IN THE COURT OF CHANCERY OF THE STATE OF...
Transcript of IN THE COURT OF CHANCERY OF THE STATE OF...
01:18081076.1
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN RE VAALCO ENERGY, INC. CONSOLIDATED STOCKHOLDER LITIGATION
) ) ) ) )
C.A. No. 11775-VCL
DEFENDANTS’ ANSWERING BRIEF IN OPPOSITION TO PLAINTIFFS’ MOTION FOR PARTIAL SUMMARY JUDGMENT
AND IN FURTHER SUPPORT OF DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
OF COUNSEL: Michael C. Holmes Andrew E. Jackson Cortney C. Thomas VINSON & ELKINS LLP Trammel Crow Center 2001 Ross Avenue, Suite 3700 Dallas, Texas 75201-2975 Dated: December 17, 2015
Rolin P. Bissell (No. 4478) Kathaleen St. J. McCormick (No. 4579) Elisabeth S. Bradley (No. 5459) Benjamin M. Potts (No. 6007) YOUNG CONAWAY STARGATT & TAYLOR, LLP Rodney Square 1000 North King Street Wilmington, Delaware 19801 (302) 571-6600 Counsel for Defendants Steven P. Guidry, Frederick W. Brazleton, O. Donaldson Chapoton, James B. Jennings, John J. Myers, Jr., Andrew L. Fawthrop, Steven J. Pully, and VAALCO Energy Inc.
EFiled: Dec 17 2015 11:51AM EST Transaction ID 58311739
Case No. 11775-VCL
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TABLE OF CONTENTS
Page
PRELIMINARY STATEMENT ............................................................................... 1
I. The Charter and Bylaws Are Valid. ................................................................ 6
A. Plaintiffs bear the burden of demonstrating invalidity. ......................... 6
B. Plaintiffs have not demonstrated invalidity........................................... 7
1. The Charter and Bylaws do not transgress a mandatory rule of Delaware law. .................................................................. 7
a. Section 141(k) does not create a mandatory rule prohibiting for cause limitations on director removal. ............................................................................ 7
b. The exceptions in Section 141(k) do not render it a mandatory prohibition, and Plaintiffs’ reliance on Arnold is misplaced. ......................................................... 8
c. The other authorities on which Plaintiffs rely do not support their position. ...............................................11
2. The Charter and Bylaws do not transgress public policy. ........14
a. Plaintiffs’ public policy-based argument is circular and lacks substance, for good reason. ............................14
b. There is no policy reason to treat an unclassified board differently than a single-class classified board, which is expressly permitted under Section 141(d). .............................................................................17
c. Public policy supports reading Section 141(k) as a default provision consistent with Delaware law’s tendency in favor of private ordering and stockholder choice. .........................................................17
II. The Consent Revocations Should Not Be Invalidated. .................................19
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III. Plaintiffs’ Factual Arguments Are Irrelevant, and Are Unsupported in Any Event. .....................................................................................................22
A. The 2009 Amendment did not “neglect” to remove the prohibition against removal without cause. ........................................23
B. This case is driven by stockholder activism, not entrenchment. .........25
CONCLUSION ........................................................................................................29
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TABLE OF AUTHORITIES
Page(s)
CASES
Abrons v. Maree, 911 A.2d 805 (Del. Ch. 2006) ............................................................................ 21
Arnold v. Society for Savings Bancorp, Inc., 650 A.2d 1270 (Del. 1994) ..........................................................................passim
Barnhart v. Peabody Coal Co., 537 U.S. 149 (2003) ............................................................................................ 11
In re Checkfree Corp. S’holders Litig., 2007 WL 3262188 (Del. Ch. Nov. 1, 2007) ....................................................... 20
Concord Real Estate CDO 2006-1, Ltd. v. Bank of Am. N.A., 996 A.2d 324 (Del. Ch. 2010), aff’d, 15 A.3d 216 (Del. 2011) ......................... 10
In re Appraisal of Dell Inc., 2015 WL 4313206 (Del. Ch. July 30, 2015) ........................................................ 7
Fuhlendorf v. Isilon Sys., Inc., 2011 WL 3300338 (Del. Ch. July 22, 2011) ........................................................ 7
In re Genelux Corp., 2015 WL 6437193 (Del. Ch. Oct. 22, 2015) ...................................................... 28
Jones Apparel Grp., Inc. v. Maxwell Shoe Co., 883 A.2d 837 (Del. Ch. 2004) .....................................................................passim
Kallick v. Sandridge Energy, Inc., 68 A.3d 242 (Del. Ch. 2013) .......................................................................... 5, 22
La. Mun. Police Empls.’ Ret. Sys. v. Fertitta, 2009 WL 2263406 (Del. Ch. Jul. 28, 2009) ....................................................... 27
MM Cos., Inc. v. Liquid Audio, Inc., 813 A.2d 1118 (Del. 2003) ................................................................................. 15
In re The MONY Grp., Inc. S’holder Litig., 853 A.2d 661 (Del. Ch. 2004) .................................................................. 5, 21, 22
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Nycal Corp. v. Angelicchio, 1993 WL 401874 (Del. Ch. Aug. 31, 1993) ....................................... 3, 11, 12, 13
Robb v. Ramey Assocs., 14 A.2d 394 (Del. Super. Ct. 1940) .................................................................... 11
Rohe v. Reliance Training Network, Inc., 2000 WL 1038190 (Del. Ch. July 21, 2000) ...............................................passim
Roven v. Cotter, 547 A.2d 603 (Del. Ch. 1988) ........................................................................... 15
Skeen v. Jo-Ann Stores, Inc., 750 A.2d 1170 (Del. 2000) ................................................................................. 20
Stroud v. Grace, 1990 WL 176803 (Del. Ch. Nov. 1, 1990), aff’d in part, rev’d in part, 606 A.2d 75 (Del. 1992) ..................................................................................... 14
Third Point LLC v. Ruprecht, 2014 WL 1922029 (Del. Ch. May 2, 2014) ............................................ 10, 21, 26
Versata Enters., Inc. v. Selectica, Inc., 5 A.3d 586 (Del. 2010) ....................................................................................... 26
STATUTES
8 Del. C. § 102(b)(1) .................................................................................................. 1
8 Del. C. § 102(b)(7) .................................................................................................. 9
8 Del. C. § 141(d) ..................................................................................................... 17
8 Del. C. § 141(k) ..............................................................................................passim
