Delaware Business Litigation Report

Court Of Chancery Discusses Bylaw To Remove Officers

Salamone v. Gorman, C.A. No. 8770-VCN (July 31, 2014)  This is an unusual case involving a director deadlock created by a stockholder voting agreement, despite the presence of a majority stockholder.

Frustrated by his inability to get his way due to the director deadlock, the stockholder adopted a bylaw that purports to give stockholders the right to remove officers.  That may conflict with the provisions of the DGCL that vest control of management in the directors, absent a different order in the certificate of incorporation. While the Court expressed some doubt the bylaw was valid it did not need to decide the issue. Note that the Delaware Supreme Court affirmed in part and reversed in part this decision on December 9, 2014.

On July 31, 2015, in Gorman v. Salamone, C.A. No. 10183-VCN, the Court of Chancery did decide that stockholders cannot remove officers under a bylaw.

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