening of the old system
because the request for an equitable remedy would not in any case
have altered the character of the jurisdiction that had been invoked or
the correct outcome of the motion.40

The Court began to widen its analysis to examine whether the relief being sought

was equitable in nature, and at the same time began to shy away from drawing

1938) (discussing defendant’s argument that, in a concurrent jurisdiction case, plaintiffs
“by choosing equity rather than law as the forum should not be permitted to escape the
bar which the statute would impose had they brought their suit at law.”).
40
Kahn, 625 A.2d at 273.

21
conclusions based on a strictly defined concurrent jurisdiction.41 The reach of the

statute of limitations thus expanded to include equitable claims seeking legal

relief.42 The rationale for this expanded application is somewhat weaker, since a

plaintiff would not have been able to bring an equitable claim in a court of law, so

there would be less risk that a plaintiff would be appearing in the Court of

Chancery merely to attempt to circumvent the statute of limitations. Regardless of

the historical factors that led to this point, it is now established that statutes of

limitations also will apply by analogy to equitable claims requesting legal relief.43

41
Id. at 273-74.
42
Although it is now clear that statutes of limitations apply to equitable claims seeking
legal relief, such claims do not necessarily fall within the technical definition of
concurrent jurisdiction, although the issue may be largely academic. See Price v. Wilm.
Trust Co., 1996 WL 560177, at *1 (Del. Ch. Sept. 3, 1996) (“[N]o matter what the form
of the remedy, equity is in cases of this type [breach of express trust] exercising its
exclusive, not concurrent, jurisdiction.”) (Allen, C.). To the extent I use concurrent
jurisdiction to describe both types of cases in this opinion, I do so only for simplicity in
discussing the application of statutes of limitations, which now apply both to legal claims
seeking equitable relief and to equitable claims seeking legal relief.
43
See Kahn, 625 A.2d. at 273-74; see also In re Dean Witter P’ship Litig., 1998 WL
442456, at *4 (Del. Ch. July 17, 1998) (applying statute of limitations to breach of
fiduciary duty claim seeking money damages and accounting) (“It is well-settled under
Delaware law that a three-year statute of limitations applies to claims for breach of
fiduciary duty.”), aff’d, 725 A.2d 441 (Del. 1999) (TABLE); Boeing v. Shrontz, 1992 WL
81228, at *2 (Del. Ch. Apr. 20, 1992) (applying statute of limitations to claim for breach
of fiduciary duty primarily seeking money damages) (“I find that the Amended
Complaint seeks essentially legal relief and, thus, is governed by § 8106.”); Halpern v.
Barran, 313 A.2d 139, 141 (Del. Ch. 1973) (“It is by now firmly established that the
three-year statute of limitations, 10 Del. C. § 8106, applies to shareholder derivative
actions which seek recovery of damages or other essentially legal relief.”); Laventhol,
Krekstein, Horwath & Horwath v. Tuckman, 372 A.2d 168, 169-70 (Del. 1976)
(recognizing general application of limitations period for damages claims while

22
 Having concluded that statutes of limitations apply by analogy to equitable

claims seeking legal relief and vice versa, I next consider what such an analogous

application entails. In many cases, the application of the analogous limitations

period appears virtually automatic, so as to preclude any other analysis.44

Although some cases within the Court’s concurrent jurisdiction note that statutory

limitations periods should not be applied inflexibly, the exceptions often are

limited to situations in which the limitations period would be tolled.45 For

instance, in In re Sirius XM Shareholder Litigation, then-Chancellor Strine noted

that “a filing after the analogous statute of limitations has run cannot be justified

