305 A.3d 352
Del. Ch.2023Background
- Bumble, Inc. is a Delaware corporation formed as an Up‑C with an unusual voting/ownership design that combines Up‑C economics with dual‑class voting mechanics.
- The certificate gives Class A shares one vote generally but ten votes per share if the holder is a “Principal Stockholder” (defined by reference to a public stockholders agreement); only Whitney Wolfe Herd and Blackstone (via affiliates) are currently Principal Stockholders.
- The charter issued only two Class B shares (one to Herd, one to Blackstone) whose votes are calculated by a formula tied to the holders’ limited‑partnership units and that likewise provide a 10x multiplier for Principal Stockholders; together Herd and Blackstone control ~92.2% of voting power.
- Plaintiff Colón sued derivatively/on behalf of Class A holders, challenging the “identity‑based” voting provisions as violating DGCL §§ 212(a) and 151(a); parties filed cross‑motions for summary judgment.
- The Court of Chancery held the challenged provisions valid as a matter of law and granted defendants’ motion for summary judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §212(a) prohibits charter provisions that make per‑share voting vary by the identity of the holder | Providence means a charter cannot make shares in the same class carry different per‑share voting power depending on who holds them | §212(a) sets a one‑vote default but §151/§102 permit special attributes and formulas tied to facts ascertainable outside the charter (including identity) | Court: §212(a) not violated; identity‑based formulas are permissible and Providence does not forbid them |
| Whether §151(a) forbids a charter creating a closed class of holders who get superior voting (i.e., identity‑based closed insiders) | Such a provision creates de facto subclasses and is invalid unless every holder has an equal opportunity to obtain the superior right | §151(a) allows special attributes to depend on facts ascertainable outside the charter; a closed set tied to an ascertainable fact is statutorily authorized | Court: §151(a) does not prohibit a closed set or identity‑based voting; the charter may deploy formulas tied to outside facts |
| Whether Delaware precedent (Providence, Williams, Sagusa) precludes the Challenged Provisions | Plaintiff relies on Providence to argue broad prohibition on per‑share differences within a class | Defendants and the court read Providence, Williams, Sagusa as permitting formulaic mechanisms that apply across a class even if results differ by holder identity | Court: Precedent permits formulaic, owner‑dependent voting rights; the Challenged Provisions are consistent with precedent |
Key Cases Cited
- Providence & Worcester Co. v. Baker, 378 A.2d 121 (Del. 1977) (upheld a charter formula that scaled voting power and treated voting as dependent on owner attributes)
- Urdan v. WR Cap. Partners, LLC, 244 A.3d 668 (Del. 2020) (stock rights are property appurtenant to shares and travel with the shares)
- Juul Labs, Inc. v. Grove, 238 A.3d 904 (Del. Ch. 2020) (certain statutory rights, e.g., Section 220 inspection, cannot be eliminated by charter)
- Sagusa v. Magellan Petroleum Corp., 650 A.2d 1306 (Del. 1994) (affirming a per‑capita voting structure and recognizing permissible share‑level variations)
- Backer v. Palisades Growth Cap. II, L.P., 246 A.3d 81 (Del. 2021) (describing the dual review—legal compliance and equitable review—of corporate action)