Document: Klaassen v. Allegro Dev. Corp., No. 583, 2013 (Del. Mar. 14, 2014)
In this case, the founder and CEO (“Klaassen”) of a Delaware corporation claimed that the company’s Board of Directors improperly removed him from his position after the company fell short of its financial performance projections in consecutive years. The Board removed Klaassen as CEO at a regularly scheduled board meeting without providing him notice of its plan to terminate him. After his removal, Klaassen served as a consultant to the company. It was not until seven months after his termination that Klaassen brought suit alleging his removal was improper because the Board did not give him advance notice of, and employed deception in carrying out, its plan to fire him.
In affirming the Court of Chancery’s decision below, the Delaware Supreme Court held that Klaassen’s termination was proper. The Court reasoned that because Delaware law does not require advance notice of regularly scheduled board meetings to be given to corporate directors, there is no requirement that directors be given advance notice of the specific agenda items to be addressed at those meetings. The Court also analyzed Klaassen’s deception-based claim, finding it to be equitable in nature. The Court clarified that alleged inequitable conduct by a board is voidable, not void, and is thus subject to equitable defenses. Finally, the Court, set forth the elements of an acquiescence defense, and highlighted the fact that “conscious intent to approve the act is not required.” Accordingly, the Court held that Klaassen had acquiesced in his removal as CEO, and as such, was barred from challenging the Board’s decision in court.