In the Matter of Dow Chem. Int'l Inc. of Delaware, C.A. No. 3972-CC (Del. Ch. Oct. 14, 2008) (C. Chandler)

In this decision, Chancellor Chandler denied petitioner Daniel Boone’s request that the Court of Chancery appoint a receiver for Dow Chemical International Inc. of Delaware (“Dow Chemical”) in order to permit California plaintiffs represented by petitioner to maintain a civil tort suit against Dow Chemical. In December 1988, Dow Chemical was dissolved pursuant to the DGCL. Since that time, Dow Chemical has held no assets. Despite the expiration of the three year statutory winding-up period provided for in Section 278 of the DGCL, during which suits may be brought against a dissolved corporation, the petitioner requested that the Court of Chancery appoint a receiver for Dow Chemical pursuant to Section 279 of the DGCL so that a suit could be maintained against Dow Chemical.  In denying the petition, Chancellor Chandler reasoned that the purpose of Section 279 is to benefit stockholders and creditors where there are undisposed assets after dissolution by allowing the appointment of a receiver to safeguard the collection and administration of the assets. Section 279 provides “little solace,” however, for one possessing after discovered claims against a dissolved corporation with no assets. The Court noted that the three-year statutory winding-up period in Section 278 of the DGCL was adopted to balance the interests of claimants in having adequate time to bring suit after a corporation was dissolved with the public policy interest of directors, officers and stockholders of a dissolved corporation in being free from claims after sufficient time has passed. Thus, petitioner could not make an end-run around the time limitations imposed by Section 278 by invoking the court’s discretionary powers to appoint a receiver under Section 279 when a corporation has no assets. Finally, the court distinguished City Investing Co. Liquidating Trust v. Continental Casualty Co. from the facts of the instant case, noting that while the dissolved corporate entity in City Investing established a separate, ongoing liquidating trust to wind up the business and affairs of the company, Dow Chemical has been dormant and without assets for twenty years.

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