One of Allscripts Healthcare Solutions Inc's (MDRX.O) largest shareholders sued the company on Monday to be allowed to launch a proxy fight after its chief executive refused demands to resign.
HealthCor Management LP, which owns about 5 percent of Allscript's outstanding shares, filed a lawsuit in Delaware's Court of Chancery seeking to strike a company bylaw that requires board nominees be proposed in January.
Allscripts, a provider of healthcare information technology services, terminated the contract of its former chairman last month. Three directors on its then nine-member board also resigned, along with the chief financial officer.
The company's shares plummeted as much as 40 percent following the resignations, and days later CEO Glen Tullman rebuffed HealthCor's demands that he resign.
HealthCor said in its lawsuit that the leadership dispute was made worse because it "purged" from the board the entire leadership team that came to Allscripts as part of its merger with Eclipsys.
"These now departed directors were those most able to protect critical product lines which Eclipsys brought to Allscripts from the continuing failures of execution by Tullman," said the complaint.
Allscripts spokeswoman Ariania Nikitas said the company was reviewing the lawsuit and does not discuss pending litigation.
Healthcor's lawsuit criticized Allscript's board for proposing nominees to fill two of the vacant board positions at the company's annual meeting while not allowing shareholders to make their own nominations.
HealthCor also asked the court to postpone the June 15 annual meeting to give it time to pursue its plan to propose a slate of three nominees.
Billionaire investor Carl Icahn scored a victory with a similar lawsuit last month in his push to have Amylin Pharmaceuticals AMLN.O put up for sale. Icahn sued the company in the same Delaware court, arguing Amylin's similar advance notice bylaws should not be enforced.
After the court agreed to fast-track Icahn's lawsuit, Amylin's CEO and Icahn entered talks and the lawsuit was dropped.
Both Amylin and Chicago-based Allscripts are incorporated in Delaware.
(Reporting By Tom Hals in Wilmington, Del.; editing by Matthew Lewis)