discussing limited exception for fraudulent self-dealing) (“Generally speaking, an action
in the Court of Chancery for damages or other relief which is legal in nature is subject to
the statute of limitations rather than the equitable doctrine of laches.”).
44
See, e.g., Kahn, 625 A.2d at 274 (“When the relief sought in Chancery is legal in
nature, it is clear that Chancery will apply the statute of limitations rather then [sic] the
equitable doctrine of laches.”) (quoting Bokat v. Getty Oil Co., 262 A.2d 246, 250 (Del.
1970) (emphasis added); id. at 272 (“When the court applies a statute of limitation by
analogy, however, it makes no such specific inquiry [into the case]; it makes no
assessment of fairness or prejudice.”); Halpern, 313 A.2d at 141; Artesian Water Co.,
283 A.2d at 692 (“[W]here the statute bars the legal remedy, it shall bar the equitable
remedy in analogous cases, or in reference to the same subject matter . . . .”).
45
Sunrise Ventures, LLC v. Rehoboth Canal Ventures, LLC, 2010 WL 363845, at *6
(Del. Ch. Jan. 27, 2010) (Strine, V.C.) (“In the absence of an applicable tolling doctrine,
a claim cannot be pressed in the Court of Chancery if the statute of limitations has
passed.”), aff’d, 7 A.3d 485 (Del. 2010); Weiss v. Swanson, 948 A.2d 433, 451 (Del. Ch.
2008) (“[E]ven in actions seeking damages or essentially legal relief this court does not
strictly apply statutes of limitations. Rather, the running of the limitations period can be
tolled in certain limited circumstances.”) (internal quotation marks omitted).

23
except in the ‘rare’ and ‘unusual’ circumstance that a recognized tolling doctrine

excuses the late filing.”46

Cutting in the opposite direction is the rule established by the Supreme

Court in IAC and Levey, which allows an exception for extraordinary

circumstances, even for purely legal matters.47 Since the IAC exception applies to

purely legal matters, presumably it also would apply where the statute of

limitations traditionally has applied only by analogy rather than strictly.48 In other

46
In re Sirius, 2013 WL 5411268, at *4 (finding that claims for breach of fiduciary duty
and associated requests for declaratory judgments were time-barred by statute of
limitations). In Sirius, the requested relief was primarily declaratory and injunctive in
nature, although the plaintiffs also requested money damages. Second Amended Verified
Class Action and Derivative Complaint, In re Sirius XM S’holder Litig., Cons. C.A. No.
7800-CS (Jan. 28, 2013). The fact that the claim was equitable and the relief was
primarily equitable arguably places the case in the previously discussed category of
exclusive equity jurisdiction, thus making its presumptive application of the statute of
limitations all the more striking. See supra note 33 and accompanying text. Presumably,
any automatic application of a statutory limitations period to a purely equitable action
also would apply in a concurrent jurisdiction case.
47
See Levey, 76 A.3d at 770-72; IAC, 26 A.3d at 177-79.
48
See Stephen G. Perlman, Rearden LLC v. Vox Media, Inc., 2015 WL 5724838, at *13
(Del. Ch. Sept. 30, 2015) (finding it reasonably conceivable, in defamation claim seeking
both equitable and legal relief, that one or more IAC factors could be present to justify
deviating from limitations period, and thus declining to dismiss for laches); Stewart v.
Wilm. Trust SP Servs., Inc., 112 A.3d 271, 293-94 (Del. Ch. 2015) (using IAC test and
declining to apply statute of limitations to fiduciary duty, contract, and negligence claims
seeking damages) (“Nevertheless, in cases where ‘unusual conditions or extraordinary
circumstances make it inequitable to allow the prosecution of a suit after a briefer, or to
forbid its maintenance after a longer period than that fixed by the statute,’ this Court has
the power to set aside the statutory limitation period and analyze whether the claim was
untimely based on laches principles.”) (quoting IAC, 26 A.3d at 177-78), aff’d, 126 A.3d
1115 (Del. 2015) (TABLE).

24
words, there is meaningful tension between these cases and Sirius: IAC allows for

exceptional circumstances even in a purely legal context that should call for the

strictest application of statutory limitations period, while Sirius seems to apply the

statute without exception (other than tolling doctrines) even in a purely equitable

context that warrants the least strict application of the statute of limitations. This

tension raises the question whether time-bar analysis should be limited to tolling

doctrines or include a separate inquiry of unusual circumstances under IAC and

Levey.49

Notwithstanding these tensions, an analogous limitations period should

operate as a strong presumption of laches for cases in this Court’s concurrent

jurisdiction, which generally will obviate the need for a traditional laches inquiry.50

