Settled: July 16, 2014
Labaton Sucharow represented Norfolk County Retirement System in a derivative action against the board of directors of Aaron's, Inc., Norfolk County Retirement System v. Aaron's, Inc., No. 14-A-02937-4 (Ga. Super. Ct., Gwinnett County). This action alleged that members of the Aaron's board of directors had improperly structured the board - in violation of Georgia law and the company's own bylaws - in order to entrench themselves.
In response to Labaton Sucharow's claims and litigation efforts, not only did the Aaron's board voluntarily restructure its composition in order to comply with Georgia law, but it also implemented several other significant corporate governance improvements, including (1) removing a non-independent director from the board and (2) ensuring that a so-called "holdover" director that had been appointed to the board, but had never previously stood for election, would in fact stand for election at a future annual meeting.
Aaron's had a so-called "staggered" or "classified" board of directors, under which the board was comprised of three separate "groups" or "classes." At each annual shareholder meeting, Aaron's shareholders voted for the election of one group of directors as opposed to the entire board. So that shareholders can have equal voice at each annual meeting, Georgia law requires classified boards, such as the Aaron's board, to structure each class to contain as nearly equal number of directors as possible. The Aaron's bylaws similarly required the board to structure itself so that each class contained as nearly equal a number of directors as possible. The action alleged that Aaron's board of directors had improperly structured itself to block shareholders from electing a new slate of directors.
In March 2014, Labaton Sucharow filed a suit and sought an order requiring the Aaron's board of directors to comply with Georgia law and the company's own bylaws.