Replacement of Directors – Delaware Docket

EQUITABLE RELIEF GRANTED TO STOP BOARD COUP

May 06 2020

By David L. Forney and Annamarie C. Larson

In a Memorandum Opinion, Palisades Growth Capital II, L.P. v. Alex Bäcker and Ricardo Bäcker and QLess, Inc. (Del. Ch. C.A. No. 2019-0931-JRS) the Delaware Court of Chancery found that actions taken at a board meeting were void because the defendant acted inequitably by formulating a secret plan to deceive the other board members into attending the meeting and then seized control. The Court stated that it will not sanction inequitable action by corporate fiduciaries simply because their act is legally authorized. The Court found that, while the defendants’ actions were technically authorized in the Company’s Charter and Bylaws, they took affirmative action to mislead the other board members in order to take control.

MOTION FOR A TEMPORARY RESTRAINING ORDER OF CONTROLLING STOCKHOLDERS DENIED AS NO EXTRAORDINARY CIRCUMSTANCES FOUND

Jun 26 2018

By Annette Becker and Caitlin Velasco

In CBS Corporation, et al. v. National Amusements, Inc., et al., Civil Action No. 2018-0342-AGB, the Court of Chancery denied a motion for temporary retraining order brought by CBS Corporation (“CBS”) and five independent directors of CBS (the “Plaintiffs”) to restrain controlling shareholders, Shari Redstone, her father Sumner Redstone, National Amusements, Inc. (“NAI”), NAI Entertainment Holdings LLC, and the Sumner M. Redstone National Amusements Trust (the “Defendants”) from taking certain actions that would interfere with the governance of CBS or other proposed actions of the board of directors of CBS. The Court found that there was no precedent for the type of relief requested by Plaintiff and that no extraordinary circumstances existed to warrant the grant of such relief. Read More

Chancery Court Enjoins Incumbent Board Members’ Plan to Reduce Number of Board Seats Prior to Contested Election at Annual Meeting

Jul 15 2016

By Remsen Kinne and David Noll

In Pell v. Kill, et al, C.A. No. 12251-VCL (Del. Ch. May, 19, 2016), Vice Chancellor Laster preliminarily enjoined incumbent members of a board of directors from implementing a plan to reduce the number of board seats prior to a directors’ election at an annual meeting after a proxy challenge had been made.

Chancery Court Holds Bylaw Permitting Stockholder Removal of Officers Invalid in Continuing Fight over the Composition of the Board of Directors of Westech Capital Corp.

Aug 14 2015

By Annette Becker and Porter Sesnon

In Gorman, IV v. Salamone, Halder and Westech Capital Corp. (“Westech”), the Delaware Chancery Court, in ruling on a motion to dismiss, issued another status quo order to temporarily fix the composition of the board of Westech while the ongoing dispute over control of Westech played out.

Plaintiff John Gorman (“Gorman”) a Westech stockholder and board member brought the Section 225 action based on two developments while a prior Section 225 temporarily designating three directors and keeping the CEO was on appeal before the Delaware Supreme Court.

Chancery Court Holds that Company Does Not Have to Pay Damages for Refusing to Appoint Director Represented by Counsel That is Also Representing Opposing Party in Adverse Litigation

Jun 24 2015

By Annette Becker and Priya Chadha

In Partners Healthcare Solutions Holdings, L.P. and GTCR Fund IX/A, L.P. v. Universal American Corp., Partners Healthcare Solutions Holdings, L.P. (“Partners”) sued Universal American Corporation (“UAM”), seeking damages and specific performance following a dispute as to Partners’ appointment of a director to UAM’s board. During the litigation, the parties reached a settlement as to the specific performance aspect of the litigation, leaving only the issues of damages. UAM filed a motion for summary judgment, which Vice Chancellor Glasscock granted.

In March 2012, Partners entered into a merger agreement with UAM, pursuant to which UAM purchased a Partners subsidiary, and Partners became one of UAM’s largest stockholders. Partners was also given a seat for its designee on UAM’s board pursuant to a letter agreement (“Board Seat Agreement”). That agreement provided that the designee must be independent under stock exchange rules, and granted Partners the right to name a replacement in the event that the initial designee resigned. Partners named David Katz, a former board member of Partners, to the UAM board.

In re: Allergan, Inc. Stockholder Litigation, C.A. No. 9609-CB (Del. Ch. November 7, 2014) (Bouchard, C.)

Nov 10 2014

By David Bernstein and Meredith Laitner

On November 7, 2014, Chancellor Bouchard denied the plaintiffs’ requests for summary judgment in In re: Allergan, Inc. Stockholder Litigation. This ruling comes amid an acrimonious proxy fight in which a company owned by Valeant and Pershing Square are seeking to remove six of the nine members of the Allergan Board and request that the Board engage in good faith discussions with Valeant with regard to a Valeant proposal to merge with Allergan that will come to a head at a special stockholder meeting scheduled for December 18, 2014.

The charter and bylaw provisions challenged by the plaintiffs permitted holders of 25% of Allergan’s stock to call a special meeting or act by stockholder consent, but not with regard to any matter that is identical or substantially similar to one presented at a stockholder meeting held during the previous year (a so-called “Similar Items” provision). In a Supplemental Proxy Statement, Allergan had stated that this would permit stockholders to remove directors, but not to replace them by written consent at a meeting called by stockholders if an election had occurred within the past year. The plaintiffs asked for a declaratory judgment that the Similar Items provisions would not prevent the stockholders from, at a special meeting, both removing the entire Board and electing a new Board so long as the new directors had not been up for election during the preceding year.

Gassis v. Corkery, C.A. No. 8868-VCG (Del. Ch. May 28, 2014)

May 29 2014

By Joanna Diakos and Mark Hammes

In Gassis v. Corkery, Civil Action No. 8868, Bishop Macram Max Gassis challenged his removal as Chairman of the Board and as a director of the Bishop Gassis Sudan Relief Fund, Inc., a Delaware charitable nonstock corporation (the “Fund”) dedicated to helping the people of southern Sudan. The Bishop also challenged the previous removal of two directors from the Fund’s board and the elections of two directors who replaced them.

Bishop Gassis’ removal at a 2013 board meeting came after years of friction with other board members, who contended that the Bishop was difficult to work with, negatively interacted with the Fund’s beneficiaries in Sudan, spent extravagantly on travels, invested in suspicious projects, and acted as though he had a personal interest in the Fund’s assets. These board members further argued that a provision of the Fund’s bylaws providing that the Bishop “shall serve [as Chairman of the Board] until his retirement or resignation” required him to be removed from the board upon his retirement as a Catholic Bishop, which was to occur on his seventy-fifth birthday on September 21, 2013.

Catagory:Replacement of Directors