CCSB Financial Corp. v. Deann M. Totta, 302 A.3d 387

Background

CCSB's certificate capped voting by any "person" at 10% and defined "person" to include a "group acting in concert;" it authorized the board to determine beneficial ownership and declared the board’s good-faith determinations "conclusive and binding."
In the 2021 director election, incumbent management concluded that David Johnson, his associates (including DEW LLC owned by David E. Watson), and three dissident nominees were "acting in concert," and instructed the inspector of elections to exclude 37,175 DEW votes that would have swung the election to the dissident slate.
The board made this determination without independent investigation of other stockholders (including management) and relied on self-reported ownership and internal "cheat sheets."
Plaintiffs brought a summary Section 225 proceeding; the Court of Chancery held the Conclusive-and-Binding Provision invalid insofar as it would prevent judicial review of fiduciary loyalty claims, found insufficient evidence that Johnson and D. Watson were "acting in concert," and ruled the exclusion of DEW’s votes improper.
The Chancery Court awarded plaintiffs attorneys’ fees under the corporate-benefit doctrine for vindicating stockholder voting rights and clarifying the Voting Limitation’s application; the Delaware Supreme Court affirmed.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Validity of the charter’s "Conclusive-and-Binding" clause	Clause cannot insulate directors from judicial equity review or exculpate duty-of-loyalty breaches	Section 102(b)(1) allows broad charter terms; clause merely alters standard of review and should be honored	Clause cannot be used to preclude court review or exculpate loyalty breaches; invalid to the extent it would do so
Standard of review for board election interference	Enhanced judicial scrutiny applies when board interferes with stockholder elections	Clause mandates business-judgment review for board determinations	Enhanced scrutiny remains available; court retains equitable jurisdiction to police loyalty breaches
Whether Johnson and D. Watson were "acting in concert" so their holdings could be aggregated	No agreement, arrangement, or understanding existed regarding voting/disposition of shares	Board: sufficient indicia and prior dealings justified finding of concerted action	Court credited D. Watson’s testimony, found insufficient evidence of an agreement, and held they were not acting in concert; excluded votes should have been counted
Award of attorneys’ fees under corporate-benefit doctrine	Litigation conferred companywide benefit by vindicating shareholder franchise and clarifying Voting Limitation	Relief principally benefitted dissident nominees (personal gain), so fees unjustified	Fee award affirmed: court reasonably found a substantial corporate benefit and did not abuse discretion

Key Cases Cited

Salzberg v. Sciabacucci, 227 A.3d 102 (Del. 2020) (discusses limits on permissible charter provisions under Section 102(b)(1))
Corwin v. KKR Fin. Holdings LLC, 125 A.3d 304 (Del. 2015) (addresses how informed stockholder action can affect judicial review)
Kahn v. M&F Worldwide Corp., 88 A.3d 635 (Del. 2014) (affirms framework for reviewing controller transactions and stockholder approvals)
In re MFW S’holders Litig., 67 A.3d 496 (Del. Ch. 2013) (sets conditions where controller transaction standards can be altered by charter and approval)
McMullin v. Beran, 765 A.2d 910 (Del. 2000) (holds exculpatory provisions cannot protect against duty-of-loyalty breaches)
Blasius Indus. v. Atlas Corp., 564 A.2d 651 (Del. Ch. 1988) (board action that improperly interferes with shareholder vote implicates duty of loyalty)
In re Invs. Bancorp, Inc. S’holder Litig., 177 A.3d 1208 (Del. 2017) (reiterates the ‘‘twice-tested’’ analysis: legal authority then equitable review)
William Penn P’ship v. Saliba, 13 A.3d 749 (Del. 2011) (abuse-of-discretion standard for fee awards)