Seinfeld v. Slager

Frank Seinfeld (plaintiff), a stockholder of Republic Services, Inc. (Republic), a Delaware corporation, sued Donald Slager and other directors of Republic (directors) (defendants) for breaches of fiduciary duty. Seinfeld alleged the directors paid themselves excessive compensation in the form of restricted-stock units (RSUs) under Republic’s stock-incentive plan (stock plan). In 2009 and 2010, Republic’s board of directors (board) granted each director RSUs worth $743,700 and $215,000, respectively. Seinfeld maintained that the directors’ annual compensation, which in 2009 and 2010 consisted mostly of the RSU grants, far exceeded the director compensation of one of Republic’s peer companies. The stock plan, which was approved by Republic’s stockholders, gave the directors nearly unlimited discretion to determine the amounts of stock-based awards. The only limitations were that the total number of shares subject to stock-based awards granted under the stock plan could not exceed 10,500,000 and no individual could be granted stock-based awards covering more than 1,250,000 shares during any one year. Under these limitations, each director could, theoretically, be granted a stock-based award worth more than $20 million every year, depending on Republic’s stock price. Seinfeld contended that because the directors granted themselves the RSUs, the grants were interested-director transactions, which Seinfeld said were unreasonable and constituted corporate waste. The directors moved to dismiss, arguing that because the RSU grants did not violate the terms of the stock plan, the board’s decisions approving those grants were protected by the business-judgment rule.