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Court of Chancery of Delaware
October 19, 2022, Submitted; December 27, 2022, Decided
C.A. No. 2022-0132-MTZ
ZURN, Vice Chancellor.
This opinion considers the corporate benefit created by, and commensurate attorneys' fees payable to, a stockholder who advised the company's board that two stockholder votes in anticipation of a merger did not comply with Delaware law. The plaintiff is a class A common stockholder in a publicly traded special purpose acquisition company. The SPAC had class A common stockholders and class B common stockholders. The SPAC was set to acquire a company in a merger, with the SPAC as the surviving post-transaction entity. The post-transaction entity would have only one class of common stock.
The SPAC's stockholders had to approve [*2] the transaction, as well as several ancillary proposals that included updating the SPAC's charter. One of the proposed charter amendments increased the number of authorized shares of class A common stock. Another proposed amendment altered the vote required for the board to change the number of authorized shares in the future.
Before the votes, the plaintiff wrote a letter to the SPAC's board asserting the proposed voting structure for those amendments violated the class A common stockholders' voting rights under Section 242(b) of the Delaware General Corporation Law. He demanded the SPAC provide the class A common stockholders a right to vote on those two amendments as a standalone class, instead of with the class B common stockholders. The SPAC amended the merger agreement and supplemented the proxy to make the changes the plaintiff demanded. The SPAC's stockholders voted to approve the merger and the proposed charter amendments, the merger was consummated, and the amended charter went into effect.
The plaintiff then filed an action in this Court seeking attorneys' fees and expenses for the benefits he conferred on the company and its stockholders by facilitating statutorily compliant votes. The plaintiff argues his inspiration of a class [*3] A vote on the charter amendments preserved the stockholder franchise, the post-transaction entity's capital structure, and the transaction itself. The defendant company asserts the changes were unnecessary because the proposed charter and voting structure were already statutorily compliant. The defendant interprets the SPAC's original charter to provide one class of common stock with two series, "Class A" and "Class B," that under Section 242 could vote together on the amendments affecting the common class. Under that interpretation, no standalone class A vote was necessary, and so the plaintiff did not confer a substantial benefit warranting a fee award.
Full case includes Shepard's, Headnotes, Legal Analytics from Lex Machina, and more.
2022 Del. Ch. LEXIS 360 *; 2022 WL 17959766
ROBERT GARFIELD, Plaintiff, v. BOXED, INC., Defendant.
Notice: THIS OPINION HAS NOT BEEN RELEASED FOR PUBLICATION. UNTIL RELEASED, IT IS SUBJECT TO REVISION OR WITHDRAWAL.
stockholders, shares, stock, common stock, voting, conferred, original charter, preferred stock, par value, merger, number of shares, Share Increase Amendment, contingency, benefits, separate class, fee award, sentence, charter, Proxy, expenses, factors, proposed charter, Opt-Out Provision Amendment, meritorious, decrease, issuance, courts, certificate of incorporation, charter amendment, summary judgment
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