49
See Pulieri v. Boardwalk Props., LLC, 2015 WL 691449, at *10 (Del. Ch. Feb. 18,
2015) (“Although this Court’s laches inquiry is fact-specific, it is often guided (but not
necessarily dictated) by the analogous statute of limitations.”); id. (noting that, under
Sirius, filing after limitations period is only justified in rare circumstance in which a
recognized tolling doctrine applies); id. at *11 (noting that IAC test is for unusual
circumstances that “may justify deviating from the three-year limitations period”). In
Pulieri, I noted the possibility of both a tolling exception and an exception under the IAC
test. As discussed above, Levey concluded that the limitations period did not apply both
because unusual circumstances existed under IAC and because of equitable tolling,
suggesting that the analyses are distinct.
50
See Whittington, 991 A.2d at 9 (“The general rule for determining which statute of
limitations should apply by analogy to a suit in equity is that ‘the applicable statute of
limitations should be applied as a bar in those cases which fall within that field of equity
jurisdiction which is concurrent with analogous suits at law.’”) (quoting Ohrstrom v.
Harris Trust Co., 1998 WL 44983, at *2 (Del. Ch. Jan. 28, 1998)); U.S. Cellular Inv. Co.
of Allentown v. Bell Atl. Mobile Sys., Inc., 677 A.2d 497, 502 (Del. 1996) (“Where a
plaintiff seeks a legal remedy in a court of equity and a statute of limitations exists for an

25
The presumption is rebuttable, however, either by a recognized tolling doctrine or

by the presence of extraordinary circumstances, such as those indicated in IAC.51

*****

To summarize, although our law is not a model of clarity, I surmise the

following from the previous discussion:

1. If a plaintiff brings a legal claim seeking legal relief in the Court of

Chancery, the statute of limitations (and its tolling doctrines) logically

should apply strictly and laches should not apply. Otherwise, one may be

able to circumvent the statutory time-bar that would have applied to the

same claim if it had been brought in a court of law. Under the precedents

of IAC and Levey, however, extraordinary circumstances may provide an

analogous action at law, the statutory period may create a presumptive time period for
application of laches to bar a claim.”); First State Towing, LLC v. Div. of State Police,
2016 WL 2621137, at *3 (Del. Ch. May 5, 2016) (“[W]hen claims are barred by a
controlling statute of limitations, a court of equity need not engage in a traditional laches
analysis.”) (quoting State ex rel. Brady v. Pettinaro Enters., 870 A.2d 513, 527 (Del. Ch.
2005)); Whittington v. Dragon Gp. L.L.C., 2008 WL 4419075, at *3 (Del. Ch. June 6,
2008) (“Where the plaintiff seeks legal relief or this court has concurrent jurisdiction,
however, the court applies the statute of limitations by analogy. Absent a tolling of the
limitations period, a party’s failure to file within an analogous statute of limitations, if
any, is typically conclusive evidence of laches.”) (emphasis added); Weiss, 948 A.2d at
451 (Del. Ch. 2008) (“However, in a case such as this, where the plaintiff seeks legal
relief or this court has concurrent jurisdiction, the court applies the statute of limitations
by analogy.”); Bovay, 29 A.2d at 803 (“But, in cases coming within their concurrent
jurisdiction, it seems that Courts of Equity consider themselves bound to apply the
analogous statutory period of limitations, governing actions at law.”).
51
See supra note 47.

26
 exception to the strict application of statutes of limitations for purely

legal matters, separate and apart from the application of tolling doctrines.

2. If a plaintiff brings an equitable claim seeking equitable relief, the case

falls under the Court’s exclusive equity jurisdiction. In this case, the

doctrine of laches applies and any applicable statute of limitations would

apply only by analogy, although the Court tends to afford great weight to

the analogous statutory period, if one exists, and may bar a claim without

further laches analysis if that period has been exceeded and the Court

does not consider it inequitable to do so.

3. When an equitable claim seeks legal relief or a legal claim seeks

equitable relief, the Court also will apply the statute of limitations by

analogy, but with at least as much and perhaps more presumptive force

given its quasi-legal status, and will bar claims outside the limitations

period absent tolling or extraordinary circumstances.

