IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
DEANN M. TOTTA, LAURIE MORRISSEY, CHASE WATSON, and PARK G.P., INC., Plaintiffs,

v. CCSB FINANCIAL CORP., Defendant. ) ) ) ) ) ) ) ) ) ) ) C.A. No. 2021-0173-KSJM

POST-TRIAL MEMO RANDUM OPINION Date Submitted: February 17, 2022 Date Decided: May 31, 2022 Kevin H. Davenport, John G. Day, PRIC KETT, JONES & ELLIOTT, P.A., Wilmington, Delaware; Counsel for Plaintiffs Deann M. Totta , Laurie Morrissey, Chase Watson, and Park G.P., Inc. Aaron. E. Moore, MARSHALL DENN EHEY WARNER COLEMAN & GOGGIN , Wilmington, Delaware; Brett A. Scher, Pa trick M. Kennell, KAUFMAN DOLOWICH & VOLUCK, LLP, New York, New York; Counsel for Defendant CCSB Financial Corp.

McCORMICK, C.The defendant is a holding company that owns a small community bank. Its directors faced a proxy contest by an insurgent who has held stock in the company for more than a decade, and who has had an antagonistic and litigious re lationship with the board. The directors feared that if the stockholder gained control of the board, then he would destroy the community bank that many of th e directors had lovingly served for years. To counter this perceived threat, the dire ctors invoked a provision in the company’s charter that prohibits a stockholder from ex ercising more than 10% of the company’s voting power in an election (the “Voting Limitation”). The directors adopted a new interpretation of that neve r-before-invoked provision und er which the board could aggregate multiple stockholders’ holdings if th e board perceived the stockholders to be acting in concert with one another. Relying on that interpretation, th e board instructed the inspector of elections not to count any vot es above the Voting Li mitation that were submitted by the insurgent, his slate of nominees, and an entity affiliated with a nominee’s father. Due to this instruction, the in surgent’s nominees lost the election. The plaintiffs are the insu rgent’s company and nominees . They have sued under Section 225 of the Delaware General Corpor ation Law (the “DGCL”) to invalidate the board’s instruction to th e inspector of elections. The par ties stipulated to trial on a paper record. This post-trial decision holds that the board improperly ap plied the aggregation principles of the Voting Limita tion to disenfranchise the plai ntiffs. This decision further concludes that the board’s conduct was inva lid under equitable pr inciples. For these reasons, judgment is entered in favor of the plaintiffs.2 I. FACTUAL BACKGROUND The court held a half-day trial on a paper record on February 17, 2022. The record comprises 113 trial exhibits, depositions from ni ne witnesses, and forty-six stipulations of fact. These are the facts as th e court finds them after trial. 1
A. CCSB And The Voting Limitation CCSB Financial Corp. (the “Company”) is a Delaware corporation that wholly owns Clay County Savings Bank (the “Bank”). 2 The Bank operates three branches near Kansas City in Clay County, Missouri. 3 The Bank has underperformed financially compared to its
peers. 4 The Company’s shares are th inly traded in the over-the -counter market. As of December 3, 2020, which was the record date for the meeting of stockholders at issue in this case (the “Record Date”), the Comp any had 743,071 shares of common stock outstanding, comprising all of the Company’s outstanding voting power. 5 As of the Record Date, the Company’s board of directors (the “Board”) comprised David Feess, Mario

1 The Factual Background cites to: C.A. No . 2021-0173-KSJM docket entries (by docket “Dkt.” number); trial exhibits (by “JX” number); the trial transcript (D kt. 75) (“Trial Tr.”); and stipulated facts set forth in the Parties’ Joint Pre-Trial Order (Dkt. 69) (“PTO”). The parties lodged the deposition tr anscripts of the following w itnesses: David Feess, David Johnson, Deborah Jones, Stephanie Kalahur ka, Laurie Morrissey, DeAnn Totta, Mario Usera, Chase Watson, and Davi d Watson. The deposition transcripts are cited by reference to the witnesses’ last names and “Dep. Tr.”
2 PTO ¶ 5.
3 Id.
4 JX-48 at 4.
5 PTO ¶ 5.3 Usera, Deborah Jones, Louis Freeman, Debr a Coltman, Robert Durden, and George McKinley. 6 Feess served as Board chairman. Usera has been the Company’s and the Bank’s president and CEO since 2013 and ha s been employed by the Bank since 1997. 7 Usera reported beneficially owning 78, 442 shares, or 10.56% of the Company’s outstanding stock on the Record Date, though he testified at his deposition that he mistakenly failed to include his daughter’s shares when reporting his beneficial ownership. 8 Collectively, the Board beneficia lly owned 23.39% of the Company’s outstanding stock on the Record Date. 9
The Bank was founded in March 1922 as a savings and loan association. 10 The Company was incorporated in September 2002 as a holding compa ny for the Bank, which converted to a federally char tered savings bank in 2003. 11 The prospectus for the conversion stated that the Bo ard “believe[d] that it is a ppropriate to adopt provisions permitted by federal regulation to protect the interests of the converted association and its stockholders from any hostile takeover.” 12

6 Id. ¶ 6.
7 Id. ¶ 9.
8 Id. ; Usera Dep. Tr. at 145:18–146:14.
9 PTO ¶ 16.
10 JX-93 (Bank Website Page “Our History” Printout) at 1. The court congratulates the Bank on recently celebrati ng its hundredt h birthday.
11 Id.
12 JX-104 at 142.4 Those anti-takeover provisions appear in Article FOURTH of the Company’s certificate of incorporation, which was file d September 13, 2002, and has never been amended. 13 Article FOURTH established the Voting Li mitation, which provides that “in no event” shall any “pers on” who “beneficially ow ns in excess of ten percent (10%) of the then-outstanding sh ares of Common Stock . . ., be entitled, or permitted to any vote in respect of the shares held in excess of the Limit.” 14 The Voting Limitation is quoted in full in the legal analysis. Article FOURTH defines “person” and “b eneficial owner” using concepts like “affiliate” and “acting in concert” that result in the aggrega tion of shares across owners. Those definitions and their implications are quoted and discussed in the legal analysis. Article FOURTH empowers the Board to interpret and enforce the Voting Limitation. Article FOURTH (C)(3) grants th e Board the “power to construe and apply the provisions of this section and to make all determinations necessary or desirable to implement such provisions,” including wh ether the aggregation principles apply. 15 Article FOURTH (C)(6) then provides that “[a]ny constructions, app lications, or determinations made by the Board of Directors pursuant to this section in good faith and on the basis of such information and assistance as was then reasonably availa ble for such purpose shall be

13 JX-1 (“Certificate of Inc.”) at 1–2; Trial Tr. at 49:8–16.
14 Certificate of Inc., art. 4(C)(1).
15 Id. art. 4(C)(3).5 conclusive and binding upon the Co rporation and its stockholders.” 16 This decision refers to Article FOURTH (C)(6) as the “Conclusive-And-Binding Provision.” It is undisputed that, before the Comp any’s 2020 annual mee ting and director election, the Board had never applied the Voting Limitation. 17 This was so despite the fact that, in at least one prior election, a stockh older holding more than 10% of the Company’s outstanding stock voted all of its shares. 18 Usera speculated at his deposition that the excess votes were not disqualified becau se “the number of shares th at were in excess of the 10 percent had no impact on . . . the election and so there was no need to apply the” Voting Limitation. 19 It is unclear from the record wh ether that was in fact the case.
B. David Johnson, Park, And The Park Nominees Non-party David Johnson is the controlling st ockholder and a board member of First Missouri Bank which, like the Ba nk, is a community bank wi th multiple branches near Kansas City. 20 Johnson is also the chairman and CEO of Maxus Realty Trust Inc. (“MRTI”), a real estate investment trus t which wholly owns Maxus Properties LLC (“Maxus Properties”) through a subsidiary. 21 Rounding out his business holdings relevant

16 Id. art. 4(C)(6).
17 JX-82 (Def.’s Resps. & Objs. to Pl .’s First Set of Interrogs.), Resp. 7.
18 JX-12 (Dec. 20, 2017 Board Mins.) at 2–3; Usera Dep. Tr. at 49:5–51:15.
19 Usera Dep. Tr. at 52:2–5.
20 Johnson Dep. T r. at 27:22–29:2.
21 PTO ¶ 1.6 to this decision, Johnson is the sole stockhol der of Park G.P., Inc. (“Park”), one of the plaintiffs in this action. 22
Johnson has been a stockholder of the Company for over a decade. 23 He testified at his deposition that he owns at least some sh ares of every bank in the Kansas City area. 24 Park owned 3,398 shares of Compa ny common stock on the Record Date. 25 Johnson asserts that he beneficially owned 73,948 sh ares, or 9.95% of the Company’s outstanding shares on the Record Da te, including Park’s. 26 Plaintiff DeAnn Totta is Park’s president. 27 Totta has worked as an accountant for both Arthur Andersen and KPMG, and currently serves as Vice President of Reporting and Compliance for Maxus Properties, overseei ng tax, audit, and regulatory compliance. 28 Totta did not beneficially own any Company stock on the Record Date. 29 Plaintiff Chase Watson (“C. Watson”) also used to work for KP MG, but at the time of trial served as Vice President and Direct or of Finance for Maxus Properties and as a

22 JX-27 at 4.
23 Johnson Dep. Tr. at 40:24–41:10.
24 Id. at 41:11–14.
25 PTO ¶ 2.
26 Id. ¶ 1.
27 Id. ¶ 2.
28 Id.
29 Id.7 Vice President of MRTI. 30 C. Watson is also a manager of MLake 96 LLC (“MLake 96”), which owned 500 Company shares on the Record Date. 31 Plaintiff Laurie Morrissey owns and op erates a marketing consulting business specializing in advertising, social media enga gement, public relations, branding, business development, and fundraising. 32 Morrissey beneficially ow ned 100 Company shares on the Record Date. 33 Park nominated Totta, C. Watson, and Morr issey for election to the Board at the Company’s 2021 annual meeting. 34
C. Johnson’s Early Attempts To Se at A Director On The Board In connection with the Company’s 2011 annual meeting, Jefferson Acquisition, LLC, solicited proxies to elect Johnson an d another nominee to the two seats up for election. 35 Johnson was a member of Jefferson Acquisition. Johnson and the other nominee lost that election, and later that y ear Jefferson Acquisition filed suit in Missouri state court against the Company and the Board, claiming that the directors breached their fiduciary duties in connection with the election. 36 The Circuit Court of Clay County,

30 Id. ¶ 3.
31 Id.
32 Morrissey Dep. Tr. at 13:4–21; PTO ¶ 4.
33 PTO ¶ 4.
34 Id. ¶¶ 2–4.
35 JX-106 at 3.
36 Id. at 4, 6.8 Missouri issued an order dismissing that ac tion, which the Missouri Court of Appeals affirmed. 37 Jefferson Acquisition again submitted nomine es for the Compan y’s 2012 annual election but, again, lost the election. 38 Johnson wrote a letter to Company stockholders on June 14, 2012, warning that if the Company “c ontinues to lose money, we face the ultimate threat of a regulator take-over.” 39 The Company responded w ith a letter signed by the Company’s then-CEO, John Davi s, and Usera, who was the Co mpany’s president and chief operating officer at the time. 40 Johnson sued Davis and Us era for defamation and other causes of action over the statements in th eir response letter, but judgment was entered against Johnson in 2014. 41 In a notice dated May 19, 2015, and publis hed in the Federal Register, the Federal Reserve System announced that Johnson and his wife had a pplied to each acquire more than 10% of the Company’s common stock. 42 In addition, Johnson, his wife, and Park, “acting in concert,” according to the Federal Reserve, applied to acquire up to 24.99% of the Company. 43 By letters dated June 24, 2015, the Federal Reserv e Bank of Kansas City notified Johnson, his wife, and Usera that Johnson and his wife were approved to

37 Id. at 6; JX-107 at 1.
38 JX-105 ¶ 8.
39 JX-108 at 1.
40 Id.
41 Id. at 2, 8.
42 JX-110 at 1–2.
43 Id.9 individually acquire more than 10% of the Company, but warned that Park should not increase its ownership above 5%. 44 In letters dated June 30, 2015, and July 14, 2015, Johnson inform ed the Bank, Usera, and the Board about the Federal Reserve’s r ecent approval and noted that the Company’s most recent proxy statement disclosed th at “record holders of Common Stock who beneficially own in excess of 10% of the outstanding shares of Common Stock are not entitled to any vote with re spect to the shares held in excess of the Limit.” 45 Johnson requested a copy of the Certificate of Inco rporation and asked the Board to waive the Voting Limitation, to “allow[] for any Shar eholders to obtain more than 10% of outstanding shares and maintain all rights.” 46 The Company responded on July 22, 2015, informing Johnson that, in its view, although the Board “has the au thority to determine the app licability of Section C as it relates to the stock ownership of any particular shareholder(s), the Board does not have the authority to simply waive that provision.” 47 The letter went on to state the Board’s belief “that Section C was intended to protect the inte rests of all shareholde rs of CCSB, and not only those shareholders owning in excess of 10% of its outsta nding common stock.” 48

44 JX-9 at 2–3.
45 Id. at 2, 5.
46 Id.
47 JX-10 at 2 (emphasis in original). The quo ted text included a footnote, which states, “[f]or example, the Board has th e authority to apply the defi nitions included in Section C to determine whether any particular shar eholder has beneficial ownership of CCSB common stock.” Id.
48 Id. (emphasis in original).10 D. The Robb Judgment Johnson is the 85% owner and managing me mber of an investment company called Bond Purchase, LLC. 49 Between 2011 and 2014, Bond Pu rchase made four loans to three companies owned by an acquaintance of Johns on, Randy Robb (the “Robb Companies”). 50 The Robb Companies collectiv ely owned 23,007 shares of Company stock, which was offered as collateral under the three of the four notes (the “Notes”). 51 The Robb Companies failed to make interest paym ents on the Notes, and in A ugust 2015, Robb notified Bond Purchase that he was considering selling the Company stock to satisfy the Notes. 52
When Johnson learned that Robb was w illing to sell Company stock, Johnson sent Robb an email calculating that the Robb Companies owed B ond Purchase $272,000 in principal and $17,200 in interest under the Note s. Johnson offered to buy the 23,007 shares for $10 per share in satisfaction of the debt. 53 Robb then went to Usera, and the two reached an agreement in princi ple that the Company would purcha se the 23,007 shares for $11 per share, which was $2–3 less than the book value of the stock. 54 To consummate the sale, the Company asked Robb to provide the pay- off amount owed under the Notes to allow the Company to purchase the shar es free and clear of any liens. 55

