Adlerstein v. Wertheimer
Delaware Court of Chancery
2002 WL 205684
Adlerstein (plaintiff) founded and controlled a majority of the voting shares of SMC, where he served as chairman and CEO. When the company faced a liquidity crisis, fellow directors Wertheimer and Mencher (defendants) secretly arranged with investor Ilan Reich to remove Adlerstein, give Reich majority voting control and the CEO title, and only revealed the plan to Adlerstein at the meeting where the board approved it over his objection. Adlerstein sued, arguing the meeting notice was defective and that the secret planning breached fiduciary duty.
Whether directors may act on a plan to remove a controlling shareholder-director without first informing him of the plan and giving him a chance to protect his interests.