D. Kraft’s Claim Is Time-Barred

With the foregoing analytical framework in mind, I next analyze whether

Kraft’s claim is time-barred by considering the nature of Kraft’s claim and the

relief sought.

27
 1. The Nature of Kraft’s Claim

The essence of Kraft’s complaint is that the shares of Tradeworx that

WisdomTree purports to own are invalid because they were issued in violation of

the Delaware Constitution and the DGCL as they existed at the time.52 This

issuance allegedly impaired the value of Kraft’s shares, albeit through the disputed

operation of an anti-dilution provision not at issue here.53 Kraft brings this claim

of invalidity against WisdomTree, Kraft’s purported fellow stockholder.

Kraft does not explain the source of its right to bring a claim against

WisdomTree. Kraft appears to have no relationship with WisdomTree, and Kraft

is not suing derivatively on behalf of Tradeworx.54 What is clear, however, is that

Kraft’s claim does not arise from a traditional equitable right.55 Kraft does not

invoke “a relationship between the parties uniquely recognized in chancery” or any

52
Compl. ¶ 26.
53
Compl. ¶¶ 2, 4.
54
Indeed, Kraft concedes that it loses if its claim is deemed to be derivative because
Kraft did not make a demand and does not contend that demand would be excused. Tr.
Oral Arg. 61 (Dec. 15, 2015).
55
See generally Corporate and Commercial Practice § 2.03[b][1], at 2-28 to -55 (listing
traditional equitable rights giving rise to Chancery jurisdiction, including trusts, fiduciary
rights, and derivative actions, among others); see also Rizzo v. Joseph Rizzo & Sons
Constr. Co., 2007 WL 1114079, at *2 (Del. Ch. Apr. 10, 2007) (“[C]ourts of this state
have long recognized that a derivative claim is cognizable only in equity.”) (internal
quotation marks omitted).

28
right “based upon a fiduciary duty or other duty recognized solely in equity.” 56

Kraft is not suing Tradeworx management for breaching its duties to stockholders,

for instance, and it does not bring a suit derivatively on behalf of Tradeworx. Nor

does Kraft raise any equitable theory against WisdomTree or point to any equitable

principle on which its claim rests. Instead, Kraft relies entirely on its statutory

claim under the DGCL and the Delaware Constitution.57

In my view, such statutory and constitutional claims are inherently legal in

nature. In Reed v. Brady, this Court considered a plaintiff’s request for a

declaration that certain restrictions on his vehicle’s emergency equipment violated

the Delaware Constitution by limiting his ability to exercise his authority as a

sheriff under the Delaware Constitution.58 The Court dismissed the request for

56
McMahon v. New Castle Assocs., 532 A.2d 601, 602, 609 (Del. Ch. 1987) (Allen, C.).
57
See Tr. Oral Arg. at 52 (Dec. 15, 2015) (agreeing that, but for the statute, Kraft would
have no claim at all). In Highlights for Children, a case discussed further below, the
Court addressed a similar issue in passing when it considered whether it had subject
matter jurisdiction over a request for a declaratory judgment that shares were invalid
because they were issued for no consideration, in violation of the Delaware Constitution
at the time. Although it did not clearly demarcate the line between claim and relief, the
Court noted that the constitutional question was the sole basis for questioning the validity
of the shares. The Court went on to find that it had subject matter jurisdiction based on
the relief plaintiff sought. But if the constitutional claim had been equitable, the Court
would have had jurisdiction on that basis without needing further analysis. By
implication, the claim itself was not inherently equitable, or the Court would not have
needed to assess the nature of the relief sought. See Highlights for Children, Inc. v.
Crown, 193 A.2d 205, 206 (Del. Ch. 1963).
58
Reed v. Brady, 2002 WL 1402238, at *1 (Del. Ch. June 21, 2002), aff’d, 818 A.2d 150
(Del. 2003) (TABLE).

