Investor Asks Yahoo Board to Take Action Over COO's Firing

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By Michael Greene

June 6 — An investor is demanding that Yahoo! Inc.'s board take action over what it alleges are improper circumstances surrounding the firing of former Chief Operating Officer Henrique de Castro ( Yahoo! Inc. v. Amalgamated Bank , Del., No. 83, 2016, stipulation and order of dismissal filed 6/6/16 ).

According to a June 6 joint filing by the parties, Amalgamated Bank is no longer seeking to enforce a Delaware Chancery Court order in February requiring Yahoo officials to turn over internal documents related to the termination. Instead, the bank said it will ask Yahoo's board to investigate or take legal action over the matter.

“Given the recent events—including the addition of nine new Board Directors as well as the possible sale of the company—we have decided to drop our [inspection] demand and instead proceed with a demand on the Yahoo! Board to investigate and hold certain current and former officers and directors responsible for the compensation and severance paid to the former COO,” Lance D. Cassak, senior vice president and deputy general counsel at Amalgamated Bank, told Bloomberg BNA in an e-mail. “Ultimately, this is about ensuring transparency and protecting shareholder rights and we plan to hold Yahoo! Inc. leadership accountable for their decisions.”

It is unclear at this point what action Amalgamated could take should Yahoo's board decide not to press the issue.

According to the filing, the parties also are watching a separate action— Buch v. Filo (Docket No. 10933)—in which the chancery court recently lifted a stay on a shareholder lawsuit alleging that Yahoo's board breached its fiduciary duties over de Castro's firing.

A Yahoo representative didn't immediately respond to a request for comment.

Appeal Dismissed

In a Feb. 2 ruling, Vice Chancellor J. Travis Laster said that Amalgamated, the largest majority union-owned bank in the U.S., had a “credible basis” for wanting to review de Castro's ouster—which occurred after only 14 months on the job and triggered nearly $60 million in severance payments (22 CARE, 2/3/16).

The court's order required Yahoo to produce internal documents, including e-mails from its outside directors' personal accounts. The company appealed, arguing that the e-mails couldn't be subjected to an inspection under Delaware law.

Amalgamated cross-appealed, asking the Delaware Supreme Court to review a portion of the lower court's decision—a ruling of first impression—that subjected the shareholder to a condition under which it could only inspect the documents if it agreed to incorporate the materials in any derivative complaint it later filed.

The parties' June 6 filing ends both Yahoo and Amalgamated's cross-appeals.

To contact the reporter on this story: Michael Greene in Washington at mgreene@bna.com

To contact the editor responsible for this story: Yin Wilczek at ywilczek@bna.com

For More Information

The court's order is available at http://src.bna.com/fCtC.