D.C. Code Ann. § 29-306.08 ................................................................................... 18
Model Business Corp. Act § 8.08(a) (2013) ............................................................ 18
N.J. Stat. Ann. § 14A:6-6 ......................................................................................... 18
Va. Code Ann. § 13.1-680 ....................................................................................... 18
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OTHER AUTHORITIES
Jeffrey M. Gorris, Lawrence A. Hamermesh, & Leo E. Strine, Jr., The Model Business Corporation Act at Sixty: Delaware Corporate Law and the Model Business Corporation Act: A Study In Symbiosis, 74 Law & Contemp. Prob. 107 (2011)................................................................................. 18
Leo E. Strine, Jr., Delaware’s Corporate Law System: Is Corporate America Buying an Exquisite Jewel or a Diamond in the Rough? A Response to Kahan & Kamar’s Price Discrimination in the Market for Corporate, 86 Cornell L. Rev. 1257 (2001) ............................................................................... 19
Michael P. Dooley & Michael D. Goldman, Some Comparisons Between the Model Business Corporation Act and the Delaware General Corporation Law, 56 Bus. Law. 737 (Feb. 2001) ................................................................... 18
2A Sutherland Statutory Construction § 47:11 (7th ed.) ......................................... 10
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PRELIMINARY STATEMENT1
The question before this Court is whether Section 141(k) of the DGCL
affirmatively prohibits a Delaware corporation from maintaining a previously
adopted charter provision limiting director removal to removal for cause if that
corporation ceases to have a staggered, classified board. Delaware law presumes
that corporate instruments are valid. Plaintiffs bear the burden of rebutting this
presumption, and it is an onerous burden.2 To rebut this presumption, Plaintiffs
must demonstrate that the challenged provisions are “contrary to the laws of this
State,” meaning they transgress a mandatory statute or Delaware public policy. 8
Del. C. § 102(b)(1); see also Defs.’ OB at 15. In their Opening Brief, Plaintiffs do
not acknowledge this burden, much less demonstrate how they have met it.
Plaintiffs cannot demonstrate that the Charter and Bylaws transgress a
mandatory statute because Section 141(k) is not mandatory. Section 141(k)
1 Citations are to docketed pleadings and documents cited by docket (“Dkt.”) number, the Opening Brief in Opposition to Plaintiffs’ Motion for Summary Judgment and in Support of Defendants’ Motion for Summary Judgment (Dkt. 9) (“Defendants’ Opening Brief,” cited as “Defs.’ OB”), Exhibits 1–16 to the Transmittal Affidavit of Benjamin M. Potts filed with Defendants’ Opening Brief (Dkt. 9) (cited as “Ex.”), the Compendium of Corporate Instruments filed with Defendants’ Opening Brief (Dkt. 11–13), Plaintiffs’ Opening Brief in Support of Their Motion for Partial Summary Judgment (Dkt. 8) (“Plaintiffs’ Opening Brief,” cited as “Pls.’ OB”), and Exhibits to the Transmittal Affidavit of Christopher M. Foulds (Dkt. 8) (cited as “Pls.’ Aff. Ex.”). 2 All capitalized terms not defined herein have the meanings set forth in Defendants’ Opening Brief.
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establishes a default rule; it does not preclude a charter provision creating an
unclassified board that is removable only for cause. In arguing that Section 141(k)
creates a mandatory prohibition, Plaintiffs rely on an inapplicable theory of
statutory construction to which the Delaware Supreme Court refers in a footnote in
Arnold v. Society for Savings Bancorp, Inc., 650 A.2d 1270 (Del. 1994). Pls.’ OB
at 13. Plaintiffs’ heavy reliance on Arnold is misplaced. In Arnold, the Delaware
Supreme Court did not abandon earlier Delaware precedent to adopt a strict
constructionist approach to the implication of exceptions. Arnold addresses the
extent to which a court should consider legislative history when the words of the
statute are clear. Further undermining Plaintiffs’ argument, the language on which
Plaintiffs rely in Arnold is not a holding of the Court, but rather, a partial quotation
from the treatise Sutherland Statutory Construction, which makes up the third and
last authority cited in a “see also” string cite in a footnote. A review of Sutherland,
including the language Plaintiffs omit from the quote on which they rely, shows
that the strict construction for which Plaintiffs advocate is disfavored. Contrary to
Plaintiffs’ argument, Delaware takes the more modern and liberal approach when
construing the DGCL as shown by Jones Apparel Group, Inc. v. Maxwell Shoe
Co., 883 A.2d 837, 845 (Del. Ch. 2004).
The other cases upon which Plaintiffs rely do not aid them either. Plaintiffs
cite to Rohe v. Reliance Training Network, Inc., 2000 WL 1038190 (Del. Ch. July
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21, 2000) and Nycal Corp. v. Angelicchio, 1993 WL 401874 (Del. Ch. Aug. 31,
1993) for the proposition that a charter provision may never limit director removal
to removal for cause. Pls.’ OB at 12–13. But neither case addresses the issue for
which it is cited. Rohe dealt with an attempt to abrogate director removal for
cause, and in Nycal, the question of director removal under Section 141(k) was not
disputed at all.
In sum, Plaintiffs cite no statutory language, no piece of legislative history,
and no case law compelling the conclusion that Section 141(k) is a mandatory rule
that affirmatively prohibits VAALCO from maintaining a charter provision
limiting director removal to for cause only.
Plaintiffs also cannot demonstrate that the Charter and Bylaws transgress
public policy. Plaintiffs argue that the public policy of Delaware is that
stockholders have a “fundamental right to remove directors,” and Plaintiffs point to
Section 141(k) as evidence for the claim. This reasoning is circular. No
fundamental right to remove directors without cause pre-dated the adoption of
Section 141(k). Rather, the only “fundamental rights” related to director removal
recognized at common law were (1) the right of stockholders to remove directors
for cause, and (2) the right of directors never to be removed without cause.
Section 141(k) eliminated the second of these common law rights while preserving
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the first; Section 141(k) did not codify any other common law removal right,
because none existed.
Plaintiffs’ “fundamental right” argument has no support in the DGCL. The
DGCL permits restrictions on director removal. Having an un-staggered board
elected annually and removable only for cause is less restrictive than having a
staggered board with directors removable only for cause. Further, Section 141(d)
and Section 141(k)(1) permit the functional equivalent of VAALCO’s board: a
single-class, classified board removable only for cause. No policy reason exists to
invalidate VAALCO’s “for cause only” charter provision simply because the board
is not called “classified.”
