Stephen Davis v. ExpicentRx, Inc.

COURT OF CHANCERY
OF THE
STATE OF DELAWARE

LORI. W. WILL LEONARD L. WILLIAMS JUSTICE CENTER
VICE CHANCELLOR 500 N. KING STREET, SUITE 11400
WILMINGTON, DELAWARE 19801-3734

April 28, 2026

Thomas P. Will, Esquire Thad J. Bracegirdle, Esquire
Phillip Reytan, Esquire Justin C. Barrett, Esquire
Morris, Nichols, Arsht & Tunnell LLP Bayard, P.A.
1201 North Market Street 600 North King Street, Suite 400
Wilmington, Delaware 19801 Wilmington, Delaware 19801

RE: Stephen Davis v. EpicentRx, Inc.,
C.A. No. 2024-0365-LM (LWW)

Dear Counsel,

This letter resolves defendant EpicentRx, Inc.’s exceptions to a Magistrate in

Chancery’s March 2, 2026 bench ruling on plaintiff Stephen Davis’s motions for

contempt and to appoint a receiver (the “Ruling”).1 In the Ruling, the Magistrate

appointed a limited-purpose receiver over EpicentRx to enforce the payment of

contempt sanctions and fees-on-fees arising from EpicentRx’s repeated violations of

a Fitracks advancement order.

The defendant takes exception to the Ruling, arguing that the appointment of

a receiver was unwarranted. I agree. Because EpicentRx cured the underlying

1
See Tr. of Rulings of the Ct. (Dkt. 92) (“Ruling”).
C.A. No. 2024-0365-LM (LWW)
April 28, 2026
Page 2 of 7

advancement arrearage before the Ruling, the coercive purpose of a receivership had

already been achieved. At that point, appointing a receiver was no longer necessary

to coerce compliance with the advancement order but functioned as a

disproportionate means to collect collateral penalties. The exceptions are therefore

granted, and the appointment of the receiver is vacated.

I. BACKGROUND

Davis is a former corporate secretary of EpicentRx.2 In April 2022, he was

named as a defendant in a California action.3 After EpicentRx refused to advance

his legal fees, Davis filed this action. In September 2024, Chancellor McCormick

granted summary judgment in Davis’s favor on his entitlement to advancement.4 A

Fitracks order was entered in December 2024.5 In April 2025, the case was

reassigned to Magistrate Mitchell.6

EpicentRx failed to satisfy its obligations under the Fitracks order. It cycled

through various excuses for its nonpayment, ranging from California wildfires to

insurance coverage disputes. The Magistrate held EpicentRx in contempt in

2
Verified Compl. for Advancement (Dkt. 1) ¶ 4.
3
Id. ¶ 18; see EpiRx, L.P. v. EpicentRx, Inc., 37-2022-00015228-CU-BT-CTL (Cal. Super.
Apr. 25, 2022).
4
See Dkts. 26-27.
5
Dkt. 31.
6
Dkt. 32.
C.A. No. 2024-0365-LM (LWW)
April 28, 2026
Page 3 of 7

September 2025 and assessed a $5,000 fine.7 When EpicentRx continued to

withhold payment, the Magistrate issued a second contempt order in October 2025,

imposing over $45,000 of retroactive fines and escalating daily fines of $2,500.8

In December 2025 and January 2026, Davis filed his third and fourth motions

for contempt and requested the appointment of a receiver.9 On February 12, 2026—

one day before the original hearing date on those motions—EpicentRx wired Davis

nearly $270,000.10 This payment satisfied all undisputed fees and expenses incurred

in the underlying California action through December 15, 2025, plus interest and

fees-on-fees requested in Davis’s first demand under the Fitracks order.11 The

payment did not, however, cover approximately $425,000 in accrued daily fines, the

initial $5,000 sanction, or fees-on-fees incurred by Davis in litigating the contempt

motions.12

On March 2, 2026, the Magistrate issued the Ruling on Davis’s third and

fourth motions for contempt and to appoint a receiver, finding that EpicentRx

7
Dkt. 41.
8
Dkt. 48.
9
Dkts. 60, 63.
10
Dkts. 78-79.
11
Dkt. 79 at 2.
12
Dkt. 78 at 2.
C.A. No. 2024-0365-LM (LWW)
April 28, 2026
Page 4 of 7

remained in civil contempt.13 Noting the company’s “serial noncompliance” and

that monetary sanctions remained unpaid, the Magistrate appointed a limited-

purpose receiver to satisfy the unpaid sums.14

EpicentRx timely filed exceptions to the Ruling pursuant to Court of Chancery

Rule 144.15 On March 11, Chancellor McCormick reassigned this action to me for

the limited purpose of resolving the exceptions.16 The exceptions were fully briefed

as of April 2.17

II. ANALYSIS

Exceptions to a Magistrate’s final report are reviewed de novo.18 I have

reviewed the exceptions briefs, the Ruling, and other filings. A further hearing is

unnecessary; the dispute can be resolved on the papers.

