BlackRock Credit Allocation Income Trust v. Saba Capital Master Fund, Ltd.

IN THE SUPREME COURT OF THE STATE OF DELAWARE
BLACKROCK CREDIT §
ALLOCATION INCOME TRUST, §
BLACKROCK NEW YORK §
MUNICIPAL BOND TRUST, § No. 297, 2019
BLACKROCK ADVISORS, LLC, §
RICHARD E. CAVANAGH, KAREN §
P. ROBARDS, MICHAEL J. §
CASTELLANO, CYNTHIA L. EGAN, §
FRANK J. FABOZZI, HENRY §
GABBAY, R. GLENN HUBBARD, W. §
CARL KESTER, CATHERINE A. §
LYNCH, ROBERT FAIRBAIRN, and § Court Below:
JOHN M. PERLOWSKI, § Court of Chancery
§ of the State of Delaware
Defendants-Below, §
Appellants, §
§
v. §
§
SABA CAPITAL MASTER FUND, §
LTD. § C.A. No. 2019-0416-MTZ
§
Plaintiff-Below, §
Appellee. §
Submitted: December 4, 2019
Decided: January 13, 2020
Before SEITZ, Chief Justice; VALIHURA and TRAYNOR, Justices.
Upon appeal from the Court of Chancery. AFFIRMED in part, REVERSED in part, and
REMANDED.
William M. Lafferty, Esquire, D. McKinley Measley, Esquire, Thomas P. Will, Esquire,
Morris, Nichols, Arsht & Tunnell LLP, Wilmington, Delaware. Of Counsel: Tariq
Mundiya, Esquire, (argued) Sameer Advani, Esquire, Alexander L. Cheney, Esquire,
Brittany M. Wagonheim, Esquire, Willkie Farr & Gallagher LLP, New York, New York
for Appellants BlackRock Credit Allocation Income Trust and BlackRock New York
Municipal Bond Trust.
Carmella P. Keener, Esquire, Rosenthal, Monhait & Goddess, P.A., Wilmington,
Delaware. Of Counsel: Carol S. Shahmoon, Esquire, Gregory E. Keller, Esquire, (argued)
Shahmoon Keller PLLC, New York, New York for Appellee.
2
VALIHURA, Justice:
The issue we confront in this case is whether under their respective bylaws, two
closed-end investment funds, BlackRock Credit Allocation Income Trust (“BTZ”) and
BlackRock New York Municipal Bond Trust (“BQH”, and with BTZ, the “Trusts”),
properly excluded their shareholder, Saba Capital Master Fund, Ltd. (“Saba”), from
presenting its slate of dissident trustee nominees for election at the respective annual
meetings. The Court of Chancery held that such exclusion was improper. It reasoned that
the supplemental questionnaires that Saba’s nominees were asked to complete (the
“Questionnaire” and collectively, the “Questionnaires”), exceeded the bylaws’ scope and,
thus, the Trusts were “not permitted to rely on the five-day deadline for Saba’s compliance
with that request.”1 It also held that laches did not bar Saba’s claims for equitable relief.
On appeal, the Appellants contend that the Court of Chancery erred by issuing an
injunction requiring the Trusts to count the votes for Saba’s nominees at the respective
annual meetings, since they claim that Saba’s nominees were ineligible for election because
of their failure to timely provide supplemental information in accordance with the clear
and unambiguous bylaws. Appellants also contend that the court erred in holding that
Saba’s claims for equitable relief were not barred by laches.
1
Saba Capital Master Fund, Ltd. v. Blackrock Credit Allocation Income Tr., 2019 WL 2711281,
at *6 (Del. Ch. June 27, 2019) [hereinafter Opinion]. The Court of Chancery drew “the undisputed
facts from the Amended Complaint, and address[ed] only those facts necessary to resolve the
expedited claims.” Id. at *1. The Court of Chancery also considered certain documents attached
to transmittal affidavits filed in connection with the injunction proceedings.
3
On appeal, the parties continue to dispute whether the Questionnaire is the type of
“necessary” and “reasonably requested” subsequent information that falls within the
meaning of Article I, Section 7(e)(ii) of the Trusts’ bylaws. But, importantly, the parties
both agree that at least part of the Questionnaire is within the bounds of Section 7(e)(ii),
and part is not. It is also undisputed that Saba, upon receipt of the request for
supplementation, did not contact the Trusts or seek relief from the deadline. Instead, it let
the deadline pass and then complained, raising a number of excuses for not complying with
the deadline. We agree with the Vice Chancellor that Section 7(e)(ii) is clear and
unambiguous. But we disagree that Saba should be excused from complying with the
Bylaws’ clear deadline. Further, we affirm the Vice Chancellor’s holding as to laches.
Accordingly, we AFFIRM in part, and REVERSE in part, and REMAND for further
proceedings.
I. BACKGROUND
Defendant-Appellants BTZ and BQH are Delaware statutory trusts registered as
closed-end investment funds under the federal Investment Company Act of 1940.
Defendant-Appellant BlackRock Advisors, LLC advises the Trusts. The individual
Defendant-Appellants comprise the Trusts’ boards of trustees (the “Boards”). We refer to
BTZ, BQH, BlackRock Advisors, LLC, and the individual Defendant-Appellants,
collectively, as the “Appellants.”
Plaintiff-Appellee Saba, a Cayman Islands company, holds shares of both Trusts.
Saba is managed by Saba Capital Management, L.P., whose managing member is Boaz
Weinstein.
4
A. The Bylaws
Article I, Section 7 (“Section 7”) and Article II, Section 1 (“Section 1”) of the
bylaws of BTZ and BQH (collectively, the “Bylaws”) are relevant to this appeal. Both sets
of Bylaws are identical with respect to those sections.
Section 7, entitled “Nomination of Directors,” sets forth the method by which
shareholders can nominate trustees to the Board.2 The section begins by stating that “[o]nly
persons who are nominated in accordance with the following procedures shall be eligible
for election as directors of the Fund.”3 Section 7(f) further states that “[n]o person shall be
eligible for election as a director of the Fund unless nominated in accordance with the
procedures set forth in this Section 7 of this Article I.”4
When nominating directors for election, under Sections 7(a)–(c), stockholders are
required to give timely written notice of a nomination (a “Nomination Notice”).5 Section
7(d) enumerates what a Nomination Notice must contain, which includes “information to
establish to the satisfaction of the Board of Directors that the Proposed Nominee satisfies
the director qualifications as set out in Section 1 of Article II.”6 It must also contain
information required by federal securities laws, including information relating to whether
2
In the record, “Board of Directors” and “Board of Trustees” are used interchangeably, as are
“Director” and “Trustee.”
3
App. to Opening Br. at A406 (BQH Bylaws Art. I, § 7(a)), A432 (BTZ Bylaws Art. I, § 7(a)).
