*1
interlocutory and
appeal
taken is an
order;
Florence,
have failed
plaintiffs
BERLIN,
and
not a final
L.
David
Ronald P.
require
procedural
comply
Sebastian,
Hall,
Craig
Theodore
Rex A.
Baylis v.
42(c)
(d).
See
ments of Rule
Inc.,
Petroleum,
H. Strauss
Center, Del.Supr.,
Wilmington Medical
Delaware,
of the State
(1984);
Julian v.
1051, 1059 n. 10
Below, Appellants,
Defendants
State,
Secretary
Department
ex rel.
v.
Del.Supr., 440 A.2d
Transportation,
v.
(1982);
Taylor
Collins
PARTNERS,
Jersey
a New
EMERALD
(1981).
Inc., Del.Supr.,
without may convert an other
lacking. Parties a final order interlocutory order into
wise representa
by consensual conduct so to take remedial action
tions of intention less-than-final an otherwise
as to render appeal. purposes of order final for Cf.
Riggs
Riggs,
Del.Supr.,
Finally, dispute directors of
is over when the defendant the cir- required, should be under
Milliken case, duty meet their of this
cumstances shareholders complete candor to their corporate
concerning significant matters directors
governance. the defendant Since the issue of their
apparently contend that fiduciary duty to Millik-
discharge their holding await the
en’s shareholders should meeting, it is annual
of the reconvened present dispute between that the
clear interlocutory issues of an
parties raises that, probability, will not ter- in all
nature litigation.
minate the reasons, we dismiss foregoing
For the to the trial the case appeal, remand
court, the court to vacate direct proceedings below dismiss the
decision and grounds stated.
on the several
[*] [*] [*]
APPEAL DISMISSED.
Jones, Elliott, Schnee, Kristol & Michael D. Goldman, Wolfe, Jr., Donald J. William J. Marsden, Potter, Jr. Anderson & Cor- roon, Conant, (ar- Wilmington, A.B. Jr. Irwin, Shank, Irwin, gued), Ivan Jr. Co- Casterline, Bickel, nant, Lipshy & Louis Vandervalk, Akin, Gump, *3 Margaret L. Feld, Dallas, Tex., Strauss, Hauer & and Moran, Simpson Berry F. & Bir- Daniel Mich., mingham, appellants. on behalf of (argued), Grego- R. Franklin Balotti and Richards, ry Layton & Fin- V. Varallo ger, Wilmington, Robert J. Schechter of Hoffman, Koether, Harris York & New City, appellee. behalf CHRISTIE, C.J., HORSEY, Before HOLLAND, JJ., MOORE, BIFFERATO, Judge (sitting by Const, designation pursuant to Del. en IV., 12) (constituting the Court art. banc).
HOLLAND, Justice, majority. for the (“Emerald”), a Emerald Partners New brought Jersey partnership, limited this ac- 1, Chancery on March tion the Court of Petroleum, May 1988. The defendants are corporation; (“May”), Inc. a Delaware its directors, Florence, L. three outside David Sebastion, Rex A. and Theodore H. Strauss; directors, Craig inside and its two (collectively, Hall and Ronald P. Berlin “the Board”). originally brought May Emerald individually, subsequently suit complaint allege class and amended its derivative claims. sought enjoin the consumma-
Emerald May thirteen tion of a (“Hall”), by Craig corporations owned Hall and Chief Executive Officer the Chairman Following discovery, a May. extensive hearing preliminary injunction was held on Chancery March Court 18,1988, prelim- entered an order on March inarily enjoining consummation of the corporations the Hall on the grounds that: (a) May certifi- Prickett, Elliott, provision Under a Wayne N. John William Small, Prickett, incorporation, cate of H. Vernon R. Proctor vote of the stockholders on cessful in years, reporting recent losses of required; approximately was million from 1983 to $80 1986, May an remained attractive takeover (b) special meeting At the target liquidity due to the of its assets and either no was carryover a net operating approxi- loss or the did not receive mately million. $54 requisite supermajority vote. During years through This case accepted, expedited was on an losing while May approximately $80 basis, interlocutory appeal as an under Su- million, audited financial statements show preme Following Court argu- Rule 42. oral corporations that the Hall approxi- made August 15, ments and deliberations on mately million. October of $67 1988,this Court announced decision.1 A Hall May’s controlled at least out- majority of provi- this Court held that the standing common stock. On October sion special meeting at a di- requiring a supermajority ap- vote was not *4 rectors, requested Hall that the outside plicable, case, under the facts of this to the May’s agree directors of Board to examine merger proposal presented May to the possibility merger of a with the Hall However, stockholders. the Court was in corporations. agreement unanimous superma- 1987, 7, On May’s November Board de- provision jority May in the cided proposal. to consider a The applicable was outside directors retained investment proposal, requisite supermajority vote &, banking Co., Inc., firm of Stearns Bear Therefore, had been judg- achieved. of any merger assess the terms and Chancery preliminari- ment the Court of ultimately opinion. to issue a fairness ly enjoining reversed, was Irwin, Shank, Conant, firm & Lipshy law injunction vacated, was and a mandate re- by Casterline2 was retained the outside manding the case issued was forthwith. negotiate directors to advise and a fair opinion This sets forth reasons for the arrangement minority for the stockholders. decision that August was announced on ¿k Company Arthur Anderson was hired to Supr.Ct.lt. 1988. 