In a recent letter opinion, the Delaware Court of Chancery dismissed claims brought by stockholders of SRA International, Inc. against the corporation challenging the validity of a consummated merger. Here, the stockholders brought the suit under Section 124 of the Delaware General Corporation Law, which permits suits by stockholders if a corporation acts without legal power or capacity (also known as the "ultra vires" doctrine). Section 124 provides that no corporate act shall be invalid by reason of the fact that the corporation was without capacity or power to do such act, however, it allows stockholders to assert that the corporation is acting ultra vires in a proceeding to enjoin the corporation from taking such actions.
Here, plaintiffs alleged that the corporation's directors breached their fiduciary duties by not complying with the company's certificate of incorporation, which required that holders of each class of common stock receive the same per-share consideration in the event of a merger of the company. In the challenged merger, different stockholders received different per-share consideration, and the plaintiffs sought to have the merger invalidated as an ultra vires act under Section 124. The court, however, rejected such claims and the applicability of Section 124 in this situation, as the merger was already consummated and plaintiffs sought not to enjoin the merger, but instead, to have it declared invalid post-consummation. As such, the court dismissed plaintiffs' claims as being barred under Section 124. The Court did, however, advise that the stockholders may assert a breach of fiduciary duties claim outside of Section 124.
Southeastern Pennsylvania Transportation Authority v. Volgenau, C.A. No. 6354-VCN (Del. Ch. Aug. 31, 2012).