285 A.2d 437, 439 (Del. 1971)
Dissident stockholders of Chris-Craft Industries, Inc. sought injunctive relief in the Court of Chancery to prevent management from advancing the annual stockholders’ meeting date.1 The corporation’s by-laws had previously fixed the meeting for January 11, 1972.2 Management changed the date to December 8, 1971, after the stockholders committee filed notice with the S.E.C. on October 16 of its intent to wage a proxy fight.3
The Court of Chancery reviewed management’s asserted business reasons for advancing the meeting but rejected those reasons.4 It found that present management had disingenuously resisted the production of a stockholder list to the plaintiffs and had otherwise turned a deaf ear to their demands for a change in management.5 Management had seized upon a new section of the Delaware Corporation Law to reduce the time available for the proxy battle after enlarging the scope of its October 18 directors’ meeting to include the by-law amendment.6
Plaintiffs reasonably contended that management’s tactics, including the hiring of two proxy solicitors and the refusal to produce the stockholder list, left them with little chance to wage a successful proxy fight by the new date due to the time required to clear materials with the S.E.C.7 The stockholders learned of management’s action unofficially on October 27, 1971, and filed their petition on November 1, 1971.8 The Court of Chancery denied the requested injunctive relief, leading to this appeal.9
Whether management advanced the date of the annual stockholders’ meeting for the purpose of perpetuating itself in office and obstructing dissident stockholders’ proxy contest?10
These are inequitable purposes, contrary to established principles of corporate democracy.11 The advancement by directors of the by-law date of a stockholders’ meeting, for such purposes, may not be permitted to stand.12 Inequitable action does not become permissible simply because it is legally possible.13
Yes. The established facts demonstrate that management changed the meeting date after the stockholders committee filed its intention to wage a proxy fight with the S.E.C. on October 16.14 Management then enlarged its October 18 directors’ meeting to include the by-law amendment.15 The Court of Chancery found that present management had disingenuously resisted the production of a stockholder list to the plaintiffs and had turned a deaf ear to their demands about a change in management.16 Management hired two established proxy solicitors and used the new section of the Delaware Corporation Law to cut down on the time available for the proxy battle.17 These actions show that management seized on the law to limit the time for contest.18 This left plaintiffs with little chance to wage a successful proxy fight due to the exigencies of time.19 This included the time required to clear material at the S.E.C.20 This constitutes an attempt to utilize the corporate machinery for inequitable purposes of self-perpetuation.21
The rule from American Hardware is inapposite here because that case involved no finding of inequitable action on the part of management, whereas here the facts establish such conduct.22 Stockholders gear their campaign to the by-law date, and it is not to be expected that management will advance that date to obtain an inequitable advantage.23
Therefore, the advancement of the meeting date cannot stand, and the cause must be remanded with instructions to nullify the December 8 date and reinstate January 11, 1972 as the sole date of the next annual meeting.24
Whether the dissident stockholders’ application for injunctive relief was filed too late?25
Stockholders may not be charged with the duty of anticipating inequitable action by management and seeking anticipatory injunctive relief simply because the law makes such action legally possible.26 In the absence of prior warning of management’s intent, filing promptly upon learning of the action is timely, as stockholders have no need of judicial assistance until management changes the date of the meeting.27
No. The stockholders learned of management’s action unofficially on October 27, 1971, and filed their petition on November 1, 1971.28 There is no indication of any prior warning of management’s intent to take such action, and it appears that an attempt was made by management to conceal its action as long as possible.29 Until management changed the date of the meeting, the stockholders had no need of judicial assistance in that connection.30 The Court of Chancery’s conclusion that the application came too late cannot be sustained on these facts.31
The application for injunctive relief was timely filed, and the judgment below on this point is reversed.32