29
lack of subject matter jurisdiction because the plaintiff was “neither seeking to

vindicate an equitable right nor, in this context, pursuing an equitable remedy.” 59

The Court went on to note that “[i]ssues of statutory and constitutional

interpretation are, beyond question, legal issues capable of resolution by the

Superior Court, and declaratory relief is available there to the same extent as it is

here.”60

Here, not only does Kraft provide no equitable underpinning for its statutory

or constitutional claim, it also does not allege that any of its own statutory or

constitutional rights were violated, in contrast to Reed v. Brady. Kraft instead uses

the constitution in the manner of a statute to show that certain corporate actions

were invalid. For all of these reasons, Kraft’s claim is purely legal in nature.

2. The Nature of Kraft’s Requested Remedy

Kraft’s only requested remedy is a declaratory judgment, which all courts in

Delaware are authorized to issue under 10 Del. C. § 6501. A declaratory judgment

is a creature of statute and “not a purely equitable remedy.” 61 Whether a

declaratory judgment is legal or equitable in nature depends on the underlying

59
Id. at *3.
60
Id. at *3 n.7.
61
Prestancia Mgmt. Gp., Inc. v. Va. Heritage Found., II LLC, 2005 WL 1364616, at *7
(Del. Ch. May 27, 2005); see also Reeder v. Wagner, 2007 WL 3301026, at *1 (Del. Ch.
Nov. 1, 2007) (“It is well settled that the Declaratory Judgment Act does not
independently confer jurisdiction on this court.”).

30
subject matter. Although most cases that address the nature of a declaratory

judgment do so in the course of deciding whether there is jurisdiction to hear the

case, they nonetheless shed light on whether the remedy is equitable or legal.

Some cases have linked the nature of the declaratory judgment to the nature of the

underlying claim.62 Others have looked at the accompanying requested relief or

the essence of the declaration being sought.63 Thus, the nature of Kraft’s requested

declaratory judgment depends on its underlying context.

Kraft requests a declaratory judgment regarding the validity of

WisdomTree’s shares of Tradeworx. As I concluded above, Kraft’s underlying

claim is legal in nature because it is based in essence on a statute and has no basis

in equity. Were I to determine the nature of the declaratory judgment based solely

62
See Heathergreen Commons Condo. Ass’n v. Paul, 503 A.2d 636, 644 (Del. Ch. 1985)
(stating that jurisdiction to issue declaratory judgment depends on legal or equitable
nature of the underlying subject matter of the controversy); Eluv Hldgs. (BVI) Ltd. v.
Dotomi, LLC, 2013 WL 1200273, at *5 (Del. Ch. Mar. 26, 2013) (concluding that
declaratory judgment to establish share ownership was based on claim that was
functionally equivalent to breach of contract, and that therefore statute of limitations
applied by analogy).
63
See E. Shore Envtl., Inc. v. Kent Cty. Dep’t of Planning, 2002 WL 244690, at *4 (Del.
Ch. Feb. 1, 2002) (finding equitable jurisdiction to issue declaratory judgment because
ultimate remedy being sought was an injunction); Highlights for Children, 193 A.2d at
206 (finding equitable jurisdiction over claim for declaratory judgment that shares were
invalid, because “the court must consider what plaintiff’s complaint really seeks” beyond
the face of the complaint). See also Diebold Computer Leasing, Inc. v. Commercial
Credit Corp., 267 A.2d 586, 591 (Del. 1970) (noting that the Court of Chancery has
jurisdiction “if there is any underlying basis for equity jurisdiction measured by
traditional standards” and finding such a basis existed because “ultimate coercive relief
would be injunctive”).

31
upon the nature of Kraft’s claim, I thus would conclude that the declaratory

judgment sought here was a form of legal relief. But I also will examine the

fundamental essence of Kraft’s declaratory judgment request, which resembles a

request to cancel shares.64

In Bush v. Hillman Land Company, the Court of Chancery held that the

cancellation of shares was a distinctly equitable remedy without legal analogue.65

The plaintiff in Bush sought judicial cancellation of shares and certificates that

allegedly had been issued illegally six years before suit was filed.66 The company

argued that the claim was barred by a three-year statute of limitations on the theory

that the claim fell within the Court’s concurrent jurisdiction.67 The Court

disagreed, concluding that the relief sought was equitable in nature:

The law forum has no remedy whereby that result can be obtained.
This suit is one where the non-existence of alleged stock is sought to
be decreed and all appearance of its pretended existence obliterated.
The fundamental concept lying at its foundation is equitable in nature
and not within the scope of the law’s notice.68

64
See supra note 63.
65
Bush v. Hillman, 2 A.2d at 135.
66
Id. at 134.
67
Id. (“The demurrants treat this case as one falling within the field of the concurrent
jurisdiction of law and equity, and, so treating it, make the point that the complainants by
choosing equity rather than law as the forum should not be permitted to escape the bar
which the statute would impose had they brought their suit at law.”).
68
Id. at 135.

