CommonWealth REIT (NYSE: CWH) today announced that the Arbitration Panel considering various motions by Corvex Management LP ("Corvex") and Related Fund Management, LLC ("Related" and together with Corvex, "Corvex/Related") has issued an order on motions by Corvex/Related to remove CWH's trustees without cause. The motions by Corvex/Related raised several legal issues which were addressed by the order, as follows:
Corvex/Related sought an order that its purported consent solicitation was proper and that CWH should convene a special meeting of shareholders to elect new trustees. The Arbitration Panel denied these motions and set an evidentiary hearing for further consideration of all matters in the disputes between Corvex/Related and CWH to begin on October 7, 2013.
CWH's bylaws provide that the combination of shareholders who may request a record date for a consent solicitation to remove trustees must have held at least three percent (3%) of CWH's common shares for at least three years. Corvex/Related first acquired shares of CWH in January 2013 and requested a record date for a consent solicitation in April 2013. The Arbitration Panel held that "some holding period and some minimum threshold ownership level singularly or in combination can be set in the bylaws as a condition to a shareholder or shareholders obtaining a record date for a consent solicitation . . . [and] that there is no evidence that the Trustees of [CWH] were not acting in good faith in adopting the 3+3 bylaws." Nonetheless, the Arbitration Panel found that "the Trustees may not adopt either a minimum ownership threshold or a minimum holding period . . . [which are] unreasonably difficult to achieve . . . [and] that the 3+3 bylaws exceed this standard." Accordingly, the Arbitration Panel found that the CWH previous bylaws which required a $2,000 stock ownership threshold for a period of at least one year remain in effect "pending further order of the Panel or valid action of CWH."