4
Id. at A409 (BQH Bylaws Art. I, §7(f)), A434 (BTZ Bylaws Art I, § 7(f)).
5
Id. at A406–A407 (BQH Bylaws Art. I, § 7(a)–(c)), A432–A433 (BTZ Bylaws Art. I, § 7(a)–
(c)).
6
Id. at A407 (BQH Bylaws Art. I, § 7(d)(i)(C)(6)), A433 (BTZ Bylaws Art. I, § 7(d)(i)(C)(6)).
5
the nominee is an “interested person” under the Investment Company Act of 1940 (the
“1940 Act”), and information “that would be required to be disclosed in a proxy statement
or other filings required to be made in connection with solicitations of proxies for election
of directors in an election contest pursuant to Section 14 of the [Securities Exchange Act
of 1934].”7
Section 7(e)(ii), the provision in the Bylaws at issue here, reads as follows:
A shareholder of record, or group of shareholders of record, providing notice
of any nomination proposed to be made at an annual meeting or special
meeting in lieu of an annual meeting shall further update and supplement
such notice, if necessary, so that:
(i) the information provided or required to be provided in such notice
pursuant to this Section 7 of this Article I shall be true and correct as of the
record date for determining the shareholders entitled to receive notice of the
annual meeting or special meeting in lieu of an annual meeting, and such
update and supplement shall be delivered to or be mailed and received by the
Secretary at the principal executive offices of the Fund not later than five (5)
business days after the record date for determining the shareholders entitled
to receive notice of such annual meeting or special meeting in lieu of an
annual meeting; and
(ii) any subsequent information reasonably requested by the Board of
Directors to determine that the Proposed Nominee has met the director
qualifications as set out in Section 1 of Article II is provided, and such update
and supplement shall be delivered to or be mailed and received by the
Secretary at the principal executive offices of the Fund no later than five (5)
business days after the request by the Board of Directors for subsequent
information regarding director qualifications has been delivered to or mailed
and received by such shareholder of record, or group of shareholders of
record, providing notice of any nomination.8
7
Id. at A407 (BQH Bylaws Art. I, § 7(d)(i)(D)), A433 (BTZ Bylaws Art. I, § 7(d)(i)(D)).
8
Id. at A408 (BQH Bylaws Art. I, § 7(e)), A434 (BTZ Bylaws Art. I, § 7(e)) (emphasis added).
6
Section 1 of Article II, entitled “Number and Qualifications,” provides an expansive
list of qualifications that prospective trustees must meet to serve on either of the Boards.
This section lists trustee requirements and restrictions relating to limits on directorship
positions, potential conflicts, criminal offenses, prohibited conduct, and various
ineligibility provisions contained in certain federal securities laws.9 The parties agreed in
the proceedings below “that some of those qualifications relate to parallel requirements
under the Investment Company Act of 1940.”10
B. The Nominations Dispute
On or about March 30, 2019, Saba delivered a timely Nomination Notice to the
Trusts pursuant to Section 7 to nominate four individuals for election to both of the Trusts’
Boards. The Nomination Notice, according to the Court of Chancery, generally contained
the information required under Section 7, “albeit at a high level and without much context
or explanation.”11
Approximately three weeks later, on April 22, 2019, the Trusts’ counsel, Willkie
Farr & Gallagher LLP (“Willkie”), emailed Saba in separate emails requesting additional
information. Willkie’s transmittal email request stated:
Pursuant to Article I, Section 7 of the bylaws of the Fund, I am writing on
behalf of the Board of Trustees of the Fund (the “Board”) to request
additional information with respect to the nominees submitted by Saba
Capital Master Fund, LTD (the “Shareholder”) for election at the Fund’s
2019 shareholder meeting. Please have each of the proposed nominees
9
See id. at A413–A415 (BQH Bylaws Art. II, § 1), A439–A441 (BTZ Bylaws Art. II, § 1).
10
Opinion, 2019 WL 2711281, at *1.
11
Id. at *2.
7
complete and sign the attached questionnaire and return it to my attention
with a copy to Janey Ahn, Secretary of the Fund.
The Board and the Fund each reserves all rights and remedies with respect to
the subject matter of this correspondence, including without limitation the
right to request additional information from the Shareholder or from the
Shareholder’s proposed nominees.12
Although it referred to Section 7 generally, the email did not specifically reference Section
7(e)(ii) or the five-business-day response deadline. As explained below, the attached
Questionnaire contained a mix of questions, with a significant number of them directly
relating to the Section 1 qualifications. Under Section 7(e)(ii), the responses were due on
April 29, 2019.
Saba did not respond to the information request before the due date. On the morning
of May 1, 2019, seven business days after making the information request, Willkie emailed
Saba on behalf of BTZ declaring that because the Questionnaires have not been completed
and returned, “the [Nomination Notice] is invalid under [BTZ’s] bylaws and Delaware
law.”13
That evening, for the first time since sending the April 22, 2019 email inquiry, the
Trusts received a response. Saba’s counsel, Schulte Roth & Zabel LLP (“Schulte Roth”),
emailed Willkie contesting the invalidity determination. It contended that the Trusts’
“assertion is incorrect, for several reasons,”14 and claimed that the Trusts’ rejection of the
nominations was based “on an overly narrow interpretation of the Bylaws [and] is a
12
App. to Opening Br. at A518, A567 (Willkie April 22, 2019 Emails).
13
Opinion, 2019 WL 2711281, at *3.
14
App. to Opening Br. at A621, A624 (Schulte Roth May 1, 2019 Letters).
8
transparent attempt to entrench the current Board by artificially imposing restrictions on
the shareholder franchise.”15
It then defended Saba’s lack of response on several grounds. First, Schulte Roth
argued that Saba was not obligated to respond to the Questionnaire under the Bylaws
because the Trusts sought duplicative information, as the Nomination Notice already
contained information sufficient to determine whether the nominees were qualified to serve
as a director of an investment company.16 It further explained that the Trusts could
determine, from the information provided in the Nomination Notice, whether the nominee
is an “interested person” pursuant to the relevant provisions of the 1940 Act.17 Schulte
Roth also asserted that the information requested was unreasonable because it was
duplicative, and to the extent there were any non-duplicative requests, those were
“particularly unreasonable” because it refers to information “unrelated to the issue of
whether the nominees meet the director qualifications as set forth in the Bylaws.”18
Schulte Roth asserted, assuming arguendo that a response was required, that the
five business day deadline had not yet been triggered (Saba’s “Trigger Theory”). They
articulated that position as follows:
Second, even assuming, arguendo, that a response is required, the time for
providing the response has not yet run. Article 1, Section 7(e)(i) of the
Bylaws provides that a shareholder making a nomination has an obligation
to “update and supplement” its notice so that the information provided
therein is true and correct as of the record date for the annual meeting for
15
Id. at A622, A625.
16
Id. at A621, A624.
17
Id. at A622, A625.
18
Id.
