Fogel v. U.S. Energy Sys.

Civil Action No. 3271-CC, 2007 Del. Ch. LEXIS 178 (Ch. Dec. 13, 2007)

 

RULE:

Each director must receive notice of a special meeting as prescribed by the bylaws; or all acts done at the meeting are void. Notice of all matters to be considered is not required, but there must be notice sufficient to allow directors an adequate opportunity to protect their interests. Where a director is tricked or deceived about the true purpose of a board meeting, and where that director subsequently does not participate, any action taken is invalid and void.

FACTS:

Defendants, operators of a swap meet, allowed vendors to sell counterfeit recordings of music in violation of plaintiff's copyrights and trademarks. Plaintiff sued defendants for copyright infringement, contributory and vicarious copyright infringement, and contributory trademark infringement under the Copyright Act, 17 U.S.C.S. § 101 et seq. The district court granted defendants' motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6). Plaintiff appealed the dismissal on all claims except the copyright infringement claim.

ISSUE:

Was the CEO properly dismissed, thereby depriving him of the authority to call the special meeting?

ANSWER:

No.

CONCLUSION:

Under Del. Code Ann. tit. 8, § 141, the court determined that the board's action on June 29 was void ab initio because (1) the gathering did not constitute a proper meeting of the board since there was no formal call to the meeting, there was no vote, and the exchange was unidirectional, and (2) even if a meeting occurred, the individual directors obtained the CEO's attendance by deception. Therefore, the CEO was not terminated before he called for a special meeting. However, the CEO's breach of fiduciary duties claim failed because the board ignored his call for a special meeting since they believed in good faith that he had been fired and lacked the authority to call for such a meeting.

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