Most Read Contributor in United States, November 2016
In the recent decision of Jay Frechter v. Cryo-Cell International,
Inc., Civil Action No. 11915-VCG (Del. Ch. Oct. 7,
2016), the Court of Chancery granted a mootness fee in connection
with a lawsuit brought by a stockholder challenging a bylaw
provision. The bylaw provision at issue indicated that
directors could be removed "for cause" at a "special
meeting" of stockholders. The plaintiff asserted
that under Section 141(k) of the Delaware General Corporation Law,
stockholders have the right to remove directors without cause, and
thus the provision was unlawful.
After the Plaintiff moved for summary judgment, the Company
amended its bylaw to remove the language complained of, mooting the
action. The Court found that the provision at issue was
"misleading to stockholders and could have a chilling effect
on the exercise of their franchise under Section 141, because
providing a procedure to remove directors for cause (and remaining
silent as to removal without cause) could indicate to a reasonable
stockholder that cause was a requisite for removal."
The Court considered the Sugarland factors and
found that a mootness fee of $50,000 for plaintiff's counsel
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