32
On that basis, the Court concluded that the statute of limitations did not apply and

that the company’s time-bar argument was governed by the doctrine of laches:

There is then no remedy whatever at law, not to speak of an adequate
remedy, to which the complainants can resort for invalidating the
shares in question and obliterating the appearance of their existence as
outstanding shares. The case, then, is not one where the act of
limitations at law is applicable in equity.

*****

My conclusion is that the case is not one where the statute of
limitations is applicable. Any delay which has attended the institution
of the suit, if it be such as to constitute a defense, is operative not by
the uncompromising rule of the statute of limitations, but according as
it gives rise or not to the principles that inhere in the equitable
doctrine of laches.69

WisdomTree seeks to distinguish Bush on the ground that the plaintiff

requested the cancellation of shares, rather than a declaratory judgment that the

shares were void. Significantly, however, in a case none of the parties cited, this

Court in Highlights for Children examined a request for a judgment declaring that

certain shares were invalid because they allegedly were issued for no consideration

in violation of the Delaware Constitution.70

69
Id. at 136, 137. The Court ultimately deferred on deciding whether the claim was
barred by laches so that a factual record could be developed. Id. at 137.
70
Highlights for Children, 193 A.2d at 206.

33
 The defendant in Highlights for Children argued that the Court of Chancery

lacked subject matter jurisdiction because the controversy was not equitable in

nature and was cognizable at law.71 Although the complaint demanded a

declaratory judgment, the Court opined that equitable jurisdiction “is not now lost

merely because the case is couched in terms of a declaratory judgment action” and

noted that it “must consider what plaintiff’s complaint really seeks.”72 Citing

Bush’s proposition that stock cancellation is fundamentally equitable in nature,

Chancellor Seitz concluded that plaintiff’s request for a declaratory judgment that

the disputed shares were invalid fell within its equity jurisdiction. 73 Highlights for

Children thus suggests that, looking to the essence of Kraft’s complaint, the

requested declaratory relief would be equitable in nature.

The issue resolved in Highlights for Children was “not wholly free from

doubt,”74 and other cases underscore this ambiguity. As discussed above, in Reed

v. Brady, this Court determined that it was unable to hear a request for declaratory

relief because the plaintiff was “simply asking for an interpretation of Delaware

law” and was “neither seeking to vindicate an equitable right nor, in this context,

71
Id.
72
Id. See also supra note 63.
73
See Highlights for Children, 193 A.2d at 206.
74
Id.

34
pursuing an equitable remedy.”75 Similarly, in Reeder v. Wagner, this Court found

that it lacked subject matter jurisdiction over a declaratory judgment action

because the claims involved statutory interpretation rather than an equitable

issue.76

Although these cases suggest that the issue is less than certain, the case at

hand bears substantial similarities to Highlights for Children, and the essence of

Kraft’s requested relief is functionally similar to an equitable cancellation of

shares. Thus, looking to the remedy that Kraft “really seeks,” I treat Kraft’s

requested relief as equitable in nature.

*****

Before discussing the consequence of my conclusion that Kraft’s claim is

legal and the relief Kraft seeks is equitable, I address two other arguments Kraft

asserted based on the Bush decision. First, Kraft suggests that it would be

improper to apply the statute of limitations here in any manner, based on the Bush

75
See Reed v. Brady, 2002 WL 1402238, at *2-4; see also supra note 58 and
accompanying text.
76
See Reeder v. Wagner, 2007 WL 3301026, at *1 (“Because the complaint does not seek
to vindicate an equitable right and does not demand an exclusively equitable remedy, this
court lacks the power to adjudicate the dispute.”). The Court in Reeder noted that the
statutes at issue did not assign the task of statutory interpretation to the exclusive
jurisdiction of the Court of Chancery. Here, the Court of Chancery indisputably has
jurisdiction to interpret the DGCL under 8 Del. C. § 111(b).