49 JX-11 at 1.
50 Id. at 1–4.
51 Id. at 6.
52 Id. at 5.
53 Id. at 6–7.
54 Id. at 7.
55 Id.11 In September 2015, Robb requested from Bond Purchase the pay-off information, which Bond Purchase failed to provide. 56 Instead, Johnson directed Bond Purchase to declare a default under the Notes a nd accelerate payment of the debt. 57 Bond Purchase notified Robb that it was pursuing a forecl osure sale of his companies’ shares. 58 The day before the sale was scheduled, on December 14, 2015, Bond Pu rchase provided Robb with inflated pay-off statements that had been prepared at Johnson’s direction, refusing to accept a lower amount. 59 At the foreclosure sale, DEW, LLC (“DE W”), purportedly purchased 17,765 of the shares for $7 per share, alth ough DEW was not form ed until two days after the sale. The sale of the remainder of the collate ral was stayed by a bankruptcy court. 60 DEW is owned by David Watson (“D. Watson”), Johnson’s lo ngtime friend and associate and C. Watson’s father. 61 Johnson maintained a “cheat sheet” at the time to keep track of the Company shares he beneficially owned, and lis ted DEW’s 17,765 shares on that sheet. 62 The Robb Companies filed suit against Johnson in Missouri state court. On November 27, 2017, the Missouri court found th at, without any “justification other than a desire to gain control of Clay County Savi ngs Bank by acquiring the CCSB Financial stock

56 Id. at 8.
57 Id. at 8–9.
58 Id. at 9.
59 Id. at 12–13.
60 Id. at 14–15.
61 Id.
62 Id. at 15.12 pledged by plaintiffs at seventy cents on the dollar, Johnson was successful in interfering with the plaintiffs’ ability to sell their stock or refinance the debt that was legitimately due.” 63 On June 25, 2019, the Missouri Cour t of Appeals affirmed those findings. 64
E. Johnson Is Notified Of A CIBCA Violation. On February 19, 2019, the Federal Reserv e Bank of Kansas City sent Johnson a letter notifying him that a th en-recent transfer of Company shares had resulted in a violation of the Change in Bank Control Act (“CIBCA”). 65 Specifically, the Federal Reserve informed Johnson that we understand that you transf erred 30,000 shares of CCSB stock to MLake 70, LLC (MLake ), in order to bypass the 10 percent voting limitation per shareholder imposed by the Certificate of Incorporation of CCSB. This transfer of stock resulted in a violation of th e CIBCA. The goal of our ownership review is to identif y all parties presumed to be acting in concert as members of the Johnson Control Group, resolve the violations in a singl e Change in Control filing, and prevent future violations and untimely filings under the CIBCA. 66 After completing its review, the Federal Reserve gave Johnson two options. The first was that he could submit filings requesti ng that certain of his identified affiliates be allowed to retain control of their Compa ny stock and become approved members of the Johnson Control Group. 67 These affiliates included Totta, as a managing member of Park’s

63 Id. at 34.
64 JX-109 at 17–21.
65 JX-14 at 1.
66 Id.
67 JX-16 at 1.13 owner, and C. Watson, as a managing member of MLake 70 LLC (“MLake 70”). 68 In addition, any imme diate family members of the managi ng members of Park’s owner and MLake 70 who owned or controlled CCSB stoc k would have to file the same request. 69 The other option was that Johnson could simply unwind the vi olative transaction. 70
The record does not reveal what occurred after these communications. The Board did not learn of this interaction with the Federal Reserve until discovery in this action. 71
F. Usera’s Cheat Sheet And The Insider Stock Sales Johnson is not the only Company stockholde r who has kept a so-called “cheat sheet” tracking Company stock ownership; Usera has as well. Usera’s ch eat sheet, which he updates monthly, tracks the share ownershi p of directors, officers, employees, and “friends” who Usera believe s would support Company ma nagement in an election. 72 The cheat sheet includes calculations of “# of shares needed for 50+ 1 Control” and “# of shares to repurchase for 50+1 Control.” 73 Usera testified at his depos ition that he initially created the cheat sheet to more easily report insider holdings for regul atory agencies, but that since the Company is no longer regist ered with the SEC, it now serv es the additional purpose of

68 Id.
69 Id.
70 Id.
71 See Dkt. 66 (“Def.’s Answeri ng Trial Br.”) at 46–47.
72 JX-90; Usera Dep. Tr. at 15:1–17:2.
73 JX-90.14 tracking friendly stockholdings that Usera expe cts would vote for the Board’s nominees in a contested election. 74 From November 1, 2016 to January 29 , 2021, Usera brokered 23 transactions through which the Company, its directors, officers, and their family members bought stock from stockholders whom Us era considered friendly. 75 These transactions included eight repurchases in which the Company bought 21 ,710 shares for $ 305,000 from Company directors, officers, and their family members who wished to sell their stock. 76 The other fifteen transactions involved private, undoc umented sales in which Company directors, officers, and their family members purchased 22,945 shares of stoc k, including 16,985 by directors Jones, Feess, and Freeman. 77 Most of the sellers in these transactions appeared in Usera’s cheat sheet as employees or friends. 78 Feess testified at his deposition about how th ese private transactions were generally conducted. He testified that, for every tran saction in which Fee ss participated, Usera contacted him, advised him that there was a seller, and arranged fo r Feess to buy the

74 Usera Dep. Tr. at 17:10–19:10.
75 JX-82 at Resp. 10.
76 Id.
77 Id.
78 See generally JX-82 at Resp. 10; JX-90 at 093019 (Ron and Karen Venable selling 10,600 shares on 9/11/2019); id. at Tab 123108 (former director Keith Oberkrom selling 7,060 shares on 2/22/2019); id. at Tab 022817 (John and Joseph Crossett selling 1,333 shares combined on 3/9/2017); id. (John May selling 2,662 shares on 6/1/2017); id. at Tab 103118 (William Davis selling 3,500 shares on 5/1/2018); id. at Tab 043019 (Paul Billings Trust and Jeff Billings selling 1,120 shares combined on 5/13/2019); id. at Tab 103118 (Jennifer Harrison selling 2 50 shares on 6/6/2019).15 stock. 79 There were no contracts documenting thes e sales and Feess paid for the shares he purchased using his personal bank account. 80
G. The 2020 Election And Related Litigation Two director seats were up for election at the Company’s Janua ry 23, 2020 annual meeting. Park nominated Totta and Morrisse y for those seats; Coltman and McKinley stood for reelection. 81 In connection with the 2020 meeting, Jo hnson disclosed that he owned 76,235 Company shares. Voluntarily subjecting himsel f to the Voting Limitation, he stated that he could only vote 74,200 of those shares. 82 In connection with this statement, Johnson sought clarification on how it would operate, asking the Board to advise on how the Board “implements and applies the 10% limit” and how Company shares held under the employee stock ownership plan and pr ofit-sharing plan are voted and treated under the Voting Limitation. 83 The Board did not respond. 84 At the 2020 meeting, Usera declared that he beneficially owned 76,324 shares. 85 He also voluntarily subjected himself to the Vo ting Limitation and only voted 74,200 of his shares.

79 Feess Dep. Tr. at 68:10–79:15.
80 Id.
81 PTO ¶¶ 17–18.
82 Id. ¶ 19.
83 JX-18 at 1.
84 Johnson Dep. Tr. at 168:24–169:19.
85 JX-19 at 1.16 Thus, the votes of 4,159 total shares bene ficially owned by Johnson and Usera were not counted at the 2020 meeting. 86
DEW was listed as the record holder of a nd voted 17,765 shares at the 2020 annual meeting in favor of Totta and Morrissey, all of which were counte d and none of which were included with Johnson’s shares under the Voting Limitation. 87 According to the insp ector of election’s 2020 report , Totta and Morrissey lost the 2020 election, the results of which are subject to a separate litigation in this court that has been stayed in favor of parallel litigation filed by Totta in Missouri. 88
H. The Lead-Up To The 2021 Election On September 10, 2020, Park nominated Totta, Morrissey , and C. Watson for the three directorships that were up for election at the 2021 annual meeting. 89 On September 15, 2020, Park made a tender offer to cert ain Company stockholde rs to purchase up to 30,000 Company shares for $16.33 per share. 90 This tender offer was the latest of many that Park and Johnson had made over the years, on a nearly annual basis. 91 Park’s letter stated that “[w]e continue to offer to buy shares in the Company because we believe the

86 JX-23 at 1.
87 PTO ¶ 23.
88 See C.A. No. 2020-0230-KSJM, Dkt. 59 (Order Granting Stay) ¶¶ 4–5, 12–14.
89 PTO ¶ 24.
90 JX-28 at 1.
91 Johnson Dep. T r. at 17:24–19:2.17 Company must: 1. Add new boar d members; 2. Make improvements to management and profitability; and 3. Cons ider selling the bank.” 92 On September 16, 2020, the Board set th e Record Date for the 2021 annual meeting. 93 The Board also retain ed Stephanie Kalahurka of Fenimore, Kay & Harrison LLP as the inspector of elections for the 2021 annual meeting. 94 Kalahurka and her firm have served as the Company’s counsel since 2 014, and in 2020, the Bo ard identified her as “primary legal counsel for fiscal year 2020.” 95 On October 1, 2020, the Company sent lette rs to Johnson and his wife and two other non-party stockholders seeki ng information about their bene ficial stock ownership for annual reporting purposes. 96 The letters requested the in formation as of September 30, 2020, and asked the stockholders to update th e information no later than 15 business days after the Record Date, which had not yet been announced. 97 The letters specifically referenced the definitions of “affiliate” and “b eneficial ownership” in Article 4(C) of the Company’s certificate of incorp oration, and asked for, among other things, the number of shares which the recipients held as a “group pursuant to any agreement, arrangement or

92 JX-28 at 1.
93 PTO ¶ 25.
94 Id.
95 Id. ¶¶ 25–26.
96 Id. ¶ 27; e.g. , JX-31. The other two stockholders la ter responded to Usera and indicated that they had made no agreements to vote their shares. JX-54 at 1.
97 JX-31; JX-30; JX-32.18 understanding (whether written or unwritten) for the purpose of acquiring, holding, voting or disposing of any shar es of Company stock.” 98 On October 21, 2020, the Board’s nomina ting committee met to discuss director nominations for the 2021 annual meeting. 99 Usera and Jones are not on the nominating committee, but attended the en tire meeting, including the di scussion of Park’s nominees. 100 The committee nominated Usera, Jones, and Freeman. 101 The Company sent a follow-up letter to J ohnson and his wife on November 2, 2020, that was nearly identical to the first batc h of letters but bore a legend reading “Second Request.” 102 At some point in Novemb er 2020, Johnson approach ed D. Watson and asked whether D. Watson would be interested in some Company shares at the market price. D. Watson responded positively. 103 On November 24, 2020, John son emailed Totta and others at Maxus Properties, writing, “I am going to have David watson [sic] buy 19500 shares from me ASAP . . . want to beat the record date .” 104

98 JX-31; JX-30; JX-32
99 PTO ¶ 28.
100 Id.
101 Id.
102 Id. ¶ 29; JX-36 at 1.
103 D. Watson Dep. Tr. at 36:12–37:7.
104 JX-39 at 1–2 (emphasis added).19 In that same November 24, 2020 email, Johnson instructed Totta to figure out how to complete the transaction. 105 Totta emailed D. Watson’s fam ily wealth planning advisors the next day asking for help on how best to hand le the transaction, and told them that the shares needed to be “moved before the end of business on December 1st.” 106 The wealth advisors responded that day, asking whether Totta wanted the shares moved into D. Watson’s revocable trust account or DEW’s accoun t, and Totta asked them to transfer the shares to DEW’s account. 107 On November 25, 2020, Johnson and D. Watson, on behalf of DEW, signed a purchase and sale agreement pu rsuant to which Johnson conv eyed 19,500 shares to DEW for $16.42 per share, for a tota l transaction price of $320,190. 108 The share transfer was

105 Id.
106 JX-40 at 3 (emphasis in original). The Co mpany argues that Totta’s use of December 1 as a deadline implies that Johnson and Park knew the Record Date before it was announced, but Totta testified at her deposition that they merely knew that the Bo ard generally sets the record date in the firs t week of December. See Def.’s Answering Trial Br. at 22 n.77; Totta Dep. Tr. at 121:18–20. This te stimony is supported by the f act that the Record Date was December 3, not December 1.
107 JX-40 at 1.
108 PTO ¶ 30. The purchase and sale agreemen t refers to Johnson and his wife as the “Assignor” or “Seller” and DEW as the “Assigne e” or “Buyer.” JX-44 at 3. The Company argues that use of the “assign” language is evid ence that the sale to DEW was not at arms’ length. Def.’s Answering Trial Br. at 22–23; Trial Tr. at 80:23 –81:12. Defendant is correct that, under Delaware law, “assign” has a mean ing indicating that something less than the full batch of ownership rights is being transferred. See Hawkins v. Daniel , --- A.3d ---, 2022 WL 997752, at *29–31 (Del. Ch. Apr. 4, 2022) (discussing meaning of “assignee” and its relationship to the concept of “transfe r”). Having reviewed the purchase and sale agreement itself, however, it is clear that the contract uses the term “Assignor” interchangeably with “Seller” and the same for “Assignee” and “Buyer.” JX-44 at 3. Outside of that minor oddity, the purchase and sale agreement appears to the court to be20 initiated on November 25, 2020, and completed on November 27, 2020. 109 On December 2, 2020, D. Watson wired the purchase amount from his line of credit at First Missouri Bank to Johnson’s account at the same. 110 Johnson failed to report the sale on his original tax returns for 2020, but later am ended them to include the sale. 111 On December 4, 2020, the Co mpany sent Johnson a “Third Request” for him to report his beneficial stock owne rship, which was substantially identical to the first two but disclosed the Record Date as being the day before. 112