Section 322 of the Delaware General Corporation Law authorizes the Court

of Chancery to appoint a receiver whenever a corporation “shall refuse, fail or

13
Ruling 43-44.
14
Id. at 42, 44.
15
Dkt. 82.
16
Dkt. 88.
17
See Def.’s Opening Br. in Supp. of Exceptions (Dkt. 93); Pl.’s Answering Br. in Opp’n
to Def.’s Exceptions (Dkt. 96); Def.’s Reply Br. in Supp. of Exceptions (Dkt. 101).
18
See DiGiacobbe v. Sestak, 743 A.2d 180, 184 (Del. 1999); see also Ct. Ch. R. 144(b)(2).
C.A. No. 2024-0365-LM (LWW)
April 28, 2026
Page 5 of 7

neglect to obey any order or decree of any court of this State . . . .”19 EpicentRx

violated the court’s advancement and contempt orders. The statutory authority to

appoint a receiver is thus established.

But statutory authority does not mandate equitable execution. When crafting

a coercive sanction, this court is obligated to use the “least possible power adequate

to the end proposed.”20 The appointment of a receiver for a solvent, operating

company is an “extraordinary” and “drastic” remedy.21 It is to be imposed with

“scrupulous care” and is “not to be resorted to if milder measures will give the

plaintiff . . . adequate protection for his rights.”22

Here, the objective of the court’s contempt orders—securing compliance with

the advancement obligation—was achieved. EpicentRx belatedly advanced the

19
8 Del. C. § 322.
TR Invs., LLC v. Genger, 2009 WL 4696062, at *18 n.74 (Del. Ch. Dec. 9, 2009) (citation
20

omitted).
21
See Gandhi-Kapoor v. Hone Cap. LLC, 305 A.3d 707, 722 (Del. Ch. 2023) (“Appointing
a receiver for a solvent entity [] ‘is an extraordinary, a drastic and . . . an “heroic”
remedy . . . .’” (quoting Maxwell v. Enter. Wall Paper Mfg. Co., 131 F.2d 400, 403 (3d Cir.
1942))).
22
Ross Hldg. & Mgmt. Co. v. Advance Realty Gp., LLC, 2010 WL 3448227, at *6 (Del.
Ch. Sept. 2, 2010) (first quoting Salnita Corp. v. Walter Hldg. Corp., 168 A. 74, 76 (Del.
Ch. 1933); and then quoting Maxwell, 131 F.2d at 403); see also Jagodzinski v. Silicon
Valley Innovation Co., 2012 WL 593613, at *2 (Del. Ch. Feb. 14, 2012) (“The appointment
of a receiver . . . is an ‘extraordinary remedy.’ Therefore, a court of equity will exercise
the power to appoint a receiver cautiously and only as necessitated by the exigencies of the
case before it.” (quoting Roth v. Laurus U.S. Fund, L.P., 2011 WL 808953, at *5 (Del. Ch.
Feb. 25, 2011))).
C.A. No. 2024-0365-LM (LWW)
April 28, 2026
Page 6 of 7

principal amounts owed to Davis, bringing itself into compliance with the Fitracks

order. What remains unpaid are sanctions and fees-on-fees resulting from the

company’s contempt, which are collateral to Davis’s advancement right. Yet a

receiver was appointed to “cause [EpicentRx] to satisfy all amounts due to [Davis]”

and was granted “all powers generally available to a receiver,” including “full

authority and control over the property and assets of [EpicentRx].”23

Given EpicentRx’s payment, the appointment of a receiver was no longer

justified as a coercive remedy. Although fees-on-fees are a critical enforcement

mechanism for advancement rights, imposing a receivership solely to satisfy a

penalty transforms a coercive remedy into a punitive one. The disruption to the

company’s operations outweighs the immediate need to collect the remaining

sanctions via a receiver.

EpicentRx’s conduct in this litigation has been inexcusable. It forced Davis

to litigate serial motions to vindicate rights the company conceded. The Magistrate

reasonably sought to address a recalcitrant litigant’s repeated violations of the court’s

orders. But imperfect compliance and delay, even when egregious, do not justify a

receivership once the primary harm has been cured.

23
Order Implementing Ruling and Appointing Receiver (Dkt. 86) ¶¶ 5-7.
C.A. No. 2024-0365-LM (LWW)
April 28, 2026
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Lesser coercive measures must be exhausted before a receiver takes control.

Because the principal advancement has been paid, the urgent policy objectives of

8 Del. C. § 145 have been met. The parties will be given 30 days to confer in good

faith to resolve the outstanding amounts.24 If they cannot reach a resolution, they

must submit a proposed schedule for the Magistrate to address the remaining

sanctions and the appropriate enforcement mechanism.

III. CONCLUSION

For the above reasons, EpicentRx’s exceptions are granted. The appointment

of the receiver is vacated. To the extent an order is necessary to implement this

ruling, IT IS SO ORDERED.

Sincerely yours,

/s/ Lori W. Will

Lori W. Will
Vice Chancellor

24
I note that the sanctions and fees-on-fees remaining are twice the advanceable funds.
EpicentRx’s exceptions, however, are limited to the appointment of the receiver; the
quantum of the sanctions is not before me. EpicentRx represented to the Magistrate that it
desires to resolve the remaining sanctions dispute. Because the coercive purpose of the
initial sanctions was achieved, I encourage the parties to work cooperatively toward a
sensible, commercial resolution over this 30-day period.