Seidman v. Clifton Savings Bank, S.L.A.

14 A.3d 36 (2011)

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Nature of the Case

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Facts

Seidman (P) became a stockholder of Clifton Savings Bancorp, Inc. (Bancorp) during a 2004 reorganization. Bancorp issued to the stockholders a notice of the meeting and a proxy statement, which advised that the stockholders would be asked to consider and approve Bancorp's 2005 Equity Incentive Plan. A copy of the Plan was attached to the proxy statement. The proxy statement noted that the Plan would be administered by a compensation committee, which would select the individuals to receive stock incentives and determine the amount and type of incentive. The compensation committee was to consider all necessary information in determining the awards, including individual job performances and surveys of grants awarded by similarly situated companies. The stockholders approved the Plan. The compensation committee issued grants of stock options to Bancorp's board of directors and twenty-two other employees of the Bank, and it issued restricted stock awards to Bancorp's board members and forty-two Bank employees. The committee's decisions were guided by and complied with the federal regulations. The committee also reviewed four scenarios for granting the stock incentives and consulted with counsel, Certified Public Accounts, and other experts. P sued Bank (D), Bancorp, and the directors alleging that it was a foregone conclusion that the compensation committee was going to issue the maximum amount of stock option grants and restricted stock awards to the seven members of Bancorp's board of directors, and that the failure to make that disclosure vitiated any stockholder approval received. P argued that the incentives were not designed to retain the directors' services, left insufficient shares and options to attract new qualified people, were not consistent with any study or survey and constituted an unreasonable portion of D's net earnings. The Chancery Court applied the business judgment rule and the doctrine of corporate waste and dismissed P's claims. P appealed. The Appellate Division affirmed: P failed to demonstrate that the directors breached their duty of care or were otherwise unconscionable and rejected his claim of corporate waste. The Supreme Court granted P's petition for certification.