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US Appeals Court Sides With Whitestone REIT

HOUSTON-The decision upholds Whitestone REIT's right to change its bylaws and eliminate a provision for majority written consent. The challenger says it's not over yet.

By Amy Wolff Sorter | Updated on October 30, 2007

HOUSTON-The US Court of Appeals for the Fifth Circuit has affirmed a ruling handed down in the spring favoring Whitestone REIT’s change in company bylaws. The decision finds the REIT didn’t breach its fiduciary duty to shareholders by eliminating the majority written consent provision as argued by former chairman and CEO Allen R. Hartman.

In the ruling, Fifth Circuit Judge Emilio M. Garza says Whitestone’s board acted within its bounds and in the best interests of shareholders. Furthermore, the ruling found no fault with Whitestone’s repealing a bylaw provision that permitted shareholders to remove board trustees by majority written consent. The ruling came with a warning, however, that the Maryland Unsolicited Takeover Act, which Whitestone REIT opted into for protection, shouldn’t be an invitation for “unqualified management protection and entrenchment.”

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