Court Opinion

ID: 9380025
Source: CourtListenerOpinion
Date Created: 2023-03-16 21:04:07.317454+00
Date Added: 2024-06-11T17:16:34.182957
License: Public Domain

COURT OF CHANCERY
                                              OF THE
                                        STATE OF DELAWARE
KATHALEEN ST. JUDE MCCORMICK                                                 LEONARD L. WILLIAMS JUSTICE CENTER
        CHANCELLOR                                                              500 N. KING STREET, SUITE 11400
                                                                               WILMINGTON, DELAWARE 19801-3734

                                               March 16, 2023

     Kevin H. Davenport                                      Aaron E. Moore
     Eric J. Juray                                           Kevin J. Connors
     John G. Day                                             Marshall Dennehy Warner Coleman &
     Prickett, Jones & Elliott, P.A.                         Goggin, P.C.
     1310 King Street                                        1007 N. Orange Street, Suite 600
     Wilmington, DE 19801                                    P.O. Box 8888
                                                             Wilmington, DE 19801

                         Re:   Park G.P., Inc. et al. v. CCSB Fin. Corp.,
                               C.A. No. 2022-0657-KSJM

      Dear Counsel:

               Pursuant to the status quo order entered on December 19, 2022 (the “Status Quo

      Order”), the plaintiffs filed a notice describing certain actions undertaken at a January 27,

      2023 meeting of the Board of Directors (the “Notice”).1 On February 3, 2023, the

      defendant objected to two of these actions on the grounds that they violated the Status Quo

      Order.2 The parties completed briefing on the defendant’s objections shortly thereafter.3

      This letter constitutes my decision on the objections.

      1
        C.A. No. 2022-0657-KSJM, Docket (“Dkt.”) 39 (Pls.’ Notice Dated January 30, 2023);
      Dkt. 40 (“Def.’s Objs.”); Dkt. 37 (December 19, 2022 Status Quo Order) [hereinafter,
      “SQO”]. Undefined terms in this letter have the same meaning ascribed to them in the
      court’s post-trial memorandum opinion in C.A. No. 2021-0173-KSJM. See Park G.P., Inc.
      v. CCSB Fin. Corp., 2022 WL 1751741 (Del. Ch. May 31, 2022).
      2
          Def.’s Objs.
      3
          See id.; Dkt. 41 (Pls.’ Opposition); Dkt. 42 (Def.’s Reply Br.).
C.A. No. 2022-0657-KSJM
March 16, 2023
Page 2 of 3

         The defendant objects to two Board actions identified in the Notice: first, the

Board’s decision to replace corporate counsel of the Company and its wholly owned Bank

subsidiary; and second, the Board’s decision to designate certain persons as Bank

directors.4    The defendant argues that these actions are “Prohibited Actions” under

Paragraphs 2, 3, and 3(b) of the Status Quo Order, which provide as follows:

                2.     If any party to this action objects during the Notice
                Period, the Prohibited Action cannot be effected without (i) the
                unanimous approval of CCSB’s board of directors or (ii) the
                approval of the Court.

                3.     For purposes of this Order, a Prohibited Action shall
                consist of . . . (b) making, committing, or causing CCSB or its
                subsidiaries to make or commit to, any agreements or contract,
                other than those required in the ordinary course of business
                operations and which do not effect a significant change in the
                business operation of CCSB or its subsidiaries[.]5

         The defendant’s first objection is without merit. The defendant does not object to

the Board’s replacement of corporate counsel per se. The defendant admits that the Board

has the authority to appoint new counsel under the terms of the Status Quo Order.6 It

argues, however, that the Board selected the wrong replacement counsel, claiming new

counsel is inexperienced and conflicted by her engagement at a law firm that represents the

4
    See Defs.’ Objs. ¶¶ 4–5.
5
    SQO ¶¶ 2–3, 3(b).
6
   See Defs.’ Objs. ¶ 8 (“The SLC’s objection to the replacement of outside
corporate/regulatory counsel is not necessarily that the Park Directors seek to replace
Stephanie Kalahurka, longtime outside corporate and regulatory counsel to CCSB and the
Bank. The SLC’s objection is who the Park Directors purport to replace Ms. Kalahurka
with.”) (emphasis in original).
C.A. No. 2022-0657-KSJM
March 16, 2023
Page 3 of 3

plaintiffs in this action.7 But either a decision to replace counsel falls outside the ordinary

course of business under the Status Quo Order, or it does not. Having conceded that hiring

counsel is within the ordinary course of business, the defendant may not use the Status Quo

Order to second-guess Board decisions.

         The defendant’s second objection has merit. The replacement of a majority of the

Bank board is a Prohibited Action. The plaintiffs have not demonstrated that these

personnel changes were required in the ordinary course of business.              The changes

furthermore “effect a significant change in the business operation of CCSB or its

subsidiaries[.]”8 They therefore violate Paragraph 3(b) of the Status Quo Order.

         In sum, the first objection is overruled. The second objection is sustained. CCSB

shall conform its conduct to this decision.

         IT IS SO ORDERED.

                                           Sincerely,

                                           /s/ Kathaleen St. Jude McCormick

                                           Kathaleen St. Jude McCormick
                                           Chancellor

cc:      All counsel of record (by File & ServeXpress)

7
    See id. ¶¶ 9–13.
8
    SQO ¶ 3(b).