Detroit’s Police and Fire Retirement System Sue to Prevent Vince McMahon From Regaining Control and Selling WWE

(Photo Credit: WWE)

The Detroit Police and Fire Retirement System has filed a lawsuit against Vince McMahon after he was re-elected to the WWE Board of Directors as Executive Chairman.

McMahon’s return was unanimously rejected by the original board. Nonetheless, because he is the company’s majority shareholder, he removed three board members to make room for himself: George Barrios and Michelle Wilson. Following Vince’s return, two other members resigned from the Board.

According to Sportico, a lawsuit filed by Detroit’s Police and Fire Retirement System seeks a declaration that effectively prevents the former CEO from regaining control of WWE’s board of directors and from hastening 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 could slow a potential sale of WWE, which McMahon mentioned when he returned to the company earlier this month, in addition to assisting in negotiations for WWE’s next TV deal. WWE hopes to sell the business by the middle of this year.

According to the lawsuit, McMahon violated his fiduciary duties as a controlling stockholder by attempting 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 due to his Class B stock, bringing his total ownership to 92%. Because of the Class B stock, he has ten votes per share, whereas someone with Class A shares has only one vote per share.

The lawsuit cited McMahon’s resignation from WWE last year amid reports of more than $12 million in “secret settlements to his accusers,” as well as letters between McMahon and the Board from December that were included in SEC filings.

The Board mentioned the denial in one letter to McMahon in order 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 follows a similar one filed on January 10th by a WWE stockholder named Scott Fellows. The Police and Fire Fund and Fellows are represented by attorneys from Labaton Sucharow, Friedlander & Gorris, and Kaskela Law.

Several law firms were considering filing lawsuits against McMahon when the hush money scandal broke last summer, and now that he’s back, complaints are beginning to be filed, with more likely to follow.