As for relief, in their Opening Brief, Plaintiffs present no argument for what
they implicitly seek—reformation of VAALCO’s Charter and Bylaws. Instead,
Plaintiffs request to invalidate VAALCO’s consent revocation cards. Because the
cards have not even been printed or mailed, they also have not yet been received.
Accordingly, there is nothing to invalidate, and Plaintiffs’ requested relief is
unnecessary.
Plaintiffs’ request to invalidate VAALCO’s consent revocation cards is
improper in any event. Plaintiffs argue that invalidation is required due to the
Board’s allegedly false statements. Plaintiffs do not identify any false or
misleading statements, however, and the actual language of the preliminary proxy
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reveals that there are none. Even if the disclosures were found to be inaccurate,
sterilization of consent revocations is unnecessary. The Court views supplemental
disclosures as a sufficient remedy, as reflected in In re The MONY Group, Inc.
Shareholder Litigation, 853 A.2d 661 (Del. Ch. 2004), to which Plaintiffs cite.
The other case on which Plaintiffs rely, Kallick v. Sandridge Energy, Inc., 68 A.3d
242 (Del. Ch. 2013), stands in helpful contrast to the case at hand. There, the
Court held on a preliminary injunction record that the defendants’ fiduciary
misconduct warranted the relief sought. Plaintiffs do not press—or even allege—
comparable allegations to those at issue in Kallick.
Additionally, although Plaintiffs portray this dispute as a narrow “legal
determination” resolvable on the undisputed record—namely, the Charter, the
Bylaws, and the DGCL (Pls.’ OB at 10)—Plaintiffs’ Opening Brief is larded with
erroneous factual assertions. While these factual assertions are unsupported and
irrelevant to the narrow legal issues of facial validity, Defendants herein rebut two:
Plaintiffs’ allegations regarding the intent underlying the 2009 Amendment and the
Board’s purported entrenchment.
Effectively, Plaintiffs beseech the VAALCO Board to proactively repudiate,
without a stockholder vote, the plain language of the Company’s governing
instruments, based solely on a legal issue that no Delaware court has previously
resolved. If directors of Delaware corporations were to heed this counsel, there is
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no doubt that stockholder plaintiffs would inundate this Court with claims that the
stockholder right to vote on the contents of a charter was being trampled.
For all of these reasons, and as described more fully below, Plaintiffs’
motion should be denied.
ARGUMENT
I. The Charter and Bylaws Are Valid.
A. Plaintiffs bear the burden of demonstrating invalidity.
Plaintiffs’ Opening Brief ignores that they bear the burden of proving
invalidity. This is an onerous burden, as discussed in Defendants’ Opening Brief.
Defs.’ OB 14–18. To succeed, Plaintiffs must demonstrate that the challenged
provisions are “contrary to the laws of this State,” in that they “contravene . . . a
mandatory rule of our corporate code or common law.” Jones Apparel, 883 A.2d
at 846. To be “contrary to the laws of this State,” a provision must be “contrary to
this State’s public policy, in the sense that it clashes with fundamental policy
priorities that clearly emerge from the DGCL or our common law of corporations.”
Id. at 843; see also Defs.’ OB at 15–16 (citing Jones Apparel and other cases).
Delaware courts interpret this language narrowly, and their approach in finding
provisions to be invalid is a “cautious one.” Defs.’ OB at 16.
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B. Plaintiffs have not demonstrated invalidity.
1. The Charter and Bylaws do not transgress a mandatory rule of Delaware law.
As discussed in Defendants’ Opening Brief, Delaware corporation law
adheres to the policy of encouraging and optimizing private ordering.3 The DGCL
does not function as “a comprehensive code, but rather as a broadly enabling
statute that leaves ample room for private ordering and interpretation.” In re
Appraisal of Dell Inc., 2015 WL 4313206, at *13 (Del. Ch. July 30, 2015).
“Delaware’s corporate statute is widely regarded as the most flexible in the nation
because it leaves the parties to the corporate contract (managers and stockholders)
with great leeway to structure their relations . . . .” Jones Apparel, 883 A.2d at
845.
a. Section 141(k) does not create a mandatory rule prohibiting for cause limitations on director removal.
Plaintiffs argue that, unlike numerous other sections of the DGCL, Section
141(k) is mandatory rather than permissive. Plaintiffs are wrong. As set forth in
Defendants’ Opening Brief, nothing on the face of Section 141(k) indicates that it
3 See, e.g., Jones Apparel, 883 A.2d at 838 (discussing “the wide room for private ordering authorized by the DGCL, when such private ordering is reflected in the corporate charter”); Fuhlendorf v. Isilon Sys., Inc., 2011 WL 3300338, at *2 (Del. Ch. July 22, 2011) (“[T]he Delaware General Corporation Law is intentionally designed to provide directors and stockholders with flexible authority, permitting great discretion for private ordering and adaptation.”) (quotations and citation omitted).
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is a mandatory prohibition on charter provisions making an unclassified board
removable only for cause. Defs.’ OB at 18–20.
Properly construed, Section 141(k) provides a series of default rules that
apply to different contexts. The first sentence of Section 141(k) creates a general
default rule that directors of a Delaware corporation “may be removed with or
without cause.” 8 Del. C. § 141(k). If the legislature had intended a mandatory
prohibition on any charter limitation on director removal, it would have been
simple enough to say: “The holders of a majority of the shares then entitled to vote
at an election of directors shall have the right to remove any director or the entire
board of directors with or without cause . . . .” By employing “may” rather than
“shall,” and by specifying that there may be different treatment of “with” cause
and “without cause,” Section 141(k) reflects that a blanket prohibition was not
intended.
b. The exceptions in Section 141(k) do not render it a mandatory prohibition, and Plaintiffs’ reliance on Arnold is misplaced.
Plaintiffs contend that the exceptions to Section 141(k) transform its first
sentence from a default rule to a mandatory prohibition. The exceptions, however,
set different default rules for companies that have adopted a classified board or
cumulative voting. For example, the first exception, Section 141(k)(1), reverses
the default rule with respect to classified boards. It provides that for a classified
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board, stockholders may effect removal only for cause, unless the charter says
otherwise. In essence, Plaintiffs argue that because Section 141(k)(1) provides that
a charter of a corporation with a classified board must specify if directors are going
to be removable without cause, then charters of all corporations without classified
boards may not have a limitation requiring removal to be for cause. This is
fallacious logic, and Section 141(k)(1)’s treatment of classified boards does not
change the meaning of the first sentence of Section 141(k).