9
which the notice is being provided, and any such update or supplement must
be delivered no later than five business days after such record date. The
reference to “subsequent information” in Section 7(e)(ii) plainly indicates
that the information called for in that section is to be provided after the
“update and supplement” required by Section 7(e)(i) and the record date. As
such, because the record date has not yet passed, the Board’s request was
premature.19
In other words, Schulte Roth understood the two subsections of Section 7(e) to be a
conjunctive sequence whereby a request under Section 7(e)(ii) could be made only after
the events in Section 7(e)(i) (that is, an update and supplement and the passing of the record
date) had occurred. Indeed, Saba’s counsel told the Court of Chancery that Saba and the
nominees had begun filling out the Questionnaires on April 22, but did not believe the
Questionnaires were subject to the five-business-day deadline under Section 7(e)(ii).20 It
nevertheless attached completed Questionnaires to its email response “[i]n an effort to
resolve this matter amicably.”21
On May 7, Willkie responded to Schulte Roth and reiterated that the Nomination
Notice was invalid because Saba failed to timely submit the Questionnaires, and that the
Boards, in the exercise of their business judgment, determined not to waive the deadlines.22
Willkie noted in its response that Saba’s contentions in their May 1 response “appear to be
litigation positions that Saba hastily concocted as soon as it realized that it had missed a
19
Id.
20
Opinion, 2019 WL 2711281, at *3.
21
App. to Opening Br. at A622, A625 (Schulte Roth May 1, 2019 Letters).
22
Id. at A818–A820 (Willkie May 7, 2019 Letter).
10
concrete April 29, 2019 deadline established pursuant to the Bylaws.”23 Willkie further
responded that the Bylaws at issue had been in effect since September 2010,24 and that
Saba’s Trigger Theory was “nonsensical.”25 Willkie then explained that the Nomination
Notice contained declaratory statements with no supporting detail, and so it needed more
information regarding whether the nominees were “interested persons” under the 1940
Act.26 It further pointed to inaccuracies or omissions in the submitted Questionnaires,27
and asserted that “we do not believe you can seriously contend that enforcement of a pre-
existing five business day deadline in a bylaw seeking more information about nominees
to the board of a public regulated entity is evidence of ‘entrenchment.’”28
Saba responded later that day arguing that the nominations were not invalid under
the Bylaws and that the Boards were breaching their fiduciary duties.29 Two days later, on
May 9, 2019, Saba sent another letter reasserting that its nominations were valid, and
provided explanations for the deficiencies in the Questionnaires the Trusts had noted in its
May 7, 2019 correspondence.30
23
Id. at A819.
24
Id. at A818. BQH’s Bylaws are dated October 28, 2010 and BTZ’s Bylaws are dated October
28, 2016.
25
Id. at A820.
26
Id.
27
See id. at A820–A822.
28
Id. at A822.
29
See id. at A825–A830 (Saba’s May 7, 2019 Letter).
30
See id. at A835–A840 (Saba’s May 9, 2019 Letter).
11
A proxy contest followed. On May 10, 2019, BQH filed its preliminary Schedule
14A with the SEC. The preliminary proxy stated that “[t]he Board has determined the
nominations of the Hedge Fund Individuals to be invalid as a result of Saba’s hedge fund
failing to comply with the Trust’s By-Laws.”31 It also urged stockholders “not to sign or
return any proxy card sent to you by Saba, even to withhold votes on the Hedge Fund
Individuals or to vote against the hedge fund’s proposal, because doing so will cancel out
any previously submitted votes on the Trust’s [] proxy card.”32 Saba filed its competing
BQH preliminary proxy on May 14, 2019, which asserted that its “nomination was properly
and timely submitted under the Amended and Restated Bylaws of the Fund (the ‘Bylaws’)
and that the Fund’s assertions to the contrary are incorrect.”33
BTZ filed its preliminary proxy on May 20, 2019, expressing the same position as
to Saba’s nominations. Saba filed its BTZ preliminary proxy the next day. BQH filed its
definitive proxy on May 24, 2019, announcing that the annual meeting would be held on
July 18, 2019, and instructing stockholders to “discard any proxy card from Saba as any
votes with respect to [its nominees] will not be counted at the meeting.” 34 Saba filed its
BQH definitive proxy on May 28. On June 5, 2019, BTZ filed its definitive proxy and set
31
Id. at A843 (BQH 2019 Prelim. Proxy).
32
Id. at A846.
33
Id. at A902 (Saba’s BQH 2019 Prelim. Proxy). Saba’s proxies were being solicited by Saba
Capital Management, L.P., Boaz Weinstein, and Saba’s nominees.
34
Opinion, 2019 WL 2711281, at *3.
12
its annual meeting date for July 8, three weeks earlier than the prior year’s July 30 meeting
date.35
C. The Questionnaire
The scope of the Questionnaire is at the center of this dispute. The cover page of
the Questionnaire states:
This Annual Questionnaire will provide BlackRock with the information
needed to:
 prepare regulatory filings, including registration statements filed with
the U.S. Securities and Exchange Commission, amendments to such
registration statements, annual reports and proxy statements;
 determine whether a Director or nominee may be an “interested
person” of a Fund set forth in Schedule I (a “Fund”), as that term is
defined under the Investment Company Act of 1940, as amended, and
therefore not an independent Director;
 evaluate potential conflicts of interest;
 update records; and
 comply with other applicable laws and regulations.36
There are two parts to the Questionnaire—the general questionnaire, and an “Annex A.”
The Questionnaire instructs that, in addition to completing the general questionnaire, “[i]f
you are nominated to serve as a Director at this year’s Annual Meeting of Shareholders,
please complete Annex A – Supplemental Questionnaire for Nominees.”37 The
Questionnaire as a whole, when counting the sub-questions, consists of nearly one-hundred
35
Id.
36
App. to Opening Br. at A519, A568 (Questionnaire).
37
Id. at A520, A569.
13
questions.38 The Trusts admit that the Questionnaire was not “crafted for this instance”39
and that some questions do not strictly relate to the Bylaws.40 However, the Trusts claimed
that none of those questions were improper because “they relate to the Code of Federal
Regulations with respect to proxy statements, with respect to Section 17(d) of the ‘40 Act,”
and to “federal law compliance for potential directors.”41
The Court of Chancery requested that the parties provide demonstratives
“categorizing whether each of the subpart questions in the Questionnaire related to Section
1’s director qualifications or some other purpose.”42 Saba claimed that only one-third
sought information relevant to the Section 1 qualifications, whereas the Trusts contended
that two-thirds of the questions were relevant to Section 1.43 Thus, the parties agreed that
at least one-third of the questions were not directly related to the enumerated qualifications,
and that at least one-third of the questions were.
38
Opinion, 2019 WL 2711281, at *2 (stating that, “[d]epending on sub-parts, Saba counts ninety-
five questions on the Questionnaire, while Defendants count ninety-seven.”).
