Blackrock Credit Allocation Income Trust v. Saba Capital Master Fund, Ltd., No. 297, 2019 (Jan. 13, 2020) (Valihura, J.)
In this decision, the Delaware Supreme Court reversed the Delaware Court of Chancery’s holding that a stockholder of two Delaware statutory trusts was excused from complying with the deadline for submitting requested supplemental information under the trusts’ advance notice bylaws. Although recognizing that the requested supplemental information was overly broad to some degree, the Court held that the stockholder failed to timely respond to the trusts in any manner and therefore should not be excused from complying with the clear and unambiguous deadline.
Blackrock Credit Allocation Income Trust and Blackrock New York Municipal Bond Trust (collectively, the “Trusts”) each had advance notice bylaws requiring the provision of certain information in order for stockholder-nominated trustees to be eligible for election. The advance notice bylaws granted the respective board of trustees the right to reasonably request certain subsequent information regarding such nominees. The deadline to respond to any such request was five business days.
In connection with the Trusts’ upcoming annual meetings, Saba Capital Master Fund, Ltd. (“Saba”), a stockholder of both Trusts, delivered nomination notices in accordance with the advance notice bylaws. The Trusts subsequently requested supplemental information from Saba in the form of extensive questionnaires. Saba did not respond to either Trust prior to the expiration of the five-business-day deadline.
After the deadline passed, one of the Trusts informed Saba that Saba’s nominees would be ineligible for election. Saba challenged this determination in the Delaware Court of Chancery. The Delaware Court of Chancery held that Saba was excused from complying with the requisite deadline because the supplemental information requested by the Trusts exceeded to some degree the scope of information required to be provided under the advance notice bylaws.
On appeal, the Delaware Supreme Court disagreed with the trial court’s holding. The Court explained that it was undisputed that (i) at least one-third of the questions that formed the supplemental request fell within the scope of information required to be provided under the advance notice bylaws, and (ii) Saba failed to respond to the Trusts in any manner prior to the deadline. The Court found no excuse for Saba’s failure to timely respond and noted that if Saba believed the requested information was overly broad, then Saba should have raised that concern with the Trusts before the expiration of the clear and unambiguous deadline. What Saba could not do, in the Court’s determination, was stay silent, do nothing, and let the deadline pass without risking disqualification of its nominees.