In arguing that the presence of exceptions to Section 141(k) renders it
mandatory, Plaintiffs do not discuss the plain language of the rule. Rather,
Plaintiffs base their argument on an excerpt from footnote 31 in Arnold v. Society
for Savings Bancorp, Inc., 650 A.2d 1270 (Del. 1994), which states: “where the
statute expressly enumerates specific exceptions, courts should not imply or create
new exceptions from otherwise generally applicable language.” Pls.’ OB at 13.
Plaintiffs’ reliance on footnote 31 is misplaced.
First, Arnold did not involve the question of how to construe exceptions to a
statute. It involved a different question of statutory interpretation—to what extent
a court should consider legislative history when the words of the statute are clear.
650 A.2d at 1287. The Delaware Supreme Court found that Section 102(b)(7) was
unambiguous and there was no need to resort to legislative history to interpret it.
Id.
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Second, the language that Plaintiffs quote is not a holding by the Delaware
Supreme Court, but rather a partial quotation from the treatise Sutherland Statutory
Construction, which makes up the third and last authority cited in a “see also”
string cite. Moreover, Plaintiffs omit language from the quote that undermines
their position. The full quotation reads:
Further, where the statute expressly enumerates specific exceptions, courts should not imply or create new exceptions from otherwise generally-applicable language, id. § 47.11, at 165, unless failure to do so would lead to a “manifest contradiction of the apparent purpose of [the] statute,” id. at 50 (Supp. 1994).
650 A.2d at 1287 n.31 (emphasis added). The rule of strict construction that
Plaintiffs’ urge here has no support in Arnold.
Third, a review of Sutherland shows that Plaintiffs’ strict construction
argument is disfavored. It states:
Generally, though, modern courts are more likely to interpret both exceptions and provisos in terms of legislative intent or statutory meaning, and not presume that qualifying language should be strictly construed. Whether a court inclines toward a strict or intent- or meaning-based interpretation, an exception usually limits only the matter which directly precedes it unless a clear, contrary intent or meaning indicates a general limitation on all of an act’s provisions.
2A Sutherland Statutory Construction § 47:11 (7th ed.) (footnotes omitted). That
Delaware takes the more modern and liberal approach when construing the DGCL
is shown by the Jones Apparel decision. 883 A.2d at 845. Cf. Concord Real
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Estate CDO 2006-1, Ltd. v. Bank of Am. N.A., 996 A.2d 324, 334 (Del. Ch. 2010),
aff’d, 15 A.3d 216 (Del. 2011) (observing that the restrictive inclusio unius est
exclusio alterius canon need not be “mechanically applied”).4
In short, through their misuse of Arnold, Plaintiffs urge this Court to
abandon its policy of flexible interpretation of the DGCL, and to adopt in the place
of such policies a mechanical and unbending rule of statutory construction. Arnold
does not require this approach, Sutherland does not suggest this approach, and
Delaware law rejects this approach. The Court should reject this approach and
construe Section 141(k) as Delaware courts have construed the other provisions of
the DGCL, i.e., as a default rule that can be altered by charter.
c. The other authorities on which Plaintiffs rely do not support their position.
Plaintiffs also cite Rohe and Nycal to contend that Section 141(k) is a
mandatory right to remove directors without cause. See Pls.’ OB at 12–13 (citing
Rohe v. Reliance Training Network, Inc., 2000 WL 1038190 (Del. Ch. July 21,
2000) and Nycal Corp. v. Angelicchio, 1993 WL 401874 (Del. Ch. Aug. 31, 4 See also Robb v. Ramey Assocs., 14 A.2d 394, 396 (Del. Super. Ct. 1940) (“The mention of one thing is not to be held exclusive when the context shows a different intention; and the maxim does not apply to a statute the language of which may fairly comprehend many different cases, in which some only are mentioned expressly by way of example, and not as excluding others of a similar nature.”); Barnhart v. Peabody Coal Co., 537 U.S. 149, 168 (2003) (“We do not read the enumeration of one case to exclude another unless it is fair to suppose that Congress considered the unnamed possibility and meant to say no to it.”).
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1993)). However, neither Rohe nor Nycal holds that Section 141(k) establishes
such a mandatory right. See Defs.’ OB at 23 n.12 (discussing Rohe and Nycal).
In Rohe, the plaintiff directors challenged their removal for cause from the
board of Reliance Training Network, Inc. (“RTN”). 2000 WL 1038190, at *12.
The Court rejected the plaintiffs’ interpretation of a series of interrelated corporate
and stockholder instruments, concluding that the RTN charter could not divest the
RTN stockholders of the right to remove directors for cause. Id. at *11–12. In
dicta, the Court described the right to remove directors as “a fundamental element
of stockholder authority.” See Pls.’ OB at 12 (citing Rohe at *11). However, the
right at issue in Rohe was the right to remove directors for cause. See Defs.’ OB at
23. Removal for cause is a fundamental stockholder right (see infra Section
I.2(a)), but that right is not at issue here.5 Thus, Rohe is inapposite.
In Nycal, the plaintiff directors did not challenge their removal under
Section 141(k) at all, but rather, whether a governance agreement gave them the
right to name their replacements before being removed. 1993 WL 401874, at *3.
The Court’s language generally describing Section 141(k) as a “guarantee” was
5 As an independent basis for rejecting the plaintiffs’ proposal, the Court also held that the relevant instruments did not express an intent to supplant the statutory rule. Id. at *12. The clear language concerning director removal in the VAALCO Charter and Bylaws stands in helpful contrast to the language at issue in Rohe, which did not reflect a clear intent concerning director removal.
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made in dictum, resolved no dispute before it, and did not address whether a
charter or bylaw provision could provide for removal only for cause. Id.
Thus, neither of these cases addresses the issue before this Court: whether
Section 141(k) affirmatively prohibits a Delaware corporation with an unclassified
board from eliminating the ability to remove directors without cause.
Plaintiffs overstate the significance of Delaware commentators’ discussions
of Section 141(k), which also do not address the question at issue in this litigation.
