Chairman Sues His Company Over Poison Pill

Last week,

the chairman of $435 million railcar manufacturer filed a lawsuit against his own company.

The suit was filed by Alan James after the board of The Greenbrier Companies adopted a poison pill against his wishes.

The suit alleges that board members breached their fiduciary duties to shareholders, and seeks a rescission of the poison pill. "Greenbrier's poison pill is bad for public shareholders and demonstrates poor corporate governance," said James in a press release. "A board should do what's best for shareholders, not what's best for management."

James

The dispute exposes a high-profile spat between James and CEO Bill Furman, each of whom own 29.3 percent of the company. The pair had a special stockholders' agreement in place that required them to vote in concert on stockholder proposals, but that agreement expired lat month.

James told The Oregonian newspaper, which serves the Lake Oswego, Ore.-based company, that Furman challenged him to buy out his shares after a disagreement erupted over certain business decisions.

"He said 'Why don't you buy me out,' " James told the paper. "I said I'll look into it."

James apparently sought assistance from investment banking firm Relational Investors, but the board blocked any takeover attempt when it approved the shareholder protection plan.

Furman

In a statement released after the suit was filed, Greenbrier CEO Furman denied the plan was a reaction to a takeover attempt by James or anyone else. "The Rights Plan was not enacted in response to any particular threat or effort to acquire control of the Company," he noted.

According to one securities expert who asked not to be quoted, the issue appears to be a breach of contract claim rather than a larger corporate governance issue.

"It's possible the [Greenbrier] board thinks James is a threat and don’t want a risk of a hostile offer," he noted, "or it could be that there was a mistake in the perceptions and they might be able to sit down and agree to standstill agreement."

The complete complaint and related press releases are available in the box above, right.

James seemed to assume the anti-takeover proposal was aimed at him, though the company denied that.

James alleges the poison pill was improperly adopted by the company’s board on July 13, and accuses board members of breaching their fiduciary duties to shareholders.

In a press release, James said, “Greenbrier’s poison pill is bad for public shareholders and demonstrates poor corporate governance. A board should do what’s best for shareholders, not what’s best for management.”

Later that day, the company fired off its own release, calling the suit “baseless” and “without merit.”

James founded the company along with Furman, and the now-feuding business partners have worked together for more than 20 years.

James said he doesn’t not plan on retiring.

The company employs 2,800 people and is one of the largest manufacturers in Oregon.