[UNPUBLISHED]
PER CURIAM.
Patrick White Mountain pleaded guilty to assaulting a federal officer in violation of 18 U.S.C. § 111(a)(1), (b). He argued in the district court that the federal courts lacked jurisdiction due to the government's failure to comply with the "bad men" provision of the Fort Laramie Treaty of 1868. The district court rejected White Mountain's jurisdictional argument, and we affirm.
The Honorable Karen E. Schreier, Chief Judge, United States District Court for the District of South Dakota.
White Mountain was a passenger in a van that park rangers stopped in Badlands National Park. White Mountain was holding dogs on leashes. When the rangers told him to control the dogs, he dropped the leashes and the dogs bit the two rangers. White Mountain then fled into the Badlands. Later, tribal officers with the Oglala Sioux Tribe arrested White Mountain on tribal land and delivered him to the park rangers.
White Mountain argues that jurisdiction is lacking because the following treaty provision imposes upon the government a notice requirement and because the government failed to provide the requisite notice in his case.
If bad men among the Indians shall commit a wrong or depredation upon the person or property of any one, white, black, or Indian, subject to the authority of the United States, and at peace therewith, the Indians herein named solemnly agree that they will, upon proof made to their agent and notice by him, deliver up the wrong-doer to the United States, to be tried and punished according to its laws. . . .
Treaty with the Sioux, Apr. 29, 1868, U.S.-Sioux, art. I, 15 Stat. 635. We rejected an identical argument from a criminal defendant in a drug prosecution in United States v. Drapeau, 414 F.3d 869 (8th Cir. 2005), finding no jurisdiction-related notice requirement and stating:
The treaty does not say that the United States must give notice to an Indian tribe before the government may arrest and prosecute a tribal member who has violated the federal drug trafficking laws. Rather, the treaty imposes
an obligation on the tribe to "deliver up the wrong-doer to the United States," upon proof and notice to the tribe.
Drapeau, 414 F.3d at 878. In
Drapeau we also noted that, subsequent to the 1868 treaty, Congress granted citizenship to Indians, making them "subject to arrest for violation of the federal . . . laws just as is any other American citizen."
Id. (applying
8 U.S.C. § 1401(b)).
Finding no material distinction between the Drapeau case and White Mountain's case, we reject White Mountain's argument and affirm the judgment of the district court.
b)(1).
Id. As for notice of the substance of the proposed amendment, the board must supply the stockholders with either i) a full recitation of the proposed amendment; or ii) a brief summary of the proposed amendment and its effects.
Id.; BALOTTI FINKELSTEIN § 8.10; 2 DREXLER § 32.04[2]; FOLK § 242.3.1.
Finally, if the stockholders vote to approve the amendment, in order to give effect to the amendment, "a certificate setting forth the amendment and certifying that such amendment has been duly adopted in accordance with . . . section [242] shall be executed, acknowledged and filed and shall become effective in accordance with § 103 [of the DGCL]."
8 Del. C. § 242(b)(1). Section 103(d) of the DGCL "establishes the general rule that the effective date of a filed instrument is its `filing date.'" 1 DREXLER § 7.04.
The order of these three events is temporally significant; the "sequence must be followed precisely, and may not be altered by charter provision." That is, "the board is statutorily required to approve the . . . stock split before it is submitted to the shareholders."
2 DREXLER § 32.04.
Ixcore, S.A.S. v. Triton Imaging, Inc., 2005 WL 1653942, at *1 n. 7 (Del. Ch. July 8, 2005) (citing 8 Del. C. § 242(b)) (emphasis in original).
B. The Global Launch Board's Purported Adherence To Formalities
The defendants agree, at least initially, that in order for Global Launch to have effected a valid stock split, the three requirements outlined above must have been followed in order. The problem for the defendants, however, is the lack of evidence they supply in support of their contention that these three requirements were in fact met.
Post-Tr. Tr. at 34 (counsel for defendants).