The cited discussions do not, as Plaintiffs suggest, reflect an understanding that
stockholders have an “absolute right to remove directors without cause.” Pls.’ OB
at 14. Instead, the commentators that Plaintiffs cite describe and quote the same
sources discussed in Defendants’ Opening Brief—common law and legislative
history leading to the enactment of Section 141(k), the language of Section 141(k)
itself, and case law discussing Section 141(k) (e.g., Rohe). Thus, the secondary
authority to which Plaintiffs cite does not supplant the language of Section 141(k)
or add to the analysis of that language.6
6 Plaintiffs cite to a 1989 article that lists Section 141(k) in a footnote identifying “a partial list of mandatory provisions in the Delaware Code.” See Pls.’ OB at 13 (citing Jeffrey N. Gordon, Contractual Freedom in Corporate Law, The Mandatory Structure of Corporate Law, 89 Colum. L. Rev. 1549, 1553 n.16 (1989)). The list appears to be based on the outdated assumption that the lack of express “unless otherwise provided” language requires a conclusion that a DGCL provision is mandatory. This argument has since been rejected by this Court. See Defs.’ OB at 18–20; Jones Apparel, 883 A.2d 837, 847–48 (Del. Ch. 2004); Stroud
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2. The Charter and Bylaws do not transgress public policy.
a. Plaintiffs’ public policy-based argument is circular and lacks substance, for good reason.
Because the Charter and Bylaws do not transgress a mandatory rule of
Delaware law, Plaintiffs must show that the provisions violate public policy. To
do so, Plaintiffs contend that the public policy of Delaware is that stockholders
have a “fundamental right to remove directors,” Pls.’ OB at 15, and such public
policy is evidenced by Section 141(k). Thus, Plaintiffs argue that their
interpretation of 141(k) is supported by public policy. This reasoning is circular.
It begs the question: from what common law or public policy can a “fundamental
right to remove directors” without cause7 be derived to support reading Section
141(k) as a mandatory provision? There is none.
v. Grace, 1990 WL 176803, at *12 (Del. Ch. Nov. 1, 1990), aff’d in part, rev’d in part, 606 A.2d 75 (Del. 1992). 7 Plaintiffs’ broad statement that Delaware law recognizes a “fundamental right to remove directors” is uncontroversial and irrelevant to the extent that it merely stands for the proposition that the stockholders’ ability to remove directors for cause can never be eliminated. Defendants do not argue, and never have argued, that Section 141(k) or any other source of Delaware law permits one to eliminate the stockholders’ ability to remove directors for cause. See, e.g., Defs.’ OB at 3 (“Delaware common law and the DGCL have always recognized an unfettered right of stockholders to remove directors for cause . . . .”). Thus, by referencing the stockholders’ “fundamental right to remove directors,” Plaintiffs must implicitly be attempting to invoke some basic right of stockholders to remove directors without cause; otherwise, Plaintiffs’ conclusion that 141(k) is mandatory is a blatant non sequitur. As explained further below, no such right exists.
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The only “fundamental rights” related to director removal recognized at
common law were (1) the right of stockholders to remove directors for cause,8 and
(2) the right of directors never to be removed without cause.9 To be sure, Section
141(k) eliminated the second of these common law rights (while preserving the
first). But to say that a fundamental right of removal without cause pre-dated
Section 141(k), and thus requires or supports reading it as a mandatory provision,
is simply wrong. Indeed, a policy-based “fundamental right” to remove directors
without cause would contradict Section 141(k)(1)’s creation of a default rule under
which directors of a staggered board can be removed only for cause.10
8 Roven v. Cotter, 547 A.2d 603, 605 (Del. Ch. 1988) (“Delaware courts have always recognized the inherent power of stockholders to remove a director for cause) (citing Campbell v. Loew’s, Inc., 134 A.2d 852, 858 (Del. Ch. 1957)); see also Rohe, 2000 WL 1038190, at *1. 9 See, e.g., Roven, 547 A.2d at 608 (“At common law a director had a vested right in his position arising from his duties and responsibilities to the corporation.”). 10 Plaintiffs cite to Rohe and MM Companies as supportive of their public policy-based argument. Rohe is unhelpful to Plaintiffs for the reasons given supra at 12–13. MM Companies is equally unhelpful because it is not even about director removal outside the context of annual elections. MM Companies, Inc. v. Liquid Audio, Inc., 813 A.2d 1118, at 1127 (Del. 2003) (“Maintaining a proper balance in the allocation of power between the stockholders’ right to elect directors and the board of directors’ right to manage the corporation is dependent upon the stockholders’ unimpeded right to vote effectively in an election of directors.”) (emphasis added). Again, Defendants take no issue with stockholders’ power and right to vote in director elections. Plaintiffs’ citation to MM Companies illustrates their confusion about the difference between the stockholder franchise generally and stockholders’ default authority to remove directors without cause.
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A review of several permissible board structures and corresponding removal
rules also reveals why Plaintiffs are unable to articulate a coherent policy basis for
reading Section 141(k) as a mandatory prohibition. First, it is permissible under
Section 141(k) to have an unclassified board with directors removable with or
without cause. Second, it is permissible under Section 141(k)(1) to have a
staggered board with directors removable with or without cause (as long as such
without-cause removal is provided for in the certificate of incorporation). Third, it
is permissible under Section 141(k)(1) to have a staggered board with directors
removable only for cause.
As one moves from the first to the third of these permissible arrangements,
the board structures and removal rules become more and more restrictive of
stockholders’ abilities to “refresh the board using tools of corporate democracy.”
Pls.’ OB at 15. A fourth arrangement, namely a de-staggered board with directors
removable only for cause, is what is at issue here. This fourth arrangement fits
comfortably in the middle of the spectrum of stockholder franchise-restrictiveness.
It is more restrictive than having a de-staggered board with directors removable
with or without cause, and it is less restrictive than having a staggered board with
directors removable only for cause. Since both ends of the spectrum are
permissible under Delaware law, there cannot be a policy reason why an
arrangement falling on the middle of the spectrum is impermissible. Thus,
17 01:18081076.1
Plaintiffs can provide no policy-based rationale for preventing a de-staggered
board from having directors removable only for cause.
b. There is no policy reason to treat an unclassified board differently than a single-class classified board, which is expressly permitted under Section 141(d).
By their express terms, Sections 141(d) and 141(k) permit the creation of a
single-class classified board whereby the directors are elected annually and are
removable only for cause.11 Section 141(d) permits the directors of a corporation
to be divided into one class, 8 Del. C. § 141(d), and Section 141(k)(1) states that
when a board is classified “as provided in [Section 141(d)], stockholders may
effect . . . removal [of directors] only for cause . . . .” Id. § 141(k)(1). The Board,
while technically not classified, is functionally equivalent to the single-class board
with directors removable for cause. No policy reason exists to invalidate
VAALCO’s “for cause only” charter provision just because the board is not
formally called “classified.”
c. Public policy supports reading Section 141(k) as a default provision consistent with Delaware law’s tendency in favor of private ordering and stockholder choice.
