Even as WWE submitted a filing to the SEC this morning (Jan. 17) seeking to solidify Vince McMahon’s control over the company, we’re learning about a second investor lawsuit that aims to stop him.
Sportico broke the news that Detroit Police and Fire Retirement System sued McMahon in Delaware’s Court of Chancery last Thursday. Like the suit filed by individual investor Scott Fellows last week, the pension fund’s case alleges Vince violated his fiduciary responsibilities to shareholders by using his control over 81% of voting stock to “impose his personal will on WWE and its [Board] by purporting to adopt a package of invalid and inequitable bylaw amendments that would hamstring the Board from making critical business decisions.”
From Michael McCann’s Sportico post:
As the Police and Fire System tells it, McMahon’s moves run afoul of both Section 141 of the Delaware General Corporation Law and WWE’s charter. Altering the company’s governance structure in the absence of bargained for exchange between WWE and McMahon, the system asserts, “usurps the power of the Board over critical corporate management functions and vests it solely in McMahon in his capacity as a stockholder.” Neither Delaware law nor WWE’s charter permits the kind of transfer of power the system says occurred, and the system wants a declaration the consent is void.
Detroit Police and Fire requests their suit be recognized as a class action, allowing other WWE shareholders to join.
It’s unclear if WWE’s latest filing neuters or invalidates the claims made by these lawsuits, since it repeals the Jan. 5 Written Consent at the center of these cases. In its place, the new Jan. 16 Written Consent doesn’t require stockholder approval for actions taken by McMahon as there is “substantial alignment among the Board and management concerning the decision to conduct a review of strategic alternatives amid the Company’s upcoming media rights cycle.” That alignment, it argues, ensures Vince’s actions will be in the best interest of shareholders.
McCann reached out to WWE for comment on the Detroiters’ suit, but didn’t get one. He did offer an educated guess (in addition to serving as Sportico’s Legal Analyst and Senior Sports Legal Reporter, McCann is a lawyer, law professor, and the Director of the University of New Hampshire’s Sports and Entertainment Law Institute) as to what the company’s response to both investor suits will be, however:
... expect attorneys for the company to insist that none of McMahon’s moves violated the law. While McMahon may have acted aggressively, the company could maintain that the board retains sufficient decision-making authority. It could also argue that McMahon’s power reflects a lawful circumstance: his ownership of stock.
He also points out that even if the lawsuits fail, they could tie WWE up in court and stall a potential sale.