Summary Judgment Denied in Section 225 Expedited Proceeding
In Openwave Systems, Inc. v. Harbinger Capital Partners Master Fund I, Ltd., (Del. Ch., Mar. 5, 2007), 2007 WL 704943, read opinion here, the Delaware Chancery Court denied a motion for summary judgment in an expedited proceeding under DGCL Section 225 to determine the valid directors holding office after an annual meeting. The complaint was filed in late January and the trial was scheduled to begin today. The decision denying summary judgment was issued last Monday, March 5, with the court explaining that it should "inquire more thoroughly into the facts in order to clarify the application of law to the circumstances." The corporation and the hedge fund shareholder had competing claims as to why each of their nominees should be properly installed as directors.
Curiously, one of the arguments was that because the provisions of the bylaws relating to selection of directors were so confusing, therefore they should not be strictly enforced. It takes a certain amount of intellectual confidence to argue that bylaws, in essence, cannot be understood. The court determined that there were too many factual issues to make the decision before trial, while conceding that the bylaws lacked clarity and were confusing.
Money quote: "This court and Delaware law are especially solicitous of the franchise rights of stockholders and "are vigilant in policing fiduciary misconduct that has the effect of impeding or interfering with the effectiveness of a stockholder vote'". (citations omitted.)