39
App. to Opening Br. at A1172 (Argument Tr.). The Court of Chancery sought clarification on
whether the Questionnaire is a standard questionnaire that directors are instructed to complete
every year, and whether the Annex A portion was “bespoke to these particular nominees.”
Appellants confirmed that this was a standard questionnaire and the Annex A was not tailored to
the nominees. Id.
40
Id. at A1170. At oral argument, Appellants stated that those questions not tethered to Article II,
Section 1 “went to the qualifications or the capacity of these individuals to serve as potential
trustees,” and that it is “exactly right” that the five business day deadline does not apply to those
questions under the Bylaws. See Oral Argument Video, 3:15–3:30,
https://livestream.com/accounts/5969852/events/8915743/videos/199548715.
41
App. to Opening Br. at A1170–A1171.
42
Opinion, 2019 WL 2711281, at *5.
43
Id.; see App. to Opening Br. at A1088–A1105 (Trusts’ Demonstrative), App. to Answering Br.
at B106–B135 (Saba’s Demonstrative).
14
D. The Court of Chancery Proceedings
Saba filed its initial complaint with the Court of Chancery on June 4, 2019, more
than three weeks after the Trusts’ first preliminary proxy statement was filed, and nearly
five weeks after it first learned of the Trusts’ position that its nominees were ineligible.
Saba asserted four counts, but sought injunctive relief only as to Counts III (breach of
Bylaws) and IV (breach of fiduciary duty).44 On June 12, Saba amended its complaint to
include allegations related to the BTZ definitive proxy statement, which was filed with the
SEC the day after Saba’s initial complaint.45 With respect to its claim for injunctive relief,
Saba asked the court to order Appellants:
to (1) refrain from precluding, invalidating, or interfering with [Saba’s]
presentation of its four trustee nominees for election to the Board of BTZ and
BQH at the 2019 annual meetings of shareholders, and (2) to allow any
proxies or votes cast in favor of [Saba’s] nominees at the meeting to be
counted so that this Court may subsequently determine the outcome of the
election and the proper constitution of the Board.46
44
The causes of action are the same in the original and the operative amended complaint. They
are: (1) breach of declaration of trust of BTZ; (2) breach of fiduciary duty to BTZ’s shareholders;
(3) breach of bylaws of BTZ and BQH; and (4) breach of fiduciary duty to shareholders of BTZ
and BQH. The first two causes of action relate to Saba’s contention that Appellants, for improper
purposes, unilaterally amended BTZ’s Bylaws to change the voting and election requirements
contrary to the language of its Declaration of Trust. Saba specifically challenges the amended
voting standard for contested director elections, which now requires a majority of the outstanding
shares in order for a candidate to prevail. Because our ruling renders Saba’s candidates ineligible,
the election is uncontested and the challenged amendment is not applicable. We note that during
oral argument before this Court, Saba expressed its interest in pursuing these claims, stating that
it would “still like a ruling” because the issue likely would arise in the future. See Oral Argument
Video at 34:13–35:31. However, we question why such a ruling would not be purely advisory
following our decision here. See Stroud v. Milliken Enters., Inc., 552 A.2d 476, 480 (Del. 1989)
(“The law is well settled that our courts will not lend themselves ‘to decide cases which have
become moot, or to render advisory opinions.’” (citation omitted)).
45
Opinion, 2019 WL 2711281, at *3.
46
App. to Opening Br. at A68–A69 (Mot. for Prelim. Inj.). Saba also requested in its Amended
Complaint “an Order delaying the annual meetings of the Trusts, if necessary. . . .” Id. at A156.
15
Saba raised several different theories in its brief in support of its motion for
preliminary injunction. It argued that it had submitted a timely Nomination Notice, and
that the Questionnaire was not a part of the requirements of a Nomination Notice.47 Saba
also noted that it never received notice of any deficiency in the Nomination Notice. It then
argued that there is no provision in the Bylaws that gives the Boards broad authority to
make general information requests without warning, nor is there a provision that allows for
requests for duplicative information. Saba further argued that its Trigger Theory was the
correct reading of Section 7(e), and, therefore, the Trusts’ information request was not a
supplemental information request under Section 7(e)(ii). Finally, Saba argued that even if
the Trusts could request supplemental information under Section 7(e)(ii), the five-business-
day deadline did not apply to the Questionnaire because the Trusts did not identify a need
for an update and supplement, and the Questionnaire went beyond the allowable scope
because it “was not properly limited to the ‘director qualifications’ requirements of Article
II, Section 1.”48
The Court of Chancery heard argument on June 25, 2019 in response to Saba’s
request that the court “rule by June 28 in order to minimize the chance that brokers would
However, in argument before the Court of Chancery, Saba acknowledged that it was not asking
for the meeting to be postponed. Id. at A1110 (Argument Tr.).
47
Id. at A96 (Prelim. Inj. Opening Br.).
48
Id. at A105.
16
discretionarily vote the shares of clients who did not provide voting instructions under New
York Stock Exchange rules.”49
On June 27, 2019, the court, on a “highly expedited and pre-discovery record,”50
issued a Memorandum Opinion (the “Opinion”) granting mandatory injunctive relief based
on Saba’s breach of Bylaws claim.51 In reaching this conclusion, the Court of Chancery
agreed with the Trusts that Section 7(e)(ii) was unambiguous. The court first described
Saba’s main theories as follows:
Although Saba’s position appeared to evolve somewhat from briefing to
argument, it broadly asserts that a request under Section 7(e)(ii) may only be
made subsequent to one or more of the following: an identified change to
the contents of a Nomination Notice that requires an update or supplement,
an update pursuant to Section 7(e)(i), or an information request under Section
7(d)(i)(C)(6).52
The court dismissed Saba’s reading of the Bylaws, rejecting Saba’s Trigger Theory and
holding that of the Bylaws provisions addressed by the parties, Section 7(e)(ii) is the
exclusive method in the Bylaws for the Boards to request supplemental information
relating to Nomination Notice.53 The court thus determined that “the Boards could request
49
Opinion, 2019 WL 2711281, at *3.
50
Id. at *1.
51
Id. at *3–4.
52
Id. at *4. Article I, Section 7(d)(i)(C)(6) of the Bylaws requires a Nomination Notice to include
“information to establish to the satisfaction of the Board of Directors that the Proposed Nominee
satisfies the director qualifications as set out in Section 1 of Article II.” App. to Opening Br. at
A407 (BQH Bylaws Art. I, § 7(d)(i)(C)(6)), A433 (BTZ Bylaws Art. I, § 7(d)(i)(C)(6)).
53
Opinion, 2019 WL 2711281, at *5 (“Section 7(e)(ii) provides the sole method identified by the
parties for the Boards to request supplemental information to a Nomination Notice.”).
