Kaiser Aluminum Corp. v. Matheson

Kaiser Aluminum Corp. (Kaiser) (defendant) announced a recapitalization plan in which existing shares of common stock would be reclassified as new common stock with full voting rights. The plan also included the issuance of new shares of common stock that would constitute a separate class with lesser voting rights. Kaiser’s certificate of designations provided that holders of Kaiser’s preferred stock—known as PRIDES (preferred redeemable increased dividend equity securities)—were entitled to convert their shares to common stock at a set rate. The certificate stated that, in the event that Kaiser reclassified any of its “Common Stock” (with capital letters) as new shares of “common stock” (with all-lowercase letters), PRIDES holders were entitled to the same number of shares of “Common Stock” as was the case before the reclassification. Various holders of PRIDES, including Donald Matheson (the preferred shareholders) (plaintiffs) sought to enjoin implementation of the recapitalization plan on the ground that it lacked their consent. The case revealed differing interpretations of the certificate, with Kaiser asserting that “Common Stock” referred to the new class planned for issue, and the preferred shareholders arguing that the same term referred to the common stock that already existed. The Delaware Court of Chancery granted a preliminary-injunction order, and the case went to the Delaware Supreme Court on interlocutory appeal.