Personal Injury Lawyer News

The Delaware Supreme Court has issued its much anticipated decision in CA, Inc. v. AFSCME Employees Pension Plan. The court ruled in favor of CA, Inc., finding that the American Federation of State, County and Municipal Employees (AFSCME) union's proposed by-law mandating the reimbursement of proxy expenses for short slate winners would violate Delaware law. The court, acting for the first time on a request by the U.S. Securities and Exchange Commission (SEC) for clarification on a Delaware law matter, ruled that the proposed by-law would deprive CA's directors of their full power to exercise their fiduciary duty to decide whether or not reimbursement of proxy expenses would be appropriate in a given circumstance. CA, Inc. had sought SEC approval to omit the AFSCME proposal from proxy papers scheduled to be sent to shareholders next week.

Perspectives:

a. Decision Affirms Authority of Corporate Boards

"Under Delaware law, the decision to spend corporate funds on contested director elections rests within the sound discretion of a company's board," says John F. Grossbauer, a partner with Potter Anderson & Corroon LLP (Wilmington, DE) who practices in the area of corporate law. "This decision affirms the authority of corporate boards in this important fiduciary matter. It also provides some clarity on the scope of by-laws, stating that by-laws cannot limit the board's authority to manage the business and affairs of Delaware corporations." Mr. Grossbauer is available to discuss the ruling and its implications. [07/24/2008]

News Contact: Lisa M. Altman
Email: altmanl@jaffeassociates.com
Phone: 301-943-9948

b. Partial Victory for Both Sides

"The court found that because the proposed bylaw focused more on the process of conducting elections and did not mandate a specific result, it was a proper subject of shareholder action," says Peter Ladig, a corporate litigation attorney and director with Bayard, P.A., a Wilmington, Delaware law firm. "The opinion leaves both the company and the shareholder with some cause to claim victory and will undoubtedly play a major role in shaping the future of Delaware law as institutional investors and other shareholders struggle to co-exist with corporate management," Ladig said. "No doubt the first in a series of cases that will test the boundaries of shareholder autonomy and the limits of directors' exclusive managerial authority. Shareholders, directors and companies should pay careful attention to this decision." Peter Ladig and Stephen Brauerman, an associate with Bayard, are available to write an article on the recent CA/ASCFME decision and its impact on corporate governance issues facing Delaware companies. They are also available for comment on this topic. [07/24/2008]

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