Finally, as discussed above, Delaware corporation law adheres to the policy
of encouraging private ordering. Consistent with that policy is a rule permitting
stockholders to have the power to determine in the governing documents whether
11 See Defs.’ OB at 24–25.
18 01:18081076.1
their unclassified board should be removable without cause or only for cause.
Indeed, the Model Business Corporation Act (the “MBCA”) and several
jurisdictions whose corporation laws are based on the MBCA expressly provide
this power to stockholders.12 In general, the DGCL tends (and aims) to be more
flexible and less restrictive than the MBCA.13 If this Court adopts Plaintiffs’
argument, however, Delaware law will be more restrictive of stockholder choice
and private ordering than the MBCA and other jurisdictions. Instead, this Court
should interpret Section 141(k) as a default rule consistent with the well-
established purpose of the DGCL to provide maximal flexibility and optionality for
12 Model Business Corp. Act § 8.08(a) (2013); see also, e.g., N.J. Stat. Ann. § 14A:6-6; Va. Code Ann. § 13.1-680; D.C. Code Ann. § 29-306.08. 13 See, e.g., Jeffrey M. Gorris, Lawrence A. Hamermesh, & Leo E. Strine, Jr., The Model Business Corporation Act at Sixty: Delaware Corporate Law and the Model Business Corporation Act: A Study In Symbiosis, 74 Law & Contemp. Prob. 107, 116 (2011) (engaging in comparative analysis of the DGCL and the MBCA, and explaining that “Delaware has been the more prolific source of innovation in statutory corporate law,” in contrast to the “MBCA’s propensity to build bright-line rules into the statute in an attempt to create greater certainty”); see also Michael P. Dooley & Michael D. Goldman, Some Comparisons Between the Model Business Corporation Act and the Delaware General Corporation Law, 56 Bus. Law. 737, 766 (Feb. 2001) (“The most significant difference that emerges from the preceding discussion is the more directive, ‘bright line’ approach the Model Act adopts in some instances. Delaware, on the other hand, has preferred to state its statutory standards in more general terms, leaving counsel and courts to fill in the interstices.”).
19 01:18081076.1
stockholders and thus encourage innovation and economically beneficial
outcomes.14
II. The Consent Revocations Should Not Be Invalidated.
Plaintiffs argue that the Court should invalidate the consent revocations
received by VAALCO due to allegedly false statements made by the Board
concerning the Charter and Bylaws. Pls.’ OB at 17–18. This argument is
superfluous, as the Company has not sent or received any consent revocations that
could be invalidated. Plaintiffs, who purportedly are stockholders, should know
that the stockholders have not yet received consent revocation cards—VAALCO
has not even printed them yet.
Plaintiffs’ argument also fails because none of the statements that Plaintiffs
identify as misleading are false or misleading on their face or in the total mix of
information available to the stockholders, and none would be made false by a
finding that the Charter and Bylaws are invalid. See Compl. ¶¶ 30-31; Pls.’ OB at
14 See, e.g., Leo E. Strine, Jr., Delaware’s Corporate Law System: Is Corporate America Buying an Exquisite Jewel or a Diamond in the Rough? A Response to Kahan & Kamar’s Price Discrimination in the Market for Corporate, 86 Cornell L. Rev. 1257, 1259 (2001) (“[M]uch of Delaware corporate law’s indeterminacy and litigation intensiveness is an unavoidable consequence of the flexibility of the Delaware Model, which leaves room for economically useful innovation and creativity. That is, reducing the indeterminacy of Delaware corporate law by moving closer to the Mandatory Statutory Model might also impair its central emphasis on corporate empowerment and private ordering, to the detriment of social welfare.”).
20 01:18081076.1
7–9.15 For example, Plaintiffs selectively, and misleadingly, quote language from
the November 16, 2015 press release. Pls.’ OB at 7 (citing Pls.’ Aff. Ex. 9 at
exhibit 99.1). The statements reflect an accurate description of language in the
Charter and of the Board’s beliefs concerning the effect of the Charter provision:
The Company noted that under its certificate of incorporation filed in accordance with the General Corporation Law of the State of Delaware (the ‘Charter’), duly elected members of VAALCO’s Board can only be removed from office for cause. As fiduciaries of the Company, the Board cannot ignore, waive or amend the clear language in its current Charter without stockholder approval. Accordingly, the Board believes that the Group 42-BLR Group proposal to remove four VAALCO Board members without cause is not an action that can properly be taken under the Company’s Charter, and therefore, any purported action by written consent to remove a director without reference to the cause requirement would be null and void.
Pls.’ Aff. Ex. 9 at exhibit 99.1. Plaintiffs additionally complain that “the press
release did not mention Section 141(k) or so much as suggest that the validity of
the Charter and Bylaw Provisions may be in question.” Pls.’ OB at 7. The press
release, however, responded to Group 42’s prior statement that Plaintiffs admit
15 “[D]irectors need only disclose information that is material, and information is material only ‘if there is a substantial likelihood that a reasonable stockholder would consider it important in deciding how to vote.’” In re Checkfree Corp. S’holders Litig., 2007 WL 3262188, at *2 (Del. Ch. Nov. 1, 2007) (quoting Loudon v. Archer-Daniels-Midland Co., 700 A.2d 135, 143 (Del. 1997)). To be material, an omitted fact must “‘significantly alter[] the ‘total mix’ of information made available.’” Skeen v. Jo-Ann Stores, Inc., 750 A.2d 1170, 1172 (Del. 2000).
21 01:18081076.1
discussed the language of Section 141(k). Compl. ¶ 24; see also Abrons v. Maree,
911 A.2d 805, 813 (Del. Ch. 2006) (disclosure of “[c]onsistent and redundant
facts” is unnecessary).16
Invalidation of any consent revocation cards would be unwarranted even if
the challenged disclosures were false and misleading. “[T]he effect of reversing
any exercise of ‘the will of the stockholder’, even for their own benefit, is to create
an insurmountable obstacle of confusion and antipathy.” Third Point LLC v.
Ruprecht, 2014 WL 1922029, at *24 (Del. Ch. May 2, 2014) (citations omitted).
