Icahn Partners LP v. Amylin Pharmaceuticals, Inc.

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COURT OF CHANCERY OF THE STATE OF DELAWARE 417 SOUTH STATE STREET DOVER, DELAWARE 19901 TELEPHONE: (302) 739-4397 FACSIMILE: (302) 739-6179 JOHN W. NOBLE VICE CHANCELLOR April 20, 2012 Kenneth J. Nachbar, Esquire Morris, Nichols, Arsht & Tunnell, LLP 1201 N. Market Street Wilmington, DE 19801 Re: Robert S. Saunders, Esquire Skadden, Arps, Slate, Meagher & Flom LLP One Rodney Square Wilmington, DE 19801 Icahn Partners LP v. Amylin Pharmaceuticals, Inc. C.A. No. 7404-VCN Date Submitted: April 18, 2012 Dear Counsel: By their complaint ), Plaintiffs Icahn Partners, LP, Icahn Partners Master Fund LP, Icahn Partners Master Fund II LP, and Icahn ) seek to enjoin the enforcement of Defendant Amylin Pharmaceuticals, Inc. Icahn Partners LP v. Amylin Pharmaceuticals, Inc. C.A. No. 7404-VCN April 20, 2012 Page 2 ) have breached their fiduciary duties by refusing to waive the Advance Notice Bylaw in connection with the Annual Meeting; and (2) an award costs, The Icahn Parties have moved to expedite this action. Specifically, they have moved to injunction hearing. For the reasons set forth below, the Plaintiffs Expedited Proceedings is granted. *** Section 5(a) of Amyli Nominations of persons for election to the Board of Directors of the corporation . . . may be made at an annual meeting of stockholders . . . (iii) by any stockholder of the corporation who was a stockholder of record at the time of giving the stockholder's notice provided for in the following paragraph, who is entitled to vote at the meeting and who complied with the notice procedures set forth in this Section 5; provided, however, that clause (iii) above shall be the exclusive means for a stockholder to make nominations . . . .1 1 Amylin s bylaws are attached to the Complaint as Exhibit B. Icahn Partners LP v. Amylin Pharmaceuticals, Inc. C.A. No. 7404-VCN April 20, 2012 Page 3 Section 5(b), which is the Advance Notice Bylaw, provides: At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. For nominations . . . to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of Section 5(a) of these Bylaws . . . the stockholder must have given timely notice thereof in writing to the Secretary of the corporation . . . . To be timely, a stockholder's notice shall be delivered to the Secretary at the principal executive offices of the corporation not later than the close of business on the one hundred twentieth (120th) day prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is advanced more than thirty (30) days prior to or delayed by more than thirty (30) days after the anniversary of the preceding year's annual meeting, notice by the stockholder to be timely must be so delivered not later than the close of business on the later of the one hundred twentieth (120th) day prior to such annual meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made. Amylin s 2011 annual stockholders meeting was held on May 24, 2011, and the Annual Meeting is scheduled to be held on May 15, 2012. Thus, under the Advance Notice Bylaw, in order for an Amylin stockholder to be able to nominate a candidate for election to Am Board ) at the Annual Meeting, that stockholder would have needed to have provided Amylin with notice of the candidate she wished to nominate no later than January 25, 2012, the 120th Icahn Partners LP v. Amylin Pharmaceuticals, Inc. C.A. No. 7404-VCN April 20, 2012 Page 4 day prior to the one year anniversary of the May 24, 2011 meeting. The Complaint alleges that no Amylin stockholder submitted notice of a Board nomination by that date. *** The Icahn Parties contend that no Amylin stockholder submitted notice of a Board nomination 2 January 25, 2012, and for weeks thereafter, The Plaintiffs argue that before that they and the Board had the same element of the investment thesis for Amylin was the prospect for a value maximizing transaction, and for the Board to faithfully consider a transaction that presented a compelling value when viewed against the considerable risks to the Company as a stand-alone business 3 The Icahn Parties contend that the Board fundamentally deviated from that outlook in February 2012 when it purportedly rejected, without considering, a proposal from Bristol-Meyers Squibb Co. 2 3 Compl. ¶ 27. Icahn Partners LP v. Amylin Pharmaceuticals, Inc. C.A. No. 7404-VCN April 20, 2012 Page 5 - a significant (approximately 43%) premium over its then-trading price. As Plaintiffs