## Facts

- STAAR Surgical Company, originally formed in California and later reincorporated in Delaware, developed and sold intraocular lenses; Thomas R. Waggoner served as CEO and president.
- By 1987, STAAR faced severe financial distress, including substantial bank debt and overdue obligations, and its lender demanded Waggoner’s personal guarantees.
- In exchange for Waggoner’s personal guarantees, STAAR’s board issued him convertible preferred stock intended to give him super-majority voting power and effective control.
- STAAR’s certificate of incorporation did not expressly provide super-majority voting rights for the preferred stock.
- As STAAR evaluated merger proposals, the board decided to proceed with a Vision Technologies proposal, while Waggoner continued private discussions with Chiron.
- After learning of Waggoner’s parallel negotiations, other directors sought to remove him; Waggoner responded by purporting to use the preferred stock’s super-majority vote to remove the other directors and add his wife, Patricia Waggoner, to the board.
- The other directors filed suit seeking a declaration of the lawful board and an injunction against the Waggoners’ use of the claimed voting rights.
- The Court of Chancery assumed (without deciding) the preferred stock was validly issued but held the super-majority voting rights void for lack of charter authorization and declared the lawful board to include Laster, Ford, Silverman, Utrata, and Waggoner; the Delaware Supreme Court reviewed on appeal.

## Issues

1. Whether Delaware law and STAAR’s certificate of incorporation authorized the board to issue preferred stock with super-majority voting rights.
2. If not authorized, whether the purported super-majority voting rights were void and rendered Waggoner’s written consent removing directors ineffective.
3. Whether reformation of the certificate of incorporation or equitable estoppel could validate or supply the missing authorization for the voting rights.

## Decision

- The Delaware Supreme Court affirmed the Court of Chancery.
- The Court held STAAR’s certificate of incorporation did not authorize preferred stock with super-majority voting rights, and the claimed voting rights were void.
- The Court rejected reformation because the record did not establish, by the required clear and convincing proof, a specific mutual agreement mistakenly omitted from the charter.
- The Court rejected estoppel because conduct cannot create or validate corporate powers or stock voting rights not authorized by the certificate of incorporation.
- Because the voting rights were void ab initio, Waggoner’s written consent to remove the other directors and seat his wife had no legal effect, and the identified directors remained the lawful board.

## Legal Principles

- Special stock preferences and extraordinary voting rights must be clearly and expressly authorized in the certificate of incorporation (or in a validly authorized designation pursuant to the charter); board action alone cannot create them.
- Ambiguities in charter provisions concerning stock preferences are construed against the existence of special or extraordinary rights; courts will not infer departures from ordinary voting arrangements.
- Reformation of a corporate charter requires clear and convincing evidence of a specific mutual agreement and a qualifying mistake; it cannot be used to rewrite a charter based on general intent.
- Equitable estoppel cannot be used to supply corporate power or validate stock voting rights absent charter authority, particularly where fundamental governance rights are affected.
- Actions taken in reliance on void voting rights, including consents purporting to change board composition, are ineffective.

## Conclusion

The Delaware Supreme Court held that super-majority voting rights claimed for preferred stock were invalid because STAAR’s certificate of incorporation did not expressly authorize them, and equitable doctrines could not substitute for missing charter authority; therefore, Waggoner’s attempted director removals and board reconstitution were void and the existing board remained in place.


Waggoner v. Laster, 581 A.2d 1127 (Del. 1990)