Michael M. Goldberg, M.D. v. Claudine Bruck, Michael Rice, and Macrophage Therapeutics, Inc.
C.A. No. 2020-1058-JRS
| Del. Ch. | Jun 23, 2021Background
- Macrophage Therapeutics, a Delaware corporation formed in 2015, had a Stock Purchase Agreement (SPA) giving Goldberg and Platinum one director and Navidea two directors; Navidea provided a sublicense of key IP to the company.
- By November 29, 2018, Goldberg and another director were the only directors remaining; Navidea (the 100% common stockholder) delivered a written consent removing directors (except Goldberg) and appointing Claudine Bruck and Michael Rice.
- Goldberg filed a Section 225 petition seeking a declaration that Bruck and Rice were not validly appointed, arguing the Certificate of Incorporation (COI) and Bylaws limited appointment/removal power to directors and required 60 days’ notice for non-board nominations at a stockholders’ meeting.
- Respondents argued the COI’s voting provision and the Bylaws’ written-consent provision authorized Navidea, as sole common stockholder, to appoint directors by unanimous written consent at any time without notice.
- The Court considered the Bylaws, COI, relevant DGCL provisions, and governing contract principles on a motion to dismiss and held that, as a matter of law, the appointments were authorized by unanimous written consent.
Issues
| Issue | Goldberg's Argument | Respondents' Argument | Held |
|---|---|---|---|
| Whether a sole stockholder may appoint directors by written consent absent a meeting | Written consent cannot be used to fill vacancies prior to the annual meeting; vacancies may be filled only by existing directors | COI and Bylaws (written-consent provision) permit stockholders to act by written consent to take any action that could be taken at a meeting, including appointing directors | Held: Unanimous written consent by the sole common stockholder validly appointed directors; DGCL §228 and the Bylaws allow immediate action by written consent |
| Whether a sole remaining director has exclusive power to fill Board vacancies before the annual meeting | Article III §3 gives the sole remaining director the power to fill vacancies, so Goldberg alone could do so | Article III §3 is permissive and does not preclude stockholder action by written consent | Held: The provision is permissive, not exclusive; stockholder written consent may also fill vacancies |
| Whether the Bylaw provision requiring 60 days’ notice for nominations applies to written-consent appointments | Article II §12’s 60-day notice applies to nominations by stockholders and so invalidates Navidea’s appointments | The 60-day notice applies only to nominations for a stockholders’ meeting; written consent is not a meeting and requires no prior notice under the Bylaws or DGCL | Held: 60-day notice requirement did not apply to unanimous written-consent appointments |
| Whether the SPA or its third‑party beneficiary clause limits Navidea’s written-consent power | SPA’s allocation of designated board seats (and the SPA’s anti–third-party-beneficiary clause) prevents Navidea from appointing directors by consent | Even if SPA limits designated seats, Navidea’s right as 100% common stockholder to act by unanimous written consent is unaffected; SPA argument is moot for consent appointments | Held: SPA argument was moot; unanimous stockholder consent complied with corporate documents and DGCL |
Key Cases Cited
- Wal-Mart Stores, Inc. v. AIG Life Ins. Co., 860 A.2d 312 (Del. 2004) (court may consider documents incorporated by reference on a motion to dismiss)
- Savor, Inc. v. FMR Corp., 812 A.2d 894 (Del. 2002) (motion to dismiss standards and acceptance of well-pled allegations)
- Hill Int’l, Inc. v. Opportunity P’rs L.P., 119 A.3d 30 (Del. 2015) (charters and bylaws are contracts governed by contract interpretation rules)
- VLIW Tech., LLC v. Hewlett-Packard Co., 840 A.2d 606 (Del. 2003) (dismissal inappropriate where reasonable competing contract interpretations exist)
- Jimenez v. Palacios, 237 A.3d 68 (Del. 2020) (stockholder written consent can apply to election of directors under Section 228)
- Hoschett v. TSI Int’l Software, Ltd., 683 A.2d 43 (Del. Ch. 1996) (recognition that Section 228 applies to director elections)
- MM Cos., Inc. v. Liquid Audio, Inc., 813 A.2d 1118 (Del. 2003) (stockholders’ power to vote on elections of directors)
- BlackRock Credit Allocation Income Tr. v. Saba Cap. Master Fund, Ltd., 224 A.3d 964 (Del. 2020) (principles on interpreting charter and bylaw provisions as contract)