just that: a purchase and sale agreement that, like most others , did not grant the seller any retained rights in the transferred shares.
109 PTO ¶ 31.
110 Id. ¶ 32, JX-47. Just before trial, First Missouri Bank produced some internal emails concerning the approval of D. Watson’s loan a pplications. The emails reflect that Johnson abstained on the vote of whether to approve Johnson’s loans. In response to one such request, in November 2018, Johnson wrote “I ab stain . . . collateral is my company.” JX113 at 6. The Company argues that this evid ence compels the conclusion that the sale to DEW was not arm’s-length, because it demonstrat es that the consideration for the sale was money from a line of credit at a bank Johns on controls on which the bank would never foreclose because the collateral for that line of credit was one of Johnson’s companies. Trial Tr. at 83:6–84:19. In the Company’s vi ew, Johnson effectively paid himself for his own shares. The court is not convinced. As Plaintiffs point out, D. Watson and Johnson have co-invested in numerous projects over their more than four decades of acquaintance. D. Watson Dep. Tr. at 16:9–12, 17:6–12. The loan submission documents are not in evidence, the line of credit documents are no t in evidence, and with out more, the court is not prepared to find anything more than Johnson abstained from voting on a loan submission on D. Watson’s lin e of credit in November 2018 because, at the time, the collateral was a company in which John son was at least a partial investor.
111 Compare JX-40, with JX-87; see also Johnson Dep. Tr. at 113:25–114:22; Trial Tr. at 100:16–22.
112 JX-43.21 On December 15, 2020, Johnson wrote to the Federal Re serve Bank of Kansas City to provide notice of the 19,50 0-share transaction with DEW. 113 The letter stated, in part: I recently sold a total of 19,500 shares of CCSB (which is less than 3% of CCSB’s outstanding shares) to DEW LLC which is owned by David Watson and want ed to provide notice of the sale for your records. DEW LLC owned shares of CCSB before this purchase, but DEW LLC is not part of the Johnson Control Group. Mr. Watson is a retired business acquaintance who owns less than a 6% ownership in terest in Maxus Realty Trust, which has hundreds of shareholders . . . . The shares were sold in an arms’ length transaction for fair market value ($16.42 per share; see CCSB web page attached). Neither Mr. Watson nor any me mber of the Johnson Control Group is a party to any agre ement, contract, understanding, relationship, or other arrangeme nt regarding the acquisition, voting, or transfer of voting securities of CCSB. 114 The Federal Reserve did not obj ect to the sale, conclude that DEW was part of the Johnson Control Group, conclude that Johnson and DEW were acting in concert, or ask for any other information from Johnson after the sale to DEW. 115 D. Watson testified that no government agency has ever in formed him that he and Johnson are acting in concert, part of a control group, affiliates under the rules an d regulations of the Securities and Exchange Act of 1934, or that they are benefi cial owners of each other’s stock. 116

113 PTO ¶ 33.
114 Id.
115 Johnson Dep. Tr. at 170:4–171:3.
116 D. Watson Dep. Tr. at 117:24–118:22.22 On December 17, 2020, John son provided the Compa ny with a statement of ownership concerning his stock which stated th at he beneficially owned 87,348 shares as of September 30, 2020, and 73,948 shares as of December 3, 2020. 117 On January 18, 2021, Brian Boos of the Wa llace Saunders law firm, who represents Usera in his pending litigati on against Johnson in Missouri, sent a letter to DEW, D. Watson, and Canvas Wealth Advisors requesti ng information about their beneficial stock ownership and relationships with other stockholders. 118 While the letter stated that Wallace Saunders was retained to assist the Board’s in vestigation into benefi cial stock ownership, Usera later clarified that the extent of the firm’s involvement was to send that letter and similar ones. 119 In the lead-up to th e 2021 annual meeting, Usera kept a close eye on proxy votes as they came in. In the weeks be fore the election, Broadridge 120 began sending Usera daily vote reports, and Usera contact ed Broadridge to ask about stockholders he believed had voted but whose votes did not appear on the reports. 121 When a stockholder’s vote appeared for Park’s nominees that Usera believed shou ld have appeared for the Board’s nominees, Usera contacted Broadridge and instructed them to update the vote totals, or he contacted

117 PTO ¶ 34.
118 Id. ¶¶ 36–37; JX-55.
119 JX-55; Usera Dep. Tr. at 99:11–17.
120 According to Usera’s deposition testimony, Br oadridge is a company that acts as “the intermediary for brokerage accounts” and would provide daily spreadsheets “of the brokerage votes,” which is cons istent with the communications between them. Usera Dep. Tr. at 87:18–23; JX-57.
121 JX-57 at 1–3.23 the stockholder directly. 122 When a stockholder who Usera expected to vote did not vote, Usera contacted Broadridge for the stockholde r’s contact details and reached out to the stockholder directly. 123
The Board held a meeti ng on January 20, 2021. 124 While this was not the first Board meeting since Johnson’s letter providing his bene ficial stock ownership, it appears to have been the first at which the letter was discussed. 125 The minutes reflect that Usera stated that Johnson’s letter provided incomplete shar e ownership and that he had “evidence to believe that Mr. Johnson may be acting in concert with others.” 126 The minutes noted an increase in share ownership of 19,500 shares by Canvas Wea lth Advisors, which the Board believed to be beneficially owned by D. Watson, and beca use C. Watson was D. Watson’s son, the Board concluded that Johnson’s “s hares were transferred to avoid the 10% beneficial ownership rule and that the individuals may be acting in concert.” 127
The Board neither informed J ohnson that it considered his December 17, 2020 letter deficient nor asked him for any follow-up information. 128 At their depositions, neither Feess nor Jones could expl ain what information was missing from Johnson’s letter. 129 The

122 E.g. , JX-60 at 1; Usera Dep. Tr. at 81:19–22.
123 E.g. , JX-62 at 1.
124 JX-56.
125 PTO ¶ 35.
126 JX-56 at 1.
127 JX-56 at 2.
128 Usera Dep. Tr. at 77:14–20.
129 Feess Dep. Tr. at 45:16–46:2 ; Jones Dep. Tr. at 36:13–22.24 Board did not investigate whether any other st ockholder was potentially acting in a manner that could justify invoking the Vo ting Limitation, including Usera. 130 The Company claims that this is because Usera “self-reports” his share owners hip. As men tioned above, however, Usera has failed to include his daugh ter’s shares with his own when calculating his beneficial ownership. 131 D. Watson responded to th e January 18, 2021 letter from Boos through his counsel by letter dated January 27, 2021, stating that DEW owned 37,175 shares, that DEW did not have any agreement to vote Company shares, and that DEW was not an affiliate of any other Company stockholder. 132 The letter also stated th at D. Watson intended to vote DEW’s shares for his son, C. Watson. 133
I. The Day Of The January 28, 2021 Board Meeting The Board met at 8:55 a.m. local time th e morning of the Company’s 2021 annual meeting. 134 The minutes reflect that the “purpose of this meeting was to discuss whether stockholders were acting in conc ert, whether they were in vi olation of the 10% beneficial ownership rule . . . and whether the Board of Directors was in a position to enforce its authority . . . at today’s Annual Meeting.” 135 The minutes and Usera’s notes from the meeting indicate that the Board was presen ted with Johnson’s December 17, 2020 letter,

130 Feess Dep. Tr. at 36:3–12.
131 Def.’s Answering Trial Br. at 26 n.94 ; Usera Dep. Tr. at 145:18–146:14.
132 PTO ¶ 38.
133 PTO ¶ 38; JX-64 at 1.
134 JX-69. Most of the Board was there in pe rson, but Durden attended by phone. JX-111.
135 JX-69.25 Boos’ January 18, 2021 letter to D. Watson and DEW, and D. Watson’s January 27, 2021
response. 136 The meeting minutes and Usera’s notes diverg e in their account of what occurred at the meeting. The minutes indicate that the Bo ard also discussed: additional facts that were previously brought to the Board’s attention, in cluding the transfer of 17,650 shares in the name of DEW, LLC to Fidelity Investment; Park’s nominati on letter; the Non-Objectional Beneficial Owner (NOBO) List; the fact that Johnson’s letter identified shares he owned that were not on the NOBO List, and thus must be on the Objectional Beneficial Owners List, which the Company cannot acce ss to verify ownership; and the Robb judgment. 137 Usera’s notes reflect only the discussion of the three communic ations previously mentioned and then finish w ith the Board’s conclusion. 138 Plaintiffs argue that the discussion of the additional facts in the minut es never took place, but were rather a posthoc addition to the minutes to make it appear that the Boar d engaged in a more thorough deliberation than it had. 139 Plaintiffs point out that Feess te stified that he had no familiarity with the Robb judgment, despite the fact that Usera had been discussing the Robb judgment in Board meetings since 2017. 140

136 Id. ; JX-75; Jones Dep. Tr. at 43:21–24.
137 JX-69.
138 JX-75. 139 Dkt. 62, (“Pls.’ Openi ng Trial Br.”) at 33–34.
140 Feess Dep. Tr. at 54:15–17; JX-12.26 The parties do not dispute th at, as the minutes reflect, the Board concluded its discussion by determining that Johnson, his wife, D. Wats on, C. Watson, Morrissey, and Totta were “acting in concert in order to get their alternate slat e elected” in what the Board considered to be a viola tion of the Voting Limitation. 141 The minutes then state that “a motion was made, seconded an d carried to hand deliver a letter to” Kalahurka in her capacity as inspector of election. 142 The letter reiterated the Board’s conclusion, supposedly reached at that meeting, that Johnson and the other identified persons were acting in concert in violation of the Voting Limitation. 143 The letter instructed Kalahurka that “during the tabulation of votes, unless you have been provided evidence to th e contrary, the Board” had determined that votes in favor of Park’s nominees “in excess of 10% owned by the aforementioned parties are not valid votes and should not be counted at the Annual Meeting of the Shareholders to be held today, January 28, 2021.” 144
The letter included a table similar to the following: 145
Shareholder/Broke r Beneficial Owner(s) Source Number of Shares Charles Schwab David Johnson Letter to the Corporate Secretary dated 12/17/2020 28,025

National Financial Services LLC David L Johnson and Sandra L. Castette r Letter to the Corporate Secretary dated 12/17/2020 42,525

141 JX-69 at 3.
142 Id.
143 JX-71 at 1.
144 Id.
145 Id.27 National Financial Services LLC (Canvas Wealth Advisors) David E Watson Letter to the Corporate Secretary dated 1/27/2021 37,150

National Financial Services (MLake LLC) Chase Watson Nomination Letter from Park GP 500
Unknown Laurie Morrissey Nomination Letter from Park GP 100 Wells Fargo (Park GP) David Johnson and DeAnn Totta Letter to the Corporate Secretary dated 12/17/2020 1,398

Park GP, Inc. David Johnson and DeAnn Totta Registered Shares 2,000
DEW LLC David E Watson Registered Shares 25 Total 111,723 Outstanding Shares 743,071 10% 74,307
Amount in Excess of 10% 37,416
Notably, the letter instruct ed Kalahurka not to count a total of 37,416 votes, including all of DEW’s 37,175 shares, not just the 19,500 that DEW purchased from Johnson in November. The Boar d did not conduct an investig ation into whether any other stockholder or group of stockholders, including insiders such as Usera, were acting in concert for purposes of appl ying the Voting Limitation. 146 Kalahurka performed no investigation of her own into any stockholder’s ownership, instead relying entirely on the Board’s letter and Usera’s self-reported stockholdings. 147

146 Feess Dep. Tr. at 36:8–12.
147 Kalahurka Dep. Tr. at 93:5–23, 94:18–25.28 The Company’s 2021 annual meeting wa s called at 10:00 a.m. local time, immediately after the Board meeting. 148 According to the minu tes, Usera stated that As of the record date, only he , Mario Usera, had declared ownership of over 10%, and as such, the 10% limit would be applied with respect to shares that he beneficially owns. However, if the outcome of this election was such that a different outcome would result if the Board of Directors were to determine that others are acting in concert, under an agreement or under an underst anding such that the 10% beneficial rule should be applie d to others, this would cause a delay in the tabulation of vote s and the Board of Directors would exercise its powers under the Certificate of Incorporation to require/reque st additional information from stockholders who have voted in order to fulfill its duties and responsibilities under the Certificate of Incorporation. 149 There is no evidence that Usera or the Boar d informed the stockholders that they had instructed Kalahurka not to co unt the 37,416 votes for Park’s nominees before the meeting. Usera called a recess so that Ka lahurka could tabulate the votes. 150 Jones then read from the Certificate and Repo rt of the Inspector of Election, stating that there were 743,071 Company shares outstandi ng as of the Record Date, and that 41,550 shares had been determined to the ineligible under the Voting Limitation. 151 Jones stated that the Board’s nominees, Freeman, Usera, and herself, had each received 359,336 votes

148 JX-70 at 1.
149 Id. at 1–2.
150 Id. at 3.
151 Id.29 while Park’s nominees, Totta, C. Watson, and Morrissey, had each received 322,859 shares. 152 Thus, the Board announced that its nominees had won the election. 153 Kalahurka testified that, w ithout the Board’s instructio n, she would have counted 360,275 votes in favor of Park ’s nominees, and the individual Plaintiffs would have won the election. 154 On the bottom of page 1 of the Cer tificate and Report of the Inspector of Election, Kalahurka handwrote the following: “* For purposes of th e number of shares determined to be ineligible pursuant to Article Fourth, Section C of the Certificate of Incorporation, the Inspector of Election reli ed solely upon the le tter from the Board of Directors attached hereto as Exhibit A, and other attached information.” 155
J. This Litigation Plaintiffs filed their comp laint in this action on February 26, 2021, seeking declaratory judgment under 8 Del. C. § 225 that the Board’s instruction to the election inspector was improper and that Park’s nominees were each elected to the Board. 156
II. LEGAL ANALYSIS Plaintiffs seek a declarati on that the 37,416 votes shoul d not have been excluded when tabulating the 2021 election results. If Plaintiffs prevail, th en Totta, Morrissey, and C. Watson were elected to the Board, and Us era, Freeman, and Jones were not. This

152 Id. at 3–4.
153 Id. at 4.
154 PTO ¶ 44; Kalahurka Dep. Tr. at 91:10–17.
155 JX-73 at 1 (underlining in original).
156 Dkt. 1.30 decision first resolves the threshold issue co ncerning the applicable analytical framework for resolving the parties’ disput e, which results in the conclu sion that the Board’s actions must be tested twice—first, to determine wh ether the action was lega lly compliant with the Voting Limitation and, second, under the enhanced scrutiny test of Blasius . This decision then resolves both steps of the test in favor of Plaintiffs.
A. Standard Of Review Under Delaware law, director actions are te sted both for legal authorization and for equity. 157 The Delaware Supreme Court recently articulated the approach as follows: This Court has long recognized that “inequitable action does not become permissible simply b ecause it is legally possible.” Under Delaware law, “director action[s] [are] ‘twice-tested,’ first for legal authorization, and second [for] equity.” “Stockholders can entrust direct ors with broad legal authority precisely because they know th at that authority must be exercised consistently with equitable principles of fiduciary duty.” 158 The first layer of analysis asks whethe r board action was legally authorized and looks to whether the conduct was permitted under positive law and the corporation’s

