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The Delaware Supreme Court Strikes a Balance in CA, Inc. v. AFSCME

August 31, 2008, John F. Grossbauer, Janine M. Salomone, Ryan J. Frampton

On July 18, 2008, the Delaware Supreme Court issued its eagerly awaited opinion in CA, Inc. v. AFSCME Employees Pension Plan.  The opinion represented the first decision in which the Delaware Supreme Court answered certified questions of Delaware law from the US Securities and Exchange Commission (SEC), a power only recently granted to the Court by the Delaware legislature.  In an en banc opinion, the Court held that a proposed bylaw that would have required corporate reimbursement of the reasonable expenses of successful short-slate proxy contestants, while a proper subject for stockholder action as a matter of Delaware statutory law, would, as drafted, violate Delaware common law by infringing on the directors' fiduciary obligations.

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