35
Court’s decision not to apply a statute of limitations to a claim for cancellation. I

disagree.

Importantly, the holding in Bush to apply laches, and not to apply the statute

of limitations by analogy, relied on Professor Pomeroy’s view of concurrent

jurisdiction circa 1938. That definition covered only legal claims seeking

equitable remedies that were substantially similar to relief available at law.77 As

discussed above, the scope of concurrent jurisdiction has evolved since Bush was

decided in 1938. At least insofar as time-bar principles are concerned, the Court

no longer limits concurrent jurisdiction to include only legal actions seeking

equitable remedies that resemble legal ones, but now also includes legal actions

seeking purely equitable remedies.78 Thus, the application of statutes of

limitations by analogy has expanded over time. Put differently, although Kraft’s

action may have fallen outside of the Court’s concurrent jurisdiction as defined

when Bush was decided, it now falls within it and is subject to the application of

77
Bush v. Hillman, 2 A.2d at 134 (describing Pomeroy’s definition of concurrent
jurisdiction). See also 1 Pomeroy, supra note 38, § 173 (explaining requirements for
concurrent jurisdiction) (“The primary right . . . which is the foundation of the suit must
be legal, or else the case would belong to the exclusive jurisdiction of equity . . . .”); id. §
137 (explaining that all cases in which the right is equitable and not legal fall within
exclusive equity jurisdiction, regardless of the nature of the remedy); id. §§ 138-39
(noting that a purely equitable remedy for a legal right, such as specific performance of a
contract, falls exclusively under equity jurisdiction, while a legal right seeking an
equitable remedy that closely resembles a legal remedy, such as an equitable means of
recovering money, falls under concurrent jurisdiction).
78
See supra notes 38-39 and accompanying text.

36
statutes of limitation to concurrent jurisdiction claims. Under this Court’s

contemporary jurisprudence, furthermore, even if the claim had fallen entirely

within this Court’s equity jurisdiction, rather than concurrent jurisdiction, the

Court would still apply the statute of limitations by analogy, though arguably with

less strictness.79

Second Kraft suggests that, under Bush, the statute of limitations cannot

apply because the shares are void, and “[t]he passage of time cannot resurrect a

void transaction . . . .”80 But this argument ignores the Bush Court’s conclusion

that laches could bar the claim even if a statute of limitations did not. 81 The issue

was whether an analogous statute of limitations existed, not whether a claim that a

transaction was void could never be time-barred. Kraft provides no authority for

the proposition that a plaintiff cannot lose a claim to void a transaction based on

delay, and Bush and other cases suggest otherwise.82

79
See supra Part II.C.2.
80
Pl.’s Ans. Br. 7.
81
See Bush v. Hillman, 2 A.2d at 137 (noting that a successful laches defense was
possible but deferring decision until the factual record was further developed).
82
See Beard v. Elster, 160 A.2d 731, 739 (Del. 1960) (finding that shares invalidly issued
for prohibited future consideration could later be validated by lapse of time and
subsequent performance of the contracted consideration); Frank v. Wilson & Co., 32
A.2d 277, 301 (Del. 1943) (noting that opportunity to invalidate a void corporate
transaction converting class A shares into common shares could be lost due to ratification
or laches); Brown v. Fenimore, 1977 WL 2566, at *2-3 (Del. Ch. Jan. 11, 1977) (noting

37
 3. An Analogous Limitations Period Applies to Kraft’s Claim

Because I have found Kraft’s claim to be legal and the relief Kraft seeks to

be equitable, Kraft’s action falls into this Court’s concurrent jurisdiction, as it is

now defined. For the reasons discussed above, therefore, if an applicable statute of

limitations exists, I will apply it by analogy and give it presumptive effect absent

tolling or extraordinary circumstances. Under 10 Del. C. § 8106, a three-year

limitations period applies to actions “based on a statute.” This statute of

limitations thus applies by analogy to Kraft’s claim, which is based on a statute