In In re The MONY Group, Inc. Shareholder Litigation, 853 A.2d 661 (Del. Ch.
2004), the plaintiff sought to invalidate proxies that were received prior to the
court’s earlier decision preliminarily enjoining a stockholder vote until
supplemental disclosures could be made. Id. at 666. Rather than invalidate the
proxies, the Court directed that “those who submitted proxies be made aware of the
additional disclosures,” requiring that the “revised proxy materials should include a
16 The other statements that Plaintiffs identify likewise are not false or misleading. It is accurate that “[t]he Company’s charter permits stockholders to remove directors only for ‘cause’ and there is no case law that has held that a ‘cause’ restriction for director removal in a charter would be unenforceable under Delaware law.” See Pls.’ Aff. Ex. 10 (VAALCO’s Nov. 23, 2014 Preliminary Proxy Statement). It is also accurate that the “Board believes that the Group 42-BLR Group’s effort to remove four directors, which constitutes a majority of the Board, ‘without cause’ is an action that cannot properly be taken under the Company’s organizational documents.” See Pls.’ Aff. Ex. 12 (VAALCO’s Dec. 4, 2015 Definitive Proxy Statement).
22 01:18081076.1
statement clearly visible to stockholders directing their attention to the
supplemental disclosures made in response to the Opinion.” Id. at 681. In
reaching this conclusion, the Court noted the unusual nature of such a remedy,
commenting that it was “unaware of any precedent that would support the
plaintiffs’ suggestion that this court should consider sterilizing the voting power of
shares in situations of this kind.” Id. at 666 n.1. Accordingly, if the Court were to
find that supplemental disclosures are required here, such disclosures would not
require invalidation of the consent revocations.
Plaintiffs cite only one case in which the Court invalidated consent
revocations, and in circumstances vastly different from the facts at issue here. In
Kallick, after considering a full record on a preliminary injunction motion, the
Court found it likely that an incumbent board had violated its fiduciary duties by
withholding approval of a stockholder’s competing slate, for the purpose of the
“proxy put” change-of-control clauses in a company’s indentures, with no
“rational, good faith justification.” Kallick, 68 A.3d at 264. No comparable facts
have been alleged, much less proven, here.
III. Plaintiffs’ Factual Arguments Are Irrelevant, and Are Unsupported in Any Event.
Plaintiffs contend that the issue before the Court is a purely “legal
determination.” Pls.’ OB at 10 (citing Arnold). Yet, Plaintiffs’ Opening Brief is
larded with factual assertions that are irrelevant to the narrow legal issue in this
23 01:18081076.1
case. They are also unsupported and erroneous. To the extent they are relevant,
these factual assertions are disputed and, thus, should not be ruled upon by this
Court on the pleadings. Rather than respond to each of these conclusory
allegations, Defendants instead focus on the two mischaracterizations that receive
the most attention in Plaintiffs’ Opening Brief: (1) the intent underlying the 2009
Amendment and (2) the Board’s purported acts of “entrenchment.”
A. The 2009 Amendment did not “neglect” to remove the prohibition
against removal without cause.
As set out in Defendants’ Opening Brief, the 2009 Amendment declassified
VAALCO’s Board while retaining the provision that directors could only be
removed for cause. Defs.’ OB at 6–9. Plaintiffs imply that this framework was
inadvertent or neglectful. See Pls.’ OB at 4 (“[T]he Company neglected to also
include for elimination the [for-cause removal provisions].”); see also Compl. ¶ 2
(attributing the purported omission to an “oversight by counsel”). However,
Plaintiffs cannot support the proposition that retention of Article V, Section 3 of
the Charter and Article III, Section 2 of the Bylaws was not the intent of the
stockholders and the Board. Indeed, the only evidence before the Court is contrary
to Plaintiffs’ position.
First, the plain language of the Charter and Bylaws is clear: beginning with
the 2010 annual meeting, VAALCO was to have a declassified Board comprised of
members who would be elected annually and could only be removed for cause.
24 01:18081076.1
Ex. 1, Charter, Art. III, §§ 2, 3; Ex. 2, Bylaws, Art. III, § 2. It is undisputed that
the Charter and Bylaws have never been amended to modify the for-cause
provision. In fact, VAALCO’s Charter has provided that “any director may be
removed from office only for cause” since at least September 1997, and the 2009
Amendment makes clear that only Article V, Section 2 will be amended. Ex. 1,
Charter, Art. V, § 3.
Second, the 2009 Amendment providing for a declassified board with
directors removable only for cause was the product of an earlier activist
intervention and a resulting settlement. Both sides were represented by counsel.
The activist stockholder who required a stockholder vote on the 2009 Amendment
as part of the proxy contest settlement, Nanes Balkany Partners, used the same law
firm and even the same attorney as Group 42, Inc. and Bradley L. Radoff, the
Activist Stockholders who assert that the 2009 Amendment was flawed.17 No
stockholders, including Nanes Balkany Partners, objected to this amended
structure. In fact, the stockholders overwhelmingly voted in favor of it. Defs.’ OB
17 Nanes Balkany Partners was represented by Olshan Frome Wolosky LLP. See Ex. 3, Nanes Delorme Partners I LP, General Statement of Acquisition of Beneficial Ownership (Schedule 13D) at 1. The Activist Stockholders referenced in the Opening Brief are also represented by the same Olshan attorney. See Pls.’ Aff. Ex. 5, Group 42, Inc., General Statement of Acquisition of Beneficial Ownership (Schedule 13D) at 1.
25 01:18081076.1
at 8; Pls.’ OB at 4. In the six years following the 2009 Amendment, no other
stockholder objected or complained.
Third, the fact that at least 175 Delaware corporations have elected to
employ a similar framework is circumstantial evidence that the continued
prohibition against removal without cause was not accidental or inadvertent. See
Compendium of Corporate Instruments.
Thus, the stockholders intended to set forth the structure provided in the
2009 Amendment, and Plaintiffs have failed to meet their burden of demonstrating
otherwise.
B. This case is driven by stockholder activism, not entrenchment.
Ignoring that stockholders will have the opportunity to replace the entire
board at the next annual meeting regardless of the outcome of this proceeding or
the January 5, 2016 special meeting, Plaintiffs argue that the Board is motivated by
entrenchment. They say: “The members of the Board chose . . . to clothe
themselves in a robe of facially invalid provisions.” Pls.’ OB at 8. But Plaintiffs’
flourish does not change what happened. Contrary to Plaintiffs’ allegations, the
Board has acted at all times in accordance with its fiduciary duties to VAALCO’s
stockholders and Delaware Law.