explain: The report of the Bristolit and failure to announce plans to sell the Company . . . have radically changed the landscape in a way that, if known before the nomination deadline, would have foreseeably generated controversy and led to the nomination of a dissident slate.4 Because, according to the Icahn Parties, the Board has radically altered its outlook for a way likely to generate controversy, the Icahn Parties argue committed to exploration of the Bristol-Meyers Proposal or other sale transactions, 5 or of reelecting a Board that has refused to make any su 6 Parties assert In order Moreover, the Icahn s stockholders are not given the opportunity to elect a new Board that will immediately pursue potential sale transactions 4 Compl. ¶ 27. Id. at ¶ 28 6 Id. 5 other Icahn Partners LP v. Amylin Pharmaceuticals, Inc. C.A. No. 7404-VCN April 20, 2012 Page 6 stockholders, may lose forever the opportunity to sell their Amylin stock at a large premium.7 *** The Defendants make four main arguments in opposition to the Icahn Complaint are not ripe because Parties, has submitted notice of a Board nomination to Amylin [the] Icahn [Parties] ha[ve] alleged is hypothetical abuse. Neither [the] Icahn [Parties] nor any other stockholder has submitted a notice of nomination that would put enforcement of the Advance Notice Bylaw in 8 Second, the Icahn Parties do not have a colorable claim that the Director Defendants breached their -Meyers Third, the Plaintiffs will not be irreparably harmed if the Court declines to expedite this matter there is no irreparable harm here because . . . if [the] Icahn [Parties are] ultimately . . . successful in challenging the Advance Notice Bylaw, the Court could invalidate 7 8 at 15. Icahn Partners LP v. Amylin Pharmaceuticals, Inc. C.A. No. 7404-VCN April 20, 2012 Page 7 9 Fourth, the Icahn Parties waited an unreasonable length of time before bringing the Complaint [the] Icahn [Parties] unreasonably waited 12 days . . . [after they learned of the Bristol-Meyers Proposal] to file . . . [the] to bring on their application for injunctive relief in a timely fashion constitutes 10 *** A plaintiff may earn sufficiently colorable claim and shown a sufficient possibility of a threatened irreparable injury, as would justify imposing on the defendants and the public the extra (and sometimes substantial) costs of an expedited preliminary injunction 11 Although the Defendants are correct that the Icahn Parties have not (and, to e, no other Amylin stockholder has) submitted notice of a Board nomination for the Annual Meeting, the fact that no 9 had Id. at 29. Id. at 31 (citing , 1994 WL 89011, at *1 (Del. Ch. Mar. 1, 1994)). 11 Giammargo v. Snapple Beverage Corp., 1994 WL 672698, at *2 (Del. Ch. Nov. 15, 1994). 10 Icahn Partners LP v. Amylin Pharmaceuticals, Inc. C.A. No. 7404-VCN April 20, 2012 Page 8 attempted to make an untimely notice did not prevent . . . [the Court in Hubbard v. Hollywood Park Realty Enterprises, Inc.12] from deciding to issue a preliminary so as to afford any shareholder who so desires a reasonable opportunity to nominate a dissident slate of candidates for election to the [] board. Moreover, during the 13 teleconference with counsel to address Plaintiffs Motion for Expedited Proceedings, counsel for the Plaintiffs represented to the 14 At least at this juncture, Plaintiffs quells any fears that the Court might have about an impermissible advisory opinion. With regard to a colorable claim, the Icahn Parties have explained that the relatively narrow -Myers signals a significant enough change in the expectations of stockholders to warrant reopening of the nomination process so that stockholders can make an informed decision about the 12 1991 WL 3151 (Del. Ch. Jan. 14, 1991). 13 14 Id. at 18 (quoting Teleconference Tr. (Apr. 13, 2012) at 28). Icahn Partners LP v. Amylin Pharmaceuticals, Inc. C.A. No. 7404-VCN April 20, 2012 Page 9 15 The Plaintiffs have adequately alleged that, after the Advance Notice Bylaw prevented Amylin stockholders from submitting Board nominations for the Annual Meeting, the Board radically changed its outlook for the Company. Moreover, if the Plaintiffs are able to show a likelihood of success on that claim, they might be entitled to a mandatory injunction under the reasoning of Hubbard. Therefore, the Icahn Parties have articulated a sufficiently colorable claim.16 The Icahn Parties have also shown a sufficient possibility of threatened irreparable injury. If the Plaintiffs can show