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Full Value Partners, L.P. v. Swiss Helvetia Fund, Inc.

Court of Chancery of Delaware

June 7, 2018

Full Value Partners, L.P.
v.
Swiss Helvetia Fund, Inc., et. al.

          Date Submitted: March 13, 2018

          Carmella P. Keener, Esquire P. Bradford deLeeuw, Esquire Rosenthal, Monhait & Goddess, P.A.

          Samuel A. Nolen, Esquire Elizabeth A. DeFelice, Esquire Ryan P. Durkin, Esquire Richards, Layton & Finger, P.A.

          ANDRE G. BOUCHARD CHANCELLOR

          Dear Counsel:

         This letter constitutes the court's decision on plaintiff's motion for an award of attorneys' fees and expenses. For the reasons explained below, the motion is granted, and plaintiff will be awarded $300, 000.

         I. Background[1]

         Plaintiff Full Value Partners, L.P. is a Delaware limited partnership and stockholder of Swiss Helvetia Fund, Inc. ("Swiss Helvetia" or the "Fund"). Defendant Swiss Helvetia is an investment company that focuses on publicly traded equity securities of Swiss companies. Swiss Helvetia is currently managed by Schroder Investment Management North America Inc., which performs investment advisory functions.

         At the times relevant to this action, Swiss Helvetia had a classified board consisting of three classes of directors serving three-year terms (the "Board"), and had in place a bylaw requiring that Board nominees have certain "relevant experience and country knowledge."[2] Specifically, Article II, Section 2 of the Fund's bylaws (the "Qualification Bylaw") stated, in relevant part, as follows:

         To be eligible for nomination as a Director a person must, at the time of such person's nomination, have Relevant Experience and Country Knowledge (as defined below) and must not have any Conflict of Interest (as defined below). Whether a proposed nominee satisfies the foregoing qualifications shall be determined by the Board of Directors.

"Relevant Experience and Country Knowledge" means experience in business, investment and economic matters in Europe, the United States, or Switzerland or political matters of Switzerland through service:
(a) for at least 5 years in one or more of the following principal occupations:
(1) senior executive officer, including senior legal officer, or partner of a financial or industrial business headquartered in Europe that has annual revenues of at least the equivalent of U.S. $500 million and whose responsibilities include or included supervision of European business operations;
(2) senior executive officer, including senior legal officer, or partner of a financial or industrial business headquartered in the United States that has annual revenues of at least the equivalent of U.S. $500 million and whose responsibilities include or included supervision of European business operations;
(3) senior executive officer, including senior legal officer, or partner of an investment management business having at least the equivalent of U.S. $500 million under discretionary management for others in securities of European companies or securities principally traded in Europe;
(4)senior executive officer or partner (including a lawyer appointed "of counsel") (i) of a business consulting, accounting or law firm having a substantial number of professionals, and (ii) one of whose principal responsibilities includes or included providing services involving European matters or clients for financial or industrial businesses or investment businesses as described in (1) - (3) above;
(5) senior official (including ambassador or minister or elected member of the legislature) in the national or cantonal government, a government agency or the central bank of Switzerland, in a major supranational agency or organization of which Switzerland is a member, in a leading international trade organization relating to Switzerland, in each case in the area of finance, economics, trade or foreign relations, or in a self-regulatory organization with direct or indirect responsibility for investment or sales practices related to registered investment companies;
(6)director of this Corporation at the time of nomination for at least five years; or
(7) officer, director, partner, or employee of the Corporation's investment advisor or of an entity controlling, controlled by or under common control with the Corporation's investment advisor; and
(b) for at least 10 years as a senior executive officer (including senior legal officer), director, partner, or senior official (including elected ambassador or minister or elected member of the legislature) of one or more of the following: (1) a financial or industrial business; (2) an investment management business; (3) a business, consulting, accounting or law firm; (4) a national government, a government agency or central bank, a major supranational agency or organization, or a leading international trade organization, in each case in the area of finance, economics, trade or foreign relations; or (5) a self-regulatory organization with direct or indirect responsibility for investment or sales practices related to registered investment companies.[3]

         On June 23, 2016, Swiss Helvetia's stockholders elected one Class I director at its annual meeting.[4] That same day, after the annual meeting ended, the Board issued a press release announcing that it had appointed Margaret Cannella as a director of the Fund. The press release provided certain background information about Cannella but did not explain how she satisfied the relevant experience and country knowledge provision of the Qualification Bylaw and did not indicate that the Board had made that determination.[5]