157 Schnell v. Chris-Craft Indus., Inc. , 285 A.2d 437, 439–40 (Del. 1971).
158 Bäcker v. Palisades Growth Cap. II, L.P. , 246 A.3d 81, 96–97 (D el. 2021) (first quoting Schnell , 285 A.2d at 439, then quoting In re Invs. Bancorp ., Inc. S’holder Litig. , 177 A.3d 1208, 1222 (Del. 20 17), then quoting Sample v. Morgan , 914 A.2d 647, 664 (Del. Ch. 2007)).31 constitutive documents. 159 A stockholder plaintiff cha llenging a board action for legal validity bears the burden of proof. 160 In this case, the question of legal author ization asks whether the Board correctly applied the Voting Limitation, and Pl aintiffs bear the burden of proof. The second layer of analysis asks whether board action was equitable and looks to whether the directors comprisi ng the board complie d with their fiduciary obligations. When determining whether a fidu ciary breached an equitable obligation, a court “evaluates the question . . . through the lens of . . . several possible standards of review.” 161 “Entity law generally uses three standards of review: a default standard of review that is highly deferential and known as the business judgment rule; an intermediate standard of review

159 See Quadrant Structured Prods. Co. v. Vertin , 2014 WL 5465535, at *3 (Del. Ch. Oct. 28, 2014) (“When evaluating corporate acti on for legal compliance, a court examines whether the action contravenes the hierarchical components of the entity-specific corporate contract, comprising (i) the Delaware Genera l Corporation Law, (ii) the corporation’s charter, (iii) its bylaws, and (iv) other entity -specific contractual agreements, such as a stock option plan, other equity compensation plan , or, as to the partie s to it, a stockholder agreement.”); see , e.g. , In re Dell Techs. Inc. Class V S’holders Litig. , 2020 WL 3096748, at *33 (Del. Ch. June 11, 2020) (noting that the board action was taken pursuant to a provision in the company’s certificate of incorp oration before moving on to the second step of the twice-tested framework).
160 See , e.g., Strategic Inv. Opportun ities LLC v. Lee Enters., Inc. , 2022 WL 453607, at *8, 16 (Del. Ch. Feb. 14, 2022) (allocating the burd en to the stockholder-p laintiff in a breach of contract claim challenging boa rd action before noting that director-defendants bear the burden of demonstrating reasonableness under enhanced scrutiny review).
161 Metro Storage Int’l LLC v. Harron , --- A.3d ---, 2022 WL 1404359, at *18 (Del. Ch. May 4, 2022) (collecting cases). Recently, the Delaware Suprem e Court clarified that this court may be required to evaluate fiduciary conduct unde r multiple equitable standards. See Coster v. UIP Cos., Inc. , 255 A.3d 952, 960–63 (Del. 2021).32 known as enhanced scrutiny; and an onerou s standard of review known as the entire fairness test.” 162 When director conduct “‘affect[s] either an election of directors or a vote touching on matters of corporate control,’ the board must justify its action under the enhanced scrutiny test.” 163 This is because “[s]hareholder voting rights are sacrosanct. The fundamental governance right possessed by shar eholders is the ability to vote for the directors the shareholder wants to oversee the firm.” 164 Disputes concerning the stockholder franchise frequently arise in the context of a proxy cont est, where directors “confront a structural and situational conf lict because their own seats are at risk,” 165 and “the realities of the decision-making context can subtly undermine the decisions of even independent and disinterested directors.” 166 In this case, the Board’s application of the Voting Li mitation must pass muster under the test articulated in Blasius Industries, Inc. v. Atlas Corp

. 167 In a typical Blasius case, the directors are named as defendants and be ar the burden of proving that their actions were equitable. 168 Here, the directors have not be en named as defendants, and the

162 Metro Storage , 2022 WL 1404359, at *18 (citing Reis v. Hazelett Strip-Casting Corp. , 28 A.3d 442 (Del. Ch. 2011)).
163 Pell v. Kill , 135 A.3d 764, 786 (Del. Ch. 2016) (quoting Mercier v. Inter-Tel (Del.), Inc. , 929 A.2d 786, 811 (Del. Ch. 2007)).
164 EMAK Worldwide, Inc. v. Kurz , 50 A.3d 429, 433 (Del. 2012).
165 Pell , 135 A.3d at 786.
166 Reis , 28 A.3d at 457.
167 564 A.2d 651 (Del. Ch. 1988)
168 Id. at 661 (holding that, when enhanced scru tiny applies to “board acts done for the primary purpose of impeding the exercise of stockholder voting power,” “the board bears33 Company has taken on the mantle of defe nding the Board’s actions. The Company, therefore, bears the burden of proof. The Company asks this court to take a totally different analytical approach, testing the Board’s action only once under a highly de ferential standard. The Company bases its argument, in the first instance, on the Conc lusive-And-Binding Provision. The Company then seeks to bolster its position by cursorily cobbling together a series of legal propositions based loosely on case law. The Company’s argument fails. Recall that the Conclusive-A nd-Binding Provision purports to render “conclusive and binding upon the Corporatio n and its stockholders” “any constructions, applications, or determinations made by the Board of Direct ors pursuant to this section in good faith and

the heavy burden of demonstrating a comp elling justification for such action”); Aprahamian v. HBO & Co. , 531 A.2d 1204, 1207 (Del. Ch. 1987) (“When the election machinery appears, at least f acially, to have been manipula ted, those in charge of the election have the burden of persua sion to justify their actions.”); Pell , 135 A.2d at 787 (“When tailored for reviewing director acti on that affects stockholder voting, enhanced scrutiny requires that the defendant fiduciaries bear the burden of proving (i) that ‘their motivations were proper and not selfish,’ (ii) that they ‘did not preclude stockholders from exercising their right to vote or coerce them into voting a particular way,’ and (iii) that the directors’ actions ‘were reasonable in rela tion to their legitimate objective.’” (citing Mercier , 929 A.2d at 810–11)); Craig W. Palm & Mark A. Kearney, A Primer on the Basics of Directors’ Duties in Delaware : The Rules of the Game (Part II) , 42 Vill. L. Rev. 1043, 1078 (1997) (“Once the challenging sharehol der shows that the board has manipulated shareholder voting rights in order to thwart t hose rights, the burden shifts to the directors to show that the board had a compelling jus tification for infringing upon the effective exercise of the shareholder franchise.”).34 on the basis of such inform ation and assistance as was then reasonably available.” 169 The last portion of this quote effectivel y tracks the business judgment rule. 170 In the Company’s view, the Conclusive-A nd-Binding Provision makes the Board’s determination binding not just on the Company and its stockholders, but also the court. In effect, the Company argues that Article FOURTH forecloses judicial review for legal validity and under otherwise applicable equitabl e standards and requires the court to evaluate the determination under the business judgment rule. 171 The Company’s argument contravenes fu ndamental principles of Delaware corporate law. In essence, th e Company asks the court to hol d that a corporate charter may alter the directors’ fiduciary obligations and the attendant equitable standards a court will apply when enforcing those obligations. The Company would treat a corporate charter like the constitutive agreement that g overns an alternative entity.

169 Certificate of Inc. art. 4(C)(6).
170 See Aronson v. Lewis , 473 A.2d 805, 812 (Del. 1984), overruled on other grounds by Brehm v. Eisner , 746 A.2d 244 (Del. 2000) (“The business ju dgment rule is an acknowledgment of the managerial preroga tives of Delaware directors under Section 141(a). It is a presumption th at in making a business decision the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the co mpany.” (citation omitted)). In Brehm , 746 A.2d at 253–54, the Delaware Supreme Court overru led seven precedents, including Aronson , to the extent those precedents reviewed a Ru le 23.1 decision by the Court of Chancery under an abuse of discretion standard or otherwise suggested a deferential appellate review. See id. at 253 & n.13 (overruling in part on this issue Scattered Corp. v. Chi. Stock Exch., Inc. , 701 A.2d 70, 72–73 (Del. 1997); Grimes v. Donald , 673 A.2d 1207, 1217 n.15 (Del. 1996); Heineman v. Da tapoint Corp. , 611 A.2d 950, 952 (Del. 1992); Levine v. Smith , 591 A.2d 194, 207 (Del. 1991); Grobow v. Perot , 539 A.2d 180, 186 (Del. 1988); Pogostin v. Rice , 480 A.2d 619, 624–25 (Del. 1984); and Aronson , 473 A.2d at 814).
171 Def.’s Answering Br. at 35–38.35 Fiduciary duties arise in equity and are a f undamental aspect of Delaware law. The constitutive agreements that gove rn an entity can only eliminat e or modify fiduciary duties and the attendant judicial standards of revi ew to the extent expressly permitted by an affirmative act of the Delaware General As sembly. The General Assembly has granted broad authorization to modify or eliminate fiduciary duties and a ttendant standards of review in some types of entities. The Gene ral Assembly has grante d only limited authority to corporations. “[T]he principle of fiduciary duty, stated most generally, [is] that one who controls property of another may not, without implied or express agreement, intentionally use that property in a way that benefits the holder of the control to th e detriment of the property or its beneficial owner,” and that while there ar e other aspects, “the central aspect of the relationship is, undoubtedly, fidelity in the c ontrol of property for the benefit of another.” 172 The persons who comprise the governing body of an entity act in a fiduciary capacity. Directors of Delaware corpora tions occupy a fiduciary role as a result of their statutory authority to manage the business and affairs of the corporation. 173 This position of trust

172 In re USACafes, L.P. Litig. , 600 A.2d 43, 48 (Del. Ch. 1991); see also Cheese Shop Int’l, Inc. v. Steele , 303 A.2d 689, 690 (Del. Ch. 1973), rev’d on other grounds , 311 A.2d 870 (Del. 1973) (“A fiduciary relationship is a situation wh ere one person reposes special trust in and reliance on the judgment of anothe r or where a special dut y exists on the part of one person to protect the interests of an other. The relationship c onnotes a dependence.”); Lank v. Steiner , 213 A.2d 848, 852 (Del. Ch. 1965) (“A fiduciary relationship is defined as a situation ‘where one person reposes special confidence in another, or where a special duty exists on the part of one person to protect the interests of another, or when there is a reposing of faith, confidence, and trust, a nd the placing of relia nce by one person on the judgment and advice of a nother.’” (citation omitted)).
173 See 8 Del. C. § 141(a); Quickturn Design Sys., Inc. v. Shapiro , 721 A.2d 1281, 1291 (Del. 1998) (noting that a corporate board of directors has “statutory authority to manage36 carries with it concomitant duties of care and l oyalty “historically root ed in ancient notions of trust and agency law.” 174 The persons who comprise the governing bodies of other types of entities occupy a fiduciar y role for similar reasons. 175
The Constitution of 1897 reta ins the distinction betwee n law and equity, and the General Assembly has empowered this court to hear and determine a ll matters and causes in equity. 176 The duties that corporate directors a nd officers “owe to shareholders with respect to the exercise of their legal powe r over corporate property supervene their legal

the corporation under 8 Del. C. §141(a) and [a] concomitant fi duciary duty pursuant to that statutory mandate”).
174 Paul M. Altman & Srinivas M. Raju, Delaware Alternative Entities and the Implied Contractual Covenant of Good Faith an d Fair Dealing Under Delaware Law , 60 Bus. Law. 1469, 1470 (2005).
175 Ross Hldg. & Mgmt. Co. v. Advance Realty Gp., LLC , 2014 WL 4374261 , at *12 (Del. Ch. Sept. 4, 2014) (“By default, the traditiona l fiduciary duties applicable to corporations apply to limited liability companies.”); Feeley v. NHAOCG, LLC , 62 A.3d 649, 661 (Del. Ch. 2012) (“[T]here has never been any serious doubt that the general partner of a Delaware limited partnership owes fiduciary duties.”); Dolby v. Key Box “5 ” Operatives, Inc. , 1994 WL 507881, at *5 n.4 (Del. Ch. Sept. 8, 1994) (“[T]he partne rs in a general partnership also owe fiduciary duties to one another.”); Tigani v. Tigani , 2021 WL 1197576, at *13 (Del. Ch. Mar. 30, 2021) (“Under default prin ciples of Delaware law, a trustee owes fiduciary duties to a beneficiary.”).
176 Del. Const. of 1792 art. VI; 10 Del. C. § 341; DuPont v. DuPont , 85 A.2d 724, 729 (Del. 1951) (“We conclude, therefore, that Sectio n 17 [of the Constitution of 1897] is not an authorization to the Legislature to restrict Ch ancery jurisdiction to less than it was in 1792. We think the Constitutions of 1 792, 1831 and 1897 intended to establish for the benefit of the people of the state a tribunal to administer the remedies and principles of equity.”); Glanding v. Indus. Tr. Co. , 45 A.2d 553, 558–59 (Del. 1945) (“It cannot be said too forcefully that the general power s of the Court of Chancery refe rs to that complete system of equity as administered by the High Court of Chancery of Great Britain, and a proper interpretation of the constitutions of this State lead to but one conclusion; that is, that the Court of Chancery shall continue to exercise th at complete system of equity jurisdiction in all respects until the Legislature of this Stat e shall provide otherwise, as by granting the exercise of a part of that jurisdicti on exclusively to some other tribunal.”).37 rights, are imposed by equity and are recogniz ed and enforced exclusively by a court of equity.” 177 This court fulfills the charge of enforcing fiduciary obligations through a system of judicially crafted standards of review. Those standards of review are conceptually distinct from the underlying fiduciary ob ligations that arise in equ ity and frame a standard of conduct by which the fiduciary should act. “The standard of conduct describes what directors are expected to do and is defined by th e content of the duties of loyalty and care. The standard of review is the test that a court applies when evaluating whether directors have met the standard of conduct.” 178 In the hierarchy of law-making in a democr atic regime, courts defer to legislatures. Within constitutional limits, the General Assembly can replace equity with statutory law. 179 For purposes of entity law, th at means the General Assembly has the authority to eliminate or modify fiduciary duties and the standards that are applied by this court, or to authorize their elimination or modifica tion through private ordering. The General Assembly has granted broad aut hority to modify or eliminate fiduciary duties for certain types of Delaware entities. The Delaware Revise d Uniform Partnership Act, the Delaware Revised Uniform Limite d Partnership Act, the Delaware Uniform

