Opinion ID: 2361133
Heading Depth: 1
Heading Rank: 4

Heading: Timing of the Consent Solicitation

Text: Appellants argue that, by timing the consent solicitation as he did, Zaucha deprived the Northstar stockholders of financial information that was crucial to their decision. They say that Zaucha purposely timed the consent to end on March 21, 1997  ten days before the board could send out Northstar's 1995 and 1996 audited financial statements and its revocation of consent cards. Relying on Schnell v. Chris-Craft Industries, Inc., [11] appellants contend that Zaucha's consent should be set aside as inequitable. In Schnell, this Court held that inequitable action does not become permissible simply because it is legally possible. [12] The cases following Schnell explain that a fiduciary may not exercise legal rights if the action is inequitable either in its purpose or effect. [13] We conclude that Zaucha did not misuse his statutory right to a consent solicitation to gain control of Northstar's board. First, the Court of Chancery found that Zaucha did not act out of any improper motivation when he initiated or concluded the consent solicitation: Mr. Zaucha began his consent solicitation in response to specific actions by an appointed board that had never held a stockholder meeting. I accept his testimony that he was not aware of the effect of Northstar's failure to file a Form 10-K and that the timing of his solicitation had nothing to do with resulting restrictions on the company. I further accept the uncontroverted testimony of Mr. Zaucha's proxy solicitor, Daniel Burch, that he set the date for the conclusion of the solicitation based on a typical six-week timetable for such an undertaking without any knowledge of Northstar's problems or plans with regard to audited financial statements. [14] The Court of Chancery, as the trier of fact, was best able to judge the credibility of the witnesses and its decision to accept the testimony of Zaucha and his proxy solicitor will not be disturbed on appeal. [15] We also are satisfied that the timing of the solicitation did not achieve an inequitable result. The solicitation deadline did require the stockholders to act before receiving Northstar's audited financial statements and the board's revocation of consent cards. But the audited financial statements were not what this consent solicitation was about. As the trial court noted, the financials would not have been particularly helpful in evaluating the issues of corporate governance and executive compensation that were the focus of the consent solicitation. With respect to the revocation of consent cards, although none were distributed, the stockholders were informed of their right to revoke in the materials circulated by both sides.