         On December 6, 2016, the Board appointed Jay Calhoun, "a director serving on the Board of the Schroder family of mutual funds, " to fill Cannella's position as a director of the Fund after Cannella passed away in November 2016.[6] The press release provided certain background information about Calhoun but did not explain how he satisfied the relevant experience and country knowledge provision of the Qualification Bylaw and did not indicate that the Board had made that determination.[7]

         In March 2017, plaintiff informed the Board that it intended to nominate as directors Phillip Goldstein, Andrew Dakos, Moritz Sell, and Thomas Mazarakis.[8]In response, the Board informed plaintiff that "it appears that neither [Goldstein] nor Mr. Dakos satisfy the Fund's Director nominee qualification provisions" and if that is the case, "they may not be properly considered for election at the 2017 Annual Meeting."[9]

         On April 17, 2017, Swiss Helvetia announced in a press release that Jean-Marc Boillat had resigned from the Board and been replaced by Fred Ricciardi and that Ricciardi would stand for election at the 2017 annual meeting.[10] The press release provided certain background information about Ricciardi but did not explain how he satisfied the relevant experience and country knowledge provision of the Qualification Bylaw and did not indicate that the Board had made that determination.[11]

         The April 17 press release also announced David Bock's plan to resign and the Board's nomination of Jean Hoysradt as his replacement.[12] As was the case with the Fund's three prior Board appointments, the press release provided certain background information about Hoysradt but did not explain how she satisfied the relevant experience and country knowledge provision of the Qualification Bylaw and did not indicate that the Board had made that determination.[13]

         On April 19, 2017, plaintiff filed its initial complaint, which it amended on April 20, 2017. The Amended Complaint contained four counts. The key claim was Count III.[14] It asserted that the members of the Board breached their fiduciary duties by inequitably applying the Qualification Bylaw against two of plaintiff's nominees (Goldstein and Dakos) to preclude them from seeking election to the Board at the Fund's next annual stockholders meeting.

         On May 2, 2017, the court denied plaintiff's motion for an expedited trial to be held before the Fund's 2017 annual stockholders meeting, which was scheduled for June 27, 2017. With respect to Count III, the court found that expedition was not necessary because-in a change of position-Swiss Helvetia decided that it would count the votes for all of plaintiff's nominees. This meant that the court could provide relief after the meeting (if necessary) and obviated the need to adjudicate the claim on an expedited basis before the meeting.[15]

         At the June 27, 2017 annual meeting, the Board and plaintiff each ran three candidates. The Fund's stockholders elected one of plaintiff's nominees (Sell) and one of the Board's nominees (Hoysradt) as Class I and Class III directors, respectively.[16] Dakos, another of plaintiff's nominees, received a majority of votes for the Class II position but was not seated because the Board determined that he did not satisfy the Qualification Bylaw.[17] On August 18, 2017, the Board announced that it was seating Dakos notwithstanding its belief that he did not satisfy the Qualification Bylaw.[18]

         On September 15, 2017, plaintiff filed an unopposed motion to dismiss this action as moot with the court retaining jurisdiction to consider a fee application. The court granted the motion that day. On November 1, 2017, plaintiff filed the pending motion for an award of attorneys' fees and expenses. On or about December 4, 2017, Swiss Helvetia amended its Bylaws to eliminate the country knowledge provision (i.e., subsections 2(a)(1)-(7)) of the Qualification Bylaw.[19]

         II. Analysis

         Plaintiff seeks a fee award of $400, 000 under the corporate benefit doctrine for essentially two alleged benefits: (1) vindicating the franchise rights of the Fund's stockholders by facilitating the election and seating of a director (Dakos) who the Fund had opposed before this litigation was filed for failing to satisfy the Qualification Bylaw and (2) effectively preventing the Board from using the Qualification Bylaw to preclude future stockholder nominees.[20]

         To obtain an award under the corporate benefit doctrine, plaintiff must show "(1) the suit was meritorious when filed; (2) the action producing [a] benefit to the corporation was taken by the defendants before a judicial resolution was achieved; and (3) the resulting corporate benefit was causally related to the lawsuit."[21] Defendants do not dispute the second element (causation) for purposes of this motion but contend that this action was not meritorious when filed and did not produce a corporate benefit.[22] I address these two issues in turn.

         A.This Action was Meritorious ...


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