The first requirement to effect a stock split is that the board adopt a formal resolution proposing the amendment, declaring its advisability, and either calling for a special meeting of the stockholders or placing the matter on the agenda for the next annual meeting. The defendants point to two resolutions as evidence that this requirement was met. The first of these is the March 1, 2008 Resolution, which authorized the amendment to Global Launch's certificate of incorporation that would increase the "total number of shares of stock which the corporation shall have the authority to issue [from the 10 million shares in Global Launch's original certificate of incorporation to] 50 Million" shares. The second resolution to which the defendants point is the December 1, 2008 Resolution, which authorized the board to amend the private placement memorandum on file with the Ohio Division of Securities such that "the offering of stock shall reflect the 5 to 1 split. . . ."
8 Del. C. § 242(b)(1).
March 1, 2008 Resolution.
December 1, 2008 Resolution (emphasis added).
The second requirement to effect a stock split is that the stockholders approve the board resolution by either voting in favor of it at a stockholders meeting or expressing approval by written consent. As to this requirement, the defendants are unable to identify when either of these methods of stockholder approval were used. There is no evidence of an actual meeting at which Blades and The Ohio Company, upon proper notice and receipt of the full text or summary of the proposed amendment to the certificate of incorporation that would implement the stock split, voted to approve it. Nor is there evidence that Blades and The Ohio Company filed written consents after receiving the required notice. Instead, the defendants point to the trial testimony of Blades, and Blazer on behalf of The Ohio Company as a Global Launch stockholder, where both admit that they "approved" the concept of a 5 to 1 split.
8 Del. C. § 242(b)(1); FOLK § 242.3; BALOTTI FINKELSTEIN § 8.10; 2 DREXLER § 32.04[2].
Tr. at 69-71 (Blades); Tr. at 480-81 (Blazer).
The third requirement for a valid certificate amendment is the filing of a certificate with the Secretary of State certifying that the amendment has been duly adopted in accordance with the statutory formalities and setting forth the amendment in full. To satisfy this requirement, the defendants point to the certificate of amendment that Wetzel filed with the Secretary of State on December 8, 2008 that stated, in full, the amended text of article 4 of Global Launch's certificate of incorporation:
The total number of shares of stock which the corporation shall have the authority to issue is Fifty Million (50,000,000) and the par value of each of such shares is $0.00010 amounting in the aggregate to Five Thousand Dollars ($5,000).
For reasons I next explain, this "evidence" is evidence of non-compliance with our law, and not of a valid stock split.
C. The Stock Split Was Not Valid
Delaware law is clear that strict compliance with statutory requirements is expected when boards change the capital structure of the corporation. If our law was ever unclear on this point, the Supreme Court's related decisions in Waggoner v. Laster and STAAR Surgical Company v. Waggoner made it plain that law trumps equity in this area of corporate decisionmaking. This mandate is premised on "a sensible assumption . . . that the capital structure and ownership of corporations are matters of great importance and should be settled with clarity." Although cases such as STAAR Surgical Company v. Waggoner, Waggoner v. Laster, Grimes v. Alteon, and Liebermann v. Frangiosa dealt with a board's issuance of stock, the same policy reasons recognized in those cases for requiring scrupulous adherence to corporate formalities are germane to a board's adoption of a stock split because both board actions involve a change in the corporation's capital structure. Indeed, adherence to formalities is even more important when, as in the case of a split, the change in capital structure and ownership requires a certificate amendment. This conclusion rests on the explicit reasoning found in STAAR itself, and the heavy weight that the Delaware Supreme Court placed on the fact that an issuance of new stock, like a stock split, requires an amendment to a corporation's certificate of incorporation, and can rightly be seen as "an act of fundamental legal significance having a direct bearing upon questions of corporate governance, control and the capital structure of the enterprise:"
There are many interacting principles of established law at play here. First, it is a basic concept that the General Corporation Law is a part of the certificate of incorporation of every Delaware company.
See 8
Del.C. § 394 Second, a corporate charter is both a contract between the State and the corporation, and the corporation and its shareholders.
