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By Yin Wilczek
Oct. 12 — Attorneys for a shareholder who challenged a biotechnology company's director-removal bylaw were awarded $50,000 in fees by the Delaware Chancery Court ( Frechter v. Cryo-Cell Int'l Inc. , 2016 BL 336487, Del. Ch., No. 11915-VCG, 10/7/16 ).
The attorneys are entitled to a “mootness” fee because the lawsuit was a valid challenge to a provision that, if not explicitly improper, could have misled shareholders and curtailed their right to remove Cryo-Cell International Inc. board members, Vice Chancellor Sam Glasscock III said.
In Delaware, plaintiffs' attorneys may seek an award of fees and costs where their clients' claims are effectively mooted by the defending party.
However, the fee is lower than that awarded in a similar case— In re Vaalco Energy Inc. Stockholder Litigation (36 CARE, 2/24/16)—because the benefit to other shareholders was only “theoretical” and “modest,” Glasscock wrote.
Cryo-Cell's bylaw stated that shareholders can only remove directors “for cause” at a special meeting. Shareholder Jay Frechter sued, saying the bylaw violated Section 141(k) of the Delaware General Corporation Law, which provides that shareholders may remove directors without cause.
The company amended the provision after Frechter asked for summary judgment, making the lawsuit moot.
To contact the reporter on this story: Yin Wilczek in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Phyllis Diamond at email@example.com
The ruling is available at http://www.bloomberglaw.com/public/document/Frechter_v_CryoCell_Intl_Inc_No_11915VCG_2016_BL_336487_Del_Ch_Oc.
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