Tamika Montgomery-Reeves.

A Delaware Court of Chancery judge on Oct. 13 criticized Abrams & Bayliss attorneys for pulling an about-face in a corporate dispute over the composition of the Roma Restaurant Holdings board.

Vice Chancellor Tamika Montgomery-Reeves accused lawyers from the Wilmington law firm of “impermissible gamesmanship,” after they reversed an earlier decision not to defend the validity of stock issues that would have given their clients two seats on the restaurant operator's board.

In May, the attorneys had told Montgomery-Reeves that they would drop the defense just ahead of a scheduled trial in the case, leading the vice chancellor to rule in favor of an asset management firm, which had challenged the appointment of Scott Wilson and Kenneth F. Reimer as Roma directors.

Montgomery-Reeves dismissed the issue as moot and issued an order recognizing Howard Golden and Bradley Scher—plaintiff Southpaw Credit Opportunities Master Fund's nominees for the seats—as board members.

According to an 18-page letter opinion, however, counsel for the directors later filed separate litigation on behalf of an investor Highland Capital Management, where Wilson works as a managing director. In the complaint, Highland had argued that it had validly voted the disputed shares to put Wilson and Reimer back on the board.

“To be clear, Golden and Scher were elected precisely because Wilson and Reimer refused to defend the [issuance] on the eve of trial, at which the validity of the plan was to be addressed,” Montgomery-Reeves wrote.

“Defendant directors cannot claim that this complaint—originally brought to settle the elections of Golden and Scher by contending that the [issuance] was invalid—is moot at the same time the investment fund employing one of the defendant directors tries to vote the [issuance] shares in order to appoint defendant directors back onto the board.”

Montgomery-Reeves' ruling Oct. 13 came on Wilson and Reimer's motion for reargument on an Aug. 22 ruling that vacated the dismissal in light of the new lawsuit. In a court filing, the directors had challenged Southpaw's standing and the court's jurisdiction over the plaintiff's claims.

“The letter opinion enters unprecedented relief by reviving a moot action to permit litigation of matters that are not the subject of any operative complaint,” Abrams & Bayliss attorney John M. Seaman argued in the motion.

“It is well-settled that the court will not adjudicate plenary claims in a Section 225 case. It is also well-settled that a plaintiff cannot obtain a declaratory judgment against a corporation and its stockholders by suing former directors.”

Seaman did not return a call Monday requesting comment on the ruling, and another Abrams & Bayliss attorney declined to comment.

Montgomery-Reeves rejected the motion on both grounds, saying the controversy ”is as alive today as it was on the eve of trial.” And used her ruling to detail the conduct that led to her to refrain from ruling on the validity issue in her May decision.

Montgomery-Reeves said Southpaw had “pleaded” with her on the eve of trial to find the issues valid so that the defendants could not later backtrack and argue that the disputed shares were voted to remove or elect directors.

Southpaw, she said, had cited a 2000 case known as Infinity, where individual defendants originally refused to acknowledge the validity of an election that named their replacements to a board of directors, only to later plead that they had resigned their seats.

In that case, former Chancellor William B. Chandler III said that dismissing the claim on the directors' resignation would merely serve to reward gamesmanship, and he held that they could not contest the issue in later cases.

Montgomery-Reeves said Abrams & Bayliss differentiated the cases by arguing that Infinity involved two directors who had conceded their seats but still wanted to maintain their legal challenge. The attorneys, she said, had asked her not to rule on the validity of the issuances because of tax ramifications for employees who had received stock.

“Defendant directors appear to have read Infinity and, instead of bringing suit themselves, had the investment fund at which one of the defendant directors is a managing director file a new complaint,” she said.

Trial in the original action is now set for Nov. 21.

Attorneys for Southpaw could not be reached Monday for comment.

Wilson and Reimer are represented by Seaman, Kevin G. Abrams and Wade Houston, all of Abrams & Bayliss.

Southpaw is represented by Martin s. Lessner, James P. Hughes Jr., Tammy L. Mercer and Richard J. Thomas of Young Conaway Stargatt & Taylor.

Tom McParland can be contacted at 215-557-2485 or at [email protected]. Follow him on Twitter @TMcParlandTLI.

