HOUSTON-The US Court of Appeals for the Fifth Circuit hasaffirmed aruling handed down in the spring favoring Whitestone REIT'schange in company bylaws. The decision finds the REIT didn't breachits fiduciary duty to shareholders by eliminating the majoritywritten consent provision as argued by former chairman and CEOAllen R. Hartman.

In the ruling, Fifth Circuit Judge Emilio M. Garza saysWhitestone's board acted within its bounds and in the bestinterests of shareholders. Furthermore, the ruling found no faultwith Whitestone's repealing a bylaw provision that permittedshareholders to remove board trustees by majority written consent.The ruling came with a warning, however, that the MarylandUnsolicited Takeover Act, which Whitestone REIT opted into forprotection, shouldn't be an invitation for “unqualified managementprotection and entrenchment.”

Hartman says his problems started with a preliminary rulingissued last April by US District Judge Vanessa D. Gilmore for theSouthern District of Texas in Houston. Despite the latest courtaffirmation, he still contends the judge erred in supportingWhitestone's board's bylaw changes. He claims the decision is indirect contrast with legal trends in corporate governance duringthe past several years.