## Facts

- U.S. Energy Systems, Inc., a publicly traded Delaware corporation, hired Asher E. Fogel as CEO in August 2005; he also became chairman and a director.
- By mid-2007, three other directors (Jacob Feinstein, Ronny Strauss, and Robert Schneider) lost confidence in Fogel and agreed privately that he should be removed.
- On June 29, 2007, a board session was scheduled for another stated purpose, but the three directors informed Fogel he was being removed.
- At the June 29 session, there was no board deliberation and no vote; no formal resolution was adopted that day.
- On July 1, 2007, Fogel asserted he remained CEO and chairman and, relying on the bylaws, called a special stockholders’ meeting to vote on removing the three directors.
- Later on July 1, at a regularly scheduled board meeting, the three directors adopted a formal resolution terminating Fogel.
- The directors refused to honor Fogel’s special-meeting call, contending he had been fired effective June 29.
- The corporation had not held an annual stockholder meeting since November 2006.

## Issues

1. Whether the board validly terminated Fogel at a duly convened board meeting on June 29, 2007.
2. If the June 29 action was ineffective, whether Fogel had authority on July 1, 2007 to call a special stockholders’ meeting under the bylaws.
3. Whether the directors’ refusal to recognize the special-meeting call required heightened scrutiny under *Blasius* as an action taken for the primary purpose of interfering with the stockholder franchise.
4. Whether the court should order a stockholder meeting to be held.

## Decision

- The court held the June 29, 2007 purported termination was not accomplished at a validly convened board meeting and was legally void.
- Because the June 29 action was void, Fogel remained CEO on July 1, 2007 and had authority under the bylaws to call a special stockholders’ meeting.
- The court granted relief compelling a special stockholders’ meeting.
- The court denied fiduciary-duty relief under *Blasius*, finding Fogel did not prove the directors acted with the primary purpose of impeding the stockholder franchise.

## Legal Principles

- Board action must be taken at a duly convened meeting (or by valid written consent) consistent with Delaware law and the corporation’s governing documents.
- Meetings held without proper notice, or where a director’s attendance is procured by deceit, are not properly convened; corporate action taken in that manner may be legally void.
- A void corporate act has no legal effect and cannot retroactively eliminate an officer’s authority exercised before valid action occurs.
- *Blasius* heightened scrutiny applies only when directors act with the primary purpose of interfering with stockholders’ voting rights; incidental interference based on a good-faith but mistaken view of authority does not trigger *Blasius*.

## Conclusion

The court concluded the board did not validly terminate the CEO on June 29 because the directors did not act through a properly convened meeting with deliberation and a vote, rendering the termination void; accordingly, the CEO retained authority to call a special stockholders’ meeting, which the court ordered, while rejecting *Blasius* relief for lack of proof that the directors’ primary purpose was to disenfranchise stockholders.


Fogel v. U.S. Energy Sys., Inc., 2007 WL 4438978 (Del. Ch. Dec. 13, 2007)