Thomas Fleming Quoted in Law360 on Overly Restrictive Director Nomination Rights
Law 360 (subscription required) reported that a bank holding company’s under pressure overhaul of an improperly restrictive director nominating and eligibility bylaw drew harsh criticism by Vice Chancellor J. Travis Laster in a withering ruling that granted stockholders their full, $610,300 attorneys’ fees request. In February, the Delaware judge approved the fee over the objections of HopFed Bancorp Inc.’s attorneys. This came from a complaint that alleged HopFed’s board had adopted irrational and overbroad rules which disqualified anyone sanctioned by financial regulators from nominating candidates for the Board. HopFed also allegedly used its share repurchase power to eliminate the company’s second largest independent investor and implemented an employee stock benefit which resulted in a pro-management voting block. Olshan client activist investor Joseph Stilwell branded the moves an effort to silence him and all shareholders who disagreed with the incumbent Board.. HOPFED decided to amend the disputed director disqualification bylaw in early October which came a little over a month after a dismissal proceeding. Thomas Fleming was quoted as saying, “The lawsuit involved a challenge to a director qualification bylaw and the court made clear at the end of the deal that the bylaw was unlawful,” he continued and said that “It’s rare that any of these bylaws are challenged and rarer still that these are found deficient.” The decision made by Vice Chancellor Laster was significant from a corporate governance standpoint.