19. verify May the financial statements of and corporations. Hall Facts 24, 1987, May On November Board parties challenged to the are met presented prelimi- and was with the May Sub-chapter and corpora- thirteen S nary May and corpo- valuations of the Hall (“the tions owned Hall Hall corpora- presentation, Following rations. Hall tions”). corporations primari- The Hall agreed accept million shares May engaged ly in the real estate service busi- exchange stock in his shares in the Hall May ness. is a Delaware head- corporations. May corpora- and Hall Dallas, quartered May Texas. had been proposed merger tions entered into a engaged in gas of oil and business agreement on November 30, 1987, exploration July until May when merger agreement execution of the was substantially produc- sold all of its income press public through made release that ing properties. time, May Since that has May was disseminated Board. operating ceased to be an company. Its cash, primarily assets consist market- minority Emerald stockholder of securities, partnership able a limited inter- May. formed Emerald was and is con- est, operating capital (“Koether”) and net loss loss trolled Paul Koether carry “NOL’s”). Koether, (collectively wife, forwards Al- Esquire. his Natalie On though May 10, 1987, financially had not been suc- Hall met with Koether December firm, argument originally experienced 1. Oral heard This is before a a Dallas law in cor- panel May matters, of this Court on 1988. This porate Court had never which sponte rehearing Supr.Ct. ordered en banc. sua May. either Hall or 4(d). R. mi- Emerald’s Dallas, Texas, posed merger by virtue of request. at Koether’s May’s stock. nority holdings of represented inter- Hall that he Koether told 450,000 shares of ests which owned would concerned that Emerald Hall was explained to Hall that he stock.3 Koether May and that the acquire stock continue money by selling their his wife made required by Article supermajority vote issuing compa- positions stock back fact, could not be obtained. Fourteenth significant profit. Koether nies at a Chancery the Court of perceived, Hall partners posed that he and Hall become characterized, Emerald’s statements “greenmail” transactions.4 types these Accordingly, Hall de- “threat.” Hall as a down”, reduce, “drop cided to persuade join Hall to Koether’s efforts to he controlled. May amount of stock which him of invest- forces with to donate a sub- His initial inclination was unsuccessful. ing in several stocks were charity. portion of his stock stantial However, inquired of Koether about Hall directors he and the holdings in buying out Emerald’s stock charitable contri- such a were advised that request, May May. of Hall’s At the time loss in the bution would result approxi- value of had a nominal market asset, i.e., the NOL’s. very valuable mately per share. Koether stated $1.00 May stock at a that Emerald would sell its Thereafter, Board Hall and January per share before price of $1.80 Hall could transfer were advised per share thereafter. and at $2.24 May stock to an significant portion of his rejected by Hall. Koether This offer was children, his with inde- trust for irrevocable *5 purchase not Emer- replied that Hall did trustees, percentage a smaller pendent holdings May, pur- he would ald’s stock loss of charity, without the of the stock to May. stock in Koether chase additional suggestion appealed to This May’s NOL’s. provisions of Article suggested that the stock portion May A of would Hall. May certificate of incor- Fourteenth of the purposes control for removed from Hall’s block, poration possible it for him to made and the transfer Fourteenth of Article complete, to or make it difficult for Hall and estate his charitable would further proposed merger. the planning objectives. May of the certificate Article Fourteenth 28,1988, met May the Board January On requires May to incorporation that for of 8, 1988, as the date for a and set March party certain business combina- be a to stockholders to vote special meeting of the tions, proposed must re- combination the Hall merger proposal with upon the particular, In supermajority vote. ceive a set as date was corporations. The record proposed required 1, 1988, where the February such a vote is 2, February 1988. On acquiring and an May 29, 1988, is between Hall transfer- January effective May (consti- of entity owning in excess of 3,981,771 May 30% of stock red shares ap- outstanding or controlled common tuting May’s stock. Since Hall owned of 27% trust, stock, pro- May stock) independent of the irrevocable proximately to an 52% daughters applica- of his four up of Article Fourteenth were for the benefit visions set Trust”). two (“Hall Hall