IN THE SUPREME COURT OF THE STATE OF DELAWARE
HAUPPAUGE DIGITAL INC., §
§
Defendant Below, § No. 338, 2022
Appellant, §
§ Court Below—Court of Chancery
v. § of the State of Delaware
§
JAMES RIVEST, § C.A. No. 2019-0848
§
Plaintiff Below, §
Appellee. §
Submitted: September 15, 2022
Decided: October 3, 2022
Before SEITZ, Chief Justice; VALIHURA and VAUGHN, Justices.
ORDER
After consideration of the notice of interlocutory appeal and the exhibits
attached thereto,1 it appears to the Court that:
(1) On October 24, 2019, plaintiff below-appellee, James Rivest, filed a
complaint under 8 Del. C. § 220 to inspect the financial statements of defendant
below-appellant, Hauppauge Digital Inc. (“the Company”). In a post-trial report
dated January 24, 2022, the Master recommended that the Court of Chancery enter
judgment in favor of Rivest and order inspection of the Company’s annual and
1
We have not considered the appellant’s September 29, 2022 letter arguing why the Court
should accept this interlocutory appeal. Supreme Court Rule 42(d) specifies the documents to be
filed in an interlocutory appeal and does not provide for additional argument by the appellant.
quarterly financial statements from 2016 through 2020, subject to a confidentiality
provision protecting financial information less than two years old. The Company
did not file any exceptions to the report, but Rivest filed an exception to the
imposition of confidentiality restrictions on the financial statements.
(2) After briefing and oral argument, the Court of Chancery issued its
opinion on September 1, 2022 (“the Opinion”).2 No one filed any exceptions to the
Master’s finding that Rivest sought books and records for the proper purpose of
valuing his Company shares, so the court adopted that finding as a ruling of the
court.3 As to the confidentiality restrictions, the court conducted a de novo review
and considered the implications of this Court’s decision in Tiger v. Boost Apparel,
Inc.4 The court held “that the Company did not make a persuasive showing of harm
that is sufficient to outweigh Rivest’s interests or support imposing a two-year
confidentiality restriction on financial statements for closed periods.”5 Finally, the
court directed the parties to do one of the following within ten days: (i) submit a
proposed form of final order, or (ii) if any issues remained to be resolved at the trial
level, submit a joint letter identifying those issues and proposing a schedule to
resolve them.6
2
Rivest v. Hauppauge Digital, Inc., 2022 WL 3973101 (Del. Ch. Sept. 1, 2022).
3
Id. at *1.
4
214 A.3d 933, 935 (Del. 2019) (holding there is no presumption of confidentiality for
inspections under Section 220).
5
Rivest, 2022 WL 3973101, at *27.
6
Id.
2
(3) On September 12, 2022, the Company filed an application for
certification of an interlocutory appeal. The Company argued that the Opinion
determined a substantial issue, established a legal right, and satisfied multiple Rule
42(b)(iii) criteria. Specifically, the Company contended that the Opinion involved
a question of law resolved for the first time in this State (Rule 42(b)(iii)(A)), there
were conflicting trial court decisions on the question of law (Rule 42(b)(iii)(B)), the
question of law related to the construction or application of a statute that should be
settled in advance of a final order (Rule 42(b)(iii)(C)), the Opinion reversed or set
aside a prior decision of the trial court (Rule 42(b)(iii)(E)), and review of the Opinion
would serve considerations of justice (Rule 42(b)(iii)(H)).
(4) On September 13, 2022, the Court of Chancery denied the motion,
finding it unnecessary for Rivest to incur the cost of responding. The court ruled
that this was “not the stage of the case for an interlocutory appeal” and “[a]n
interlocutory appeal at the end of a case is a contradiction in terms.”7 The court
emphasized that the Company could appeal as of right from the final order that the
court had directed the parties to prepare.
(5) The Company then filed this interlocutory appeal. A review of the
Court of Chancery docket reflects that the parties submitted, after prodding by the
Court of Chancery, a joint letter on September 21, 2022 identifying the remaining
7
Denial of Application to Certify, Ex. C to Notice of Interlocutory Appeal.
3
issues to be resolved (the form of final judgment, whether Rule 54 costs and
attorneys’ fees should be awarded to either party, and whether the documents should
be produced and any fees and costs paid before the time to appeal ran). Briefing on
these issues will be complete by November 14, 2022.
(6) Applications for interlocutory review are addressed to the sound
discretion of the Court.8 In the exercise of our discretion and giving due weight to
the trial court’s view, we have concluded that the application for interlocutory
review does not meet the strict standards for certification under Supreme Court Rule
42(b). As the Court of Chancery recognized, this case is close to a final judgment
that the Company may appeal as a matter of right. The Company’s desire to avoid
briefing on fee-shifting it views as premature and unmerited does not constitute
exceptional circumstances meriting interlocutory review of the Opinion.9 Nor do
the potential benefits of interlocutory review outweigh the inefficiency, disruption,
and probable costs caused by an interlocutory appeal at this stage of the
proceedings.10
8
Supr. Ct. R. 42(d)(v).
9
Supr. Ct. R. 42(b)(ii).
10
Supr. Ct. R. 42(b)(iii).
4
NOW, THEREFORE, IT IS ORDERED that the interlocutory appeal is
REFUSED.
BY THE COURT:
/s/ Karen L. Valihura
Justice
5