Jana Master Fund, Ltd. v. CNET Networks, Inc.

Delaware Court of Chancery · 2008 · Corporations

CorporationsBylawsShareholder franchiseProxy contestsRule 14a-8DelawareCourt of Chanceryshareholder nominations

Facts

JANA owned approximately eleven percent of CNET's common stock and wanted to replace two directors, expand the board from eight to thirteen seats, and nominate five individuals for the new seats at CNET's 2008 annual meeting. Because JANA first invested in October 2007, it would not have held CNET stock for one year by the expected June 2008 meeting. CNET initially refused stocklist materials on the ground that JANA had not complied with a bylaw requiring a stockholder seeking to transact other corporate business at the annual meeting to have beneficially owned at least $1,000 of voting securities for at least one year. CNET ultimately argued that Article II, Section 3, the Notice Bylaw, governed both shareholder nominations and other proposals, while JANA planned to run its own independently financed proxy solicitation rather than seek inclusion in CNET's proxy materials.

Issue

Does CNET's Notice Bylaw, which requires one year of beneficial ownership for a stockholder who 'may seek to transact other corporate business' and ties notice to the timing of CNET's proxy statement, apply to JANA's independently financed nominations and proposals at the annual meeting? If the bylaw does not apply, JANA may proceed without satisfying the one-year ownership requirement.

Rule

When a bylaw is unambiguous, its construction is a question of law. A bylaw that uses language indicating a shareholder may 'seek' to transact business, sets its notice deadline by reference to the corporation's proxy-statement mailing, and expressly requires compliance with federal securities laws governing when the corporation must include a proposal in its proxy statement or form of proxy applies only to proposals or nominations the shareholder seeks to have included in the corporation's proxy materials under Rule 14a-8; any doubt is resolved in favor of stockholders' electoral rights.

🔒

See the holding & full analysis

Create a free KwikCourt account to unlock the rest of this brief — and practice the case.

The court's holding and reasoning
Doctrine tests, pitfalls & exam hypotheticals
10 practice questions + 4 AI-graded essays on this case

Free sample · practice this case

Test yourself

One of 10 multiple-choice questions for this case. Pick an answer to see why.

Maple Ridge Biotech, a Delaware corporation based in San Diego, has a bylaw stating that any stockholder who has beneficially owned at least $1,000 of voting stock for one year may "seek to transact other corporate business" at the annual meeting by sending notice 120 days before the date of the corporation's proxy statement released for the prior year's annual meeting. The bylaw adds that "such notice must also comply with applicable federal securities laws establishing the circumstances under which the corporation is required to include the proposal in its proxy statement or form of proxy." Elena Park bought shares nine months ago and plans to mail her own proxy materials to propose a bylaw amendment at the next annual meeting.

Is the bylaw most likely applicable to Elena's proposal?

Explanation. The majority opinion held that a bylaw using "may seek" language, tying notice to the company's proxy-statement mailing, and expressly referencing federal rules governing when the company must include a proposal in its proxy materials applies only to Rule 14a-8-type inclusion requests. Elena is not asking Maple Ridge Biotech to print her proposal in management's proxy materials; she is funding her own solicitation. The court in the case did not decide facial validity, only applicability.