Memorandum Opinion - the Circuit Court for Baltimore City

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legitimate efforts of dissident stockholders inthe exercise of their rights to undertake a proxycontest against management.Schnell v. Chris-Craft Indus., Inc., 285 A.2d 437, 439 (Del. 1971).A more recent unpublished opinion 3 by the Delaware Chancery Court imposed apreliminary injunction against the enforcement of an advance notice by-law requirement whichwould have deprived shareholders of the opportunity to nominate a dissident slate of corporatedirectors. Relying in part on Schnell v. Chris-Craft Indus., Inc., supra, and Blasius Indus., Inc. v.Atlas Corp., 564 A.2d 651 (Del. Ch. 1988), the court addressed a fact pattern where the boardhad taken no affirmative action to thwart the shareholder challenge, but merely declined to waivethe by-law requirement of notice in advance of the annual shareholders’ meeting. The Delawarecourt said:... the case-by-case development of the lawsgoverning fiduciary obligations - a processthat is integral to our common lawtradition - cannot be constrained by so facilea distinction. From a semantic and evenlegal viewpoint, “inaction” and “action”may be substantive equivalents, differentonly in form. Morever, occasions do arisewhere board inaction, even where notinequitable in purpose or design, maynonetheless operate inequitably. If thatoccurs, it cannot tenably be maintainedthat equity is without power to grantrelief to an aggrieved party in an appropriatecase.R.D. Hubbard v. Hollywood Park Realty Enterprises, Inc., 1991 WL 3151 (Del. Ch.), 17 Del. J.3Md. Rule 1-104 generally prohibits citation to unreported Maryland decisions butDelaware courts do not prohibit their citation. See Hudson v. Prime Retail, Inc., 2004 WL1982383 (Md. Cir. Ct.) at p. 13, n.17.6
Corp. L. 238, 257.For at least a half century, the Maryland courts have exercised their equityjurisdiction to consider whether corporate by-laws were invalid under our law, as unreasonablewhen applied to challenges to the control of corporate boards of directors. Roland Pk. Shop.Center v. Hendler, 206 Md. 10, 24 (1954). Other Maryland cases have addressed directors’actions taken to ensure their continued control, Mtge. Board Ass’n v. Baker, 157 Md. 309, 321(1929) and scrutinized directors’ actions for fairness applying the fiduciary duty rule, Cummingsv. United Artists, 237 Md. 1, 24-25 (1964) (although not deciding whether to apply fiduciary dutyrule or less stringent business judgment rule).This Court believes that Maryland law provides the same protection toshareholder voting rights that obtains in Delaware, in similar factual contexts, such as the presentone involving a proxy fight over control of the board. Cf. Brown v. McLanahan, 148 F.2d 703,708 (4 th Cir. 1945). Assuming the truth of plaintiffs’ allegations for purposes of the presentmotion, plaintiff Shaker took appropriate actions to notify the directors and the SEC of his intentto challenge the management nominees with his own slate. The board reacted by engaging in acontest for shareholder proxies, which would have been unsuccessful, except for the invocationof the notice provisions in the amended by-laws. Thus, under the circumstances of this case, theCourt finds that the application of the notice provisions brings this action within the equitablepowers of the Court to determine whether defendants breached their fiduciary duties to theshareholders by enforcing unreasonable or discriminatory by-law provisions against plaintiffs.II. The Other Challenged By-Law ProvisionsPlaintiffs allege that the by-law amendments adopted by the board of directors7
Page 1 and 2: RICHARD J. SHAKER, et al. * IN THEP
Page 3 and 4: judicial review of the election res
Page 5: Manager, at the expense of the shar
Page 9 and 10: Neither party disputes the right of
Page 11: Blasius Indus., Inc., 564 A.2d at 6

Memorandum Opinion - the Circuit Court for Baltimore City

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