177 McMahon v. New Castle Assocs. , 532 A.2d 601, 604 (Del. Ch. 1987) (citation omitted).
178 In re Trados Inc. S’holder Litig. , 73 A.3d 17, 35–36 (Del. Ch. 2013).
179 See In re Carlisle Etcetera LLC , 114 A.3d 592, 602 (Del. Ch. 2015) (citing the Delaware Supreme Court’s holding that “the General Asse mbly cannot enact legislation that reduces this court’s jurisdiction below the constitutionally established minimum, unless there is an adequate remedy at law”).38 Limited Liability Company Act, and the Delaware Statutory Tr ust Act each allow investors in these entities to expand, restrict, or eliminate fiduciary obligations. 180

180 See 6 Del. C. § 15-103(f) (“A partnership agreement may provide for the limitation or elimination of any and all liabilities for breach of contract and breac h of duties (including fiduciary duties) of a partner or other person to a partnership or to another partner or to another person that is a party to or is otherwise bound by a partnership agreement; provided, that a partnership agreement may not limit or eliminate liability for any act or omission that constitutes a bad faith violation of the im plied contractual covena nt of good faith and fair dealing.”); 6 Del. C. § 17-1101(d) (“To the extent that, at law or in equity, a partner or other person has duties (includi ng fiduciary duties) to a limite d partnership or to another partner or to another person th at is a party to or is othe rwise bound by a partnership agreement, the partner’s or other person’s duties may be expanded or restricted or eliminated by provisions in the partnership agreement; provided that the partnership agreement may not eliminate the implied cont ractual covenant of good faith and fair dealing.”); 6 Del. C. § 18-1101(c) (“To the extent that, at law or in equity, a member or manager or other person has duties (includi ng fiduciary duties) to a limited liability company or to another member or manager or to another person that is a party to or is otherwise bound by a limited liability company agreement, th e member’s or manager’s or other person’s duties may be ex panded or restricted or elim inated by provisions in the limited liability company agre ement; provided, that th e limited liability company agreement may not eliminate the implied cont ractual covenant of good faith and fair dealing.”); 12 Del. C. § 3806(c) (“To the exte nt that, at law or in equity, a trustee or beneficial owner or other person has duties (including fiduciary duties) to a statutory trust or to another trustee or beneficial owner or to another person that is a party to or is otherwise bound by a governing instrument, the trustee’s or beneficial owner’s or other person’s duties may be expanded or restricted or eliminated by provisions in the governing instrument; provided, that the governing instrument may not e liminate the implied contractual covenant of good faith and fair dealing.”); see also 12 Del. C. § 3303(a) (“Notwithstanding any other prov ision of this Code or other law, the terms of a governing instrument may expand, restrict, eliminate, or otherwise vary any laws of general application to fiduciaries, trusts, and trust administration, including, but not limited to, any such laws pertaining to: . . . (5) A fiduciary’s powers, duties, standard of care, rights of indemnification and liability to persons whose interests aris e from that instrument . . . provided, however, that nothing contained in th is section shall be construed to permit the exculpation or indemnification of a fiduciary for the fiduciary’s own wilful misconduct or preclude a court of competent jurisdiction fro m removing a fiduciary on account of the fiduciary’s wilful misconduct. The rule that statutes in de rogation of the common law are to be strictly construed shall ha ve no application to this secti on. It is the policy of this section to give maximum effect to the principle of freedom of disposition and to the enforceability of governing instruments.”).39 Although the General Assembly has th e power to wholesale displace the foundational role of equi ty in corporate law, it has not done so. There was some concern when Delaware adopted its corporate statut e that it too broadly empowered management and too minimally restrained them, as Adolf Berle explained in his famous 1931 Harvard Law Review article articulati ng the twice-tested approach. 181 These concerns again flared after the 1967 revisions to the DGCL. Schnell allayed these concerns, cementing Delaware’s adherence to Berl e’s “twice tested” framework. 182 More modern articulations of the principle clarify that th e broad “latitude for substantia l private ordering” granted by the DGCL is constrained by “s tatutory parameters and judici ally imposed principles of fiduciary duty.” 183 Put simply, Delaware corporatio ns may not alter default fiduciary obligations unless authorized to do so by statute. The General Assembly has acted cautiously to limit specific default rules of equity. The prime example is Section 102(b)(7), whic h allows corporations to adopt charter provisions that eliminate director lia bility for breach of the duty of care. 184 Section

181 See Leo E. Strine, Jr., Lawrence A. Hamerm esh, R. Franklin Balotti, & Jeffrey M. Gorris, Loyalty’s Core Demand: The Defining Role of Good Faith in Corporation Law , 98 G EO

. L.J. 629, 642 (2010) (citin g Adolf A. Berle, Jr., Corporate Powers as Powers in Trust , 44 Harv. L. Rev. 1049 (1931)).
182 See Schnell , 285 A.2d at 439–40.
183 Williams v. Geier , 671 A.2d 1368, 1381 (Del. 1996).
184 See 8 Del. C. § 102(b)(7).40 102(b)(7), however, only elimin ates the availability of mone tary damages; it does not eliminate the underlying duty of care nor the possibility of ot her forms of relief. 185 Section 122(17) of the DGCL represents another restrained foray by the General Assembly into the realm of fiduciary principl es. Section 122(17) permits corporations to renounce in advance “any interest or expectancy of the corporation in, or in being offered an opportunity to part icipate in, specified business oppor tunities or specified classes or categories of business opportuniti es that are presented to the corporation or 1 or more of its officers, directors or stockholders.” 186 As with Section 102(b )(7), Section 122(17) does not eliminate or limit the fiduciary duty of loyalty or the corporat e opportunity doctrine that generally applies. 187 Section 122(17) merely author izes a corporation to renounce

185 See E. Norman Veasey et al., Delaware Supports Directors With a Three-Legged Stool of Limited Liability, Inde mnification, and Insurance , 42 Bus. Law. 399, 403 (1987) (“[N]ew section 102(b)(7) does not eliminate the duty of care that is properly imposed upon directors.”); 1 R. Franklin Balotti & Jesse A. Finkelstein, Balotti and Finkelstein’s Delaware Law of Corporati ons and Business Organizations § 4.19[A] n.1097 (3d ed. Supp. 2019-2) (“Note also that Section 102(b)(7) allows th e certificate of incorporation of a Delaware corporation to limit or eliminate th e financial liability of directors for breach of the duty of care . . . . Su ch a limitation of liability does not, however, limit or eliminate the requirement that directors act with due care . . . .”); see also Malpiede v. Townson , 780 A.2d 1075, 1095 n.68 (Del. 2001); Siegman v. Tri-Star Pictures, Inc. , 1989 WL 48746, at *8 (Del. Ch. May 30, 1989) (denying motion to dismiss where a pr ovision in a charter amendment could be construed to “eliminate or limit th e liability of . . . directors for breach of their fiduciary duty of loyalty--a result pros cribed by § 102(b)(7)”); 1 Edward P. Welch et al., Folk on the Delaware General Corporation Law § 102.16, at 1-32 –33 n.65 (7th ed. Supp. 2021-2) (quoting commentary to section 102(b)(7)) (“This provi sion would have no effect on the availability of equitable remedies, such as injunction or rescission, for breach of fiduciary duty.”).
186 8 Del. C. § 122(17).
187 See Lawrence A. Hamermesh, The Policy Foundations of Delaware Corporate Law , 106 Colum. L. Rev. 1749, 1782 n.150 (2006) (“By and la rge, the fiduciary duties of directors are nonwaivable, mandatory terms of the corporate contract. . . . The limited41 certain business opportunities in advance. For this reason, S ection 122(17) onl y authorizes waivers that are sufficiently narrow and specifi ed. By contrast, a broad and non-specific waiver would go beyond what Section 122(17) authorizes by effectively limiting or eliminating the operation of the duty of loyalty. 188 Another example of the role of equity is Section 152 of the DGCL, which governs stock issuances. That statute provides that “[i]n the absence of actual fraud in the transaction, the judgment of th e directors as to the value of such consideration [for the stock issuance] shall be conclusive.” 189 The court has observed, ho wever, that even the broad language of Section 152 “does not provide a defense when the underlying transaction involves unfair self-dealing proscribed by equitable fiduciary duty concepts.” 190 Fiduciary duties continue to apply.

exceptions--DGCL sections 102(b)(7 ) (permitting charter elimin ation of monetary liability of directors for breach of fiduciary duty ex cept in specified circumstances) and 122(17) (permitting advance renunciation of corpor ate opportunities)--reflect the generally mandatory character of dir ector fiduciary duties.”).
188 See , e.g. , Alarm.com Hldgs., Inc. v. ABS Cap. P’rs, Inc. , 2018 WL 3006118, at *8 n.46 (Del. Ch. June 15, 2018) (identifying issue pose d by potential breath of waiver but noting that “[n]o one has challenge d the scope of the waiver, and this decision provides no opportunity to opine on the validity of a broad and ge neral renunciation of corporate opportunities, as contrasted w ith a more tailored provision addressing a specified business opportunity or a well-defined class or category of business opportunities”), aff’d , 204 A.3d 113 (Del. 2019); Lewis S. Black, Jr. & Frederick H. Alexander, Analysis of the 2000 Amendments to the Delaware General Corporation Law 3 (2000) (“The legislative synopsis [to Section 1 22(17)] explicitly provides that th e amendment is not intended to change the application of fiduciary duties to the renunciation of corporate opportunities itself, which may still be subject to duty of loyalty issues.”).
189 8 Del. C. § 152.
190 Parfi Hldg. AB v. Mirror Image Internet, Inc. , 794 A.2d 1211, 1235 (Del. Ch. 2001), rev’d on other grounds , 817 A.2d 149 (Del. 2002).42 The sharp contrast between the extent to which fiduciary duties can be eliminated through private ordering in the alternative entity context versus in the corporate context is one of the defining features that distingu ishes alternative entities from corporations. Delaware decisions have cited this contrast. 191 Commentators have called attention to it repeatedly. 192 Yet even alternative en tities retain mandatory feat ures and contain domains

191 See also Auriga Cap. Corp. v. Gatz Props., LLC , 40 A.3d 839, 849 (Del. Ch. 2012), aff’d , 59 A.3d 1206 (Del. 2012) (“ [T]he [LLC] Act lets contrac ting parties modify or even eliminate any equitable fiduciary duties, a more expansive cons triction than is allowed in the case of corporations.”); Dieckman v. Regency GP LP , 2016 WL 1223348, at *8 (Del. Ch. Mar. 29, 2016), rev’d on other grounds , 155 A.3d 358 (Del. 2017) (“But in stark contrast to the corporate context, in whic h fiduciary duties cannot be waived, a limited partnership may eliminate all fiduciary dutie s, including the duty of disclosure.”).
192 Mohsen Manesh, Contractual Freedom Under Dela ware Alternative Entity Law: Evidence from Publicly Traded LPs and LLCs , 37 J. Corp. L. 555, 561–62 (2012) (“At most, corporations may eliminate manageri al liability arising from breaches of the fiduciary duty of care and carve out limite d exceptions to the co rporate opportunity doctrine. Corporations cannot e liminate the substantive obligati ons of the fiduciary duty of care; cannot eliminate the substa ntive obligations of the fiducia ry duty of loyalty or any liability arising from the breach of that duty; cannot eliminate the corporate opportunity doctrine altogether; cannot insulate all intere sted transactions from exacting entire fairness review; cannot eliminate so-called Revlon duties; and cannot protect managerial decisions from judicial scrutiny under the intermediate Unocal standard of review. Delaware alternative entities, however, can do all of these things.”); Brent J. Horton, Modifying Fiduciary Duties in Dela ware: Observing Ten Years of Decisional Law , 40 Del. J. Corp. L. 921, 949 (2016) (when describing Hite Hedge LP v. El Paso Corp. , 2012 WL 4788658 (Del. Ch. Oct. 9, 2012), observing that “El Pa so MLP was not a corporation, and thus was able to eliminate fiduciary duties pursu ant to 17-1101”); Larry E. Ribstein, The Uncorporation and Cor porate Indeterminacy , 2009 U. Ill. L. Rev. 131, 143 (2009) (“This contrast between the role of fiduciary duti es in corporations and uncorporations helps explain why Delaware limits fidu ciary duty waivers in corpora tions while, as discussed in the next Part, freely allowing waiver in un incorporated firms.”); Susan Pace Hamill, Some Musings As LLCs Approac h the Fifty-Year Milestone , 51 Cumb. L. Rev. 1, 28–29 (2021) (“The ability to contractually eliminate fiduci ary duties is another controversial area in which corporations and LLCs are treated differe ntly under some state laws. Legal standards that cannot be contractually a ltered--known as immutable pr ovisions--reflect an important policy that must prevail. The fiduciary duties ow ed by directors to a corporation have both default and immutable componen ts.”); Jonathan G. Rohr, Freedom of Contract and the43 where equity continues to apply. 193 The lesson is the same: The General Assembly can displace equity, but only when it does so expressly. The constraints of equity bind not only as to standards of conduct, but also as to standards of review. Where the General A ssembly has authorized it, the constitutive agreements that govern an en tity can modify standards of re view. The General Assembly has not authorized corporations to take that step. “Having chosen a for-profit corporate form, . . . directors are b ound by the fiduciary duties and standards that accompany that form .” 194

