Document: Southern Pennsylvania Transportation Authority v. Volgenau, C.A. No. 6354-VCN (Del. Ch. August 31, 2012)

The Delaware Court of Chancery held that plaintiff’s claims that a merger was void for violation of defendant corporation’s certificate of incorporation were procedurally barred under Section 124 of the Delaware General Corporation Law (“Section 124”).  According to the Court, Section 124 only permits a challenge to corporate acts on the basis of a lack of authority in three limited circumstances: (1) an injunction proceeding brought by a stockholder of the corporation, (2) a proceeding brought by the corporation, whether acting directly or indirectly, through a stockholder in a representative suit, or (3) a proceeding by the attorney general to dissolve the corporation or to enjoin the corporation from the transaction of unauthorized business.  However, the Court allowed plaintiff’s claims that defendants breached their fiduciary duties by approving a merger that violated the corporation’s certificate of incorporation to proceed: “Although corporate actions may be deemed valid [under Section 124], it does not follow, however, that the conduct of those persons who cause such actions to occur may not be challenged on legal or equitable grounds.”