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Delaware Supreme Court Rules in Favor of Airgas on Annual Meeting Bylaw Issue

By Francis G.X. Pileggi

Airgas, Inc. v. Air Products and Chemicals, Inc., Del. Supr., No. 649, 2010 (Nov. 23, 2010), read opinion here. This Delaware Supreme Court opinion determined that the bylaw amendment by which Air Products attempted to shorten the number of months before the next "regularly scheduled" annual meeting, as a means of circumventing the otherwise lengthier process of removing staggered board members, was inconsistent with the charter of Airgas and the applicable statute. The relatively short 23-page decision is full of memorable quotes, but one snippet follows:

No party to this case has argued that DGCL Section 141(d) or the Airgas Charter requires that the three year terms be measured with mathematical precision. Nor is it necessary for us to define with exactitude the parameters of what deviation from 365 days (multiplied by 3) satisfies the Airgas Charter three year durational requirement. In this specific case, we may safely conclude that under any construction of "annual" within the intended meaning of the Airgas Charter or title 8, section 141(d) of the Delaware Code, four months does not
qualify. In substance, the January Bylaw so extremely truncates the directors' terms as to constitute a de facto removal that is inconsistent with the Airgas Charter. (citations omitted).

Delaware's High Court also regarded the net result of removing a staggered board member in this manner, prior to the end of his term, as failing to satisfy another provision in the charter that only allowed such removal based on a two-thirds' vote of shareholders entitled to vote.

Due to the great importance of this decision, and the benefit in publicizing it promptly, we now provide this short overview and then will provide supplemental commentary at a later date. This short highlight presumes familiarity with the background facts and prior procedural history of this important case. Prior decisions and developments in this case (including the Court of Chancery's decision that was reversed), have been highlighted on this blog here. An example of the many articles that will be written about this case in the mainstream press, trade publications, academic journals and blogs, is the article by Reuters here, which includes a quote from your friendly author by reporter Jonathan Stempel of Reuters.

Full post as published by Delaware Corporate and Commercial Litigation Blog on November 23, 2010 (boomark / email).