Cloudflare’s Request for Delaware Supreme Court Review Remains Pending

Cloudflare’s proposed stock recapitalization remains blocked as the Delaware Supreme Court has yet to decide whether to accept the company’s request to review a preliminary injunction, leaving the plan on hold while stockholder litigation continues.

On Nov. 3, Delaware Vice Chancellor J. Travis Laster recommended that the justices take up an interlocutory appeal, which seeks review before a case reaches final judgment. The request raises whether Delaware should keep the Disney standard for director good faith and whether a special committee’s good faith should be judged collectively or director by director. Laster wrote, “Whether to permit an interlocutory appeal lies in the discretion of the Delaware Supreme Court.”

The recommendation concerns an Oct. 16 preliminary injunction that bars Cloudflare from implementing the recapitalization while the consolidated stockholder case proceeds. At this stage, the Court of Chancery found plaintiffs had a reasonable probability of showing the special committee did not act in good faith. The court made no final findings about the directors’ conduct and concluded plaintiffs had not shown a reasonable probability of proving gross negligence on the evidence before it.

Under the proposed plan, Cloudflare’s founders would exchange each high-vote share for one low-vote share and a preferred share carrying nine votes. The company would issue one nonvoting share for each outstanding low-vote share. The structure is intended to let the founders sell shares while retaining voting control.

The dispute involves Section 144 of Delaware’s General Corporation Law, amended in 2025 to set safe-harbor procedures for certain conflicted transactions. The law requires an approving committee to act in good faith and without gross negligence. The proposed appeal asks how the good-faith standard applies in this setting.

Eight stockholder complaints have been filed. Seven were consolidated into a fiduciary-duty case, while a separate eighth complaint alleges the plan violates Cloudflare’s charter. Cloudflare and its board say the claims lack merit and that the recapitalization complies with applicable law.

The Delaware Supreme Court’s decision on whether to accept the appeal remains pending, and the injunction remains in effect.