Detroit’s Police and Fire Retirement System has filed a lawsuit against Vince McMahon after being voted back on to the WWE Board of Directors to become the Board’s Executive Chairman.
The original board unanimously voted against McMahon’s return. Still, because he is the majority shareholder of the company, he removed three board members to make way for himself, George Barrios and Michelle Wilson. There were two other members that left the Board following Vince’s return.
According to Sportico, a lawsuit by Detroit’s Police and Fire Retirement System notes they are seeking a declaration that would effectively block the former CEO from regaining control of WWE’s board of directors and prevent him from expediting a sale.
They requested it be recognized as a class action on behalf of other WWE stockholders and was filed in Delaware’s Court of Chancery,
The lawsuit may slow a potential sale of WWE, which is something McMahon noted when he returned to the company earlier this month in addition to helping lead talks for WWE’s next TV deal. WWE wants to sell the company by the middle of this year.
The lawsuit argued that McMahon had breached fiduciary duties as a controlling stockholder by trying 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.”
McMahon owns 39% of WWE’s equity but 81% of its voting power because of his Class B stock which comes to 92%. This means that he has ten votes per share because of the Class B stock, while someone with Class A shares holds only one vote per share.
The lawsuit cited McMahon stepping down from his WWE duties last year amid reports of more than $12 million in “secret settlements to his accusers” and the letters between McMahon and the Board from December that were part of SEC filings.
In one letter to McMahon, the Board mentioned the denial to protect stockholders. “Your return to the Company at this time,” the board wrote, “would not be prudent from a shareholder value perspective [given that] government investigations into your conduct by the U.S. Attorney’s Office and SEC are still pending.”
“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.”
This lawsuit comes after the same suit was filed on January 10th by a WWE stockholder named Scott Fellows. Attorneys from Labaton Sucharow, Friedlander & Gorris and Kaskela Law represent the Police and Fire fund and Fellows.
Several law firms were looking into potentially filing lawsuits against McMahon when the hush money scandal first broke last summer, and now that he’s back, complaints are starting to be filed, with likely more to come.
