Friday, November 22, 2013

International Brotherhood of Teamsters v. Fleming Companies case brief

International Brotherhood of Teamsters v. Fleming Companies case brief summary
975 P.2d 907 (1999)


CASE SYNOPSIS
The United States Court of Appeals, Tenth Circuit, certified the question of whether Oklahoma law restricted the authority to create and implement shareholder rights plans exclusively to the board of directors, or whether shareholders could propose resolutions requiring that shareholder rights plans be submitted to the shareholders for vote at the succeeding annual meeting.

CASE FACTS
Plaintiff owned shares of defendant's stock. Defendant implemented a shareholder's rights plan which was an anti-takeover mechanism. Plaintiff prepared a proxy statement for inclusion in the proxy materials for the annual shareholder's meeting. With the proxy effort, plaintiff proposed an amendment to defendant's bylaws which would require any rights plan implemented by the board of directors to be put to the shareholders for a majority vote.

DISCUSSION

  • On certification, the court held that defendant's board of directors did not have the exclusive authority to create and issue rights and options within the grant of authority given it in Okla. Stat. tit. 18, § 1038 (1991). 
  • Plaintiff could propose a resolution requiring that plans be submitted to the shareholders. 
  • A shareholder rights plan was essentially a variety of stock option plan. Its use as an anti-takeover mechanism did not change its essential character. 
  • The revenue code's recognition of shareholder approval of stock options revealed stock option plans were not exempt from shareholder approval or ratification. 
  • No statute or case law indicated the shareholder rights plan was exempt from shareholder adopted bylaws.

CONCLUSION
The court held that there was no exclusive authority granted boards of directors to create and implement shareholder rights plans and that shareholders could propose bylaws which restricted board implementation of shareholder rights plans, assuming the certificate of incorporation did not provide otherwise.

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