In Fogel v. U.S. Energy Systems, Inc., 2007 WL 4438978 (Del. Ch., Dec. 13, 2007), read opinion here, the Delaware Chancery Court addressed issues raised in connection with a contested board meeting during which the CEO was allegedly fired. After the purported firing, the CEO attempted to call a shareholders’ meeting. The board refused to hold the shareholders’ meeting because they said the CEO who called it was no longer in office. The court held that the board meeting at which the board attempted to fire the CEO was not convened properly and thus the termination was "legally void". Board meetings held without proper notice and those where a member’s attendance is procured by deceit, are not properly convened.
The court also determined that the heightened review under Blasius Indus., Inc. v. Atlas Corp., 564 A.2d 651,. 653 (Del. Ch.1988), would not apply. Blasius applies where directors act with the primary purpose of thwarting a shareholder vote. Such an action would be a violation of the fiduciary duty of loyalty even if such actions are taken in good faith. Here, the decision of the board to ignore the call for a special shareholders’ meeting interferes with the shareholders’ ability to cast votes, but the decision was not made with the "principle purpose of preventing the shareholders from electing a majority of new directors". (citing Stroud v. Grace, 606 A.2d 75, 92 (Del. 1992)).
In sum, the court found that the board believed in good faith (though wrongly) that the CEO had been fired and that is why they did not call a shareholders’ meeting. Moreover, the CEO (who filed the lawsuit) failed to prove that the board’s primary purpose was to impinge on the shareholder franchise (which is a prerequisite for applying the Blasius review.)
UPDATE: Professor Bainbridge comments here on the aspects of the opinion that focus on the need for certain prerequisites in order to properly constitute a board meeting. He also discusses and refers to his own scholarship on the dynamics of and the issues surrounding the decisionmaking process in connection with board meetings.