proposed merger with the 1988 Children’s to the ble independent Therefore, if Koether fol- were vested with corporations. co-trustees dispose of the shares acquire power to or through his intention to vote lowed with Emerald, effect of this by trust. The net through he owned May’s stock more of personal own- Hall’s transfer was to reduce arguably be able to block would concert, intimidating purpose ing for the of May’s shares controlled The actual number of causing from the record. into Koethers is not clear board of directors hearing, pre- Emerald owned date of the repurchase On the 330,000 such shares at a substantial approximately May stock or shares price.” market Good over their realistic mium May. Brown, 2.2% of Texaco, Inc., C.A. No. 19, 1985) C., (Feb. WL op. slip [1985 at 21 "greenmail” as "the has been defined 4. The term 11536]. significant amount of stock accumulation shareholder, group of shareholders act- or 25%, issue to incorporation. The first at a tifieate of May stock from ership of date, prior appeal super- the record be decided on whether prior time merger. applicable vote on the requirement the stockholder vote pertinent part, merger proposal. May February Board On provision states: supermajority vote merger agreement which reaffirmed the presented eventually voted shall be effect- No Business Combination upon May stockholders.5 The approved it is at a ed unless proxy were advised in a state stockholders Corporation’s stockholders called percentage in Hall’s ment of the reduction person or purpose. presence ownership trans of stock as a result of the less than by proxy of the holders February the trust. On action with voting Corpo- securities of the Proxy released a Statement required to constitute a ration shall be seeking approval its stockholders of the meeting. The af- quorum any at such One”) merger agreement (“Proposal voting firmative vote 66-%% approval of an amendment to Article Four person by proxy, or power present, incorpo certificate of teenth of meeting, excluding all securi- such Two”). (“Proposal proxy ration state Acquiring beneficially, by ties owned need for ment addressed issue required approval Entity, shall be approval merger by majority vote any such Business Combination. rather after the than May’s incorporation defines a drop percentage in Hall's down owners “any merger Business as or Combination hip.6 Corporation [May] consolidation of the May bylaws Pursuant and the corporation, person or into other statement, the stockholders of owner, entity is the which beneficial special meeting held a in March for the directly indirectly, or more of the proposals. on the two outstanding voting Corpo- securities of the 14,655,660 Of the shares entitled to vote ration.” certificate 11,834,661 date, of the record shares were provides also person by proxy. Ap- *6 required unless minority of stockholders is 10,513,703 proximately shares voted were May Board authorized the Business One, 9,934,172 Proposal as to with votes in Combination: Two, respect Proposal favor. With of any corpora- such prior to the time that 11,834,661 11,151,- represented, shares tion, entity person or other became the 902 voted favor. owner, directly indirectly, of beneficial Applicability Supermajority outstanding voting or more of the 30% Vote Provision Corporation. corpora- A securities of the tion, person entity or other which is the granted Em Chancery The Court of owner, directly indirectly, beneficial preliminary injunction enjoining erald a Corporation’s out- or more of the 30% merger consummation of the because the (taken togeth- standing securities merger approval stockholder failed class) single a is herein referred supermajority voting require er as to meet Entity”. May’s “Acquiring cer- as the ments of Article Fourteenth of Court, merg- May "approved” argument appel sumed that the Board 5. At oral before this agreed attorney er on November lants' that there was no material change merger agreement between the in the Board, approval by May proxy Novem Hall’s at- date statement disclosed that 6. The 30, 1987, legal opinion torneys provided ber it, and the date the Board reaffirmed a written had change February only requirements of Article supermajority The was the that títe ownership May longer applicable stock Hall. no to the reduction in Fourteenth were Petroleum, Inc., See, Proxy dis- May merger proposal. statement also Statement/Pro 16, 1988) indepen- (disclosing spectus (February Board had been at 64 closed that the legal stock). rely upon the ownership part dently that it could of Hall’s advised transfer opinion opinion, rendered to Hall. of this we have as- For the Chancery interpreted poration The Court of subject provisions Arti- are also to the cle May’s Fourteenth of certificate of Corporation incor- of the Delaware General Law. poration requiring as supermajority Theatres, vote Loew’s Inc. v. Commercial approve merger any entity Company, Credit May’s outstanding held or more of 30%
common stock at the time May
Board
provision
supermajority
merger.