Publicly Traded Uncorporation , 14 N.Y.U. J.L. & Bus. 247, 250–51 (2017) (“Unlike corporations, alternative entities can modify and even eliminate th e fiduciary duties of management and controllers .”); Winnifred A. Lewis, Waiving Fiduciary Duties in Delaware Limited Partnerships and Limited Liability Companies , 82 Fordham L. Rev. 1017, 1030 (2013) (“[C]orporations ca n never eliminate fiduciary duties.”).
193 For example, LLCs, which are frequently de scribed in this court and elsewhere as “creatures of contract,” see , e.g. , TravelCenters of America, LLC v. Brog , 2008 WL 1746987, at *1 (Del. Ch. Ap r. 3, 2008), are not devoid of mandatory components that inhere in every entity whose existence is dependent on an act of the sovereign. See 6 Del. C. § 18-201; see also 8 Del. C. § 101; 6 Del. C. § 17-201. Indeed, there are “core attributes of the LLC that only the sovereign can authoriz e, such as its separate legal existence, potentially perpetual life, and limit ed liability for its members.” Carlisle , 114 A.3d at 605. This court has explained that “when a soverei gn makes available an entity with attributes that contracting parties cannot grant themselv es by agreement, the entity is not purely contractual. Because the entity has taken a dvantage of benefits th at the sovereign has provided, the sovereign retains an interest in that entity.” Id. Thus, “Delaware courts . . . retain some measure of inherent residual authority so that entities created under the authority of Delaware law coul d not wholly exempt themselves from Delaware oversight.” In re Revlon, Inc. S’holders Litig. , 990 A.2d 940, 960 n. 8 (Del. Ch. 2010).
194 eBay Domestic Hldgs., Inc. v. Newmark , 16 A.3d 1, 34 (Del. Ch. 2010) (emphasis added).44 Chancellor Chandler’s decision in Leonard Loventhal Account v. Hilton Hotels Corp. illustrates this point. 195 There, the board of Hilton Ho tels adopted a rights plan that purported to eliminate any liability that may accrue to the directors when exercising the rights plan. Like the Conclusive-And-Binding Provision in this ca se, Section 31 of the rights plan purported to make the directors’ interpretation of the rights plan “final, conclusive and binding” on the corporation a nd all other parties. The full provision stated:
DETERMINATION AND ACTIONS BY THE BOARD OF DIRECTORS. The Board of Directors of the Company shall have the exclusive power and au thority to administer this Agreement and to exercise the rights and powers specifically granted to the Board of Direct ors of the Company or to the Company, or as may be nece ssary or advisable in the administration of this Agre ement, including, without limitation, the right and power to (i) interpret the provisions of this Agreement, and (ii) make all determinations deemed necessary or advisable for the ad ministration of this Agreement (including a determination to rede em or not redeem the Rights or to amend this Agreement). All such actions, calculations, interpretations and determinations (including for purposes of clause (y) below, all omissions with respect to the foregoing) that are done or made by the Boar d in good faith, shall (x) be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights, as such, and all other parties, and (y) not subject the Board to any liability to the holders of the Rights. 196 A stockholder challenged Section 31 as invali d under Section 102(b)(7 ) and Section 141(a) of the DGCL because it sought to insulate the board and its decisions from equitable review to a greater degree than the DGCL permitted.

195 2000 WL 1528909, at *11–12 (Del. Ch . Oct. 10, 2000).
196 Id. at *10.45 Although defense counsel made critical c oncessions in an ef fort to moot the plaintiff’s challenge to the validity of Sec tion 31, Chancellor Chandler nevertheless took pains to observe that Section 31 was invalid. Quot ing the Delaware Supreme Court decision establishing enhanced scrutiny of rights plans, the Chancellor “t[ook] [the] opportunity to reaffirm the prin ciple” that the board would be held to “fiduciary standards any other board of directors w ould be held to in deciding to adopt a defensive mechanism,” regardless of the plan’s inclusion of Section 31. 197 There are admittedly distinctions between the rights plan in Hilton Hotels and the Conclusive-And-Binding Provision in this case . A rights plan is a control device that a board adopts unilaterally. The Conclusive-And-Binding Provis ion in a charter provision that appears in the constitutiv e document of the Company. But the premise underlying Hilton Hotels is that a company cannot se ek to obviate equitable re view to a greater extent than the General Assembly has permitted. That premise applie s equally to the ConclusiveAnd-Binding Provision. The Conclusive-And-Binding Provision cannot conclusively empower the Board to make determinations under a good faith standard. The provis ion cannot prevent the court from applying equitable principles to evaluate the Board’s decision. Having concluded that the Conclusive-And -Binding Provision has no effect on the standard of review, the analysis now addresses the Company’s appeal to case law. In the portion of its brief urging an interpretation of the Conclusi ve-And-Binding Provision that

197 Id. at *12 (quoting Moran v. Household Int’l, Inc. , 500 A.2d 1346, 13 52 (Del. 1985)).46 could be viewed as resetting th e orientation of Delaware corp orate law, the Company cited a grand total of six cases. 198 The Company identified two of the six solely to distinguish them. That means that the Company affirm atively relied on only four cases. For completeness, this decision addresses all six. None support the Company’s position. Of the four cases on which the Comp any affirmatively relies, it cites two— Hockessin Community Center, Inc. v. Swift and In re IAC/Interactive Corp. 199 —for the proposition that the plaintiff in an action file d under Section 225 of the DGCL always bears the burden of proof rega rdless of the circumstan ces leading to the dis pute. From this, the Company extrapolates that an enhanced scrutiny framework under which the Company bears the burden canno t apply in the Section 225 context. Both premises are flatly wrong. The procedural vehicle through which a st ockholder challenges a corporate election does not dictate the allocation of the burden of proof, nor do pr ocedural principles foreclose equitable review. This court retains the “ability to review appropriate claims of inequitable conduct within the boundaries of Section 225,” 200 and the court has reviewed board action under enhanced scrutiny in such contexts. 201 Where enhanced scrutin y applies, so too does

198 One other appears only in a parent hetical as required by The Bluebook, A Uniform System of Citation

. See Def.’s Answering Br. at 36 n.125.
199 See 59 A.3d 437, 453 (Del. Ch. 2012); 948 A.2d 471, 493 (Del. Ch. 2008).
200 Brown v. Kellar , 2018 WL 6721263, at *6 (Del. Ch. Dec. 21, 2018) (applying Schnell in the context of a Section 22 5 dispute, collecting cases).
201 See Johnston v. Pedersen , 28 A.3d 1079, 1089–90 (Del. Ch. 2011) (applying enhanced scrutiny in a Section 225 action concerni ng a contested election of directors); see also Brown , 2018 WL 6721263, at *6–7 & n.50; MM Cos., Inc. v. Liquid Audio, Inc. , 813 A.2d 1118, 1127 (Del. 2003) (observing that Delawa re courts “have remained assiduous in47 the burden allocation tied to that standard. 202 In both Hockessin and IAC , the plaintiff challenged only the legal validity of the board action. 203 Because the claims were based on legal invalidity and not eq uity, the plaintiffs bore the burden of proof. Neither Hockessin nor IAC stand for the proposition that the procedural vehicle of Section 225 overrides the burden allocation principles of enhanced scrutiny doctrines. The Company miscites to the third case— In re Walt Disney Co. Derivative Litigation —for the definition of good faith. Freque ntly defined by Delaware courts in the negative—that is, in terms of bad faith 204 —good faith is a subjectiv e standard that requires a fiduciary to act in the best interest s of the corporation. To be clear, Disney included a textbook definition of bad faith, which the Company does not cite. 205 Rather, the Company

carefully reviewing any board actions designed to interfere with or impede the effective exercise of corporate democracy by shareholders, especially in an election of directors”).
202 See , e.g. , Pell , 135 A.2d at 787 (“When tailored for reviewing director action that affects stockholder voting, enhanced scrutiny requires that the defendant fiduciaries bear the burden of proving (i) that ‘their motivations were proper and not se lfish,’ (ii) that they ‘did not preclude stockholders from exercising their ri ght to vote or coerce them into voting a particular way,’ and (iii) that the directors’ actions ‘were reasonable in relation to their legitimate objective.’” (citing Mercier , 929 A.2d at 810–11)).
203 See Hockessin , 59 A.3d at 453–64 (assessing valid ity of director actions under the company’s charter and bylaws, under a cont ract, and under Sections 141, 102(b)(4), and 223(a)(1) of the DGCL); IAC , 948 A.2d at 493–512 (assessing legal validity under a governance agreement, the implied covenant of good faith and fair dealing, and the charters of various entities).
204 See Liberty Prop. Ltd. P’ship v. 25 Mass. Ave. Prop. LLC , 2009 WL 224904 , at *5 (Del. Ch. Jan. 22, 2009) (noting that “in our corpor ate law, this court has firmly rejected the notion that the words ‘not in good faith’ mean something different than ‘bad faith,’ and has done so on sensible policy, logical, and linguistic grounds”).
205 In re Walt Disney Co. Deriv. Litig. , 906 A.2d 27, 64 (Del. 2006) (defining bad faith as an “intentional dereliction of duty, a conscious disregar d for one’s responsibilities); see also id. at 67 (defining bad faith as when a fidu ciary (i) “intentionally acts with a purpose48 pulls a quotation from a portion of the Disney decision describing the presumptions of the business judgment rule to suggest that Artic le FOURTH’s standard means that “[u]nless the [Board’s] decision ‘cannot be attributed to any rationa l business purpose,’ courts will not interfere or second-guess.” 206 The Company’s reference to this portion of Disney is misleading. The Company cites to the fourth case, Williams v. Geier , for the proposition that Blasius should be applied rarely, 207 but that uncontroversial st atement does not mean that Blasius should not apply here. 208 Although Williams does stand for the proposition that

other than that of advancing the best interests of the corporation,” (ii) “acts with the intent to violate applicable positive law, or” (iii) “int entionally fails to act in the face of a known duty to act, demonstrating a consci ous disregard for his duties”); Goldstein v. Denner , 2022 WL 1671006, at *40 (Del. Ch. May 26, 2022) (“ Bad faith can be the result of ‘any human emotion [that] may cause a director to [int entionally] place his own interests, preferences or appetites before the welfare of the corpor ation,’ including greed, ‘hatred, lust, envy, revenge, . . . shame or pride.’” (quoting In re RJR Nabisco, Inc. S’holders Litig. , 1989 WL 7036, at *15 (Del. Ch. Jan. 31, 1989)).
206 Def.’s Answering Br. at 36 & n.125 (quoting Disney , 906 A.2d at 74, which in turn quoted Sinclair Oil Corp. v. Levien , 280 A.2d 717, 720 (Del. 1971)).
207 Def.’s Answering Br. at 37 (arguing that “[t] here is no sound reason . . . to apply the heightened review envisioned by Blasius ” and “[]indeed, as the Supreme Court of Delaware has noted, ‘ Blasius ’ burden of demonstrating a ‘com pelling justification’ is quite onerous, and is therefore applied rarely’” (quoting Williams , 671 A.2d at 1376)).
208 Williams bears no similarity to this case. In Williams , a stockholder brought suit challenging an amendment to a certificate of incorporation intended to promote long-term value for stockholders. The amendment grante d all holders of common stock as of an established record date supe r-voting rights of ten votes pe r share subject to transfer restrictions. Stock issued after the record da te would be entitled to on ly one vote until held for thirty-six consecutive months by the same stockholder. A major ity independent board approved the amendment and recommended it to stockholders. A super-majority of stockholders approved the amendment. The plaintiff argued that the charter amendment was for entrenchment purpo ses and thus subject to Blasius review. The trial court instead applied the more lenient standard of Unocal and ruled in favor of the defendants. On appeal, the plaintiff argued that the trial court’s application of Unocal rather than Blasius49 Blasius should be applied rarely, Williams also reaffirms that Blasius applies where “the primary purpose of the board’s action is to in terfere with or impede exercise of the shareholder franchise and the stockholders are not given a full and fair opportunity to
vote.” 209 As discussed further belo w, that is the case here. The Company also fails to effectively di stinguish two of th e authorities on which Plaintiffs rely, Pell and Blasius . In Pell and Blasius , the court applied enhanced scrutiny to evaluate board action to in crease or decrease the number of board seats, respectively. The Company draws on this commonality in Pell and Blasius to fashion a rule that enhanced scrutiny only applies when a boar d takes action to “change the fundamental structure of the board” or “the nature of the shareholder voting construct.” 210 In the Company’s view, enhanced scrutiny should appl y only where the stockholder franchise is only indirectly frustrated, like in Pell and Blasius , and not directly frustrated, as was the case here. The Company’s reading of Pell and Blasius runs contrary to many decisions. 211

constituted reversable error. The high cour t disagreed and affirmed the trial court’s opinion, but on different grounds. The high court held that th e trial court erred in applying Unocal because “there was no unila teral board action” where th e stockholders approved the challenged amendment. Williams , 671 A.2d at 1376. In th is case, the Company does not (and could not) argue that stockholder rati fication restored the business judgment rule.
209 671 A.2d at 1376 (cleaned up).
210 Def.’s Answering Trial Br. at 36–37 (emphasis omitted).
211 See , e.g. , Mercier , 929 A.2d at 813–14 (applying en hanced scrutiny to a board’s postponement of a vote on a merger, which ch anged neither the boar d structure nor the stockholder voting construct); State of Wis. Inv. Bd. v. Peerless Sys. Corp. , 2000 WL 1805376, at *11–12 (Del. Ch. Dec. 4, 2000) (applyi ng enhanced scrutiny to a board’s postponement of polls closing at an annual meeting, which changed neither the board structure nor the stockholder voting construct).50 Under Delaware law, application of enhanced scrutiny in the stockholder franchise context does not turn on whether the board is purporting to exerci se existing authority under certificates or corporations or bylaws, or whether the challenged action changes a board structure. “[I]nequitable acti on does not become permissible simply because it is legally possible.” 212 Last, and without citing any case law, the Company argues that enhanced scrutiny does not apply because the Board only enforced the Voting Provision, which was adopted on a clear day. 213 That supposed distinction is i rrelevant here. Even when a board mechanically applies voting restrictions adop ted on a clear day, its application of those restrictions may be subject to enhanced scrutiny. 214

