Strougo v. Hollander

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In 2014, Defendant First Aviation Services, Inc., a Delaware corporation, completed a 10,000-to-1 reverse stock split, which eliminated the interests of Plaintiff, a former stockholder of First Aviation. Four days later, the First Aviation directors adopted a non-reciprocal fee-shifting bylaw purporting to create fee exposure for former stockholders of the company and their attorneys in any challenge to the reverse stock split. Ten days later, Plaintiff brought this action against First Aviation and its directors (collectively, Defendants) on behalf of himself and a class of former First Aviation stockholders who had been similarly cashed out, alleging that the reverse stock split was unfair. Plaintiff subsequently amended his complaint to challenge the bylaw. Defendants argued that the bylaw was enforceable in this case. Plaintiff moved for partial judgment on the pleadings that the bylaw did not apply here. The Court of Chancery granted Plaintiff’s motion, holding that because the bylaw was adopted after Plaintiff was cashed out of First Aviation by operation of the reverse stock split, the bylaw did not apply to this case. View "Strougo v. Hollander" on Justia Law