Matter of Auer v. Dressel

Brief Fact Summary. The President of R. Hoe & Co, Inc., refused to call a special meeting requested by Petitioners, class A stockholders. The trial court granted the mandamus to compel the special meeting.

Synopsis of Rule of Law. Class A stockholders have a right to call a special meeting to be heard on their disproval of management decisions, to elect and remove directors and to amend bylaws.

Facts. Petitioners submitted a written request for a special meeting of class A stockholders to R. Hoe’s & Co., Inc.’s President, as permitted under the company’s bylaws. After the President failed to call a special meeting, Petitioners brought this present proceeding to compel it.
The President claims that he failed to call a class A stockholder’s special meeting because the demand for the meeting was made by more than class A stockholders and none of the purposes given by Petitioners were proper grounds to call such a meeting.
Petitioner’s primary purpose was to endorse and reinstate the former President, to hear charges against four of the class A directors, to remove them if the charges were proven, and to amend the by-laws so that the successor directors be elected by the class A stockholders and to require and that an effective quorum of directors be made up of no fewer than half of the directors in office and no fewer than one third of the whole authorized number of directors.
The trial court granted the mandamus to compel the special meeting for the purposes stated above. This appeal followed.

Issue. Whether Petitioners have a right to a special meeting for the purposes stated above?

Held. Yes. The trial court’s decision is affirmed. Petitioners are entitled to a meeting for the purposes discussed above.

Dissent. This proceeding should be dismissed because none of the stated purposes for the special meeting could legally be transacted.
A meeting for the purpose of reinstating the former president is unnecessary as it is the duty of the directors to manage the affairs of the corporation.

A recall and removal of elected directors before the expiration of their term is not permitted absent a full and fair trial by proxy.

An amendment to the by-laws to change the requirements of a quorum is unnecessary because the by-laws already address this issue and need to be adhered to.

Discussion. Although stockholders are unable to directly effect a change in officers, they are allowed to express themselves to the directors regarding this change. Further, stockholders may call a special meeting to elect and remove directors and to amend the by-laws effecting the removal and election of directors.