Barry M. Klayman, left, and Mark E. Felger, right. Courtesy photos Director's Access to Company's Privileged Information Upheld Despite Proxy Contest
Where two halves of a deadlocked board are competing in a proxy contest, can one half assert the corporation's privilege against the other?
June 01, 2022 at 09:00 AM
8 minute read
Where two halves of a deadlocked board are competing in a proxy contest, can one half assert the corporation's privilege against the other? In In re Aerojet Rocketdyne Holdings, C.A. No. 2022-0127-LWW, (Del. Ch. May 5, 2022), Vice Chancellor Lori Will concluded that it could not. The even division of the board meant that neither side could benefit from the company's resources, including its privilege, to the exclusion of the other.
The background of the dispute was somewhat unusual. Disagreements among members of the board had developed over a potential merger agreement with Lockheed Martin. Defendant Drake, a board member and CEO, accused another board member, plaintiff Lichtenstein, the company's executive chairman, of plotting to remove her so the Company could solicit other bidders allegedly to benefit Lichtenstein financially. To address the accusations, the board appointed a nonmanagement committee to investigate. Meantime, the FTC sued to block the Lockheed merger. The board, fearing that the merger would not close and cognizant of the approaching deadline for submitting director nominations, tried to agree on a slate of nominees but was unsuccessful.
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