See Lawson v. Household Finance Corp., Del.Supr.,
152 A. 723, 727 (1930). The charter is also a contract among the shareholders themselves.
See Morris v. American Public Utilities Co., Del.Ch.,
122 A. 696, 700 (1923). When a corporation files a certificate of designation under § 151(g), it amends the certificate of incorporation and fundamentally alters the contract between all of the parties.
See 8
Del.C. §§ 104, 151(g).
A party affecting these interrelated, fundamental interests, through an amendment to the corporate charter, must scrupulously observe the law.
STAAR Surgical Co. v. Waggoner, 588 A.2d 1130 (Del. 1991); Waggoner v. Laster, 581 A.2d 1127 (Del. 1990).
Liebermann v. Frangiosa, 844 A.2d 992, 1004 (Del. Ch. 2002) (citing Grimes v. Alteon, 804 A.2d 256, 262 (Del. 2002); STAAR, 588 A.2d at 1136; Triplex Shoe Co. v. Rice Hutchins, Inc., 152 A. 342, 347 (Del. 1930)).
8 Del. C. § 242(b)(1); Ixcore, 2005 WL 1653942, at *1.
STAAR, 588 A.2d at 1136.
Although it is clear from the record that the directors of Global Launch and Blades and The Ohio Company subjectively wished to adopt a stock split, the reality is that Global Launch did not adhere to the requirements of § 242(b)(1) of the DGCL. As an initial matter, there is no evidence of an adequate board resolution proposing an amendment that would effect a stock split. Section 242(a) of the DGCL provides that any amendment that would effect "a change in stock or . . . an exchange, reclassification, subdivision, combination or cancellation of stock" will be valid "so long as [the] certificate of incorporation as amended would contain . . . such provisions as may be necessary to effect such change, exchange, subdivision, combination or cancellation. " In this regard, it is crucial to distinguish an amendment to the certificate of incorporation that merely increases a corporation's authorized but unissued capital stock, as expressly authorized under the first clause of § 242(a)(3), from an amendment that changes the number of outstanding shares, as expressly authorized by the amended language in the last clause of § 242(a)(3) that contemplates a distinct charter amendment that would have the effect of "subdividing or combining the outstanding shares of any class or series of a class of shares into a greater or lesser number of outstanding shares."
8 Del. C. § 242(a); cf. Chalfin v. Hart Holdings Co., Inc., 1990 WL 181958, at *1 (Del. Ch. Nov. 20, 1990) (observing that a company "proposed an amendment to the certificate of incorporation that would have effected a 10 to 1 reverse stock split . . . [by] chang[ing] the par value from $.01 per share to $1.00 per share, and convert[ing] each block of 100 `Existing Shares' into one `New Share.'") (emphasis added).
8 Del. C. § 242(a)(3).
By its plain terms, the March 1, 2008 Resolution resolves to amend Global Launch's certificate of incorporation to increase the "total number of shares of stock which the corporation shall have the authority to issue" from 10 million to 50 million, and says nothing about implementing a forward stock split. Whether this is because Wetzel believed he could simply later cause a split of Global Launch's stock without an amendment to the certificate of incorporation, as seems likely, or because he simply failed to later get an amendment to split the stock properly and timely approved, is without moment. What counts is that the March 1, 2008 Resolution plainly does not involve a board resolution approving a stock split.
March 1, 2008 Resolution.
The defendants' reliance on the December 1, 2008 Resolution is also unavailing, albeit for different reasons. That resolution, far from implementing a stock split, merely authorizes the board to amend the private placement memorandum such that the "offering of stock shall reflect the 5 to 1 split. . . ." As a matter of logic, a document which purports to "reflect" a prior action, like a stock split, does not constitute an actual vote to approve the split in the first instance. Nor does this "reflection" ratify the prior defect in obtaining proper approval. To do that, and legally cure the prior defect, what was necessary was for the Global Launch board to take all the required steps: i) properly adopt a resolution with the required substantive content that would ratify the prior understanding; ii) attain the proper stockholder approval; and iii) file an implementing certificate of amendment. That was never done.
December 1, 2008 Resolution (emphasis added).
