My Note: I am sad to report that private investor has lost his lawsuit against Advanced Photonix, in regard to proxy vote 6. The Court's Order is found below. Knowles vows to continue the fight again this year.
IN THE COURT OF CHANCERY
OF THE STATE OF DELAWARE
CHARLES
M. KNOWLES, JR.,
Plaintiff,
v.
ADVANCED
PHOTONIX, INC.,
Defendant.
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FINAL ORDER
WHEREAS
on November 6, 2013, Plaintiff Charles M. Knowles, Jr. filed claims
seeking
a declaratory judgment regarding the proper interpretation of the bylaws
Advanced
Photonix, Inc. (the “Company”);
WHEREAS
on December 30, 2013, the Company moved for summary judgment;
WHEREAS
on December 30, 2013, Plaintiff cross-moved for summary judgment;
WHEREAS
the court has considered the submissions of counsel and determined
that
oral argument is unnecessary;
NOW
THEREFORE, this 2nd day of February, 2014, the court finds and orders as
follows:
1.
Plaintiff seeks a judgment declaring that (i) the outcome of a stockholder
vote
on proposed amendments to the bylaws of the Company (the “Bylaws”) is
determined
by a majority vote of the shares entitled to vote on such matters and present
at the meeting in person or by proxy, (ii) Article IX of the Bylaws is invalid
to the extent that it would require the vote of a majority of the outstanding
shares in order to amend the Bylaws, (iii) broker non-votes must be disregarded
for purposes of proposals to amend the Bylaws, and (iv) “Proposal 6” received
the requisite votes in favor and was approved by the stockholders.
2.
The court may grant summary judgment when the record shows that “there
is no
genuine issue as to any material fact and that the moving party is entitled to
a
judgment
as a matter of law.” Ct. Ch.
summary
judgment, the court must examine each motion separately and only grant a motion
for summary judgment to one of the parties when there is no disputed issue of material
fact and that party is entitled to judgment as a matter of law.” Fasciana v.
Elec. Data Sys. Corp., 829 A.2d 160, 166-67 (Del. Ch. 2003)
(footnotes omitted).
3.
The material facts are not in dispute. The parties agree that the votes cast
with
respect to Proposal 6 were 11,970,378 in favor, 3,538,820 against, 371,529
abstentions,
and 12,281,996 broker non-votes. Whether that vote was sufficient for
Proposal
6 to pass presents a question of law.
4.
Article I, Section 4 of the Bylaws, entitled “VOTING,” states: “At all
meetings
of the stockholders, all questions, the manner of deciding which is not
specifically
regulated by statute, shall be determined by a majority vote of the shares entitled
to vote on such matters present in person or by proxy.” Dkt. 1 Ex. A at 1. The only
exception in Article I, Section 4 is the election of directors, which is
determined by plurality vote.
5.
Article IX, Section 1 provides that the Bylaws “may be altered, amended,
repealed
or added to by an affirmative vote of the stockholders representing a majority
of the whole capital stock entitled to vote at an Annual Meeting or at a Special
Meeting called for that purpose.” Dkt. 1 Ex. A at 11.
6.
Under Delaware
used
to interpret “statutes, contracts, and other written instruments.” Hibbert
v.
Hollywood
Park, Inc., 457 A.2d 339, 342-43 (Del. 1983). If the bylaws are
unambiguous,
the court does not look to the parties’ intent, but rather enforces the plain language
of the bylaws. Id. Id.
7. “Specific
language in a contract controls over general language, and where
specific
and general provisions conflict, the specific provision ordinarily qualifies
the meaning of the general one.” DCV Hldgs., Inc. v. ConAgra, Inc., 889
A.2d 954, 961 (Del. 2005) (footnote omitted).
8.
Article I, Section 4 is a broad provision that governs the procedure for
voting
on “all questions” put to the stockholders, excepting only director elections.
Article
IX, Section 1 deals specifically with the procedures for stockholder votes on bylaw
amendments. The former is the general provision. The latter is the specific provision.
9.
The specific language of Article IX, Section 1 controls over the general
language
of Article I, Section 4. Therefore, for a proposed amendment to the Bylaws to pass,
it must receive the “affirmative vote of the stockholders representing a
majority of the whole capital stock entitled to vote.”
10.
The “whole capital stock entitled to vote” comprises all shares outstanding,
including
shares that abstained from voting on Proposal 6 and broker non-votes.
Proposal
6 therefore needed the support of 15,578,774 shares, which would constitute a simple
majority of the Company’s 31,157,547 outstanding shares. Proposal 6 only received
the affirmative vote of 11,970,378 shares.
including
shares that abstained from voting on Proposal 6 and broker non-votes.
Proposal
6 therefore needed the support of 15,578,774 shares, which would constitute a simple
majority of the Company’s 31,157,547 outstanding shares. Proposal 6 only received
the affirmative vote of 11,970,378 shares.
11.
Proposal 6 was not approved by the stockholders.
12.
Plaintiff’s motion for summary judgment is denied.
13.
Defendant’s motion for summary judgment is granted.
14.
Costs are awarded to Defendant as the prevailing party.
/s/
J. Travis Laster
Vice Chancellor J. Travis Laster
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