B. F. Rich Co., Inc. v. Gray, et al., 2006 WL 33376163(Del. Ch. Nov. 9, 2006), read opinion here. The Chancery Court here addressed a claim brought under DGCL Section 225, regarding a determination of the proper directors and officers of the nominal defendant. The election by written consent was contested. The allegation was that the attempt to replace directors and officers by written consent was improper due to the consent being exercised by minor children who allegedly lacked legal authority to vote those shares. A declaratory judgment was sought on the authority of the minor children to vote shares. A one day trial was held on March 15, 2006 and this post-trial opinion concluded that the written consents were effective to properly elect de jure directors and officers. The defendants wanted the court to consider a “parade of horribles” regarding prior findings of breach of fiduciary duties by the director whose election was contested. See e.g., In Re Summit Metals, Inc. v. Gray, 2004 WL 1812700 (D.Del. Aug. 6, 2004).
However, the Chancery Court made clear that the scope of a Section 225 action is: “narrowly limited to the validity of the election or vote and the right to hold office. Consequently, the court must disregard collateral issues outside of this realm.”(citing Bachmann v. Ontell, 1984 Del. Ch. LEXIS 569, Brown, C. (Nov. 5, 1984)).
Moreover the court reasoned that if there were breaches in the future of any duties, the parties could seek appropriate relief at that time. Otherwise a Section 225 proceeding limits the court to a determination of the validity of the written consents at issue in the particular case before the court. In reaching its conclusion, the court also was required to review the impact, under the applicable Connecticut law, of a stipulation which affected the authority of the party who had signed the consent on behalf of his minor children.
