Last December, Mullen Automotive (NASDAQ:MULN) stock holders filed a putative class action complaint against the company. The shareholders claimed that Mullen’s proposal to change its state of incorporation to Maryland from Delaware was created to escape litigation for its board of directors. They also claimed that a majority of common stock votes, when considered separately as a class, did not vote in favor of an increase in authorized shares at the 2022 annual meeting.
As a result of the class action, Mullen rescinded its proposal to change its state of incorporation. On top of that, Delaware’s Court of Chancery ratified and validated the vote to increase authorized shares.
However, attorneys associated with the class action are now seeking $3 million in fee awards from Mullen. Shareholders involved with the complaint allege that it “set in motion a chain of events that not only stopped a cascade of cumulative harms but also cured serious, existing problems.”
MULN Stock: Failed Class Action Attorneys Seek $3 Million
According to the legal brief:
“Delaware courts have embraced the corporate benefit doctrine to incentivize vigilant stockholders to bring litigation to address issues head on before they compound into larger problems. The doctrine rewards litigants who assert meritorious claims with attorneys’ fees commensurate with the benefits achieved by their efforts.”
Now, the shareholders allege that their actions led to a validation of authorized shares in court, which will lead to legal protection in the future. Furthermore, they claim that Mullen’s action to stay in Delaware will benefit other shareholders because the state makes it “easier to hold fiduciaries to account for their breaches.” In Maryland, companies are not required to have shareholders vote to change the number of authorized shares.
Unfortunately, this case isn’t the only litigation that Mullen is dealing with. Earlier this month, Drawbridge Investments and DBI Lease Buyback Servicing filed a complaint against the company for not receiving options to purchase Series E preferred stock. The complaint stems from an agreement made last year in which the two parties agreed to receive a note discount in exchange for the option.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.