voted to recommend the
This in-
in May’s
incorporation
vote
certificate of
terpretation
percentage
makes the
of stock
applicable only to a Business
ownership
Combination.
on the date of the directors’
May’s
incorporation
certificate of
defines a
applicability
vote determinative of the
Business Combination
Article Fourteenth. The
Court of Chan-
cery
“any
concluded
consolidation between
that since the
Board
entity
...
authorized the
which is the beneficial
on November
owner ...
1987, “long
Hall,
outstanding voting
or more of the
Acquiring
after Mr.
added).
Entity,
[May].” (emphasis
securities of
May’s
obtained
stock and
it,”
Corporation
The Delaware
supermajor-
while he still controlled
General
Law
that,
provides
ity
requirements
notwithstanding
vote
certain fil
applicable
were
ing
merger.
requirements,
urges
e.g.,
Emerald
see
8 Del.C.
this Court to
§
(1983 Supp.1988), merger
affirm that
&
is not com
conclusion.
plete
corpora
until the stockholders of the
appellants
contend that the critical
See,
approve
tions have voted to
it.
determining
time for
the applicability of
251(c)
case,
(Supp.1988). In
Del.C.
this
Article Fourteenth is the date of the stock-
we find
inconsistency
May’s
appellants argue
holder vote. The
that the
applica
certificate of
and the
provision applies
only to
provisions
ble
of the Delaware General
(30%
Acquiring Entity
with an
Corporation Law.
stockholder).
only
Since Hall
owned 25%
common stock at the time the
Chancery
recog-
correctly
The Court of
was ratified
proposed merger
nized that the
could not
appellants
contend that there was no be effective until the stockholders voted.
Acquiring Entity being merged
May.
into
Chancery
the Court of
concluded
Accordingly,
appellants argue
that the
that,
terms,
by its
Article
ap-
Fourteenth
provision
in Article plied
at the time the
stockholders vot-
apply
proposed
Fourteenth did not
upon
merger,
ed
because Hall owned
merger.
(52%) May’s
more than
stock at the
time the directors voted to recommend it.
examining
provisions
anything
We do not find
that there
incorporation,
apply
courts
*7
language of Article Fourteenth
re-
which
interpretation.
the
of
rules
contract
Hib
quires
application
merger
any
to
with
Park,
Inc.,
Hollywood
Del.Supr.,
bert v.
entity,
an
which is not then the owner of
only
teenth,
of
the
or
Hall’s transfer
stock to
Hall
the co-trustees and Hall
the
corpo-
Hall
1988
Trust
ef
improper
respect
voting
Children’s
was an
rations with
on
to
the
deny
minority
merger,
fort
to
posed
legal
the
stockholders’
and there is no
basis to
rights.
argues
Hall
that his actions were
assume that the co-trustees would act con-
designed
valid and
comply
trary
fiduciary
the
to their
duties.
Kauf-
Cf.
Belmont,
Ch.,
man v.
incorpo
terms of the
Del.
479 A.2d
(court
(1984)
ration. This Court will not tolerate “the
not
will
assume that a
wrongful
corporate
designated
of
by
subversion
democra
dominant
director
stockhold-
Corp.,
v.
cy.”
duties).
Giuricich
Emtrol
his
perform fiduciary
Del.
er will fail to
Supr.,
See also
(1982).
