Stahl v. Apple Bancorp, Inc.

In 1986 Stanley Stahl (plaintiff) began acquiring common stock of Apple Bancorp, Inc. (Bancorp) (defendant), and by November 7, 1989, he was the company’s largest shareholder, owning 30.3 percent of outstanding shares. As Stahl’s ownership increased, Bancorp’s board of directors grew increasingly concerned that Stahl would seek to take over the company. On November 22, 1989, Stahl delivered a proposal to the company that would increase the number of directors from 12 to 21. Along with the proposal to increase the number of directors, Stahl also nominated 13 individuals, including himself, to serve as directors. Therefore, if it was approved, the proposal would have given Stahl majority control over the company. On March 19, 1990, the board fixed April 17 as the record date for determining voting rights at the next annual shareholder meeting. Under Delaware corporate law, this meant that the annual meeting had to be held no later than June 16. The board did not fix an annual meeting date, but it intended that the meeting would be held in May. On March 28, Stahl initiated a tender offer to purchase all outstanding common stock at a price of $38 per share, conditioned on approval of his proposal to increase the number of board seats and confirm his nominations for directors. The tender-offer documents stated an intent to solicit supporting proxies. The board of directors sought advice from a financial advisor, who advised that Stahl’s offer was inadequate but that more time would be needed to explore alternatives. Subsequently, the board resolved to withdraw the April 17 record date, which would allow for more time before the annual meeting was required. On May 14, Stahl filed a lawsuit in the Delaware Court of Chancery, claiming that the board had improperly disenfranchised stockholders. Stahl moved for a preliminary injunction requiring that the board convene the annual meeting on or before June 16. The board argued that neither Delaware corporate law nor Bancorp bylaws required an annual meeting until September and, therefore, it was permissible for the board to withdraw the April 17 record date.