Forescout Tech., Inc. v. Ferrari Grp. Holdings, L.P., C.A. No. 2020-0385-SG (Del. Ch. July 14, 2020)

In the midst of this global pandemic, the Court of Chancery certified an interlocutory appeal to the Delaware Supreme Court to address two unique issues presented by COVID-19: (i) whether the Court could rightly decide to accept trial testimony remotely; and (ii) whether the Court had discretion to decline to compel a witness to travel to Delaware so that the witness may be cross-examined in-person without infringing upon the opposing party’s due process rights.

Litigation arose between parties to a merger agreement regarding the extent to which the COVID-19 pandemic constituted a materially adverse effect (or MAE). The seller-plaintiff brought suit in the Court of Chancery seeking injunctive relief compelling the defendants to close. The Court ordered an expedited trial to commence on July 20, 2020. Because the merger agreement set August 6, 2020 as the termination date, the Court intended to rule by then to preserve the possibility for the seller to obtain equitable relief. 

As the trial approached, the Court denied the defendants’ request to continue the trial due to purported safety and health concerns. To alleviate these concerns, the Court ruled that the defendants could have counsel in California (the location of one of plaintiff’s key witnesses) cross-examine the witness in person while the Vice Chancellor presided remotely. The defendants disagreed, and instead requested that the Court certify an interlocutory appeal to the Delaware Supreme Court, which it did.

Of the factors the Court of Chancery is required to consider in deciding whether to certify an interlocutory appeal, it found most important the fact that the issues involved were questions of first impression in Delaware. The Court of Chancery has continued to conduct business throughout the pandemic largely via virtual means. The Delaware Supreme Court’s emergency administrative orders permitted in-person trials but encouraged remote proceedings whenever possible. But whether trial testimony may be taken remotely consistent with a defendant’s due process rights, and whether a key witness may be forced to travel to Delaware for live testimony in the current pandemic environment were issues of first impression in this State.

The Delaware Supreme Court will not be called upon to decide such issues in this matter, as the defendants subsequently voluntarily dismissed their appeal.