As I previously wrote about in an article for Bloomberg Law, activists have generally not been successful in getting meaningful relief from Delaware courts when it comes to advance notice bylaw challenges. That trend continued with last month's decision in Siegel v. Morse, where the court held that a challenge to an advance notice bylaw was unripe absent an actual proxy contest, notwithstanding the potential chilling effect of the bylaw.
But yesterday in Vejseli v. Duffy, the Court of Chancery issued an opinion finding that a board improperly eliminated a classified board seat, not for a valid corporate purpose, but as an inequitable defensive measure in response to the plaintiffs' proxy contest. As a remedy, the court directed the board to reopen the nomination window to permit stockholders to submit new director nominations.
Interestingly, the court also found that the board had properly rejected the plaintiffs' nomination notice for failure to comply with the company's advance notice bylaw. But by re-opening the nomination window, the court is allowing the dissidents to get a second bite at the apple.
This is the first case I can think of where the court awarded meaningful equitable relief to the activist in an advance notice bylaw case. In Kellner v. AIM Immunotech, the Delaware Supreme Court held that the advance notice bylaws at issue were unenforceable but nevertheless denied the stockholder election relief. And in Politan v. Kiani (i.e., the Masimo case), the bylaw was withdrawn voluntarily, before the court ruled (although the court went on to award the plaintiff $18 million in legal fees).
Notably, the Vejseli decision was penned by the newest Vice Chancellor, Bonnie David, who just joined the Court of Chancery in February.
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