Datapoint Corp. v. Plaza Securities Co.

496 A.2d 1031 (Del. 1985)

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Nature of the Case

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Facts

Edelman, a general partner of both Ps and a beneficial owner of more than 10% of Datapoint's (D) stock, advised the latter's chairman that he was interested in acquiring control of D. D's board of directors was opposed to this and when the written proposal was submitted, it was rejected by D's board. Edelman renewed his offer with a threat to consider the solicitation of consents from shareholders. D's certificate of incorporation lacked any provisions relating to the solicitation of shareholder consents. Counsel to D than recommended that D adopt a new bylaw by amendment to regulate consents. That amendment was adopted. Edelman withdrew his offer, and Ps sued to prevent enforcement of the new bylaw just adopted. D then set March 4 as the record date and April 18 as the action date for counting shareholder consents submitted under section 228 of Delaware law. Then on February 28, D filed suit to invalidate any consents obtained by Ps. Ps preliminary injunction was granted on March 5 and D was enjoined from enforcing the new bylaw. D appealed; the court erred in construing section 228 as not permitting the consent solicitation procedure, in requiring consent accomplished thereunder to be put into effect immediately and without any review of its legality. D also made a derivative argument that the bylaw constitutes a reasonable regulation of shareholder section 228 solicitation and that the delay and review features were designed to prevent midnight raids on an uninformed electorate. D concedes that the 45-day waiting period would permit management to solicit its own proxies.