Dissident stockholders of Baltimore Bancorp have appealed a federal judge's ruling ordering a new stockholder vote on a proposal to expand the company's board of directors to 28 members.
The proposal is critical to the hopes of dissidents led by Edwin F. Hale Sr. to gain control of the parent company of the Bank of Baltimore, because only six of the 18 existing board seats were up for election this year. The Hale slate hopes also to win the 10 new seats to gain a majority on the board.
The dissidents asked the 4th U.S. Circuit Court of Appeals Monday evening to overturn a ruling last Friday by U.S. District Judge J. Frederick Motz, who said that he couldn't resolve what to do about more than 1 million disputed votes in the bitterly fought proxy contest. The bank's incumbent management also said that it probably would appeal.
Neither side has formally stated its grounds for appeal. The deadline to file legal briefs for an appeal is July 1.
The parties are trying to arrange for a hearing July 8 in Wilmington, N.C.
A lawyer for Mr. Hale, owner of the Baltimore Blast soccer team and barge and trucking companies, said that the appeal was filed only after the bank's incumbent management rejected a settlement proposal, which offered to skip the appeal if the new vote were limited to the 1,016,793 shares whose votes are disputed.
"Those are the votes that are at issue," Dennis Gingold said. "We could have an election completed within seven to 10 days. They didn't want that."
In the vote to expand the board, the dissidents received about 970,000 more votes than management. Mr. Gingold noted that management would need a massive majority of the disputed votes to reverse the earlier outcome.
Management said that its likely cross-appeal would include a claim that it should get the disputed votes, but a senior bank official insisted that all stockholders deserve a chance to vote in a second election.
"We wanted it to be every stockholder," said Jerome P. Baroch, )) the company's executive vice president. "We don't see how you can do that [limit it]."
Shareholders elected a slate of six dissidents, including Mr. Hale, to the board of directors May 28 after a hotly contested proxy contest in which Mr. Hale and his backers criticized the company's performance under Chief Executive Officer Harry L. Robinson.
But to gain control of the company, the dissidents also needed to push through a change in the company's bylaws to allow stockholders to expand the board to 28 members. That is the resolution that passed by just less than 1 million votes. And that is the resolution on which there are the 1,016,793 disputed votes that management hopes will save it from electoral doom.
Management says that those votes were cast on ballots sent out by two outside companies before Mr. Hale proposed expanding the board.
Those ballots don't mention the expansion proposal, but management contends that the proxy statement accompanying those ballots told shareholders that if they signed the ballot, they would be giving management authority to vote those shares as it wished on any proposals made after the ballots were sent out.
Corporation Trust Co., a Delaware firm hired to serve as referee in the election, said the ballots didn't have specific language giving management discretionary voting authority on late-breaking issues. The firm counted the votes as abstentions.