Riviera Beach (Fla.) General Employees' Retirement System preliminarily resolved a lawsuit it filed against Aaron's Inc. and its directors accusing the company of illegally restructuring its board in favor of management to deflect a proxy contest and possible takeover.
The $158 million retirement system won approval from Judge Rodney “Keith” Miles of Superior Court, Gwinnett County, Lawrenceville, Ga., to “hold the case in abeyance” until after Atlanta-based Aaron's completes the election of directors following the change in its board to conform to Georgia law and the company's bylaws, said Jeff A. Almeida, attorney with Grant & Eisenhofer, the law firm representing the pension fund, in an e-mailed response to questions.
The retirement system filed suit March 26 challenging Aaron's Feb. 21 restructuring of its board, reducing the number of directors to nine from 11 and disproportionally staggering terms, making directors less accountable to shareholders and helping to fend off an acquisition by a group led by Vintage Capital Management, according to the complaint. The Vintage group, which nominated a dissident slate of directors to the board, is offering $30.50 a share, or $2.3 billion, for Aaron's. The stock was priced at $29.82 a share in midday trading Wednesday.
Aaron's hasn't issued its proxy statement or scheduled its annual meeting.
After the lawsuit was filed, the board on April 15 again revamped its composition, reducing it to eight directors and staggering terms on a more equalized basis.
“We believe they did” make the change in response to the lawsuit, Mr. Almeida said. “The change was made through a board resolution that was executed just hours before Judge Miles was to hear our motion specifically asking the court to enjoin the board from violating (Georgia) law and (to) fix its board structure.”
Aaron's action was not a settlement of the case, although it did “resolve the violations that we raised in our suit … rather than having the court direct them how to fix it,” Mr. Almeida said. “We are no longer pressing our claims, because the board addressed them (and) if Aaron's maintains a legally compliant board through the vote, we will voluntarily dismiss the case.”
Kenneth R. Harrison Sr., attorney with Sugarman & Susskind law firm, counsel to the retirement system, said the system wasn't seeking any cash award in the lawsuit, just a resolution of the corporate governance issues and legal fees.
Brian R. Kahn, Vintage managing partner, and Garet Hayes, Aaron's director of public relations, couldn't be reached for comment.