(CN) – The founder of Marconi Broadcasting can’t stop a merger with MBC Acquisition but can sue for allegedly being “squeezed out” of the company, the Delaware Court of Chancery ruled.
Thomas Kelly founded Marconi Broadcasting in 2006 and purchased Philadelphia’s WHAT radio station (1340 AM) the following year. Marconi purchased the station in partnership with ELB Media Enterprises.
But the station struggled financially, and Marconi was ousted as president of Marconi.
In 2009, Marconi merged with MBC Acquisition, a wholly owned subsidiary of ELB.
Marconi sued ELB, its leaders and subsidiaries, but the trial court ruled against his attempt to void the merger.
On appeal, Vice Chancellor Donald Parsons Jr. ruled that Kelly was unable to stop the merger, because the other managers of the company gave him proper notice.
“Because I find that the Marconi LLC agreement permitted and authorized mergers, such as the one at issue here, and that the merger was not void for failure to comply with the notice requirements established in that agreement, I hold that plaintiff lacks standing to sue derivatively because his membership interest in Marconi dissipated at the time of the merger,” Parsons wrote.
However, Parsons ruled that Kelly can sue for defamation and breach of fiduciary duty.
“Plaintiff has alleged facts that, if proven, could support a finding that Marconi’s managers and controlling members breached their fiduciary duties by willfully engaging in a non-arm’s length, unfair, self-dealing transaction aimed at squeezing plaintiff out of his interest in Marconi,” Parsons wrote.
Kelly’s defamation claims stem from ELB chairman Eric Blum’s alleged criticism of Kelly’s ability to run a radio station.