Summary
The Delaware Supreme Court affirmed the Court of Chancery’s determination that Alexander Arrow orally resigned from Biolase’s board and that Paul Clark was properly appointed to fill the resulting vacancy. The court held that 8 Del. C. § 141(b) permits, but does not require, a director’s resignation to be in writing or by electronic transmission. The court also affirmed the denial of Oracle’s request for attorneys’ fees because Oracle had not properly presented that request during the litigation.
Topics
Practice areas
Questions Presented
- Whether 8 Del. C. § 141(b) requires a director's resignation to be in writing or permits an oral resignation.
- Whether the Court of Chancery's finding that Arrow resigned orally at the February 28, 2014 board meeting and that Clark was appointed to fill the resulting vacancy was supported by substantial evidence.
- Whether the Court of Chancery abused its discretion by denying Oracle attorneys' fees when Oracle failed to present supporting arguments in its pretrial briefs, at trial, or in post-trial argument.
Holdings
- Section 141(b) is permissive: it authorizes resignation by written notice or electronic transmission but does not require a director to resign in writing. A director may therefore resign orally or through other conduct sufficient to establish resignation.
- The Court of Chancery's finding that Arrow resigned at the February 28, 2014 board meeting and that Clark was appointed to fill the resulting vacancy was supported by substantial evidence.
- The Court of Chancery did not abuse its discretion by denying Oracle attorneys' fees because Oracle failed to fairly present an argument supporting a fee award in its trial briefs, at trial, or in post-trial argument.
Key quotations
“The Court of Chancery’s interpretation of § 141(b) as taking a permissive approach that authorizes resignation by the means specified, but not ruling out a resignation by other means, is a sensible and reasonable one.” (1034)
“The circumstances here present one of the clearest cases of a director resignation by means other than a formal writing.” (1035)
“Thus, the Court of Chancery did not abuse its discretion when it entered a final judgment that denied Oracle’s claim for attorneys’ fees.” (1036)
Factual background
Biolase's directors discussed the planned resignations of Alexander Arrow and Samuel Low so that Paul Clark and Jeffrey Nugent could be appointed to the board. At a February 28, 2014 board meeting, Arrow discussed the effect of his resignation on his stock options and stated, "Okay, I agree, I go along with that"; the board then appointed Clark and Nugent to fill the expected vacancies. After learning that Clark and Nugent supported removing CEO and chairman Federico Pignatelli, Pignatelli attempted to rescind the resignations, creating a dispute over the board's composition.
Procedural history
Oracle brought a statutory proceeding in the Court of Chancery seeking a declaration concerning the composition of Biolase's board after directors Alexander Arrow and Samuel Low purportedly resigned and Paul Clark and Jeffrey Nugent were appointed. The Court of Chancery held that Arrow had orally resigned and that Clark was properly appointed, but found that Low had not resigned during the meeting and therefore Nugent was not properly appointed. It denied Oracle's request for attorneys' fees while awarding costs. The Supreme Court of Delaware affirmed and lifted the stay of the final judgment.