Tamika Montgomery-Reeves.

A Delaware Court of Chancery judge on Oct. 13 criticized Abrams & Bayliss attorneys for pulling an about-face in a corporate dispute over the composition of the Roma Restaurant Holdings board.

Vice Chancellor Tamika Montgomery-Reeves accused lawyers from the Wilmington law firm of “impermissible gamesmanship,” after they reversed an earlier decision not to defend the validity of stock issues that would have given their clients two seats on the restaurant operator's board.

In May, the attorneys had told Montgomery-Reeves that they would drop the defense just ahead of a scheduled trial in the case, leading the vice chancellor to rule in favor of an asset management firm, which had challenged the appointment of Scott Wilson and Kenneth F. Reimer as Roma directors.

Montgomery-Reeves dismissed the issue as moot and issued an order recognizing Howard Golden and Bradley Scher—plaintiff Southpaw Credit Opportunities Master Fund's nominees for the seats—as board members.

According to an 18-page letter opinion, however, counsel for the directors later filed separate litigation on behalf of an investor Highland Capital Management, where Wilson works as a managing director. In the complaint, Highland had argued that it had validly voted the disputed shares to put Wilson and Reimer back on the board.

“To be clear, Golden and Scher were elected precisely because Wilson and Reimer refused to defend the [issuance] on the eve of trial, at which the validity of the plan was to be addressed,” Montgomery-Reeves wrote.

“Defendant directors cannot claim that this complaint—originally brought to settle the elections of Golden and Scher by contending that the [issuance] was invalid—is moot at the same time the investment fund employing one of the defendant directors tries to vote the [issuance] shares in order to appoint defendant directors back onto the board.”

Montgomery-Reeves' ruling Oct. 13 came on Wilson and Reimer's motion for reargument on an Aug. 22 ruling that vacated the dismissal in light of the new lawsuit. In a court filing, the directors had challenged Southpaw's standing and the court's jurisdiction over the plaintiff's claims.

“The letter opinion enters unprecedented relief by reviving a moot action to permit litigation of matters that are not the subject of any operative complaint,” Abrams & Bayliss attorney John M. Seaman argued in the motion.

“It is well-settled that the court will not adjudicate plenary claims in a Section 225 case. It is also well-settled that a plaintiff cannot obtain a declaratory judgment against a corporation and its stockholders by suing former directors.”

Seaman did not return a call Monday requesting comment on the ruling, and another Abrams & Bayliss attorney declined to comment.

Montgomery-Reeves rejected the motion on both grounds, saying the controversy ”is as alive today as it was on the eve of trial.” And used her ruling to detail the conduct that led to her to refrain from ruling on the validity issue in her May decision.

Montgomery-Reeves said Southpaw had “pleaded” with her on the eve of trial to find the issues valid so that the defendants could not later backtrack and argue that the disputed shares were voted to remove or elect directors.

Southpaw, she said, had cited a 2000 case known as Infinity, where individual defendants originally refused to acknowledge the validity of an election that named their replacements to a board of directors, only to later plead that they had resigned their seats.

In that case, former Chancellor William B. Chandler III said that dismissing the claim on the directors' resignation would merely serve to reward gamesmanship, and he held that they could not contest the issue in later cases.

Montgomery-Reeves said Abrams & Bayliss differentiated the cases by arguing that Infinity involved two directors who had conceded their seats but still wanted to maintain their legal challenge. The attorneys, she said, had asked her not to rule on the validity of the issuances because of tax ramifications for employees who had received stock.

“Defendant directors appear to have read Infinity and, instead of bringing suit themselves, had the investment fund at which one of the defendant directors is a managing director file a new complaint,” she said.

Trial in the original action is now set for Nov. 21.

Attorneys for Southpaw could not be reached Monday for comment.

Wilson and Reimer are represented by Seaman, Kevin G. Abrams and Wade Houston, all of Abrams & Bayliss.

Southpaw is represented by Martin s. Lessner, James P. Hughes Jr., Tammy L. Mercer and Richard J. Thomas of Young Conaway Stargatt & Taylor.

Tom McParland can be contacted at 215-557-2485 or at [email protected]. Follow him on Twitter @TMcParlandTLI.