Court of Chancery Holds That Structurally Coercive Stockholder Vote Does Not Ratify Fiduciary Actions Related To Shares Issuance and Proxy Grant To Stockholder
By: Remsen Kinne and Tami Mack
In Sciabacucchi v. Liberty Broadband Corporation, C.A. No. 11418-VCG (Del. Ch. May 31, 2017), the Court of Chancery ruled on a motion to dismiss by defendants Liberty Broadband Corporation (“Liberty”), a stockholder of Charter Communications, Inc. (“Charter”) and officers and directors of Charter. The Court held that facts alleged by plaintiff, a Charter stockholder, supported the inference that a vote by Charter stockholders approving a shares issuance to and voting proxy agreement with Liberty was structurally coercive. The Court determined that since the vote was coercive, it did not ratify actions by Liberty and Charter’s directors and officers claimed by plaintiff to have breached fiduciary duties of loyalty. As a result, the Court held, defendants were not entitled to dismissal of plaintiff’s claims solely on the basis that stockholder vote ratification operated to “cleanse” fiduciary duties breaches.