Was the meeting of the Bigmar board of directors valid?
Bigmar was a Delaware corporation that manufactured and marketed pharmaceuticals in Europe. While trying to raise additional capital, the company’s founder, John Tramontana, met Cynthia May. She lied to him about her education, wealth, and connections in the investment community. Unfortunately, he believed her. The upshot was thatMay became Bigmar’s president and a director of the company. She soon took control of the company’s financial records and refused to give Tramontana any information (always a bad sign).4 When Bigmar ran out of money, Tramontana sent May an email asking for her resignation. She did not respond. (Also a bad sign.)
The company was in desperate financial shape, but Tramontana managed to find a bank willing to buy $1 million of Bigmar stock. He called a special meeting of the board of directors to approve the sale of shares and to fire May. The meeting was to take place by telephone. To establish a quorum necessary for the meeting to be valid, at least five of the nine directors had to take part. May and her three allies on the board refused to participate.
Tramontana testified that, at the appointed time, hemet with two directors in his office. They used a speaker feature on a cell phone that Tramontana borrowed from Danilo Graticola to call two other directors, one of whom was in Heathrow Airport in London. The five directors unanimously resolved to issue the stock to the bank. The meeting then adjourned so that they could consult counsel. It was reconvened the next day, at which time they voted to fire May.
The following day, the bank transferred $1 million to Bigmar. Tramontana instructed the company’s transfer agent to send stock certificates to the bank, but May contradicted his order. Tramontana and May went to court to determine if the director’s meeting was valid and the bank entitled to the shares.