17
supplemental information related to the Nomination [Notice] on April 22 under Section
7(e)(ii).”54
However, the court said that the Trusts “went too far” with the Questionnaire. It
explained that Section 7(e)(ii) establishes three limitations on what information the Trusts
could request: “the desired information must be (a) for the purpose of determining whether
Saba’s nominees met Section 1’s enumerated requirements, (b) ‘reasonably requested’
with that scope in mind, and (c) ‘necessary’ for the Boards’ determinations.”55 The court
found “that the Questionnaire as a whole was not ‘reasonably requested’ or ‘necessary’ to
determine whether Saba’s nominees met Section 1’s requirements,”56 and held that:
[b]y including in the Questionnaire a substantial number of questions
unrelated to Section 1’s director qualifications, and nonetheless enforcing the
strict five-day deadline to invalidate Saba’s nominations, Defendants
overstepped their authority under Section 7(e)(ii) while demanding strict
compliance from Saba.57
The court also held that, because it was ruling for Saba on Count III, it need not
reach any of the claims in Count IV alleging that the Trusts had acted inequitably.
Nevertheless, the court stated that it would deny Saba relief “at this stage,”58 as Saba had
not met its burden under the mandatory injunction standard. It concluded that Section 7 of
the Bylaws had been adopted on a “clear day” before this proxy contest, and that there was
54
Id.
55
Id.
56
Id. at *6.
57
Id.
58
Id. at *7.
18
no evidence that they were being applied in bad faith. The court found that Saba’s lack of
proof was, in part, “a mess of Saba’s own making” as it could have brought the claim weeks
before it did, and “[t]he emergency nature of [Saba’s motion] is, to some degree, a self-
inflicted wound.”59 By waiting until June to file its case, Saba eliminated its opportunity
to seek meaningful discovery prior to the hearing. However, the court stated that it would
“stop short of finding that Saba is guilty of laches at this stage due to its reasonable belief
that BTZ’s annual meeting would not be scheduled until late July.”60
On July 2, 2019, the Court of Chancery entered a partial final judgment pursuant to
Court of Chancery Rule 54(b) as to the breach of Bylaws claim (Count III), deeming that
Saba’s nominees have been validly nominated, enjoining the Trusts from deeming Saba’s
nominees to be ineligible for failure to comply with Section 7(e)(ii), and requiring that the
votes for those nominees to be counted.61 Defendants filed a timely notice of appeal on
July 10, 2019.
II. STANDARD OF REVIEW
This Court reviews a grant of injunctive relief for an abuse of discretion.62
Embedded legal conclusions, however, are reviewed de novo.63 “The construction or
interpretation of a corporate certificate or by-law is a question of law subject to de novo
59
Id. (internal quotation marks omitted).
60
Id.
61
See Opening Br. at Ex. B (Partial Final Judgment).
62
Hill Int’l, Inc. v. Opportunity P’rs L.P., 119 A.3d 30, 37 (Del. 2015).
63
Id.; see North River Ins. Co. v. Mine Safety Appliances Co., 105 A.3d 369, 380–81 (Del. 2014).
19
review by this Court.”64 The trial court’s findings of fact and inferences drawn from those
facts are given deference unless clearly erroneous.65 As this Court stated recently, this
Court has a “long established policy against piecemeal appeals.”66 We reiterate that policy
here, but we also continue to recognize the importance of providing timely appellate review
of issues arising in the electoral setting, such as those presented here where the Court of
Chancery has ordered mandatory injunctive relief enforcing its interpretation of an advance
notice bylaw.67
III. ANALYSIS
Appellants raise two issues on appeal. First, they claim that the Court of Chancery
erred by issuing a mandatory injunction requiring the Trusts to count votes for Saba’s
nominees, contrary to the plain and unambiguous language of the Bylaws. Second, they
64
Centaur P’rs, IV v. Nat’l Intergroup, Inc., 582 A.2d 923, 926 (Del. 1990).
65
DV Realty Advisors LLC v. Policemen’s Annuity and Ben. Fund of Chicago, 75 A.3d 101, 108
(Del. 2013); Honeywell Int’l Inc. v. Air Prods. & Chems., Inc., 872 A.2d 944, 950 (Del. 2005).
66
Hill Int’l Inc., 119 A.3d at 36. See Tyson Foods, Inc. v. Aetos Corp., 809 A.2d 575, 580 (Del.
2002) (“The policy underlying the final judgment rule is one of efficient use of judicial resources
through disposition of cases as a whole, rather than piecemeal.” (citing Showell Poultry, Inc. v.
Delmarva Poultry Corp., 146 A.2d 794, 795 (Del. 1958))); Simmons v. Simmons, 1992 WL
397461, at *1 (Del. Nov. 12, 1992) (ORDER) (noting the “strong policy of this Court not to accept
piecemeal appeals from a single proceeding in a trial court”); see also Zimmerman v. Home
Shopping Network, Inc., 1990 WL 140890, at *1 (Del. Ch. Sept. 25, 1990) (“Rule 54(b) is not to
be used as a vehicle to trigger routine appellate review in cases where summary judgment is
granted as to some, but not all, of a party’s claims. Rather, Rule 54(b) is an exception to the well-
established policy against ‘piecemeal’ appeals, and does not contemplate the entry of final
judgment absent a showing of some degree of hardship or injustice through delay which would be
alleviated by immediate appeal.” (internal citations and quotations omitted)).
67
See Hill Int’l Inc., 119 A.3d at 36; see also Blasius Indus., Inc. v. Atlas Corp., 564 A.2d 651,
659 (Del. Ch. 1988) (observing that “[t]he shareholder franchise is the ideological underpinning
upon which the legitimacy of directorial power rests,” and that “it can be seen that matters
involving the integrity of the shareholder voting process involve consideration not present in any
other context in which directors exercise delegated power”).
20
claim that the court erred in holding that the doctrine of laches did not bar Saba’s request
for equitable relief. We agree with Appellants on the former, but reject the latter.
A. The Court Correctly Interpreted the Bylaws, But Erred in Granting Injunctive Relief
In Light Of Saba’s Failure to Timely Respond.
First, we address Appellants’ argument that the Court of Chancery erred in granting
mandatory injunctive relief to Saba. The court held that Appellants could not require Saba
to comply with the five business day deadline because the Questionnaire exceeded the
Bylaws’ scope. Appellants contend that this ruling is contrary to the language of the clear
and unambiguous Bylaws, which required Saba to respond to the information request
within the deadline set forth in Section 7(e)(ii).
“To obtain a preliminary injunction, [Saba] must demonstrate: (1) a reasonable
probability of success on the merits; (2) that [it] will suffer irreparable injury without an
injunction; and (3) that [its] harm without an injunction outweighs the harm to the
defendants that will result from the injunction.”68 The Court of Chancery viewed Saba’s
request as one seeking mandatory injunctive relief because requiring Appellants “to permit
and count votes they otherwise would not have” would “upend, not preserve, [the] status
quo.”69 There is a “higher mandatory injunction standard where, instead of seeking to
preserve the status quo as interim relief, Petitioners, as a practical matter, seek the very
68
C & J Energy Servs., Inc. v. City of Miami Gen. Empls.’ Ret. Tr., 107 A.3d 1049, 1066 (Del.