212 Schnell , 285 A.2d at 439.
213 Def.’s Answering Br. at 36–38.
214 See Strategic Inv. Opportunities , 2022 WL 453607, at *16 (applying enhanced scrutiny to a board’s application of by laws adopted “on a clear day”); In re Ebix, Inc. S’holder Litig. , 2016 WL 208402, at *19 (D el. Ch. Jan. 15, 2016) (holding that “Delaware law supports the imposition of Unocal scrutiny in this sort of scenario—that is, one where a board implements defensive measures in response to a threat to cor porate control that is not immediate, but rather per ceived as a future possibility”); Hills Stores Co. v. Bozic , 769 A.2d 88, 106–07 (Del. Ch. 2000) (observi ng that “Delaware case law has assured stockholders that the fact that the court has approved a board’ s decision to put defenses in place on a clear day does not mean that the board will escape its burden to justify its use of those defenses in the heat of battle under the Unocal standard”); Stroud v. Grace , 606 A.2d 75, 82 (Del. 1992) (noting that the court has held that Unocal enhanced scrutiny applies “to a preemptive defensive measure where the corporation was not under immediate ‘attack’” (citing Moran , 500 A.2d at 1350–53)); see also Hubbard v. Hollywood Park Realty Enters., Inc. , 1991 WL 3151, at *11–13 (Del. Ch. Jan. 14, 1991) (considering Schnell and Blasius when deciding to enjoin a board’s decision not to waive a facially valid advance notice bylaw).51 For all of these reasons, the court reje cts the Company’s argument concerning the appropriate standard of review. 215
B. Legal Validity The Board argues that its in struction to Kalahurka corr ectly applied the Company’s Voting Limitation. To determine the legal va lidity of the Board’s in struction, the court must determine whether the Voting Limitation can be applied to gr oups of stockholders that act in concert, and, if so, whether the stockholders to whom the Board applied this interpretation of the Voting Limi tation could be deemed to be acting in concert under these circumstances.
1. The Voting Limitation Provid es A Basis For The Board To Exclude The Votes Of Stockh olders Acting In Concert. “In examining the provisions of a certificat e of incorporation, co urts apply the rules of contract interpretation.” 216 This is because certificates of incorporation and by-laws are

215 As Vice Chancellor Laster noted in Trados , 73 A.3d at 56 n.32, Section 141(a) of the DGCL could be construed as leaving open the possibility th at a charter provision could provide a mechanism for ta iloring or realigning fiduciary obl igations in a manner that alters the traditional fiduciary analysis. Such an ar gument would rely on the exception to the general rule in Section 141(a), which states: “The business and affair s of every corporation organized under this chapter shall be manage d by or under the dire ction of a board of directors , except as may be otherwise provided in this chapter or in its certificate of incorporation. If any such prov ision is made in the certificat e of incorporation, the powers and duties conferred or imposed upon the board of directo rs by this chapter shall be exercised or performed to such extent and by such person or pers ons as shall be provided in the certificate of incorporation .” 8 Del. C. § 141(a) (emphasis added). The Trados decision “provide[d] no opportunity for expre ssing a view as to the effectiveness of any such mechanism or realignment, and [the cour t did] not intimate one.” 73 A.3d at 56 n.32. It would require a sophisticated and nuanced ar gument to carry the day on this point. Given the paucity of the briefing, this is not the case to test the sc ope of the exception to Section 141(a).
216 Berlin v. Emerald P’rs , 552 A.2d 482, 488 (Del. 1988).52 contracts between stockholders and the corporation. 217 “If no ambiguity is present, the Court must give effect to the cl ear language of the Certificate.” 218 “If charter or bylaw provisions are unclear, we resolve any doubt in favor of the stockholders’ electoral rights.” 219 “A contract is not re ndered ambiguous simply because the parties do not agree upon its proper construction. Rather, a contr act is ambiguous only when the provisions in controversy are reasonably or fairly susceptible of different interpretations or may have two or more different meanings.” 220 The Voting Limitation, found in Article FOURTH, Section 4(C)(1) of the Company’s certificate of incorp oration, provides that Notwithstanding any other provis ion of this Certificate of Incorporation, in no event sh all any record owner of any outstanding Common Stock which is beneficially owned, directly or indirectly, by a person who , as of any record date for the determination of stockho lders entitled to vote on anymatter, beneficially owns in excess of 10% of the thenoutstanding shares of Common Stock (the “Limit”), be entitled, or permitted to any vote in respect of the shares held in excess of the Limit. 221 Section 4(C)(2) contains definitions relevant to the application of the Voting Limitation, including:

217 See Centaur P’rs, IV v. Nat’l Intergroup, Inc. , 582 A.2d 923, 928 (Del. 1990) (“Corporate charters and by-l aws are contracts among the sh areholders of a corporation and the general rules of contract in terpretation are held to apply.”).
218 Kaiser Aluminum Corp. v. Matheson , 681 A.2d 392, 395 (Del. 1996).
219 Airgas, Inc. v. Air Prods. & Chems., Inc. , 8 A.3d 1182, 1188 (Del. 2010).
220 Rhone-Poulenc Basic Chems. Co . v. Am. Motorists Ins. Co. , 616 A.2d 1192, 1196 (Del. 1992).
221 Certificate of Inc. art. 4(C)(1) (emphasis added).53 (a) “Affiliate” shall have the mean ing ascribed to it in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, as in effect on the date of filing of this Ce rtificate of Incorporation. (b) “Beneficial ownership” shall be determined pursuant to Rule 13d-3 of the General Ru les and Regulations under the Securities Exchange Ac t of 1934 . . . ; pr ovided, however, that a person shall, in any event, al so be deemed the “beneficial owner” of any Common Stock: (1) which such person or any of its affiliates beneficially owns, directly or indirectly; or . . . (3) which is beneficially owned, directly or indirectly, by any other pe rson with which such first mentioned person or any of its Affiliates acts as a partnership, limited partnership, syndicate or other group pursuant to any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of capital stock of this Corporation; and provided further, however, that (1) no Director or Officer of this Corporation (or any Aff iliate of any such Director or Officer) shall, solely by reason of any or all of such Directors or Officers acting in their capacities as such, be deemed, for any purposes hereof, to bene ficially own any Common Stock beneficially owned by any other such Director or Officer (or any Affiliate thereof) . . . (d) A “person” shall include an individual, firm, a group acting in concert , a corporation, a partnership, an association, a joint venture, a pool, a joint stock company, a trust, an unincorporated organization or similar company, a syndicate or any other group formed for the purpose of acquiring, holding, or disposing of se curities of any other entity. 222 The definition of “beneficial ownership” includes a limited carve-out, providing that a stockholder “shall not be deemed to be the beneficial owner of any voting shares solely by

222 Id. art. 4(C)(2) (emphasis added).54 reason of a revocable proxy granted for a par ticular meeting of stockholders . . . with respect to shares of which neith er such person nor any such Affiliate is otherwise deemed the beneficial owner.” 223
The Board determined that Johnson, his wife, D. Wats on, C. Watson, Morrissey, and Totta were “a group acting in concert” whose shares could thus be aggregated as the shares of a single “person” under the Voting Limitation. 224 In the Board’s view, a plainmeaning construction of the Certificate of Inco rporation necessarily l eads to the conclusion that a “group acting in concert,” as part of the definition of “pers on,” can be substituted into the Voting Limitation like so : “[I]n no event shall . . . a [group acting in concert] who . . . beneficially owns in excess of 10% of the then-outstanding shares of Common Stock . . ., be . . . permitted to any vote in respect of the shares held in exce ss of the [10% limit].” Plaintiffs advance several theories why, in their view, the Board’s interpretation of the Company’s Certificate of Incorporation is incorrect under a plain reading of the text. They contend that the Board’ s interpretation of “person” would subsume and expand the definitions of “affiliate” and “beneficial owne rship,” neither of which include the phrase “acting in concert.” 225 They point out that the cer tificate’s Article EIGHTH, which addresses tender offers and offe rs to merge, includes an iden tical definition of the word “person,” and therefore argue that “person” was defined expansively to ensure that the certificate applies to all form s of people and business entitie s, not to expand the Voting

223 Id. art. 4(C)(2)(b)(2).
224 Def.’s Answering Trial Br. at 40–42.
225 Pls.’ Opening Trial Br. at 56–57.55 Limitation to allow for the aggregation of peop le’s stockholdings who are neither affiliates of one another nor the beneficial owners of one another’s shares. 226 These arguments fail. The Board’s read ing of “person” does not “subsume and expand” the definitions of aff iliate and beneficial ownership, nor does it expand the Voting Limitation. The definition of “beneficial owne rship” includes the word “person,” which is defined as, among many other things, “a group acting in concert.” T hose definitions appear in the section of the certificate that addre sses stockholder voting, immediately after the Voting Limitation. A plain reading of the Voting Limitation and the definitions immediately following it compel the conclusion that “a group acting in concert” “who beneficially owns in excess of 10% of the th en-outstanding shares of Common Stock” may not vote shares in excess of the 10% limit. 227 Plaintiffs also point out th at the definition of “benef icial ownership” includes a carve-out for those granted a revocable proxy pursuant to a public proxy solicitation, which in their view means that “the Certificate ma ndates that stockholders’ share ownership not be aggregated under the [Voting Limitation] for efforts to elect a slate of directors.” 228 The carve-out, however, is not absolute. It merely says that a stockholder may not be deemed a beneficial owner of Company stock “solely by reason of a revocable proxy granted for a particular meeting of stockhol ders,” which has been a standa rd exception to beneficial

226 Id. at 56 n.186.
227 Certificate of Inc. art. 4(C).
228 Pls.’ Opening Trial Br. at 57.56 ownership definitions since at least Moran

. 229 The exception leav es open the possibility that, if the Board has additional reasons for ma king such a determination, the Board can do so. The limited exception for a revocable proxy does not co mpel the conclusion that stockholders’ share ownershi p can never be aggregated. Finally, Plaintiffs invoke the canon of construction ejusdem generis , under which where general language follows a list of specifi c words, “such general words are not to be construed in their widest extent, but are to be held as applying only to persons or things of the same general kind or class as those specifically mentioned.” 230 They point out that the definition of “person” includes a long list of entity types, followed by the catch-all “or any other group formed for the purpose of acquiring, holding, or disposing of securities of any other entity.” 231 In Plaintiffs’ view, because the de finition of “person” does not mention voting, application of the “acting in conc ert” language in the context of the Voting Limitation is contrary to the drafters’ intent. This final argument fails as well. The definition of “person” does not need to mention voting; all that matters is that the Voting Limitation applies to a “person,” which is defined in part as “a group acting in conc ert.” The court therefore adopts the Board’s reading of the certificate, which allows for th e Voting Limitation to be applied to holdings of separate stockholders when the stockh olders form a group acting in concert.

229 See Moran , 500 A.2d at 1355.
230 Aspen Advisors LLC v. Un ited Artists Theatre Co. , 861 A.2d 1251, 1265 (Del. 2004) (footnote omitted).
231 Certificate of Inc. art. 4(C)(2).57 2. Johnson And D. Watson Were Not Acting In Concert. The next question is whether the Board correctly applied the acting in concert principle when aggregating the shares of Johnson, D. Watson, and Park’s nominees. The Company’s charter does not define “acting in concert.” “Under well-settled case law, Delaware courts look to dictionaries for assistan ce in determining the plain meaning of terms which are not defined in a contract,” as “d ictionaries are the customary reference source that a reasonable person in th e position of a party to a contract would use to ascertain the ordinary meaning of words not defined in the contract.” 232 Black’s Law Dictionary is unhelpful. 233 Merriam-Webster defines “concer t” as “agreement in design or plan: union formed by mutual communication of opinion and views.” 234
The definition from Merriam-Webster tracks the general corporate law understanding that persons act in concert when they have an agreement, arrangement, or understanding regarding the voting or disposition of shares. That is a longstanding concept under the federal securities laws that histor ically has been used to determine when

232 Lorillard Toba cco Co. v. Am. Legacy Found. , 903 A.2d 728, 738 (Del. 2006).
233 Black’s Law Dictionary defines “In Concert” as “See Acting In Concert,” but offers no independent definition fo r acting in concert. In Concert , Black’s Law Dictionary (11th ed. 2019).
234 Concert , Merriam-Webster Dictionary, https ://www.merriam-webster.com/dictionary/ concert (last visited May 16, 2022).58 individuals form a group. 235 Section 203 of the DGCL uses the same concept as one of its definitions of ownership. 236 The concept of an agreement, arrangeme nt, or understanding appears consistent with the manner in which the Company comm unicated with stockholders about their holdings and the manner in which Usera and Kalahurka discussed responses to those inquiries. When the Company sent letters to Johnson, hi s wife, and other stockholders about their holdings on Octobe r 1, 2020, those letters aske d for, among other things, the number of Company shares held by the stockholders, their aff iliates, or “any other person with which you or any or your Affiliates acts as a partnership, limited partnership, syndicate or other group pursuant to any agreement, arrangement or understanding (whether written or unwritten) for the purpose of acquiring, holding, voting or disposing of any shares of Company stock.” 237 On January 16, 2021, Kalahurka emailed Usera, writing “I know we received a response from Johnson on our information request letter (stating that he had no agreements). Did we receive a response from O’Dell?” 238 O’Dell was one of the other

235 See 17 C.F.R. § 240.13d-5. The statement that federal rules have looked to whether persons have an agreement, arrangement, or understanding to determine whether they formed a group is true as a historical matter. On March 10, 2022, however, the Securities and Exchange Commission proposed amen dments to Rule 13D to broaden the circumstances under which persons are treated as a “group.” See Modernization of Beneficial Ownership Repor ting, 87 Fed. Reg. 13846-01, 2022 WL 705047 , at *13865–72 (proposed Mar. 10, 2022).
236 See 8 Del. C. § 203(c)(9)(iii).
237 E.g. , JX-32.
238 JX-54 at 1.59 stockholders from whom the Company requeste d information. User a responded in the affirmative, noting that O’Dell and another stoc kholder, Oliver, “[b]oth stated as well that there was [sic] no agreements. O’Dell did not acquire his stock from Johnson and we do not speculate that there is any agreement. Oliver, however, di d acquire shares from Johnson.” 239
Those letters and emails a ppear to indicate that Usera was on the lookout for agreements, arrangements, or understandings among stockholders that would affect the manner in which a stockholder will vote. The existence of an agreement, arrangement , or understanding is a sufficient basis for invoking an acting-in-concert provision. An undefined refe rence to “acting in concert” cannot reasonably go beyond that definition. It cannot be enough that the stockholder plans to vote the same way as another stockholder, is acquainted with another stockholder, or even has a business relationship with another stockholder. This court has rejected far greater showings when considering whether stockholders were sufficiently aligned for purposes of forming a control group. 240