8 Del. C. § 242(b)(1); FOLK §§ 242.1, 242.3; BALOTTI FINKELSTEIN § 8.10; 2 DREXLER § 32.04[2].
Moreover, the record is devoid of any written notice to the stockholders specifying when the stockholders would vote on the proposed amendment. Likewise, nowhere in the two resolutions cited by the defendants is there any board declaration of the proposed amendment's advisability.
Putting aside the lack of any evidence in the record of a stockholders meeting, even the March 1, 2008 Resolution that purports to represent the unanimous stockholder approval of the proposed certificate amendment is not signed by a single stockholder. March 1, 2008 Resolution. Instead, the resolution is signed by Wetzel, as corporate secretary, and Borden in his capacity as CFO, as witness to the supposed "unanimous vote of the shareholders and directors." Id. Even were I to accept that the March 1, 2008 Resolution saying nothing about a stock split encapsulated the board's adoption of a resolution proposing an amendment to effect a stock split, the board's declaration of the amendment's advisability, adequate notice, and the stockholder vote of approval — and nothing on that document's face evidences any of those things — that resolution still does not reflect the requisite temporality, namely, that the board must adopt the resolution proposing the amendment and declaring its advisability before notifying the stockholders and submitting it to them for approval by vote or written consents. 8 Del. C. § 242(b)(1); Williams v. Geier, 671 A.2d 1368, 1381 (Del. 1996) ("Like the statutory scheme relating to mergers under 8 Del. C. § 251, it is significant that two discrete corporate events must occur, in precise sequence, to amend the certificate of incorporation under 8 Del. C. § 242: First, the board of directors must adopt a resolution declaring the advisability of the amendment and calling for a stockholder vote. Second, a majority of the outstanding stock entitled to vote must vote in favor.") (emphasis added); Ixcore, 2005 WL 1653942, at *1 n. 7 (citing 8 Del. C. § 242(b)); 2 DREXLER § 32.04. Because the March 1, 2008 Resolution clearly does not deal with a stock split, I premise my ruling on other grounds and do not address whether this temporal uncertainty compromises the certificate amendment increasing the number of authorized shares.
Recognizing that the documentary evidence does not satisfy the requirements of § 242(b)(1), the defendants instead press a more generalized notion of fairness: because a general aura of subjective agreement existed among Blades, The Ohio Company, and the Global Launch directors with respect to the stock split, I should ignore the DGCL and find, using some unspecified judicial authority to ignore the statute, that Global Launch effected a stock split at some unspecified point anyway. To that end, the defendants' arguments have the flavor that it is just downright unfair for Blades, who admitted he was in favor of a stock split, to fall back on technicalities in an effort to "undo" that which has been, in the defendants' opinion, "done," even if done in a way not countenanced by our General Assembly.
Even if I were to weigh the equities, I am not convinced they tilt in the defendants' favor, given the primary role Wetzel played in creating pervasive uncertainty about Global Launch's ownership. Moreover, many of the actions the defendants took after Blades left the board were self-interested, poorly documented, and greatly suspect as both a legal and equitable matter. Thus, even if I were entitled to weigh equity against law, I would not rule for the defendants.
But what is more critical is that STAAR and other binding precedent make clear that I cannot ignore the statutory infirmity of the stock split because my equitable heartstrings have been plucked. That is, in the sensitive and important area of the capital structure of the firm, law trumps equity. Finally, there is no argument by the defendants that a second attempt (one adhering to the statutory formalities) at the stock split was ever made, nor is there an argument that the board or the stockholders successfully ratified the flawed amendment process. D. Blades And The Ohio Company Are The Only Two Stockholders In Global Launch And The Court Need Not Reach The Defendants' Remaining Arguments The parties are in agreement that initially, Global Launch had only two stockholders who together held 100% of Global Launch's authorized and outstanding stock: Blades and The Ohio Company. The disagreement centered on what happened thereafter. The defendants maintained throughout this action that other stockholders received post-split shares via transfers from Blades and The Ohio Company. But because I find that the stock split was invalid, and therefore ineffective, these transfers were of shares in Global Launch that did not exist. Put differently, from the time the first of these transfers was purportedly made, on December 15, 2008, Global Launch had only 10 million authorized, issued, and outstanding shares, all of which were held by Blades and The Ohio Company alone. The stock purportedly held by minority stockholders, having never been properly authorized through a valid stock split, is, to borrow a phrase from STAAR, "void and a nullity."
