Sinchareonkul v. Fahnemann, C.A. No. 10543-VCL (Del. Ch. Jan. 22, 2015).
Several aspects of this Court of Chancery opinion make it noteworthy. First, this declaratory judgment action seeking to invalidate bylaws that confer disproportionate voting power on certain directors, addresses the various provisions of the DGCL which animate and authorize bylaws and the limitations on the scope of bylaws in general. This analysis of course can be useful in connection with any bylaw challenge, such as fee-shifting bylaws which were not at issue in this case. The Court also recites the truism that corporate action must be twice-tested: Once to determine compliance with the DGCL and once to address equitable principles.
Second, the court provides a thorough explanation of the prerequisites for seeking expedited proceedings which are routinely granted when there is a colorable claim that also includes irreparable harm in the absence of expedition.
Third, the court provides an exemplary doctrinal analysis of the authority of directors, the rights of directors and the prerequisites for valid board action. This includes a reference to an article in the current issue of The Business Lawyer, the hard copy of which arrived in the mail this week. The co-authors of the article are the Vice Chancellor who wrote this opinion and his former colleague at a premier Delaware law firm. See J. Travis Laster and John Mark Zeberkiewicz, The Rights and Duties of Blockholder Directors, 70 Bus. Law. 33 (2014/2015).
Although not one of the aspects that makes this pithy Chancery opinion noteworthy, the court discusses the procedural prerequisites for standing required to file suit, as opposed to the necessary elements of a cause of action.