239 Id. Usera testified at his deposition that th e Board “still believe[s] that Mr. Johnson and Mr. Oliver are acting in concert,” but lacks what the Board consid ers sufficient evidence to make that determination. Usera Dep. Tr. at 113:4–6.
240 See , e.g. , Sheldon v. Pinto T ech. Ventures, L.P. , 220 A.3d 245, 250– 56 (Del. 2019); van der Fluit v. Yates , 2017 WL 5953514, at *6–7 (Del. Ch. Nov. 30, 2017); In re Crimson Expl. Inc. S’holder Litig. , 2014 WL 5449419, at *15 (D el. Ch. Oct. 24, 2014); Zimmerman v. Crothall , 62 A.3d 676, 700 (Del. Ch. 2013); Dubroff v. Wren Hldgs., LLC , 2009 WL 1478697, at *4 (Del. Ch. May 22, 2009); Feldman v. Cutaia , 956 A.2d 644, 657–58 (Del. Ch. 2007); see also Williams Cos. S’holder Litig. , 2021 WL 754593, at *37 (Del. Ch. Feb. 26, 2021), aff’d , 264 A.3d 641 (Del. 2021) (TABLE ) (discussing an acting-in-concert60 Stockholder voting rights are sacrosanct. A charter provision that limits their exercise must be plain and un ambiguous. The words “acting in concert,” standing alone, will not support any greater restric tion of stockholde r voting rights. Turning to the question of whether an e xpress or implied agreement, arrangement, or understanding, the court fi rst addresses Park’s nominees. The Board determined that Totta was acting in concert with Johnson to get herself elected, but she did not own shares on the Record Date. 241 Morrissey beneficially owned 100 shares on the Record Date. 242 C. Watson is a manager of MLake 96, which owned 500 sh ares on the Record Date. 243 The court assumes without deciding that their no minations were pursuan t to an agreement, arrangement, or understanding that the nominees would vote their 600 sh ares for their slate, justifying the aggregation of their shares w ith Johnson’s for purposes of the applying the Voting Limitation. The analysis thus turns to D. Watson, w ho beneficially owned 37,175 shares on the Record Date through DEW. Whether D. Wa tson could properly be found to have been acting in concert with Johnson is dispositive as to the question of who won the election. 244

provision that was defined more broadl y than an “agreement, arrangement, or understanding” as the “primary offende r” when invalidating a poison pill).
241 PTO ¶ 2.
242 Id. ¶ 4.
243 Id. ¶ 3.
244 The Board’s nominees received 359,336 vote s, while Park’s nominees received 360,275 votes, a difference of 939 votes. Id. ¶¶ 44, 46. The court has a ssumed that the aggregation of Park’s nominees’ shares with Johnson’s was appropriate , meaning that of the 37,416 votes the Board instructed the election inspec tor not to count, only DEW’s 37,175 shares61 In support of the Board’s determination th at D. Watson was acting in concert with Johnson, the Company points out that, when the Board made its decision, it knew that DEW had acquired 19,500 in ad vance of the Record Date, th at Johnson had fewer shares between September 2020 and the Record Date, and that C. Watson, a Park nominee, was
D. Watson’s son. 245 The Company also points to the Robb findings, but as discussed above, it is unclear the extent to whic h the Board was familiar with an d considered that case when rendering its decision. Finally, the Comp any highlights the circumstances of DEW’s purchase of 19,500 shares from Johnson base d on information adduced in discovery, including Johnson’s email to Totta and others saying that he was “going to have David watson buy 19500 shares from me ASAP” because he “want[ed] to beat the record date,” Totta’s arrangement of the trans action, the immediate transfer of the shares followed by a nearly week-long delay in payment, and Johnso n’s failure to report the sale on his original
2020 tax returns. 246 None of these facts, individually or in th e aggregate, support a finding that Johnson and D. Watson are or were acti ng in concert pursuant to a mu tual agreement, arrangement, or understanding as to how D. Watson would vote his shares . It is unsurprising that Johnson would choose to sell his shares in excess of 10% of the Company’s outstanding shares; in his hands, those shares cannot vote a nd are effectively useless to him in his efforts

remain at issue, a difference of 241 votes. Thus, Park’s nominees won the election by 698 votes (939 - 241 = 698) if it was inappropri ate to count DEW’s shares with Johnson’s.
245 Def.’s Answering Trial Br. at 44–46.
246 Id. at 47–48.62 to seat directors on the Board. It is unobjec tionable that Johnson would choose to sell those non-voting shares to his frie nd and business partner, D. Wats on. Company insiders have been selling shares to one anot her for years, and the Compan y has strenuously argued that those stockholders were not acting in con cert with each other when they did so. 247 It is also both unsurprising and unobjectionable that D. Watson would vote for his son to join the Board. There is no evidence, for example, that Park nominated C. Watson in a quid pro quo for D. Watson’s votes; C. Watson has wo rked for Johnson’s en tities for years and the record reflects no indication that he was nomi nated for any reason other than merit and, perhaps, to vote MLake 96’s sh ares for Park’s nominees. In the end, the court has been presented w ith: a contract evidenci ng a transaction in which DEW purchased 19,500 shares from Johnso n at a price that no party has argued was discounted; 248 an amended tax return reporting the en tire purchase price as a capital gain, inviting tax consequences; 249 a letter to the Federal Reserve reporting the transaction, 250 to which the Federal Reserve did not object despite Johnson’s history; 251 and deposition testimony from D. Watson that he has not entere d into a voting agreemen t of any kind with respect to his shares, which is consistent with his representations to the Company. 252

247 Id. at 53.
248 JX-44 at 3; see also JX-27 (Park offering to buy Compa ny stock in September 2020 for $16.33 per share, less than the $16.42 per share price at which the DEW sale was consummated).
249 JX-87 at 7.
250 JX-44 at 2.
251 Johnson Dep. Tr. at 170:9–171:3.
252 D. Watson Dep. Tr. at 116:6–19; JX-68 at 2.63 On this record, the court cannot find that the Board’s instruction not to count D. Watson’s 37,175 votes was legally valid, be cause there is insuffi cient evidence to find that D. Watson and Johnson were acting in concert.
C. Enhanced Scrutiny Under Blasius It is a fundamental principle of Delaware law that boards of directors manage the business and affairs of corporations, and cour ts will respect the decisions that directors make pursuant to their sound business judgment. “Neverthele ss, there are rare situations which mandate that a court take a more direct and active role in overseeing the decisions made and actions taken by directors. . . . [ by] subject[ing] the directors’ conduct to enhanced scrutiny to ensure that it is reasonable.” 253 “The Blasius compelling justification standard of enhanced judici al review is based upon accep ted and well-established legal
tenets.” 254 Delaware courts “have recognized the substantial degree of congruence between the rationale that led to the Blasius ‘compelling justification’ enha nced standard of judicial review and the logical exte nsion of that rationale within the context of the Unocal enhanced standard of judicial review.” 255
Blasius established a two-part test that asks, first, whether the board acted “for the primary purpose of impeding the exercise of stockholder voting power,” and second,

253 Paramount Commc’ns Inc. v. QVC Network Inc. , 637 A.2d 34, 42 (Del. 1994).
254 Liquid Audio , 813 A.2d at 1129.
255 Id. (emphasis in original); accord Stroud , 606 A.2d at 92 n.3 (“In certain circumstances, a court must recognize the special import of protecting the shareholders’ franchise within Unocal ’s requirement that any defensive meas ure be proportionate and reasonable in relation to the threat posed.” (quotation marks omitted)).64 whether the board has established “a co mpelling justification for such action.” 256 The court addresses each step of the test in turn.
1. Primary Purpose The first, subjective inquiry of the Blasius test asks whether the “primary purpose of a board of directors’ defensive measure is to in terfere with or impede the effective exercise of the shareholder franchise in a contested election for directors.” 257 Under these unusual circumstances, wher e the Board expressly instructed the inspector of elections not to count a certain number of votes from pa rticular stockholders, it becomes self-evident that th e Board took action to interfere with the ability of certain stockholders to vote their shares. Thus, th e court finds that the Board’s primary purpose in giving its instruction to Ka lahurka was to interfe re with the effectiv e exercise of the shareholder franchise in a cont ested election for directors. The parties did not focus on this aspect of the Blasius standard in briefing. At trial, the Company’s counsel argued that the Board’s instruction was not given “with the primary purpose of interfering with the stockholder vote.” 258 Rather, the Board’ s “primary purpose was to protect the shareholders from [a] corporate takeover.” 259 This proffered “primary purpose,” however, more appropriately speaks to whether the action was justified.

256 Blasius , 564 A.2d at 661–63.
257 Liquid Audio , 813 A.2d at 1132 (emphasis omitted).
258 Trial Tr. at 112:5–6.
259 Id. at 112:7–9.65 2. Compelling Justification Having satisfied the first step of Blasius , the court turns to th e question of whether the Board has demonstrated a compelling justification for its actions. To satisfy the compelling-justification standard, “the dire ctors must show that their actions were reasonable in relation to their legitimate objec tive, and did not precl ude the stockholders from exercising their right to vote or co erce them into voting a particular way.” 260 “In this context, the shift from ‘reasonable’ to ‘compelli ng’ requires that the directors establish a closer fit between means and ends.” 261 It is important to note that “the belief that directors know better than stockholders is not a legitimate justification wh en the question involves who should serve on the board of a Delaware corporation.” 262 “[E]ven a board’s honest belie f that its incumbency protects and advances the best interest s of the stockholders is not a compelling justification. Instead, such action typically amounts to an unintentional viola tion of the duty of loyalty.” 263 In fact, “[t]he notion that directors know better than the stockholders about who should be on the board is no justification at all.” 264 Unfortunately for the Company, the Board’s sole justification for its decision to exclude the votes at issue is “protecting [the Company’s] shareholde rs from Mr. Johnson’s

260 Mercier , 929 A.2d at 810–11.
261 Pell , 135 A.3d at 787 (citation omitted).
262 Id. at 790.
263 Esopus Creek Value LP v. Hauf , 913 A.2d 593, 602 (Del. Ch . 2006) (footnotes omitted).
264 Mercier , 929 A.2d at 811.66 effort to ‘take control’ and ‘consider selling the bank.’” 265 The Company characterizes Johnson as a corporate raider intending to sell the Bank, someone from whom it believes the Board had an obligation to protect th e Company’s stockholders. The Company observes that Johnson has attempted to seat directors on the Board for over a decade and has floated his position in tender offers th at the Company should add board members, improve management a nd profitability, and cons ider selling the bank. Yet there are numerous deficiencies w ith the Company’s corporate-raider justification argument. For starters, the Co mpany has a staggered seven-member board. Even if Park’s three no minees were seated directly after the 2021 election, therefore, they could not have taken any action on behalf of th e Board, such as atte mpting to sell the Bank, without a majority. This mitigat es any “need” to prevent thei r installment to keep the Bank from being sold. Even the Company’s characterization of Johnson as a “corporate raider” is problematic. The court need not, and does not, decide whether that characterization is accurate. But the Company’s ar gument calls to mind an ob servation made by Chancellor Allen in Sutton Holding Corp. v. DeSoto, Inc

. 266 In Sutton , the court evaluated whether a electing a dissident slate of directors would co nstitute a “change in control” as defined in provisions the defendant company’s pension plans. 267 The court noted that the purpose of those kinds of provisions “is to foreclose a ‘raider’ from financing any part of a ‘takeover’

265 Def.’s Answering Trial Br. at 49.
266 1991 WL 80223 (Del . Ch. May 14, 1991).
267 Id. at *1.67 by resorting to the Company’s excess pension funding . . . . The most critical defect, in my opinion, is the fact that the ‘enemy’ here, the raider, includes anyone that the shareholders elect but that the board has not nominated.” 268 Similarly, the Company’s arguments about “corporate raiders” and “acting in concert” a ppear directed at anyone who the Board does not approve, and exempts anyone who is a member of the incumbent Board. 269 As important, the Company’s argument is directly contrary to the well-established law of this state. Even if Park’s nominees would, once se ated, propose to sell the Bank, and that is not at all an obvi ous conclusion to draw from the record before the court, the decision to elect those nominees must be left to the Compa ny’s stockholders. The Board does not have an obligation to “protect” stock holders from that outcome by excluding votes for insurgent nominees. Quite the opposite. The Board has an affirmative obligation not to interfere with the stockhold er franchise without a compellin g justification, and its sole justification is perhaps the only justification the Company could possibly have raised that is foreclosed under Delaware law.
In Liquid Audio , for example, the board of dir ectors responded to a plaintiffstockholder, MM Companies, Inc., that had “s ought to obtain control of Liquid Audio” “[f]or more than a year” by expanding the si ze of the board from five to seven and

268 Id. at *1 n.3.
269 See Chesapeake Corp. v. Shore , 771 A.2d 293, 345 (Del. Ch. 2000) (footnotes omitted) (“The primary purpose for this action was to impair Ches apeake’s ability to win the Consent Solicitation by increasing the required majority Chesapeake ne eded to obtain to preclusive levels. Compounding this intent ional impairment of the franchise was the defendants’ decision to apply a very different st andard to their own self-interest than they did to that of Chesapeake and Ariel.”).68 appointing two directors when it became “apparent that MM’ s nominees . . . would be elected at the annual meeting.” 270 The Delaware Supreme Court noted the Court of Chancery’s conclusion that the board had acted with the “primary purpose of diminishing the influence of MM’s two nominees on a fi ve-member Board by eliminating either the possibility of a deadlo ck on the board or of MM contro lling the Board, if one or two Director Defendants resigned from the Board.” 271 The court held that, despite the plaintiff’s attempts to seat directors and increa se the size of the board by an additional four seats to be filled with more of plaintiff’s nominees, the board “d id not demonstrate a compelling justification” for its decision to a ttempt to reduce the plai ntiff’s influence on the board. 272 Thus, the court finds that the Board’s ac tion was both legally invalid, as discussed above, and void under Blasius for failing to demonstrate a compelling justification.
III. CONCLUSION For the foregoing reasons, the court finds that the Board’s in struction to the inspector of elections was improper as to DEW’ s 37,175 votes. This conclusion is no doubt a bitter pill for the Boar d to swallow. Many of the Compa ny directors appeared at trial (by Zoom) to signal their earnest desire to defend the Board’s actions. Deeming their

270 Liquid Audio , 813 A.2d at 1122, 1124.
271 Id. at 1132.
272 Id. at 1123, 1132; see also Chesapeake , 771 A.2d at 345 (holding that the “mild threat” posed to the target company by a potential acquirer’s tende r offer and consent solicitation did not provide a compelling justification fo r the adoption of a supermajority bylaw, the primary purpose of which was to impair the acquirer’s ability to win the consent solicitation).69 application of the Voting Limitation legally invalid does not make them bad people; however, it does require judgment in Plaintiffs ’ favor. More than a year has elapsed since this case was filed, and the Company has he ld another annual election in the interim. 273 The parties did not meaningfully brief the significance of this fact when addressing the requested relief. The parties shall confer on a schedule for promptly presenting their respective positions on how to justly implem ent this ruling given the passage of time.

273 Pls.’ Opening Trial Br. at 4.