2014).
69
Opinion, 2019 WL 2711281, at *4.
21
relief that they would hope to receive in a final decision on the merits.” 70 To obtain
mandatory injunctive relief, the movant must make a showing sufficient to support a grant
of summary judgment, that is, “[m]andatory injunctions should only issue with the
confidence of findings made after a trial or on undisputed facts.”71 We agree with the Court
of Chancery that Section 7(e)(ii) is clear and unambiguous. But based upon the record
before us, and as explained below, we hold that Saba was required to comply with the five-
business-day deadline.
1. The Bylaws are Clear and Unambiguous.
The Bylaws “constitute part of a binding broader contract among the directors,
officers and stockholders formed within the statutory framework of the Delaware General
Corporation Law.”72 “Because corporate charters and bylaws are contracts, our rules of
contract interpretation apply.”73 “Words and phrases used in a bylaw are to be given their
commonly accepted meaning unless the context clearly requires a different one or unless
legal phrases having a special meaning are used.”74 “Under the applicable interpretation
rules, if the bylaw’s language is unambiguous, the court need not interpret it or search for
70
Alpha Builders, Inc. v. Sullivan, 2004 WL 2694917, at *3 (Del. Ch. Nov. 5, 2004) (internal
quotation marks omitted).
71
C & J Energy, 107 A.3d at 1053–54; see TW Servs., Inc. v. SWT Acq. Corp., 1989 WL 20290,
at *6 (Del. Ch. Mar. 2, 1989) (finding that mandatory relief is not appropriate absent satisfying the
standards applicable to summary judgment).
72
Hill Int’l Inc., 119 A.3d at 38; see also Airgas Inc. v. Air Products & Chemicals, Inc., 8 A.3d
1182, 1188 (Del. 2010); Centaur P’rs IV, 582 A.2d at 928; Lawson v. Household Fin. Corp., 152
A. 723, 726 (Del. 1930).
73
Hill Int’l Inc., 119 A.3d at 38; Centaur P’rs IV, 582 A.2d at 928.
74
Hill Int’l Inc., 119 A.3d at 38. (quoting Airgas, Inc., 8 A.3d at 1188) (internal quotation marks
omitted).
22
the parties’ intent.”75 “If charter or bylaw provisions are unclear, we resolve any doubt in
favor of the stockholder's electoral rights.”76
In the proceedings below, Appellants and Saba both argued that the relevant Bylaws
unambiguously support their interpretation. Saba claimed that, under its Trigger Theory,
Section 7(e)(ii) could be invoked only after one or more of the following occur: “an
identified change to the contents of a Nomination Notice that requires an update or
supplement, an update pursuant to Section 7(e)(i), or an information request under Section
7(d)(i)(C)(6).”77 Appellants, on the other hand, asserted “that Section 7(e)(ii) is the
exclusive method for the Boards to request supplemental information relating to
Nomination Notices in the Bylaws, and that such a request need not be preceded by any of
the triggering events Saba identifies.”78
The Court of Chancery held that the pertinent language of the Bylaws was
unambiguous and agreed with Appellants’ reading. It held that Section 7(e)(ii) is “the sole
method identified by the parties for the Boards to request supplemental information to a
Nomination Notice.”79 It reasoned that Section 7(d) addresses only what is required in a
Nomination Notice. Section 7(d)(i)(C)(6) reads:
To be in proper written form, a record shareholder’s notice to the Secretary
must set forth the following information: (i) as to each person whom the
75
Id. (quoting Openwave Sys. Inc. v. Harbinger Capital P’rs Master Fund I, Ltd., 924 A.2d 228,
239 (Del. Ch. 2007) (internal quotation marks omitted).
76
Id.
77
Opinion, 2019 WL 2711281, at *4.
78
Id.
79
Id. at *5.
23
shareholder of record proposes to nominate for election as a director (a
“Proposed Nominee”) and any Proposed Nominee Associated Person . . . (C)
. . . (6) information to establish to the satisfaction of the Board of Directors
that the Proposed Nominee satisfies the director qualifications as set out in
Section 1 of Article II . . . .80
Thus, the court concluded that Section 7(d)(i)(C)(6) “does not include an independent right
under that section for the Board to request information.”81 We agree that Section
7(d)(i)(C)(6) does not address follow-up requests to a Nomination Notice.
The Court of Chancery also properly rejected Saba’s Trigger Theory. The court
held that “a request under Section 7(e)(ii) does not need to follow the record date or any
other triggering event related to Section 7(e)(i).”82 It further noted that the conjunction
“and” between the two subsections, which Saba references in support of its reading,
“indicates only that the two subsections are not mutually exclusive, not that they must occur
jointly.”83 We agree that a plain reading indicates that the occurrence of the events referred
to in Section 7(e)(i) is not a prerequisite to the ability to make a request under Section
7(e)(ii). Thus, “the Boards could request supplemental information related to the
[Nomination Notice] on April 22 under Section 7(e)(ii).”84 Because Section 7(e)(ii)
80
App. to Opening Br. at A407 (BQH Bylaws Art. I, § 7(d)(i)(C)(6), A433 (BTZ Bylaws Art. I, §
7(d)(i)(C)(6)).
81
Opinion, 2019 WL 2711281, at *5.
82
Id.
83
Id. at n.35. The Court of Chancery observed that, “[a]ny other reading would lead to bizarre
results. For instance, the Board would have no right to request supplemental information (under
Section 7(e)(ii)) in situations where a shareholder did not, or was not required to, update its
Nomination Notice to reflect changes as of the record date (under Section 7(e)(i)).” Id.
84
Id. at *5.
24
contains a response deadline, supplemental information requested pursuant to that section
must be submitted to the Trusts within five business days of the request.
2. Saba Missed the Section 7(e)(ii) Deadline.
We part company with the Court of Chancery as to the remainder of its analysis of
Section 7. We conclude that under the clear language of the Bylaws, Saba had an obligation
to respond to the request before the expiration of the deadline. Instead, Saba did nothing
and let the deadline pass.
