Memorandum Opinion - the Circuit Court for Baltimore City

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Standard of ReviewWhen considering a motion to dismiss filed pursuant to Maryland Rule 2-322(b), theCourt must assume the truth of all relevant and material facts that are well-pleaded and allinferences that can be reasonably drawn from the pleadings. Bennett Heating & AirConditioning, Inc. v. Nations Bank, 103 Md. App. 749, rev’d in part on other grounds, 342 Md.169 (1996). If the Court considers matters outside the pleadings, however, it must treat themotion as one for summary judgment under Maryland Rule 2-501, after determining that there isno genuine dispute as to any material fact and that judgment can be entered as a matter of law.Boyd v. Hickman, 114 Md. App. 108 (1997). All parties must be given a reasonable opportunityto present material pertinent to such a motion. Md. Rule 2-322(c).DiscussionPlaintiffs ask this Court to declare that Phillip Goldstein, Rojeev Dos and AndrewDakos (the Shaker nominees) were duly elected to the board of directors at the 2004 annualmeeting; that the management nominees were not elected (and enjoining them from taking officeas directors); and that the by-law amendments adopted by the corporate directors since 2002,which affected the election of directors at the 2004 annual meeting, are null and void (andenjoining their enforcement). 1Because plaintiffs’ entitlement to relief depends upon an analysis of the amendedby-laws of the corporation, the Court will address first the notice provisions in the by-laws andthen the other challenged provisions concerning director qualification, vote requirements and1The Complaint asks the Court to declare the Net Asset Value Proposal adopted at the2004 annual meeting. (Comp. 41.) But counsel appear to have abandoned this issue by notaddressing it in plaintiffs’ memorandum or argument.2
judicial review of the election results.I. The Notice Provisions in the By-LawsThe factual circumstances of the election are not disputed. At the 2004 annualelection three directors were to be elected, labeled Class I, Class II, and Class V. There is nodispute that plaintiffs knew as of March 2004 that the Class II director would be elected at the2004 annual meeting. (Compl. at 22.) There is also no dispute that the plaintiffs were on noticeof the Class I and Class V positions as of July 23, 2004, when Foxby filed its proxy statement forthe September 7, 2004 annual meeting. (Compl. at 23.) Plaintiffs’ argument that filing a proxystatement with the Securities and Exchange Commission (SEC) was not a public announcementis without merit. As pointed out by the defendants, Article II, § 12(c)(3) of the by-laws statesthat an SEC filing constitutes a public announcement.At the hearing and in their complaint and opposition, the plaintiffs do not disputethat the notice requirements are valid on their face, only that their validity might be compromisedif they were passed to interfere with shareholder voting rights. As authorized by Marylandstatute, by-laws may specify an advance notice requirement for director nominations. Md. CodeAnn. Corps. & Ass’ns § 2-504(f ) (1999) 2 . Article II, § 12(a)(2) of the Foxby by-laws requiresshareholders to give notice of annual meeting business, e.g., notice of the Shaker nominees, tothe secretary, within 90 days of mailing of the annual meeting notice. In turn, Article II, §12(a)(3) of the by-laws requires notice of nominees for a newly created director positionannounced less than one hundred days before the annual meeting to be given to the directorsArticle.2Unless otherwise stated, all statutory citations are to the Corporations and Associations3
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Memorandum Opinion - the Circuit Court for Baltimore City

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