STAAR, 588 A.2d at 1131, 1137.
See STAAR, 588 A.2d at 1137 (reversing the Court of Chancery's authorization, on equitable grounds, of invalidly issued shares and holding that a "court cannot imbue void stock with the attributes of valid shares."); id. at 1136 ("The Waggoners' attempt to trivialize the unassailable facts of this case as mere `technicalities' is wholly unpersuasive."); Liebermann, 844 A.2d at 1004-05 (citing STAAR 588 A.2d at 1136) (noting that Delaware "case law has refused to overlook the statutory invalidity of stock even in situations when that might generate an inequitable result."); see also Superwire.Com, Inc. v. Hampton, 805 A.2d 904, 909 n. 17 (Del. Ch. 2002) (citing STAAR, 588 A.2d at 1137) (rejecting an equitable estoppel defense because the court "cannot give any effect to void shares even in the context of an equitable defense.") (emphasis in original).
In an effort to have me excuse the invalidity of the split, the defendants point to a solitary case, In re Staples, Inc. S'holders Litig., 792 A.2d 934 (Del. Ch. 2001), to support their argument that "[t]his court has recognized that even where a corporation seeks to implement a stock split that may not have been permitted by its certificate of incorporation, a Delaware corporation may effect a de facto stock split through separate contracts with investors." Def. Ans. Post-Tr. Br. at 9. This argument fails for a number of reasons.
Staples arose in a very different context and this court made no ruling on the validity of the corporation's prior actions. In that extremely expedited case, the plaintiffs, stockholders of Staples, sought to preliminarily enjoin a stockholder vote on a proposed reclassification of one class of Staples common stock (Staples.com stock) into another (Staples RD stock). They did so on the basis of alleged director self-interest, various disclosure violations, and certain other arguments, including one that the vote should be enjoined because of an earlier reverse stock split of the Staples.com shares that was conducted without a specific amendment to Staples' certificate of incorporation. In that transaction, Staples, in order to achieve more favorable pricing for an anticipated Staples.com IPO, entered into a series of identical, "discrete contracts in which holders [of Staples.com shares] exchanged two shares of Staples.com for one share" of the same. Staples, 792 A.2d at 941. The court noted that "each of those contracts was premised on the fact that Staples' retained interest [in Staples.com] would be reduced on the same basis." Id. at 961. Thus, the court concluded that even if the reverse stock split was not done in conformity with Staples' certificate of incorporation, "[a]ny invalidation of the reverse split would require that the court . . . treat the individual stockholders equally with Staples . . . [and] [a]s a result, no economic differences in result could equitably ensue." Id. Recognizing that remedial reality, the court declined to enjoin the reclassification vote on that basis. Id.
The court in Staples did not, as the defendants contend, make a ruling on the underlying law with respect to the validity of the purported stock split. Instead, it simply reasoned that regardless of whether the stock split was proper, the economic situation facing each Staples.com shareholder vis a vis one another would be identical, and that the split was therefore no equitable reason to preliminary enjoin the vote. Moreover, the court noted that "as a purely legal matter," it was not clear that Staples' certificate did not authorize the manner in which the split was effected because the certificate "expressly state[d] that Staples' retained interest [in Staples.com] will be automatically `adjusted in proportion to any changes in the number of outstanding shares of Staples.com Stock caused by . . . combinations (by reverse stock split, reclassification or otherwise) of Staples.com stock. . . .'" Id. n. 52 (emphasis in original). The specific, clear contracts might have satisfied the " otherwise" provision of the certificate. Id. But, in the context of an expedited preliminary injunction application, the court never answered that question.