(DGCL § 152) and a constitutional provision that goes hand-in-hand with the

statute and is invoked for the same purpose.83

The three-year limitations period created by 10 Del. C. § 8106 begins to run

from the time of the wrongful act, without regard for whether the plaintiff became

aware of the wrongdoing at that time.84 The allegedly wrongful stock issuance

giving rise to Kraft’s claim took place on May 4, 2000. This action was filed on

that share issuance for prohibited consideration was not necessarily ultra vires or
unlawful, and that acquiescence in the transaction could bar a claim to invalidate shares).
83
As discussed above, Kraft’s complaint uses Article 9, Section 3 of the Delaware
Constitution in the manner of a statute rather than arguing that its constitutional rights
were violated.
84
See Wal-Mart Stores, Inc. v. AIG Life Ins. Co., 860 A.2d 312, 319 (Del. 2004) (“This
Court has repeatedly held that a cause of action ‘accrues’ under Section 8106 at the time
of the wrongful act, even if the plaintiff is ignorant of the cause of action.”).

38
March 20, 2015. Consequently, the statutory period expired almost twelve years

before suit was filed.

Kraft has not made any tolling argument.85 Taking into consideration the

factors identified in IAC, I find that this is not a case that “presents the rare

circumstance where the analogous period of limitations ought not to be the

measure of whether a litigant unreasonably delayed in commencing his action.”86

Kraft’s claim exceeded the analogous statutory limitations period, and did so by

almost twelve years. Accordingly, Kraft’s claim is barred by laches.

E. Tradeworx’s Motion for Leave to Amend Would Be Futile

Tradeworx requests leave to amend its pleadings to add a cross-claim

seeking a declaratory judgment that WisdomTree’s purported shares in Tradeworx

are void or voidable. WisdomTree argues in opposition that the amendment would

be futile because it would not survive a motion to dismiss under Court of Chancery

Rule 12(b)(6). I agree.

Tradeworx’s declaratory judgment claim is similar to Kraft’s, with a couple

of additions. Tradeworx and Kraft each request a declaration that WisdomTree’s

purported shares in Tradeworx are void because they purportedly were issued

85
Tr. Oral Arg. at 53 (Dec. 15, 2015) (“We are not making a tolling argument.”).
86
Levey, 76 A.3d at 772. The only one of the five factors identified in IAC that arguably
applies here in my view is that, when this action was filed, the parties had a “bona fide
dispute as to the validity of the claim.” IAC, 26 A.3d at 178.

39
solely in exchange for future services. Tradeworx also requests in the alternative a

declaration that the shares are voidable, and a determination of the number of

shares WisdomTree owns, including as a result of any alleged anti-dilution rights.87

For purposes of determining whether Tradeworx’s claim also is barred by laches,

the alternative request that the shares be declared voidable as opposed to void does

not alter the analysis.88

Tradeworx’s proposed cross-claim would be barred by laches for the same

reasons I concluded that Kraft’s claim is time-barred. If anything, the justification

for laches applies even more forcefully for Tradeworx. Although Kraft alleges it

was unaware of the original transaction by which WisdomTree acquired its shares,

the same cannot be said about Tradeworx, which participated in and thus

necessarily knew about the transaction from the outset.89 Consequently, the statute

of limitations would presumptively apply by analogy to Tradeworx’s claim as well,

and the claim would be barred by laches. For these reasons, Tradeworx’s

amendment would be futile.

87
Mot. for Leave to Amend Ex. A at 7.
88
I do not address Tradeworx’s request that I make a determination relating to the alleged
anti-dilution rights. Any potential disputes relating to the anti-dilution rights do not
pertain to the question addressed in this action, namely whether the 1,045,000 shares
originally issued to WisdomTree may be challenged as void or voidable. Nor have the
parties briefed those issues.
89
See Tr. Oral Arg. 61 (Dec. 15, 2015).

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III. CONCLUSION

For the foregoing reasons, WisdomTree’s motion to dismiss the complaint is

GRANTED, and Tradeworx’s motion for leave to amend its pleading is DENIED.

The complaint is dismissed with prejudice.

IT IS SO ORDERED.

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