Delaware Business Litigation Report

Chancery Finds Defendants Were Bound by Voting Agreement to Follow Board’s Recommendation

Texas Pacific Land Corp. v. Horizon Kinetics LLC, C.A. No. 2022-1066-JTL (Del. Ch. Dec. 1, 2023)
In this post-trial opinion, the plaintiffs argued that a voting agreement required that the defendants follow the board’s recommendation regarding a charter amendment to increase the corporation’s authorized shares. In opposition, the defendants argued that exceptions to the voting agreement allowed them to vote against the proposal, despite the board’s recommendation, if it related to a merger, acquisition, recapitalization, or other corporate transaction requiring a stockholder vote. The Court of Chancery found that portions of the voting agreement were ambiguous, and after considering certain course of performance extrinsic evidence, concluded that the defendants were required to follow the board’s recommendation because the defendants failed to show that the proposal fell under a contractual exception. As a remedy, the Court deemed the shares as voted in support of the proposal under the Court’s equitable power to treat as done that which in good conscious ought to be done. Notably, in reaching its conclusion, the Court enforced a clause in the agreement that excluded the consideration of the parties’ drafting history.

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