OptimisCorp v. Waite, No. 523, 2015 (Del. Apr. 25, 2016)
 

The OptimisCorp plaintiffs—the corporation, CEO Alan Morelli, and his investment company—asserted claims for breach of the duty of loyalty, breach of contract, tortious interference, and conspiracy, seeking damages and equitable relief against three of the corporation’s directors and its CFO.  The action stemmed from defendants’ efforts to oust Morelli after an internal investigation determined that allegations of sexual harassment by the CEO were credible.  The defendant directors convened a special board meeting to address the situation without circulating an agenda for the meeting, effectively ambushing Morelli.  At the special meeting, the board formed an ad-hoc committee, which was advised by counsel during the meeting to terminate Morelli; the committee then fired Morelli and amended his stockholder agreement to strip him of the right to appoint five of the corporation’s nine board members in an effort to prevent him from returning himself to power. 

Morelli filed and prevailed in a Section 225 action, with the court vacating his removal and the amendment to his stockholder agreement.  Once returned to power, Morelli removed the defendants from the board and brought the instant action.  During the bench trial, defendants established that the plaintiffs engaged in extensive witness tampering through bribery and threats of criminal and civil liability; as sanctions for the egregious misconduct, Vice Chancellor Parsons dismissed plaintiffs’ conspiracy claims and drew certain adverse inferences against the plaintiffs in connection with certain other claims.  The VC dismissed all of the claims, other than a single violation of the duty of candor, and found that plaintiffs had not proven damages.

In so ruling, the VC rejected plaintiffs’ contention that Morelli was a “super-director” entitled to advance notice of the special meeting agenda and a chance to exercise his right to reconstitute the board.  The VC concluded that Delaware law obligates the board “to act in the best interest of the entity and the stockholders as a whole” such that the defendant directors had not “breached their duty of loyalty by not advising [CEO] in advance of his potential termination.”

The Delaware Supreme Court affirmed dismissal of the claims but rejected the VC’s conclusion that the defendants had no duty to inform Morelli about the agenda of the meeting.  Though the Court did not embrace the “super-director” theory, the Court rejected the idea “that cliques of the board may … sandbag a fellow director.”  Nor was the Court persuaded that surprise tactics were justified the risk that new directors appointed Morelli might violate their fiduciary duties.  The Court observed that Delaware law has “potent remedies” for stockholders aggrieved by such improprieties and places primacy on the “value [of] collaboration” among board members. 
Accordingly, the Court ruled that the Chancery should have engaged in a “considered evaluation of whether intentional duplicity toward fellow board members is consistent with the fiduciary duties those directors owe to the company and its stockholders, including stockholders who are entitled to rely upon stockholder agreements.  The Court emphasized the important public policy embodied in the DGCL’s authorization of stockholder agreements—that control rights incentivize investors to commit capital and enable society to create wealth through the corporate form. 

The decision in OptimisCorp thus serves to reaffirm at least two principles:  First, directors may not engage in “Pearl Harbor-like tactics” to remove directors or restrict stockholders whom the majority of the board perceives as problematic but rather should employ the tools available under Delaware law to protect the company.  Second, stockholder agreements as authorized by the DGCL must not be trivialized and warrant deference as a matter of public policy.