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Why Biolase v. Oracle Partners, L.P. May Not Be The Last Word On Resignations

Yesterday, I mentioned the Delaware Supreme Court's recent holding in Biolase, Inc. v. Oracle Partners, L.P., 2014 Del. LEXIS 278 (Del. June 12, 2014).  In an opinion written by Chief Justice Leo E. Strine, Jr., the Supreme Court affirmed a finding by Vice Chancellor John Noble that a director had resigned when at a board meeting he mouthed the words: ""Okay, I agree, I go along with that."  This factual finding was bolstered by evidence that the director had (i) discussed his resignation with the Company's CEO and Chairman the evening before the scheduled board meeting and agreed to resign; (ii) attended the board meeting knowing that the agenda included his resignation and immediate replacement by a new director; (iii) discussed his resignation and the effect it would have on his stock options during the meeting itself; (iv) indicated that he agreed to resign at the end of that discussion; and (v) assented to the immediate appointment of his successor.  As a legal matter, the Supreme Court agreed with the Vice Chancellor's conclusion that the word "may" in Section 141(b) of the Delaware General Corporation law was permissible. I believe that this result is in accord with California Corporations Code Section 305(d).

One might be tempted to conclude that the Delaware Supreme Court has spoken and that oral resignations are always permissible.  That may not be the case, however.  One should not forget the bylaws which may provide more specific and prescriptive requirements for resignations.  This argument was made in Biolase to no avail because the company's bylaws also used the word "may" and thus the Supreme Court concluded that they should be interpreted in the same manner as Section 141(b).

Why It Takes A Village To Make A Bylaw

Oddly, we can thank the ninth century Viking invaders of England for the term "bylaw".  The Vikings, including those from Denmark, invaded and ruled a large swath of England.  That region eventually began to be called the Danelaw.  The term "bylaw" is derived from the Old Norse words bi-lagu.  Bi refers to a place where people live such as a village and lagu means law.  See Just What Does Deem Mean?  If you look at a map of England, you can quickly find areas that were once under Viking control by looking at the town names.  English towns with names ending in -by, -wick, -howe, -thorpe, and –thwaite are generally found in the former Danelaw.  Note that -by ending found in town names such as Selby and Utterby is the same by found in the modern English word "bylaw".

 

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