Delaware Business Litigation Report

Chancery Imposes Rule 15(aaa)’s Requirement – Amend or Risk Dismissal with Prejudice – on Cases Transferred from the Superior Court

Otto Candies, LLC v. KPMG, LLP, C.A. No. 2018-0435-MTZ (Del. Ch. Apr. 25, 2019)

Rule 15(aaa), a rule unique to the Court of Chancery, requires plaintiffs faced with a motion to dismiss for failure to state a claim to either:  (i) amend their complaint; or (ii) stand on their pleading and risk dismissal with prejudice.  In this case, the plaintiffs initially brought suit in the Superior Court of Delaware, which does not have a corollary to Rule 15(aaa).  Before the Superior Court, defendants moved to dismiss the plaintiffs’ complaint on personal and subject matter jurisdictional grounds, as well as for failure to state a claim. 

The Superior Court ruled that it did not have subject matter jurisdiction and the complaint, along with the fully briefed but undecided motion to dismiss for failure to state a claim, was transferred to the Court of Chancery under 10 Del. C. § 1902.  After argument on the motion to dismiss and supplemental briefing on the application of Rule 15(aaa) to complaints with this procedural posture, the Court held that Rule 15(aaa) and the policies behind it apply to a complaint transferred to the Court of Chancery subject to a fully briefed motion to dismiss for failure to state a claim.  Because this was an issue of first impression, however, the Court of Chancery gave the plaintiffs a “mulligan” and permitted them to seek leave to amend.  Practitioners in Delaware courts are now on notice that Court of Chancery Rule 15(aaa) applies to cases transferred from the Superior Court.           

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