Schnell v. Chris-Craft Industries, Inc.
285 A.2d 437 (Del.Sup. 1971)
- The directors of Chris-Craft were worried because some shareholders had announced that at the next shareholders’ meeting, they were going to hold a vote to replace the directors.
- So, the directors moved the annual meeting up from January to December, making it harder for stockholders to make travel arrangements (and therefore show up to vote to kick out the directors).
- Some of the shareholders (including Schnell) sued to stop the directors from moving up the date of the shareholders’ meeting.
- Under the by-laws of the company, and under Delaware State law, it was legal for the directors to change the date of a shareholders meeting, as long as they gave 60 days notice (which they did).
- The Trial Court found for the directors. The shareholders appealed.
- The Trial Court found that the directors’ actions were designed to obstruct the shareholders’ efforts to gain control of the corporation. However, the Court declined to force the directors to reschedule the meeting.
- The Delaware Supreme Court reversed.
- The Delaware Supreme Court found that even though the directors strictly complied with Delaware law, it was inequitable for them to profit from their shady decision.
- Contrast this case with Bove v. Community Hotel Corp. of Newport, R.I. (249 A.2d 89 (1969)), where the Court found that even though the directors were doing something shady, it was not a court’s prerogative to question a technically legal business decision.