In re Baker Hughes, A GE Company, Derivative Litigation

IN THE SUPREME COURT OF THE STATE OF DELAWARE
IN RE BAKER HUGHES, A GE §
COMPANY, DERIVATIVE § No. 169, 2023
LITIGATION §
§ Court Below–Court of Chancery
§ of the State of Delaware
§
§ C.A. No. 2019-0201
Submitted: December 13, 2023
Decided: February 1, 2024
Before SEITZ, Chief Justice; VALIHURA, TRAYNOR, LEGROW, and
GRIFFITHS, Justices constituting the Court en banc.
ORDER
This 1st day of February, 2024, after consideration of the parties’ briefs, the
argument of counsel, and the record on appeal, it appears to the Court that:
(1) The Court of Chancery granted the defendant special litigation
committee’s motion to terminate derivative litigation filed by two Baker Hughes
Class A stockholders.1 The court’s ruling followed its consideration of the parties’
briefs and oral argument at which the special litigation committee presented live
testimony from its sole member.
(2) In this appeal, the derivative plaintiffs have challenged the Court of
Chancery’s decision on various grounds, including that it “violated the summary
1
In re Baker Hughes, a GE Co., Deriv. Litig., 2023 WL 2967780 (Del. Ch. Apr. 17, 2023).
judgment standard by weighing evidence and making credibility determinations”2
based on the live testimony taken at oral argument. This, according to the plaintiffs,
“violated ‘Rule 56 standards,’”3 which are applicable to motions to terminate
derivative litigation under this Court’s decision in Zapata Corp. v. Maldonado.4
(3) The plaintiffs’ argument overlooks two salient points. First, Zapata
explicitly held open the possibility that the Court of Chancery, when considering a
special litigation committee’s motion to terminate derivative litigation, might hold
“a discretionary trial of factual issues . . . .”5 Second, the special litigation
committee’s counsel notified the plaintiffs’ counsel and the Court of Chancery that
the committee intended to call Mr. Ebel as a witness to testify at the December 19,
2022 hearing “about his independence, investigation, and conclusions.”6 Despite
receiving this notice, the plaintiffs did not object before or during the hearing to
Ebel’s testimony as being beyond the scope of permissible inquiry under Zapata;
instead, they cross-examined Ebel extensively.
(4) To be sure, given that Zapata envisions only limited discovery, holding
an evidentiary hearing where the credibility of witnesses will be weighed poses a
risk of procedural unfairness. Moreover, credibility determinations do not sit
2
Opening Br. at 27.
3
Id. at 28 (quoting Zapata Corp. v. Maldonado, 430 A.2d 779, 786 (Del. 1981)).
4
430 A.2d 779 (Del. 1981).
5
Id. at 778 n.15.
6
App. to Answering Br. at B349–50.
2
comfortably with the application of the summary-judgment standard. But the time
for addressing such issues is when they arise in the Court of Chancery, which, in the
words of Zapata, exercises its “independent discretion” in these matters. Here, in
the face of the plaintiffs’ acquiescence to Ebel’s live testimony, the Vice Chancellor
did not abuse her discretion by relying on that testimony, including its credibility, in
reaching her decision.
(5) For this reason and on the basis of the other reasons stated in the Court
of Chancery’s April 17, 2023 Memorandum Opinion, we affirm the judgment of the
Court of Chancery.
NOW, THEREFORE, IT IS ORDERED that the judgment of the Court of
Chancery be AFFIRMED.
BY THE COURT:
/s/ Gary F. Traynor
Justice
3