As the Trusts concede, there are questions in the Questionnaire not tethered to
Section 1. These include, as the Court of Chancery noted, questions about the Iran Threat
Reduction and Syria Human Rights Act of 2012, academic probation, sexual misconduct,
future business commitments, and nominations to other boards.85 But the Questionnaire is
comprised of other questions that are directly tied to the nominee qualifications under
Section 1. It is undisputed that at least one-third of the questions in the Questionnaire are
directly relevant to Section 1. And it is undisputed that Saba failed to respond in any way
prior to the deadline. If, after reviewing the Questionnaire, Saba believed that the
Questionnaire exceeded the limits of Section 7(e)(ii), it should have raised that concern
85
Id. at *5–6. The Trusts’ counsel noted in argument before the Court of Chancery:
And when you go through the questionnaire - - you know, there’s no secret that this
is a regulated entity. The consequences of this fund having a majority of interested
directors is draconian. If we blow it, it’s no longer a registered investment
company. Its contracts could be voidable. The SEC could commence enforcement
proceedings. There’s a whole slew of bad consequences that could relate to the
BlackRock funds if it turns out that there are people on the board who are interested.
App. to Opening Br. at A1173.
25
with the Trusts before the expiration of the deadline. What it could not do, without risking
disqualification of its nominees, was to stay silent, do nothing, and let the deadline pass.
Its failure to raise any objection undercuts its various challenges to the Questionnaire,
namely, that the requests were premature, duplicative, unreasonable, or the product of
entrenchment motives, or that no response was required.
Although the Court of Chancery’s decision hinged upon the Questionnaire’s “over-
breadth,” the record does not suggest that the Questionnaire’s over-breadth precluded a
timely response.86 Saba mentioned this excuse only when it stated that, “to the extent that
the Board requested information not contained in Saba’s Notice—that is, information
unrelated to the issue of whether the nominees meet the director qualifications as set forth
in the Bylaws—those requests in particular are unreasonable.”87 This was the only
contention that resembled an over-breadth argument in Saba’s May 1, 2019 letters, which
were each three pages long. Similarly, in its six-page May 7, 2019 letter, Saba re-argued
its Trigger Theory and raised over-breadth only by reiterating the same phrase.88 As the
events leading up to this action were unfolding, the gravamen of Saba’s argument was that
either the Questionnaire was not necessary because the questions were duplicative of what
86
This seems apparent, in part, in view of Saba’s inclusion of response to the Questionnaires for
each of its nominees in its May 1 letters, even though the Trusts viewed these responses as deficient
in certain respects.
87
App. to Opening Br. at A622, A625 (Schulte Roth May 1, 2019 Letters)
88
See id. at A828 (Saba May 7, 2019 Letter) (“And, because the Notice already provided
information sufficient to establish that each nominee of Saba is qualified to serve as a director
under the Bylaws and the 1940 Act, to the extent that the Board requested information not
contained in Saba’s Notice—that is, information unrelated to the issue of whether the nominees
meet the director qualifications as set forth in the Bylaws—those requests in particular are
unreasonable.” (emphasis added)).
26
was already given in the Nomination Notice, or its “Trigger Theory”—that the five
business day deadline was premature because a request under Section 7(e)(ii) can be
brought only after the record date and an update and supplement pursuant to Section 7(e)(i).
A reasonable reading of the record is that Saba misread the Bylaws and did not think
it had to respond to the follow-up request within five business days, and that the other
justifications were after-the-fact excuses. In fact, it told the Court of Chancery that it “did
not view the Questionnaire as falling under the five business day deadline imposed by
Section 7(e)(ii).”89 We recognize that the April 22, 2019 transmittal email made no
mention of a five-business-day deadline, nor did it specify that the request was being sent
pursuant to Section 7(e)(ii). But, as the Court of Chancery noted:
Saba, a sophisticated entity that had already completed the Nomination
[Notice] and understood the structure of the Bylaws, could only have been
reasonably confused by the April 22 email if there was another method under
Section 7 for the Boards to request additional information about the
nominations. As addressed above, Section 7(e)(ii) is the only provision
applicable to that purpose.90
Because Section 7(e)(ii) speaks clearly to the Board’s ability to request supplemental
information with regard to the Nomination Notice, Saba, as a sophisticated corporate entity,
should have understood that, and its failure to respond does not justify disregarding the
deadline.
89
Opinion, 2019 WL 2711281, at *3 (stating that, “[a]t argument, Saba’s counsel represented that
Saba and the nominees began completing the Questionnaire on or about April 22, but that Saba
did not view the Questionnaire as falling under the five business day deadline imposed by Section
7(e)(ii).”).
90
Id. at *5.
27
In a perfect world, the Trusts’ request for supplemental information would have
identified the portions within the bounds of Section 1 and would have referenced Section
7(e)(ii) and noted the deadline. But even though these things were not done, we are
reluctant to hold that it is acceptable to simply let pass a clear and unambiguous deadline
contained in an advance-notice bylaw, particularly one that had been adopted on a “clear
day.”91 Bylaws, including advance notice bylaws, are “commonplace”92 and are
interpreted using contractual principles. If such provisions are unclear, we resolve any
doubt in favor of stockholders’ electoral rights.93 But the provisions at issue here were
clear, as the Court of Chancery held. A rule that would permit election-contest participants
to ignore a clear deadline and then, without having raised any objection, proffer after-the-
fact reasons for their non-compliance with it, would create uncertainty in the electoral
setting. Encouraging such after-the-fact factual inquiries into missed deadlines could
potentially frustrate the purpose of advance notice bylaws, which “are designed and
function to permit orderly meetings and election contests and to provide fair warning to the
corporation so that it may have sufficient time to respond to shareholder nominations.”94
91
See, e.g., AB Value Partners, LP v. Kreisler Mfg. Corp., 2014 WL 7150465, at *3 (Del. Ch. Dec.
16, 2014) (holding that the plaintiff did not state a colorable claim that an advance notice bylaw
(adopted on a clear day) was improperly enforced when the plaintiff missed a deadline).
92
Goggin v. Vermillion, Inc., 2011 WL 2347704, at *4 (Del. Ch. June 3, 2011) (quoting Openwave
Sys., 924 A.2d 228, 238–39); Mentor Graphics Corp. v. Quickturn Design Sys. Inc., 728 A.2d 25,
43 (Del. Ch. 1998), aff’d on other grounds sub nom. Quickturn Design Sys., Inc. v. Shapiro, 721
A.2d 1281 (Del. 1998).
93
See Hill, 119 A.3d at 38 (“If charter or bylaw provisions are unclear, we resolve any doubt in
favor of the stockholder’s electoral rights.”).
94
Openwave Sys., 924 A.2d at 239; see Boilermakers Local 154 Retirement Fund v. Chevron
Corp., 73 A.3d 934, 952 (Del. Ch. 2013); 1 R. FRANKLIN BALOTTI & JESSE A. FINKELSTEIN,
DELAWARE LAW OF CORPORATIONS AND BUSINESS ORGANIZATIONS, § 7.9 (3d ed. 2020) (“In order
28
Accordingly, we hold that Saba was obligated to respond prior to the expiration of the five-
business-day deadline set forth in Section 7(e)(ii).
