Salamone v. Gorman

John Gorman (plaintiff) founded Westech Capital Corporation and was the majority shareholder. Gary Salamone, Mike Dura, and Robert Halder (the management group) (defendants) all served at one time or another on Westech’s board of directors. In 2011, Westech issued a new series of stock. Gorman and the parties that bought the stock signed a voting agreement providing that the board would expand from three (Gorman, Gorman’s uncle, and Halder at the time) to seven members. Section 1.2(b) of the voting agreement stated that one of the directors, an “independent” director, would be designated by the “majority of the holders of the” stock. Section 1.2(c) of the agreement stated that two of the directors would be elected by “Key Holders,” who were initially to be Gorman and Halder. Gorman and the management group interpreted these clauses differently. Gorman thought that the provisions were per share provisions, meaning one vote per share. The management group thought that the provisions were per-capita votes, meaning one vote per shareholder. Both Gorman and the management group brought suit in the Chancery Court of Delaware, seeking a ruling on the construction of the provisions. The chancery court ruled that the relevant provisions were ambiguous, that section 1.2(b) was a per-share provision, and that section 1.2(c) was a per-capita provision. Both parties appealed.