State of Wisconsin Inv. Bd. v. Peerless Systems Corp

Facts

Plaintiff held 7 to 9 percent of Defendant company’s shares. Defendants released a proxy statement that notified shareholders that one of the proposals presented at the annual meeting would provide another 1 million stock option shares for the directors of Defendant company. Plaintiff notified Defendants that they would vote against this proposal because it would dilute the shares available in the option program by 33 percent. Plaintiff also contacted other owners and requested that they vote against the proposal. At the annual meeting, Defendants offered three proposals. Two of the proposals easily passed, but when it became apparent that the stock option proposal would fail, the meeting was adjourned with the polls still open on the stock option proposal. A shareholder meeting reconvened thirty days later and the proposal passed by a very slim margin. During the thirty days, Gavaldon actively solicited shareholders yet to vote who he knew were more likely to vote in f avor of the proposal. Plaintiff claimed that Defendants breached their fiduciary duty by adjourning the meeting without closing the stock option proposal, by interfering with shareholder voting and by making misleading and false statements. Defendant asserts that Plaintiff lacked standing because they did not attend the shareholder meeting and voice an objection at that time. Both parties moved for summary judgment.