## Facts

- Peerless Systems Corp. circulated a proxy for its June 17, 1999 annual meeting proposing (1) director re-election, (2) an amendment increasing shares available under a stock-option plan by 1,000,000 shares, and (3) auditor ratification.
- The State of Wisconsin Investment Board (SWIB), a significant Peerless stockholder, opposed the option-plan amendment as dilutive and solicited other stockholders to vote against it.
- At the June 17 meeting, Peerless’s CEO (who chaired the meeting) closed the polls on Proposals 1 and 3 and adjourned the meeting for 30 days without closing the polls on Proposal 2.
- If the polls on Proposal 2 had closed on June 17, the proposal would have failed; after the adjournment, Peerless continued soliciting votes on Proposal 2 and did not inform all stockholders of the adjournment.
- During the adjournment, the CEO targeted solicitation toward stockholders believed more likely to support Proposal 2.
- When the meeting reconvened on July 16, 1999, the polls were closed and Proposal 2 passed by a very narrow margin.
- SWIB sued seeking, among other relief, nullification of the option-plan amendment, alleging vote manipulation, a loyalty breach tied to the CEO’s personal interest in the option pool, and misleading disclosure about the adjournment.

## Issues

1. Whether a stockholder has standing to challenge alleged inequitable meeting conduct without attending the meeting or objecting contemporaneously.
2. What standard of review applies to a board/management decision to adjourn a stockholder meeting without closing the polls on a proposal and to continue soliciting votes during the adjournment.
3. Whether the adjournment and post-adjournment solicitation could constitute fiduciary misconduct by interfering with the stockholder franchise and/or breaching the duty of loyalty.
4. Whether the record supported a claim that defendants made materially false or misleading statements or omissions concerning the adjournment.

## Decision

- The court held SWIB had standing despite not attending the meeting or objecting on the record.
- The court granted defendants summary judgment on the disclosure claim, finding insufficient evidence of materially false or misleading disclosure about the adjournment.
- The court denied summary judgment on the vote-manipulation and loyalty claims, concluding factual disputes remained regarding the CEO’s purpose in adjourning the meeting and the manner of solicitation during the adjournment.

## Legal Principles

- Stockholders entitled to vote may challenge allegedly inequitable interference with the stockholder franchise without being required to attend the meeting and object contemporaneously.
- A meeting adjournment and continued solicitation are generally reviewed under the business judgment rule unless the plaintiff shows evidence that the primary purpose of the action was to interfere with or frustrate the stockholder vote.
- If evidence supports an inference of primary-purpose interference with voting rights, defendants must justify the action under a more exacting standard requiring a compelling justification.
- On summary judgment, disclosure-based fiduciary claims fail absent record evidence of a materially false statement or omission.

## Conclusion

The court permitted SWIB to proceed on claims that management adjourned the annual meeting and selectively solicited votes to change the outcome of a contested stockholder vote, while rejecting a separate disclosure theory for lack of supporting evidence and confirming that meeting attendance is not a prerequisite to standing.


State of Wis. Inv. Bd. v. Peerless Sys. Corp., No. 17637, 2000 WL 1805376 (Del. Ch. Dec. 4, 2000)