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Aug. 31 — A Qualcomm Inc. investor will not be allowed to revive claims related to whether board members improperly submitted amendments to the company's long-term incentive plan for shareholder approval, the U.S. Court of Appeals for the Third Circuit ruled Aug. 28.
The investor asserted that the individual director defendants made material misstatements in two proxy statements and breached their fiduciary duties in connection with the incentive plan.
In a non-precedential opinion, a three-judge panel affirmed the U.S. District Court for the District of Delaware's dismissal of the claims, including direct claims related to whether the compensation committee had the authority to submit the amendments to the shareholders for a vote.
“The Board delegated broad powers to the Compensation Committee,” Judge Joseph Anthony Greenaway Jr. wrote. He added that there was nothing in the bylaws that explicitly required the full board to slate the vote.
“The Bylaws state that matters may be submitted to the shareholders ‘by or at the direction of the Board of Directors,'” he opined. “In light of the broad powers delegated to the Compensation Committee, it was acting ‘at the direction' of the Board when it slated the LTIP amendments for shareholder vote.”
The court also affirmed the dismissal of several derivative claims on the grounds that the plaintiff failed to show that a pre-suit demand on the board to take action was excused.
In doing so, the court rejected an argument that individual directors were interested because a majority of their compensation was awarded based on the shareholder votes.
“As noted by Appellees, there is no evidence that, had the LTIP amendments not been passed by shareholders, QualComm, Inc. would not have used an alternative compensation form to provide its Directors the compensation to which they were contractually entitled,” Greenaway wrote.
Additionally, the Third Circuit concluded that the plaintiff failed to establish a majority of the board was “interested” with regard to the actions generally of the Compensation Committee.
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The opinion is available at http://www.bloomberglaw.com/public/document/JEFFREY_KAUFMAN_Appellant_v_BARBARA_T_ALEXANDER_STEPHEN_M_BENNETT.
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