Icahn Partners LP v. Amylin Pharmaceuticals, Inc., C.A. No. 7404-VCN (Del. Ch. Apr. 20, 2012).
Issue Addressed: Whether a challenge to an advanced notice bylaw should be given expedited treatment. That is, whether a colorable claim for interfering with the shareholder voting franchise and irreparable harm have been shown?
Short Answer: Yes. Tom Hals of Reuters has an article on the decision.
This case involved a request to enjoin the enforcement of an advance notice bylaw in connection with an annual stockholders meeting. The advance notice bylaw provision required that notice be provided of the candidate that a stockholder wished to nominate not later than January 25, 2012, for the annual meeting scheduled to be held on May 15, 2012. The main argument was that the issue that motivated the need to nominate new directors arose after the cutoff deadline. Namely, the argument was that: “A key element of the investment thesis for Amylin was the prospect for a value maximizing transaction, and for the board to faithfully consider a transaction that presented a compelling value when viewed against the considerable risks that a company has as a stand-alone business.” After the cut-off, the board rejected, without considering, a proposal to acquire the company at a significant premium over the trading price.
Thus, the essential reason for the need to expedite these proceedings was because if the stockholders were not given the opportunity to elect a new board that will immediately pursue potential sale transactions, they and other shareholders may lose forever the opportunity to sell their stock at a large premium.
The Court explained the standard that must be met in order for a motion to expedite to be granted, including the need to: (1) articulate a sufficiently colorable claim; and (2) to show a sufficient possibility of a threatened irreparable injury. The Court cited the well-known Delaware decision that articulated this standard: Giammargo v. Snapple Beverage Corp., 1994 WL 672698, at *2 (Del. Ch. Nov. 15, 1994).
The Court also relied on the seminal decision in Hubbard v. Hollywood Park Realty Enterprises, Inc., 1991 WL 3151 (Del. Ch. Jan. 14, 1991), in which the Court held that the mere fact that no stockholder had yet attempted to make an untimely notice, did not prevent the Court from deciding to issue a preliminary injunction to afford any shareholder who so desires, a reasonable opportunity to nominate a dissident slate of candidates for election to the board.
In addition, the Court noted that the colorable claim argument was satisfied because the refusal of the board to engage in discussions with a suitor may signal a significant change in the expectation of stockholders to warrant the reopening of the nomination process so that the stockholders can make an informed decision about the composition of the board that will guide the future activities of the company.
Further, the Court found a sufficient possibility of threatened irreparable injury because if plaintiffs can show that a key element of the investment thesis for the company was the prospect of a sale transaction, and the board has now abandoned interest in the sale, then there is a sufficient possibility that plaintiffs will each be irreparably injured if the enforcement of the advanced notice bylaw is not enjoined.
The Court quoted from the April 17, 2012 decision of the Delaware Supreme Court in the Kurz case, highlighted here, which emphasized a fundamental principle of Delaware law that: “Shareholder voting rights are sacrosanct.” The Court of Chancery reasoned that if the shareholders are denied the opportunity to exercise their voting rights in an arguably critical time, then they would be irreparably harmed if they had wait 13 months to effectuate a change (at the next annual meeting), at which time nobody can predict whether another company will value Amylin as highly a year from now.
The Court ordered a preliminary hearing to be scheduled on May 10, 2012, and all written submissions to be filed with the Court not later than May 8, 2012, even though the Court acknowledged that issues may arise regarding the scope of discovery in light of the abbreviated timetable.