that, before the Bristol-Meyers Proposal, a key element of the investment thesis for Amylin was the prospect of a 15 Id. at 2. The Defendants argue that the Bristol-Meyers Proposal was not material, and therefore, the Board was not required to report it much less act on it. While the Defendants may be correct that the Bristol-Meyers Proposal was not material, in and of itself, the Plaintiffs have alleged that a key element of the investment thesis for Amylin was the prospect of a sale transaction. Thus, the alleged fact that the Board rejected the Bristol-Meyers Proposal without even considering it, indicates that there has ( 16 The Defendants also argue that the Board was disinterested and independent, and that there is no allegation that it has acted in bad faith. Therefore, according to the Defendants, the Plaintiffs cannot allege a colorable claim for breach of fiduciary duty. The narrow issue for these expedited proceedings, however, is not whether the Board was structurally unassailable, but whether, under Hubbard engage in discussions with Bristol-Myers signals a significant enough change in the expectations of stockholders to warrant reopening of Id. Icahn Partners LP v. Amylin Pharmaceuticals, Inc. C.A. No. 7404-VCN April 20, 2012 Page 10 sale transaction, and that the Board has now abandoned interest in a sale transaction, then there is a sufficient possibility that the Plaintiffs will be irreparably injured if enforcement of the Advance Notice Bylaw is not enjoined. 17 and if the Plaintiffs are correct that the Board radically changed its plans stockholders, including the Icahn Parties, will be denied the opportunity to exercise their voting rights at an arguably critical time harmed by having to wait 13 months to effectuate change when no one can predict whether another company will value Amylin as highly over 18 Although the Defendants are correct that, imposes additional burdens on 19 the Court may deny a motion to expedite, at least at this preliminary stage, any delay by the Plaintiffs appears to have been justified. 17 EMAK Worldwide, Inc. v. Kurz, 2012 WL 1319771, at *3 (Del. Apr. 17, 2012). 18 if the Court declines to expedite this matter because the Court could invalidate the May 15 election proves too much. That argument, taken to its logical conclusion, is that the Court should never enjoin the enforcement of an advance notice bylaw because the Court could always later invalidate a tainted election. That is a too definitive principle for an application that almost inevitably depends on context. 19 Oliver Press Partners v. Decker, 2005 WL 3441364, at *1 (Del. Ch. Dec. 6, 2005). Icahn Partners LP v. Amylin Pharmaceuticals, Inc. C.A. No. 7404-VCN April 20, 2012 Page 11 The Icahn Parties learned of the Bristol-Meyers Proposal on March 28, 2012. Shortly thereafter, the Icahn Parties reached out to the Defendants. After what the 20 the Icahn Parties sent, on Wednesday, April 4, 2012, an open letter to the Defendants and requested a response by Thursday, April 5, 2012. After the Defendants did not respond to that letter, the Plaintiffs filed this action on April 9, 2012. Thus, although the Icahn Parties waited twelve days after they learned of the Bristol-Meyers Proposal to file good faith them to enter into discussions with potential acquirors.21 20 Compl. ¶ 22. 21 still ultimately be thwarted by 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. Whether that point was reached in this case, remains to be determined. Icahn Partners LP v. Amylin Pharmaceuticals, Inc. C.A. No. 7404-VCN April 20, 2012 Page 12 The Plaintiffs have articulated a sufficiently colorable claim and shown a sufficient possibility of a Motion for Expedited Proceedings is granted.22 *** Timing is not propitious. A preliminary injunction hearing is scheduled for the time being for May 10, 2012, at 2:00 p.m., in Dover. All written submissions shall be filed no later than 4:30 p.m. on May 8, 2012. Counsel are requested to confer and to seek to agree on appropriate interim milestones.23 IT IS SO ORDERED. Very truly yours, /s/ John W. Noble JWN/cap cc: Register in Chancery-K 22 In their briefing, the Plaintiffs and the Defendants each spend several pages discussing a balance of the equities. The Court, however, often waits, and in this case will wait, until a preliminary injunction hearing to consider the equities. See, e.g., Giammargo, 1994 WL 672968, at *2. 23 See Br. at 12. The contours of that potential debate are not yet well-enough defined for its resolution.