Finally, in stark contrast to Staples, where the previous exchanges were absolutely clear, and so was the proposed reclassification, here Wetzel heaped uncertainty on uncertainty. Almost all of the supposed post-split transfers are deeply suspect on their own, either as a matter of law, equity, or often both. To sanction the invalid split here would therefore encourage future messes of this kind, generating precisely the uncertainty § 242 of the DGCL and Supreme Court cases like STAAR seek to avoid.
STAAR, 588 A.2d at 1136.
Because the only stockholders of Global Launch with validly issued shares are Blades and The Ohio Company, the other issues in the case need not be reached. Having all of the current voting power, their action by Written Consent was sufficient to remove all the members of the board and elect a new board. Likewise, it was sufficient to ratify the actions taken at the November 18, 2009 board meeting. As to the last point, that does not, of course, mean that the court insulates any of the board's actions from challenge in another lawsuit. The board seated by Blades will have to face responsibility for its actions.
For instance, the defendants' argument that the provision in the December 2007 Agreement requiring an 80% stockholder vote to alter the board of directors remained viable is without merit because that agreement was plainly superseded by the March 2008 Agreement. But because Blades and The Ohio Company had 100% of the voting shares, the Written Consent would still be sufficient even if the December 2007 Agreement was in force. Likewise, because Blades and The Ohio Company had 100% of the vote, the interesting question raised regarding whether stockholders holding less than enough votes to elect all the members to a board of a corporation having cumulative voting can take action by written consent to remove and elect an entire new slate need not be answered. E.g., FRANKLIN BALOTTI ET AL., MEETINGS OF STOCKHOLDERS § 11.7 (3d ed. 2009) (noting that § 228 of the DGCL "speaks in terms of `elections' and `votes,'" and questioning the propriety of using written consents to remove and elect directors in a corporation that has cumulative voting). Finally, because all of the questionable transfers were of "post-split shares" that were never validly created, I need not explore the reality that i) the purported transfers by The Ohio Company violated clear provisions of the March 2008 Agreement because, among other things, no proper notice was given to Blades, no proper opinion of counsel was given by Wetzel, and no written waiver of these rights was executed as required by the Agreement; ii) the gifts of Blades' shares to programmers were executed by Wetzel without proper authorization by Blades as to the timing, amounts, and recipients; iii) the grants of shares to Wetzel's law firm and other incumbent board members may fail the entire fairness standard of review generally applicable to self-interested transactions, especially given the role of Wetzel's law firm in creating a corporate mess; iv) agreements Wetzel claims to have negotiated with Blades to give up certain other shares are suspiciously documented, of very dubious existence, and are highly questionable on equitable grounds; and v) several of the other supposed transfers and share certificate cancellations are subject to possible, perhaps even likely, invalidation on other grounds, such as lack of performance under a contract and lack of consideration.
In order for stockholder ratification to be valid, three things must exist. First, the stockholders must be fully informed of all material facts related to the act to be ratified. DONALD J. WOLFE AND MICHAEL A. PITTENGER, CORPORATE AND COMMERCIAL PRACTICE IN THE DELAWARE COURT OF CHANCERY § 11.04 [a] (2009). Second, the ratification must not have been improperly coerced. Id. And finally, the act to be ratified must have been voidable and not void. Michelson v. Duncan, 407 A.2d 211, 218 (Del. 1979). The actions purportedly taken at the board meeting on November 18, 2009 are voidable acts such as terminating contracts, and initiating an investigation into whether The Ohio Company complied with its contractual obligation to invest $500,000 in Global Launch. Thus, these acts could be ratified by a fully informed, uncoerced vote, which the Written Consent represents.
The fact that now Blades and The Ohio Company have sole control of Global Launch may not be the cause for celebration they may have anticipated at the outset of this litigation. Despite its name, it seems from the record that Global Launch has not impressively launched, let alone gone global. Instead, it looks as if Global Launch may need to buy office supplies on layaway itself. To make matters worse, as Blades acknowledged at trial, there are nearly fifty minority stockholders listed on the stock ledger who hold invalid Global Launch share certificates Wetzel sent them, some of whom Blades reached out to in preparation for his ineffective stockholders meeting in November, 2009.
