West Palm Beach Firefighters' Pension Fund v. Moelis & Company

311 A.3d 809 (2024)

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Nature of the Case

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Facts

P is an owner of Class A stock. He purchased his shares on November 19, 2014. He filed this action on March 13, 2023. P seeks declarations that the Challenged Provisions are invalid and unenforceable. D is a global investment bank. Ken Moelis is its founder, CEO, and Chairman of the Board. Ken decided to raise capital from the public markets. Ken created D as a new holding company and reorganized the bank's underlying entity structure. One day before D's shares began trading publicly, Ken, three of his affiliates, and D entered into a stockholder agreement (Stockholder Agreement). D's board of directors must obtain Ken's prior written consent before taking eighteen different categories of action. The Pre-Approval Requirements encompass virtually everything the Board can do. The Board can only act if Ken signs off in advance. Ken can also select a majority of its members and the Board is contractually obligated to maintain its size at not more than eleven seats. Ken is entitled to name a number of designees equal to a majority of those seats. The Board must nominate Ken's designees as candidates for election. The Board must recommend that stockholders vote in favor of Ken's designees D must use reasonable efforts to enable Ken's designees to be elected and continue to serve. The Board must fill any vacancy in a seat occupied by a Ken designee with a new Ken designee. Even if Ken holds less than a majority of the Company's outstanding voting power, as is currently true, the Board Composition Provisions force the directors to ensure that his designees control the Board. The Board must populate any committee with a number of Ken's designees proportionate to the number of designees on the full Board. The Board cannot create a committee with a different number of Ken designees unless Ken consents. The Board must populate any committee with a number of Ken's designees proportionate to the number of designees on the full Board. The Board cannot create a committee with a different number of Ken designees unless Ken consents. The Board cannot create an independent committee without any Ken designees unless Ken consents. P is a D stockholder who contends that these provisions violate Section 141(a). P contends that the Committee Composition Provision also violates Section 141(c). Presently, Ken owns approximately 6.5% of the outstanding equity and possesses the right to obtain additional shares that would bring his equity interest to 11.5%. The Class B Condition therefore continues to be satisfied. Because he continues to beneficially own all of the Company's Class B stock, his voting power currently stands at 40.4%.