Sunday, April 6, 2014

Adlerstein v. Wertheimer case brief summary

Adlerstein v Wertheimer case brief
(Delaware 2002)

  • Alderstein is former scientist, Chairman, CEO, founder, and controlling shareholder.
  • The other two Board of Directors are concerned that Alderstein is responsible for the company's financial woes including perhaps actual wrong doing by Alderstein which includes a sexual harassment suit against him.
  • The other two Board of Directors members, an outside financier, and the company's attorney (who is also Alderstein's personal lawyer) met privately to come up with a plan to save the company by removing Alderstein from the BOD and firing him.
  • The plan is to issue new 'blank check' stock to fellow Board of Director member Reich, who will now have controlling interest in the company.
  • Reich then signs a Consent removing Alderstein as chairman.

Alderstein's claim is that the board meeting removing him was invalid. However, various elements of a valid meeting were satisfied ( such as call, quorum, and sufficient vote)

Was there proper notice given to Alderstein?

  • Adlerstein was aware of a meeting, although there is dispute if the meeting was a formal board meeting or an informal meeting with other Board of Directors members.
  • However, Adlerstein was not given any notice of the purpose of the meeting.
  • The court notes this is not fair and is dishonest.
  • However, there was no rule in the corporation's bylaws requiring notice of proposed meeting topics.
  • There was not prior case or statute requiring notice.
  • The court uses a balancing test to weigh the defendant's needs with surprising Adlerstein so he doesnt stop the plan, the lack of an actual violation by the defendents and the extreme inequiable result of the lack of notice.

The Court orders the actions taken at the meeting be undone.
Delaware can decide based purely on if there was an equitable result.

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