A similar situation was encountered in the Liebermann case, where the defendant directors had participated in the creation and sale of preferred stock to outside investors that was never properly authorized in the corporation's certificate of incorporation, but defended their use of a written consent to remove incumbent board members on the ground that the consents represented a majority of the validly issued common stock. This court, in upholding the written consent and the defendants' argument with respect to the invalidly issued preferred stock, noted the Pyrrhic nature of the victory:
Although it might be galling to the plaintiffs to have Frangiosa and D'Ambrosio take advantage of a legal problem they contributed to creating, the inequity that results is no greater than that which occurred in
STAAR, wherein a purchaser who had accepted substantial economic risk in exchange for shares was denied the benefits of the bargain he thought he made by the company with whom he had made it. . . . Even more critical, my recognition of the New Board as the proper board of MobileToys does not leave the investors [holding the invalid preferred stock] without a remedy. . . . Frangiosa and D'Ambrosio will now bear primary responsibility for directing MobileToys' response to this substantial legal problem, which exposes the company (and perhaps its directors) to rather obvious claims (
e.g., for equitable rescission or unjust enrichment). Another court on another day may well confront disputes arising out of the New Board's decisions, if it is unable to address the purchasers' concerns in a manner that generates consensus.
Indeed, the defendant directors had purchased some of the unauthorized preferred stock for themselves. Liebermann, 844 A.2d at 1004.
Id. at 1000.
E.g., 3 PLUTARCH'S LIVES 26 (John Langhorne William Langhorne trans., 1st ed. Isaiah Thomas, Jr. 1804) ("Pyrrhus being wounded in the arm with a javelin, and the Samnites having plundered his baggage; and that the number of the slain, counting the loss on both sides, amounted to above fifteen thousand men. When they had all quitted the field, and Pyrrhus was congratulated on the victory, he said, `Such another victory, and we are undone.'").
Global Launch and its newly elected directors will face the same difficult situation. They will have to address various claims by investors, employees, the defendants, and others if they do not straighten out the situation fairly. But it is important that the capital structure of Delaware corporations be established in a reliable and certain manner. To ignore the reality that no valid split occurred would encourage a repeat of situations like this, in which uncertainty is heaped on uncertainty, with the result being a jumbled corporate mess. As noted previously, because the defendants, especially Wetzel, are as much or more responsible for this situation, no inequity is worked by seating Blades' slate. By the defendants' own acknowledgement, Blades and The Ohio Company are entitled to seat a majority of the board anyway and yet the defendants have clung to unilateral power for nearly a year. Blades and the new board will have a duty to respond to claims by the defendants and others regarding the questionable transfers Wetzel made.
At trial, Blades acknowledged as much, and said that if victorious, he plans to initiate an audit of Global Launch's books to come up with a fair solution. Tr. at 34 (Blades).
Def. Op. Post-Tr. Br. at 26 ("Blades and The Ohio Company own 21,433,575 shares (JX 55, line 34) and 558,335 shares (JX 55, line 67), respectively, or together, roughly 52% of [Global Launch's] 42,264,000 outstanding shares. . . ."); Stip. ¶ 15 ("According to the Stock Ledger [maintained by Wetzel], at the commencement of this action, Blades owned 21,433,575 shares of [Global Launch] common stock out of 42,264,000 outstanding and The Ohio Company owned 558,335 shares.").
V. Conclusion
For all of the foregoing reasons, the Written Consent of March 8, 2010 was effective to remove Wetzel, Wisehart, and Blazer as directors and to elect Rusty Blades, Lindsay Borden, Chris Haydocy, Chris Beasley, Gerrick Doss, Bill Delord, and Larry Calhoon as directors of Global Launch. The Written Consent also validly ratified the actions taken at the November 18, 2009 board meeting. The parties shall submit a final order to that effect on or before November 23, 2010. Each side to bear its own costs.