A.2d
conveyance
find that Hall’s
We
to the
Valhi, Inc.,
Young
Ch.,
Del.
effectively
Hall 1988
Trust
di-
Children’s
(1978). Therefore,
we
examine
now
ownership
him
of
any
vested
and control
the transfer which resulted in the reduction
ownership
shares and
his
those
reduced
holdings.
of Hall’s stock
the
and control
stock.
Cf.
Inc.,
Aviation,
At the
Sundlun v. Executive Jet
time when the
first
Board
approved
merger,
30, 1987,
the
November
Emerald
their
record
that
indicates
dence”.11
the
outstanding
co-trustees
stock
trust are
fiduciary
imbued with
duties to
was voted
favor of the
with the
que
cestui
act in
trusts. The Hall
corporations.
favor of
Since the
co-trustees
duty
provision
apply,
would have the
to vote in
all
did not
that was
opposition
merger,
necessary
to the
if in
to ratify
proposal
their view
simple major-
were adverse to the interests of was
the affirmative vote
See,
que
cestui
trusts.
8 Del.C.
There
evidence
ity
is no
stockholders.
251(c)
any agreement,
suggest
(Supp.1988).
the record
or
The decision of the
arrangement
understanding,
of Chancery enjoining
merger,
between Court
attorney
10. Emerald’s
reaffirmed this at oral
THE COURT:
a valid
It was
transfer.
argument:
point.
concede that
THE ATTORNEY: I
Well,
you
THE
do
that the
COURT:
concede
provides
powers
all of
11. The trust
that
the trust
transfer
trust is
to the
irrevocable?
Honor,
Among
things,
THE
I do
reside in the co-trustees.
other
ATTORNEY: Your
argument
present
provides
person,
have an
that I can
to the
the trust
that
other than
“[n]o
Court at
that the
can be
[co-trustees],
this time
trust shares
acting
fiduciary
in [their]
ca-
returned to Mr. Hall.
pacity,
power
shall have or
exercise
to vote
you
point,
THE
So
concede
COURT:
that
or direct
stock or other securi-
irrevocably
transfer-
the trust shares are
trust,
ties of
control
investment of the
red?
by directing
either
trust
investments of the trust
THE
I concede that
ATTORNEY:
reinvestments,
reacquire
exchange
or to
nothing
record there is
which would
any property
submitting
of the trust
they
prepared
indicate
not.
I am not
are
property
equivalent
Agree-
of an
value." Trust
point forever.
concede that
X(A).
only right given
Article
ment
certainly
THE
But
as we stand
COURT:
(the
que trusts
cestui
beneficiaries
trust—
today you
conceding
pur-
here
it
children)
right
specific
is the
Hall’s
distri-
record,
pose
right?
provided
the trust.
butions
for under
it,
question
THE ATTORNEY: No
about
*9
yes, sir.
One”),
(b)
super-
porations (“Proposal
due to an absence of an
affirmative
incorpo-
amendment of
REVERSED.
to increase the authorized
ration
number
Quorum/Voting
Distinguished,
Power
(“Pro-
to 100 million
common shares
Two”).
posal
We have concluded that there was
and,
an Acquiring Entity
with
14,655,660
The record indicates that
therefore,
that Article Fourteenth was
special
shares
entitled to vote at the
were
completely inapplicable.
we
meeting
of the
of the
assume, arguendo,
Proposal
shall now
that
14,655,660
record date. Of the
shares enti-
One involved Business Combination with
vote, 11,834,661
repre-
tled to
shares were
i.e.,
Acquiring Entity,
corpora
an
the Hall
meeting
person
sented at
in
or
tions, as affiliates of a
stockholder.
proxy,
present
and were all counted as
quorum
establishing
Fourteenth,
Pursuant to Article
there are
(80.8%).
