Datapoint Corporation v. Plaza Sec. Company

Supreme Court of Delaware · 1985 · Corporations

496 A.2d 1031 (Del. 1985)

Updated August 22, 2026

CorporationsShareholder action by written consentBylawsDelaware General Corporation Law § 228§ 228§ 109(b)written consentshareholder rights

Facts

After a shareholder affiliated with the plaintiffs indicated he might solicit shareholder consents to remove Datapoint's board, Datapoint's board adopted bylaw amendments governing action by written consent under 8 Del. C. § 228. The February bylaw delayed consent action by requiring a record date procedure, prohibiting action until the 45th day after the record date, and staying effectiveness until the termination of any litigation challenging the consents. Datapoint's board set dates under the bylaw and then filed litigation in Texas, which triggered the bylaw's litigation hold. Plaintiffs sued in the Court of Chancery to enjoin enforcement of the bylaw, arguing it conflicted with § 228.

Issue

Whether Datapoint's bylaw regulating shareholder action by written consent under 8 Del. C. § 228 was invalid because it conflicted with the statute by delaying or thwarting the effectiveness of otherwise sufficient shareholder consents. More narrowly, whether the specific February bylaw's delay and litigation-stay provisions were inconsistent with the letter and intent of § 228.

Rule

Under Delaware law, a bylaw authorized by 8 Del. C. § 109(b) is invalid if it is inconsistent with 8 Del. C. § 228. A bylaw conflicts with § 228 when it arbitrarily or unreasonably delays, defers, or thwarts shareholder action by written consent on grounds unrelated to the legal sufficiency of the consents; however, the court did not foreclose bylaws imposing minimal essential provisions for ministerial review of consent validity.

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Pine Harbor Systems, a Delaware corporation based in Seattle, adopts a bylaw providing that any stockholder action by written consent becomes effective only after three business days, during which independent inspectors may verify signatures, dates, and share ownership. The bylaw gives the inspectors no discretion beyond checking objective validity and does not permit management to solicit opposition materials during the review period.

If stockholders challenge the bylaw as inconsistent with Delaware law governing action by written consent, what is the strongest argument for upholding it?

Explanation. The majority held only that a bylaw is invalid when it arbitrarily or unreasonably delays, defers, or thwarts action by written consent on grounds unrelated to the legal sufficiency of the consents. The court expressly did not foreclose bylaws imposing minimal essential provisions for ministerial review of validity. A short, objective verification period by independent inspectors best fits that permissible category.