Carmody v. Toll Brothers, Inc.
Delaware Court of Chancery
723 A.2d 1180 (1998)
Anticipating a possible takeover, Toll Brothers, Inc. adopted a poison-pill Rights Plan diluting stock upon any acquiror reaching 15 percent ownership, paired with a "dead hand" provision letting only current board members (or their chosen successors) redeem the plan — even though Toll Brothers' certificate of incorporation contained no provision authorizing directors to hold varying degrees of voting or redemption power. A shareholder (plaintiff) sued the company and its board (defendants), arguing the dead-hand provision was ultra vires because it improperly restricted future boards' powers beyond what the certificate authorized, and alternatively that adopting it breached the board's duty of loyalty under the Blasius and Unocal standards; the board moved to dismiss.
Whether a dead hand provision is preclusive and coercive under the Unocal test if it compels shareholders who want a fully functional board to vote for the incumbent directors, or if it makes a proxy contest realistically unattainable.