C.A. No. 4497 (Del. Ch., Apr. 14, 2009) (Letter Opinion)
The Delaware Court of Chancery denied defendant company Trico’s motion for expedited proceedings because the Court obviated the need for expedited proceedings by preserving the company’s legal position. Plaintiff stockholder Kistefos had proposed a bylaw, so-called “Proposal 8,” that the company rejected on the basis that, if accepted, the bylaw would be inconsistent with the company’s certificate of incorporation and Delaware law. Proposal 8 would cause the term of any director to immediately expire when failing to receive the number of votes required for re-election, rather than allow “an incumbent director who receives only a plurality of votes [to] continue to serve as a ‘holdover’ director.” The company asserted that “in order to preserve its legal position that Proposal 8 was invalid . . ., it must ‘disregard’ the proposal if it is presented at the meeting.” The company argued that the Court should expedite the case and rule on the validity of Proposal 8 before stockholders voted on it at the annual meeting. Rather than ruling on the validity of Proposal 8 before the meeting, the Court (a) preserved the company’s legal position, (b) permitted the plaintiff stockholder to solicit proxies and present arguments at the annual meeting regarding Proposal 8 in the same manner permitted with respect to other proposed bylaws, and (c) ordered the company to permit stockholders to vote on Proposal 8 in the same manner permitted with respect to other proposed bylaws. The Court’s preservation of the company’s legal position obviated the company’s justification for expedition. As a result, the Court concluded that it was not necessary to rule on the validity of Proposal 8 unless and until the stockholders approved it.
The full opinion is available here.