Abstract
The Court of Chancery possesses a potent, “heroic,” yet seldom used power: the authority to appoint a receiver when necessary to protect an entity or preserve property involved in litigation. This interim remedy operates as an adjunct to the claims being asserted and is not decisive on the ultimate merits of the case. The remedy is nonetheless extremely powerful, as it can temporarily strip management of its ability to operate the business or manage the assets. While the litigation receiver may appear less frequently in Delaware jurisprudence than other types of receiverships, the Court of Chancery has not hesitated to appoint litigation receivers when necessary. Nevertheless, because it is such a potent interim remedy, the Court of Chancery only deploys it in truly egregious situations or true emergencies, such as those involving fraud or gross mismanagement.
This article describes the development of the litigation receiver in Delaware jurisprudence and summarizes the principles that the Court of Chancery has developed to evaluate applications for this extraordinary remedy. To show the extraordinary nature of this relief and the relative infrequency with which it is used, this article explores the small number of reported decisions in which such relief was granted and discusses several reasons that have caused the courts to reject such an application. Drawing from the cases, this article then lays out practical considerations for serving as a litigation receiver.