3,675,359 of
Hall controlled
voting requirements
two
that must he sat-
represented
meeting.
shares
at the
Emer-
for a Business
isfied
Combination with an
special meeting
ald did not attend the
in
Acquiring Entity,
merger,
such as the
person
by proxy.
or
First,
gain approval.
there must be the
“presence
person
in
or
proxy of the
Judges Voting
The
Certificate
voting
holders of not less than
of the
power
to vote
Proposal
reflects that the
on
Corporation” (i.e.,
securities of the
an 80%
1,329,958
One was withheld on
shares.
added).
quorum) (emphasis
Second, the
inspectors
The
of election at the stockhold
Business
approved by
Combination must be
10,513,703(11,843,661
ers
counted
of the vot-
the “affirmative vote of
66-%%
1,329,958)
voting power
minus
shares as
on
ing power present,
person
by proxy,
in
or
One,
9,934,172
Proposal
with
of these
meeting, excluding
at such
voting
all
secu-
in
proposed
shares voted
favor of the
beneficially, directly
rities owned
or indi-
432,796
146,735
merger,
opposed, and
abs
rectly, by
Acquiring
Entity” (emphasis
Two,
11,834,661
Proposal
tained.12
all
On
added). Specifically, the supermajority lan-
voted,
11,151,902
shares
with
guage
establishing
of Article Fourteenth
affirmative, 485,912
shares
in the
voted
quorum
voting requirements
161,747
against,
Al
voted
abstained.
provides:
such a situation
though
report
inspectors of
of the
elec
presence
person
The
or
ministerial,
presumed
tion is
it is
to be
the holders of not less than
Cop
of the
correct. Atterbury v. Consolidated
voting
Corporation
securities of the
shall permines Corp.,
Nevertheless, relationship voting power present a verse” of to which broker, owner”, who is “record applied.17 and the standard Cf. Exchange (CCH) 14. supplementa- Both New York Stock and the 2 Guide N.Y.S.E. 2452.11 ¶ 3809-11; Exchange require also, ry Stock American ganizations member or material at see 2 Am. Stock soliciting (CCH) who have received commentary materi Ex. Guide 9529.11 at ¶[ respect als to certain actions with take 2721-23. instructions from the beneficial owner of the See, e.g., (CCH) 2 N.Y.S.E. Guide 2452.12 ¶ name.” 2 stock held "street N.Y.S.E. Guide 2451-2452; (“the (CCH) supplementary 2 material at 3811 member Am. Stock Ex. Guide ¶¶ (CCH) organization may proxy 9528-9529. NASD Rules of Fair in the absence ¶¶ Cf. Practice, III, .05, Interpretation Art. physically Section § instructions it crosses out those (CCH) portions discretion.”). NASD Manual 2151.05 2038. See ¶ where it not have does Senouf, Del.Supr., Corp. also Enstar 1351 argues Proposal 17. Emerald was Two also and, therefore, nondiscretionary could not be example. Exchange 15. For New York Stock voted on a broker was the who record holder provides part: pertinent Rule 452.11 without instructions from beneficial owner. broker, If the was stockholder record a Generally organization speaking, a member Two, Proposal on give the broker cast a vote may proxy to vote without instruc- required beyond was not to look from owners tions beneficial when matter (3) registered corporation ought upon: merg- voted “The to be ... relates owner. er_” possible not to be involved in misunderstand-
495 Ernst, Fradkin v. Del.C. F.Supp. rejection, pursuant to 8 Bank York v. For a (N.D.Ohio 1983); provision such as Arti- New Co. efficacious, it must be Irving Corp., Bank 140 Misc.2d 531 cle Fourteenth to be aff'd, (N.Y.Sup.Ct.), operable N.Y. found to at the time of N.Y.S.2d 730 become action, (N.Y.A.D. Dept.1988). We also board and thereafter to remain S.2d place procedures of Section 251 inspectors find that of election were until all counting securities carried out. correct have been person which were super- provides Article Fourteenth that a pur at the majority quorum requirement and vote quo poses “greater universe” approval applies shareholder set in Article Four requirement rum forth involving defined “Business Combinations” teenth. or more shareholder unless of directors “shall have authorized” established, Article Once board “prior provided Fourteenth of the vot- such combination to the time” that 66-%% (those ing power present person holder of entitled to vote such became 30% *13 added). subject) affirmatively (emphasis had to vote securities On the merger. May’s adopted ap- approve Accordingly, we con- date that board and quorum requirement proved, thereby clude that the and the and “authorized” the Hall voting power provision Craig only merger, of Article Four- Hall not owned 52% were, correctly applied May’s teenth in stood on both sides of the were and stock but fact, by in For satisfied this case. this alter- transaction virtue of his control reason, Therefore, corporations. my nate the decision of in the Court the Hall view, Chancery enjoin merger plain language is RE- under the of Article Fourteenth, quorum VERSED. its requirement
