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Icahn Partners LP v. Amylin Pharmaceuticals, Inc., C. A. No. 7404-VCN (Del. Ch. Apr. 20, 2012) (V. C. Noble)

April 20, 2012

In this letter opinion, the Court of Chancery granted plaintiffs’ motion to expedite proceedings seeking to enjoin the enforcement of an advance notice bylaw.  The bylaws of Amylin Pharmaceuticals Inc. (“Amylin”) contain an advance notice bylaw (the “Bylaw”) requiring stockholders to submit director nominations at least 120 days prior to the first anniversary of the preceding year’s annual meeting of stockholders (except under certain limited circumstances).  Amylin’s annual meeting is scheduled to be held on May 15, 2012; thus, stockholders had until January 25, 2012 to submit nominations.  On March 28, 2012, plaintiffs learned that the defendant directors purportedly rejected, without considering, a proposal from Bristol-Meyers Squibb Co. (“BMSC”) to acquire Amylin at a premium.  Plaintiffs contend that one of the key elements of the investment thesis for Amylin is the prospect for a sale transaction, and the board of directors’ rejection of BMSC’s proposal constituted a material change in the board’s outlook for Amylin’s future.  Under such circumstances, plaintiffs argue, the Bylaw should be waived, or enforcement thereof enjoined, in order to give stockholders the opportunity to elect directors committed to pursuing a potential sale transaction. 

Defendants countered plaintiffs’ allegations by first noting that the claims raised in the complaint are not ripe because none of Amylin’s stockholders have submitted notice of director nominations.  The Court rejected this claim, noting that the absence of director nominations did not prevent the Court of Chancery in Hubbard v. Hollywood Park Realty Enterprises, Inc., 1991 WL 3151 (Del. Ch. Jan. 14, 1991) from issuing a preliminary injunction under potentially similar circumstances.  The Court also noted that plaintiffs committed to submitting notice of director nominations if permitted.  Defendants also argued that plaintiffs’ complaint lacked colorable claims that the defendant directors breached their fiduciary obligations.  Vice Chancellor Noble disagreed, finding that plaintiffs adequately alleged that the Amylin board of directors changed its outlook for the company and that, even in the absence of allegations of bad faith, plaintiffs may still be able to demonstrate that the board of directors’ refusal to engage in discussions with BMSC constituted a change in the expectations of stockholders that would warrant a re-opening of the nomination process.  The Court also found that plaintiffs alleged facts showing a sufficient possibility of irreparable injury.  If the Amylin board of directors changed its plans for the Company, stockholders could be denied the opportunity to exercise their rights to nominate and elect new directors for up to 13 months.  Finally, the Court declined to accept defendants’ laches claim, finding instead that the 12-day delay between learning of the BMSC proposal and Amylin rejection and the filing of the instant action was the result of plaintiffs’ attempts to persuade defendants to engage with BMSC.  Based upon the foregoing, the Court granted plaintiffs’ motion to expedite.  Importantly, however, the Vice Chancellor noted that although he was granting plaintiffs’ motion, there may still be “timing issues.  At some point, the time between when a board radically alters its stance and the date of the annual meeting is too short for the Court to grant relief from an advance notice bylaw.”

The full opinion is available here