As one example, Plaintiffs argue that the Board is entrenched because it
instituted a 10% shareholder rights plan after becoming aware of the rapid
26 01:18081076.1
accumulation of stock by the Activist Stockholders. However, this Court has
created a high bar for plaintiffs who would argue that a board’s decision to adopt a
shareholder rights plan, in the context of a stockholder activist campaign and the
related prospect of creeping control or negative control, is not a reasonable
response in relation to the threat posed to the company. Third Point, 2014 WL
1922029, at *16–17, 20 (finding that stock accumulation by an activist hedge fund
was a cognizable threat under Delaware law). Given that the VAALCO Board was
aware of the accumulation by the Activist Stockholders, and given that the
adoption of a shareholder rights plan in response to an attempt to gain effective
control without paying a control premium is widely deemed under Delaware law to
be a proportionate response, VAALCO’s Board acted appropriately and with
reasonable business judgment. See id. at *20. And, a 10% ownership trigger, as
here, is not out of the ordinary or substantial evidence of an entrenchment motive.
Cf. Versata Enters., Inc. v. Selectica, Inc., 5 A.3d 586, 602 (Del. 2010) (finding
that a shareholder rights plan that contained a 5% trigger should not be
differentiated from other similar rights plans previously upheld by Delaware
courts).
If the Board were to sit idly by, as Plaintiffs appear to suggest, and simply
allow a Group 42-led slate of director candidates take control of the Company
without regard for protecting the interests of all stockholders, then it could be
27 01:18081076.1
subjected to the same criticisms the board of Landry’s Restaurants, Inc. faced in
Louisiana Municipal Police Employees’ Retirement System v. Fertitta, 2009 WL
2263406, at *8, n.34 (Del. Ch. Jul. 28, 2009). In Fertitta, the Court found it
reasonable to infer fiduciary misconduct in “the board’s failure to employ a poison
pill to prevent a significant stockholder (also a director and officer) from obtaining
control without paying a control premium” in the context of a motion to dismiss.
Id.18 Put simply, the Board has a duty to its stockholders to prevent the Activist
Stockholders from obtaining control without paying a control premium. Thus, the
Board’s use of a poison pill is in accordance with its obligations under Delaware
law, not an attempt to “entrench” itself, as Plaintiffs suggest.
As another example, Plaintiffs denounce, without any support, the January
2016 special meeting as “a cynical attempt to appear magnanimous,” complaining
that the stockholders should not be required to first vote by supermajority (66.67%)
to amend the Charter and Bylaws to additionally provide for removal without
cause. See Pls.’ OB at 7–8. However, the VAALCO Board’s decision to put the
18 Plaintiffs make no attempt to distance themselves from the Activist Stockholders. In fact, they actively embrace their efforts. See generally Pls.’ OB at 5–6. The Activist Stockholders have similarly embraced Plaintiffs’ positions in this case. See Letter from Gregory Varallo to the Hon. J. Travis Laster (Dec. 15, 2015). The Activist Stockholders also have recently championed a plan for VAALCO to repurchase stock using the corporation’s precious cash, a move calculated to benefit the Activist Stockholders without regard to the best interests of the corporation itself. Ex. 14, Group 42 Proxy at 4.
28 01:18081076.1
issue of its removal up to a stockholder vote in early January 2016, standing alone,
indicates that it is not seeking to entrench itself.19
Moreover, the Board’s resolution to leave this decision to the stockholders is
entirely appropriate. Plaintiffs argue, effectively, that the Board should have
unilaterally determined that the Charter and Bylaw removal provisions were
invalid, and then reformed or ignored them.20 As discussed above and in
Defendants’ Opening Brief, the language of the Charter and Bylaws
unambiguously prohibits removal without cause. While Plaintiffs contend that
these provisions conflict with Delaware law, they are unable to point to a single
case where a Delaware court invalidated a similar provision. Instead, this is a case
of first impression. In the absence of contrary case law, the Board did not have the
ability to unilaterally amend its Charter without stockholder approval, nor could it
simply choose to ignore the Charter’s clear language. 19 It should also be noted that the VAALCO Board has engaged the Activist Stockholders in settlement discussions for the purpose of resolving this dispute. 20 Alternatively, Plaintiffs contend that VAALCO should have filed a Section 205 action to obtain a declaration that the Charter and Bylaw provisions are null and void rather than holding a stockholder vote. Pls.’ OB at 8. Plaintiffs’ reliance on Section 205 is misplaced. Section 205 allows for a company that has taken an act it believes to be valid to petition the Court to correct a technical defect. In re Genelux Corp., 2015 WL 6437193, at *18 (Del. Ch. Oct. 22, 2015). Section 205 is not to be used to enable “a company to invalidate a prior act.” Id. (finding such an interpretation of Section 205 enabling invalidation to be “unreasonable and inconsistent with the statute’s inherent presumption that the company intended to act and believed it to be valid at the time it was taken”).
29 01:18081076.1
By urging VAALCO’s directors to ignore the plain language of the Charter
and Bylaws based on an unsupported interpretation of Delaware law, Plaintiffs
invite havoc and promote bad policy.
CONCLUSION
For all the foregoing reasons, and those set forth in Defendants’ Opening
Brief, Defendants respectfully request that the Court grant their Motion for
Summary Judgment, deny Plaintiffs’ Motion for Partial Summary Judgment, and
enter a declaratory judgment in favor of Defendants that VAALCO Energy Inc.’s
Charter and Bylaws are valid and enforceable.
OF COUNSEL: Michael C. Holmes Andrew E. Jackson Cortney C. Thomas VINSON & ELKINS LLP Trammel Crow Center 2001 Ross Avenue, Suite 3700 Dallas, Texas 75201-2975 Dated: December 17, 2015
YOUNG CONAWAY STARGATT & TAYLOR, LLP /s/ Rolin P. Bissell Rolin P. Bissell (No. 4478) Kathaleen St. J. McCormick (No. 4579) Elisabeth S. Bradley (No. 5459) Benjamin M. Potts (No. 6007) Rodney Square 1000 North King Street Wilmington, Delaware 19801 (302) 571-6600 Counsel for Defendants Steven P. Guidry, Frederick W. Brazleton, O. Donaldson Chapoton, James B. Jennings, John J. Myers, Jr., Andrew L. Fawthrop, Steven J. Pully, and VAALCO Energy, Inc.