vote then attached. HORSEY, Justice, concurring part in approval, at time of board Attachment dissenting part: time of shareholder rather than at ruling I the un- majority’s appears dissent from the also to be consistent with supermajority voting requirement derlying purpose May’s propos- con- board ing tained in its shareholders May’s Article Fourteenth of char- Article Fourteenth to apply proposed merger Proxy ter did not That stated its 1977 Statement. notes, I was, protec- corporations. purpose plaintiff with the Hall as minority from business portion concur of the Court’s deci- tion of stockholders sion finds that shareholder vote “transactions are not effected which [that] arms-length bargaining.” satisfy through re- Since was sufficient to corporate quirement supermajority voting re- and conditions of a terms by by and not quirement of Article Fourteenth. transaction are set a board trig- the relevant date for its Thus, I affirm the Court of Chan- would provision should gering be cery’s May’s construction of charter’s su- approval of of board the business date permajority provision; namely, that The raison combination or transaction. determining application its to the date for is, d’etre for such a provision plaintiff May’s beneficial owner of more inability of argues, presumptive “the [a] is the date on which the securities genuine, arms-length ne- to conduct board proposed by such business combination controlling stockholder.” gotiations with a Hall) ap- controlling (Craig was owner originally defendants themselves proved by May’s board of directors and Four- of Article merger adopted this construction the date of submission of the applied to this transaction. adoption teenth as agreement to the stockholders 583, (1945). Schenck, Del.Supr., non-reg- A.2d 589 ings opinion or clashes of between the may registered Corp. v. principle istered and holder of shares. It in Enstar This was reaffirmed rightfully corporate books as the sole look to the Senouf, A.2d at 1356. Corp. membership.” evidence of Salt Dome Oil statement, their February issued fecting the investment interests of the mi- stated, defendants “The transaction nority non-management shareholders. was originally comply structured being claim, This a class or derivative Article requirements; Fourteenth’s how- fact plaintiff appears that this to have a ever, Mr. Hall subsequently decided to seek motive of in enforcing self-interest the su- applicability superma- obviate the permajority provision is irrelevant to jority voting requirements of Article Four- significant the determination legal of this by reducing teenth his ... beneficial own- question. There minority are other share- ership May common stock below 30%.” holder interests involved. special meeting Finally, it should be noted that May’s stockholders was also stated to be Court’s Order of August remand dated upon consider proposal and vote “[t]o 1988 stated that parties “the adopt an Agree- Amended and Restated may proceed at their own risk.” This be- Merger, ment and Plan of dated November ing interlocutory appeal, an there may re- Thus, 1987....” November main for determination the trial court was date that decided, several issues raised below but not plan merger by May was authorized including the fairness of the Hence, board. Article Fourteenth price exchange terms of ratio and date, terms attached since as of that whether the shareholder ratifying thereto, prior Craig well holdings Hall’s fairly effected stockholders well exceeded outstand- who fully were informed consistent with ing stock. Duncan, Del.Supr., Michelson v. While a completed is not unless *14 approved by the majori- ty’s initialruling may per- be construed as
mitting controlling shareholder to influ-
ence, dominate, corporate not transac-
tion and thereafter reduce his sharehold-
ings to avoid requirement super- ratify. vote to hap- That did not
pen case, precedent but the will be application
available for its in a future STEWART, Derice Ann and John Mad case. I fear the Court’s decision will send dox, individually and as Guardian Ad wrong signal that a supermajority vot- Maddox, minor, Litem for Mark ing provision adopted by shareholders may Plaintiffs, avoided an act of divestment of shares controlling after shareholder has exercised his dominance to secure MODERACKI, Genevieve Defendant. approval
board of a transaction. Superior Delaware, Court of One apply manipu- standard should County. New Castle affecting gover- lative conduct corporate nance, practiced by whether controlling July Submitted: insider or an outsider bent a takeover. July Decided: in, acquiesced Such conduct should not be especially controlling where the sharehold-
er times his divestment shares to “turn supermajority voting requirement
off” the follow, precede, his exercise of dom-
inance approval to secure board
transaction. The
tective device is indisputably designed to
provide greater shareholders with a control corporate management
over decisions af-