Motion Picture Daily (Jul-Sep 1957)

Motion Picture Daily Tuesday, August 27, l'\ Vogel Wins Court Decision in Loew's Cast No Quorum at July 30 Meet, Seitz Holds (Continued from page 1) to oust Tomlinson and his associate, Stanley W. Meyer, from the Loew's directorate and to amend the company's bylaws so as to increase the number of directors from 13 to 19. In that connection, the stockholders will be asked to elect the new slate of directors, with a large majority in favor of management, which has been proposed by Vogel. Industry Seems Elated In New York, Louis Nizer, special counsel for the Vogel management in the struggle for control of Loew's, described the Delaware chancellor's decision as "a complete victory." His pronouncement was echoed from one end of the industry to the other with relief and gratitude. Seldom has the industry been so united on any single cause as it has on its support of Vogel in the contest with Tomlinson, believing a Vogel victory to be essential to the preservation of Loew'M-G-M. While the Delaware court did not rule specifically on the matter of whether Vogel could use corporate funds for the solicitation of proxies for the Sept. 12 meeting, the point is not considered vital to the Vogel forces. The basic significance of the Chancellor's findings was that all of the actions of Tomlinson's "rump" board meeting, including their order to cancel the Sept. 12 meeting, were invalid. Seen in 'Driver's Seat' The effect of the ruling is to restore Vogel and his management associates to the undisputed "driver's seat" in Loew's operations. Milton Pollack, attorney for Tom Calls to 'Daily' Denote Keen Interest in Loew's Motion Picture Daily again yesterday, as throughout last Friday afternoon, was kept busy answering phone calls from industry members near and far seeking fast word of the Wilmington court decision in the litigation involving the struggle for control of Loew's. Word of the chancellor's ruling was flashed to the Daily at approximately 5 P.M. All callers were given the information immediately. Many expressed unrestrained glee when told the Joseph R. Vogel forces had won a most important victory by the court's decision. linson, when reached yesterday said he would have no comment until he had read the decision and consulted with his clients. The decision, which took 22 pages, sketched the complete background on which the case rested and also brought out many important aspects of the action, especially as it impinged on Delaware corporation law and on the construction of Loew's laws. 'This Then, Is the Decision' Chancellor Seitz wrote in his decision: "This then is the decision upon the motions for summary judgment filed by the individual defendants and by the corporation through its opposing factions. A limited factual narrative of this most unusual case may not be amiss." He finds that the corporation has been beset with factional difficulties for some time. It has some 26,000 stockholders owning 5,400,000 shares and its average gross receipts have been about $ 178,000,000 annually over the last 10 years. The chancellor then identifies two factions in the corporation although "in so identifying them I do not intend to reflect adversely upon them." Basically Chancellor Seitz set the question to be decided as "were the individual defendants validly elected directors at the meeting of July 30, 1957?" No Ruling on Campbell Issue Incidentally, the chancellor did not rule on the Campbell issue in which an injunction is sought to restrain Loew's from using funds of the corporation for the purposes of promoting a stockholders meeting on Sept. 12. The decision points out that "since there was a quorum in office but not in attendance at the July 30 meeting, the Vogel group concludes that the individual defendants were not validly elected." The Tomlinson group denies that the by-laws are at variance with the state and this makes the issue. Commenting on the legal aspects of the case with respect to the case, the decision states: Says By-Laws Govern "Since a majority of directors in office voted at the directors' meeting of July 30, 1957, to fill two vacancies, it follows that, assuming they were all qualified to vote, they were authorized by the state to take such action unless Loew's by-laws otherwise provided, there being no pertinent charter provision. "The Vogel group contends that Loew's by-laws do otherwise provide. They contend that under the corporation's by-laws, when there is a quorum of directors in office, a director vacancy can be filled only by a majority at a meeting of directors at which a quorum is present. They concede that the by-laws provide that a majority of the directors, though less than a quorum, can fill vacancies where there is no quorum of directors in office. "The interveners on behalf of the Vogel faction go further and say that in such a case under the bylaws the director action must be unanimous. However we are here dealing with a case where there was admittedly a quorum of directors in office and so the vote required by the Loew's by-laws in a situation where there is no quorum in office need not be determined." Tomlinson Claim 'Without Merit' The chancellor states that the distinction by the Tomlinson faction regarding the matter of interpreting the connotation "directors" as distinct from "board of directors" is without merit. The decision points out that Article II, par 8 (14) of the Loew's by-laws was a grant of power to the board of directors to fill vacancies on the board. "Since the quorum provision concerning board action is also a part of Article II," the decision states, "and also because a board without specific provision to the contrary can act (emergencies aside) only in the presence of a quorum, ' have no hesitancy in concluding that the specified powers granted the directors in part 8, of Article II to fill vacancies was a grant of power to the board which could be exercised by it only in the presence of a quorum." Points to 'Permissive Grants' Turning again to the Tomlinson group argument, the decision states: "If Article V, par 2 is to be construed as the Tomlinson group urges, it is evident that in a situation where there is a quorum of directors in office, it provides for a different rule than that provided by Article II, par 8. I say this because Article 2 would authorize a majority, absent a quorum, to fill vacancies although there was a quorum of directors in office, whereas, Article II par 8, would authorize such action in such a situation only in the presence of a quorum. It may be noted that both bylaws are couched in terms of permissive grants of power." Removal 'Only for Cause' Again bearing on this issue, Chancellor Seitz wrote: ". . . it would mean that the court would be saying that those adopting Article V, par 2 of the by-laws intended to authorize the majority of directors to fill any office at a meeting without a quorum although a quorum was in office. Such a construction would duplicate Article II, par 8 (13). I cannot believe that this broad power was intended to be conferred upon less than a quorum when there is a quorum of directors in office. This power is particularly sweeping because, for example, once a president is elected, under the by-laws he can be removed by the directors only for Edict Draw Wide Industr Approbatio ". . . nor is this construcl strained," the decision mainta "when we consider that under construction of Article V, par urged by the Tomlinson group,! would be possible for less tharl quorum to take the important acll by filling director vacancies tho there was a quorum in office, much less important powers co only be exercised in the presence a quorum under the by-laws." Guided by 1919 Law "It must be emphasized," Ch cellor Seitz wrote, "that the Loe by-laws were adopted in 1919 and reaching its construction this cg must look at the then existing stat governing case law. I do not belii that the construction of the by-h should be flavored by the 1J amendment which played such important part in the chancelli construction of the by-law in Chelsea case. The date of adopt and the content of Loew's by-la make the Chelsea case inapplicabl "I therefore conclude," the dc sion reads, "That the Loew's by-L Article II, par 8, must be constn to require quorum action to fill dir tor vacancies when a quorum of rectors is in office. I further conch that by-law, Article V, par 2 m be construed to apply to a situat where there is no quorum in office., this construction of Article V, pai is incorrect then I think the alter] tive construction would be that (Continued on page 9) Nizer 's View ( Continued from page 1 ) kin to be invalidly elected by rump Tomlinson group. The co enjoins them from pretending to as directors. Also, all resolutk adopted by the Tomlinson rui meeting are declared illegal. Confident of Industry Support "Furthermore, the court has fi bidden the Tomlinson group to plement the resolutions, one of whi attempted to repudiate the spec stockholders meeting called by pr ident Vogel. The entire attack the Tomlinson-Meyer-Mayer facti has been rejected by the chancell The entire position of Mr. Vogel a executive management has been held. We are confident that owners of Loew's will support > Vogel's administration and that pea harmony and success will come to t great enterprise."