Levitt Corp. v. Office Depot, Inc.
April 15, 2008
In Levitt Corp. v. Office Depot, Inc., C.A. No. 3622-VCN (Del. Ch. Apr. 14, 2008), the Court of Chancery held that a bylaw limiting business to be transacted at an annual stockholders’ meeting to (a) business proposed by the board, or (b) business proposed by a stockholder with advance notice, did not require a stockholder who sought to nominate candidates for election to the board to give advance notice of its intent to nominate, where the board’s notice of the meeting specified that one item of business at the meeting would be the election of directors.
Levitt is engaged in a proxy contest seeking to place two nominees on the twelve-member Office Depot board of directors at Office Depot’s annual meeting of stockholders, currently scheduled for April 23, 2008. Levitt sent notice of intent to nominate these two nominees to Office Depot on March 17, 2008.
The issue before the Court was the meaning and application of Article II, Section 14 of Office Depot’s bylaws, which provides in relevant part: “At an annual meeting of stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (i) specified in the notice of the meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (ii) otherwise properly brought before the meeting by or at the direction of the Board of Directors or (iii) otherwise properly brought before the meeting by a stockholder of the corporation who was a stockholder of record at the time of giving of notice provided for in this Section, who is entitled to vote at the meeting and who complied with the notice procedures set forth in this Section.” A separate provision of the bylaws required the stockholder notice to be delivered at least 120 calendar days before the date of the proxy statement for the previous year’s annual meeting.
Levitt contended that the term “business” does not expressly include nominations of candidates for election to the board of directors, and that Article II, Section 14 consequently does not apply to stockholder nominations of directors. Levitt alternatively contended that, because Office Depot’s notice of the annual meeting specified that the election of directors would be an item of business, Office Depot’s notice satisfied the requirements of Article II, Section 14, so that stockholders (including Levitt) were not obligated to give advance notice of their intent to nominate directors, but could make nominations from the floor of the meeting.
Office Depot took the position that “business” in the foregoing bylaw provision is a general term that includes, among other kinds of “business” that might be conducted at an annual meeting, stockholder nominations of candidates for election to the board of directors. Consequently, Office Depot argued, the bylaw required Levitt to give advance notice of its intent to nominate directors, but Levitt’s notice was untimely and its nominations consequently were improper. Alternatively, Office Depot argued, to the extent the company’s own notice of the meeting made the election of directors an item of “business” for the meeting, Levitt’s attempt to nominate candidates for election to the board was a separate item of business, as to which Levitt was obligated to give advance notice.
After hearing the matter on cross-motions for judgment on the pleadings, the Court held that the term “business,” as used in Article II, Section 14 of Office Depot’s bylaws, includes the nomination of directors. The Court then held that Office Depot’s notice of meeting, by listing the election of directors as an item of “business” for the annual meeting, had satisfied the requirement of Article II, Section 14 both as to the election of directors and as to “the subsidiary business of nominating directors for election.” However, the Court suggested in a footnote that, had Office Depot’s notice of meeting been drafted differently, a different result may have obtained. The Court therefore granted Levitt’s request for a declaration that it may nominate two candidates for election to Office Depot’s board at the annual meeting.