Further, we observe that in the limited record before us, there is no evidence of any
manipulative conduct on the part of the Trusts. Delaware law protects stockholders in
instances where there is manipulative conduct or where the electoral machinery is applied
inequitably.95 The Court of Chancery correctly observed that such an allegation “requires
more than merely laying out the timeline of Defendants’ conduct and speculating about
bad intent or purpose.”96 As noted above, Saba could have brought its claims weeks before
to permit an orderly period of solicitation prior to a meeting, many corporations have adopted
provisions in their certificates of incorporation or bylaws to provide for advance notice of the
nomination of directors or of matters to be raised at a meeting.”); ARTHUR FLEISCHER, JR.,
ALEXANDER R. SUSSMAN & GAIL WEINSTEIN, TAKEOVER DEFENSE: MERGERS AND ACQUISITIONS,
§ 6.06 (8th ed. 2018) (“Advance notice bylaw provisions provide several benefits to a company,
including giving a board time to evaluate the proposed candidates and preventing last-minute
“surprise attacks” by third parties for control or board representation.”).
95
See, e.g., MM Cos. v. Liquid Audio, Inc., 813 A.2d 1118, 1132 (Del. 2003) (invalidating the
expansion of directors from five to seven because the primary purpose of that expansion was to
impede the stockholders’ right to vote effectively in an impending election for successor directors);
Schnell, Inc. v. Chris-Craft Indus., Inc., 285 A.2d 437, 439 (Del. 1971) (“[I]nequitable action does
not become permissible simply because it is legally possible.”); Blasius Indus., Inc., 564 A.2d at
652 (holding that a board act done with care and in good faith but “for the primary purpose of
preventing or impeding an unaffiliated majority of shareholders from expanding the board and
electing a new majority” is invalid); Aprahamian v. HBO & Co., 531 A.2d 1204, 1208 (Del. Ch.
1987) (enjoining the incumbent board from further delaying the company’s annual stockholders
meeting given the timing, “on the eve of the meeting, upon learning that they might be turned out
of office”); Mesa Petroleum Co. v. Unocal Corp., 1985 WL 44692, at *5–6 (Del. Ch. Apr. 22,
1985) (finding inequitable a 30-day notice bylaw interpreted by a corporation effectively to require
90-days’ notice under the circumstances in question, a requirement with which the dissident
stockholder could not possibly comply); Lerman v. Diagnostic Data, Inc. 421 A.2d 906, 914 (Del.
Ch. 1980) (holding that a 70-days’ notice bylaw was inequitable in a situation where the board
announced the annual meeting only 63 days before it was to occur, rendering compliance
impossible).
96
Opinion, 2019 WL 2711281, at *7.
29
when it actually, did, and thus the emergency nature of Saba’s motion and having to
proceed without discovery is, “to some degree, a self-inflicted wound.”97
In sum, although we agree with the Court of Chancery’s interpretation of the
Bylaws, we disagree with the court’s decision to excuse Saba’s non-compliance with the
deadline based upon the record before us. Accordingly, we hold that Saba’s nominations
are deemed ineligible under Section 7 due to their failure to timely respond to the Trusts’
request for supplemental information.
B. Saba’s Claims Were Not Barred by Laches.
To the extent that it becomes relevant on remand, we address the Appellants’ second
issue, and we affirm the Court of Chancery’s determination that Saba was not guilty of
laches. To raise the equitable defense of laches, the party raising the defense bears the
burden of showing “first, knowledge by the claimant; second, unreasonable delay in
bringing the claim; and third, resulting prejudice to the defendant.”98 “A trial court’s
application of equitable defenses presents a mixed question of law and fact.”99
Appellants argue that Saba unreasonably waited until June 4 to file this action,
thirty-five days after they informed Saba that its director nominations were invalid. They
further assert that they were prejudiced by this delay because voters may have voted or
97
Id. (internal quotation marks omitted).
98
Whittington v. Dragon Grp., L.L.C., 991 A.2d 1, 8 (Del. 2009) (quoting Reid v. Spazio, 970 A.2d
176, 182–83 (Del. 2009) (internal quotation marks omitted).
99
Klaassen v. Allegro Dev. Corp., 106 A.3d 1035, 1043 (Del. 2014).
30
failed to vote based on the understanding that Saba’s nominees would not be counted as
stated in the Trusts’ proxy materials.
However, the relevant facts are not in dispute and the Appellants fail to adequately
explain why we should not defer to the court’s findings. We agree with the Court of
Chancery that, based on the prior year’s July 30 meeting date, Saba had reason to believe
BTZ’s 2019 annual meeting date would be in late July.
Moreover, Appellants argued in the proceedings below that Saba’s delay in filing
the action would be harmful because of the costs associated with corrective disclosures and
soliciting additional votes in a compressed time period.100 But, as the Court of Chancery
noted, Appellants “set the BTZ meeting date after Saba filed its initial complaint, so costs
related to its rapid approach are at least partly self-imposed.”101 BTZ’s 2019 annual
meeting date was set to take place on July 8, 2019, approximately three weeks earlier than
the prior-year annual meeting. The meeting was also ten days earlier than BQH’s July 18,
2019 annual meeting, even though BQH’s proxy materials were filed earlier than BTZ’s.
The Appellants admit it could have set BTZ’s meeting date as far out as August 24.102
Thus, we concur with the court that the prejudice the Appellants allege is not entirely a
100
App. to Opening Br. at A251 (Prelim. Inj. Opp’n Br.).
101
Opinion, 2019 WL 2711281, at *8.
102
Opening Br. at 34 (“BTZ’s prior annual meeting was held on July 30, 2018, and therefore BTZ’s
2019 meeting could have been held on any date between July 5 and August 24, 2019, without
eliminating the application of BTZ’s advance notice deadline.”).
31
result of Saba’s delay in filing the suit. Accordingly, we find no error in the Court of
Chancery’s rejection of the Appellants’ laches contentions.103
IV. CONCLUSION
Based on the foregoing, we affirm the Court of Chancery’s interpretation of the
Bylaws. However, we reverse the court’s grant of Saba’s request for mandatory injunctive
relief. We affirm the court’s holding that Saba’s equitable claims are not barred by laches.
Thus, we AFFIRM in part, and REVERSE in part, and REMAND to the Court of
Chancery for further proceedings.
103
During oral argument, we expressed our concern that by delaying filing suit and foreclosing
itself from taking discovery prior to pressing for relief, Saba might seek to press issues that it could
have raised earlier and then seek further appellate review in this Court. We note, in this regard,
certain issues raised in footnotes in Saba’s Answering Brief but which were not seriously pressed
on appeal. See Answering Br. at 33 n.16 (arguing that only the Chairperson of the meeting—
during the meeting—can make an ineligibility determination, and that Saba’s failure to comply
was immaterial as it constituted only a short delay). Although we affirm the Vice Chancellor’s
ruling on laches, our ruling should not be viewed as an invitation to engage in further litigation on
issues that are fairly subsumed within our ruling today or that could have been the subject of a
cross-appeal.
32