A New Orleans-based investor group has sued Kansas City, Kan.-based Epiq Systems Inc. amid a battle for control of the company’s board of directors.
St. Denis J. Villere & Co., which owns 14 percent of Epiq, had nominated six candidates for Epiq’s nine-member board of directors. Shareholders elect the company’s entire board at each year’s shareholders meeting, usually held in June.
Epiq, according to a Securities and Exchange Commission filing by Villere, declared the nominees “unlawful” and a breach of a standstill agreement the two sides had.
“We had informed you that the standstill continued through the date of the 2016 annual meeting as recently as this August and you did not object or express a different view,” a letter from Epiq to Villere said. “In fact, in an August 14, 2015, letter, Villere raised questions regarding the continued prohibitions in the agreement. We answered all of those questions in an August 17, 2015, letter and explained that the standstill continued in full force and effect. Villere never responded to that August 17, 2015, letter.”
Epiq’s letter, signed by its general counsel, also challenged Villere’s standing to nominate directors under the company’s bylaws.
Villere’s lawsuit, which the investor group said it filed in Jackson County Circuit Court on Friday, called Epiq’s reasons for rejecting the nominees “a pretext” and said Villere had given notice at the end of July that it was terminating the standstill agreement.
The investor group wants the court to declare the standstill terminated, its director nominees valid and various parts of Epiq’s bylaws invalid.
Analyst Peter Heckmann at AvondalePartners LLC has said Villere’s nominees likely would win shareholder support.
In a new note Monday, he said the lawsuit also seems to have “merit.” He noted that the standstill agreement allowed Villere to nominate one board member, Kevin Robert, to Epiq’s board.
“Based on our understanding of the director appointment agreement, Epiq can simply re-nominate Kevin Robert year after year, potentially forcing Villere to abide by the standstill agreement indefinitely. This loophole effectively strips Villere of its rights as a shareholder, and we suspect the legality of such a loophole will be at the forefront of both companies’ legal arguments,” Heckmann wrote.
In the lawsuit, Villere portrayed itself as a long-standing Epiq shareholder, having first bought shares in 2003. It also outlined years of discontent among institutional investors like itself in Epiq’s performance and the company’s reaction to that discontent.