Steve Wolosky, Andrew Freedman, and Lori Marks-Esterman are partners at Olshan Frome Wolosky LLP. This post is based on an Olshan memorandum by Mr. Wolosky, Mr. Freedman, and Ms. Marks-Esterman, Ron S. Berenblat, and Kyle J. Kolb. This post is part of the Delaware law series; links to other posts in the series are available here.
On June 27, 2019, the Delaware Chancery Court entered an injunction requiring the boards of trustees (the “Boards”) of two closed-end investment funds (the “Funds”) to count the votes in favor of director candidates nominated by shareholder Saba Capital at the annual meetings scheduled for July 8, 2019. In the case captioned Saba Capital Master Fund, Ltd. v. BlackRock Credit Allocation Income Trust, et al., C.A. No. 2019-0416-MTZ, 2019 WL 2711281 (Del. Ch. Jun 27, 2019), Vice Chancellor Zurn granted Saba Capital’s request for injunctive relief, finding that the Funds’ rejection of the nominations submitted by Saba Capital violated the Funds’ bylaws. The Court’s ruling is consistent with views recently expressed by Olshan that overzealous defense advisors continue to “cross the line” by using onerous, overbroad questionnaires as traps to thwart shareholder nominations and chill activist campaigns.
Saba Capital had timely given notice of its nominations in compliance with the Funds’ advance notification bylaws. In a response weeks later, the Funds asked that the nominees complete a supplemental questionnaire, which had “nearly one hundred questions over forty-seven pages, and was due in five business days.” The Funds declared the nominations invalid after Saba Capital missed the five-day deadline for submitting the questionnaires (although Saba Capital eventually provided the completed questionnaires).
