C.A. No. 4133-VCL (Del. Ch. Nov. 6, 2008)
In this case, Vice Chancellor Lamb denied a motion for a temporary restraining order (“TRO”) which sought to reverse certain actions taken by the board of directors of the defendant corporation. Essentially, the motion sought to restore the status quo ante and was akin to a demand for a mandatory preliminary injunction, which is “extraordinary relief of a sort that the court does not lightly issue.”
The action concerned the timing of the special meetings of both Alpha and Cliffs stockholders to consider the pending merger agreement between the two corporations. Partly because of a mutual $100 million termination fee obligation that would be triggered if one corporation obtained the necessary stockholder vote but the other did not, those meetings had been scheduled to occur simultaneously on November 21, 2008.
Questions arose as to whether Cliffs would obtain the minimum number of stockholder votes needed to approve the merger. On October 30, Alpha became aware that Cliffs’ management would recommend that the board postpone the Cliffs special meeting. On November 3, Alpha filed a complaint, a motion for preliminary injunction and a motion to expedite proceedings. It did not, however, apply for a TRO -- even though Alpha knew or should have known that Cliffs’ board was meeting that day to consider the postponement. On November 4, after Alpha saw the press release announcing Cliffs’ decision to postpone its special meeting to December 19, Alpha applied for a TRO.
Alpha’s TRO motion did not seek to prohibit Cliffs from changing the status quo. Rather, the motion sought an order requiring Cliffs to restore the status quo ante by reinstating the November 21 special meeting date. Noting that such relief is akin to a mandatory preliminary injunction and that this would constitute “extraordinary relief of a sort that the court does not issue lightly,” the Court held that such relief required the moving party to show that it is “entitled as a matter of law to the relief it seeks based on undisputed facts.” Because Alpha’s argument hinged on disputed facts regarding whether Cliffs violated the merger agreement by delaying its stockholders meeting, the Court ruled that Alpha failed to satisfy the requirements for granting mandatory preliminary injunctive relief.
Additionally, the Court wrote that “the mere filing of a complaint seeking an injunction does not operate as a temporary restraining order. ... Alpha could have immediately sought a temporary restraining order prohibiting Cliffs from taking any action to postpone its meeting date until such time as this court had opportunity to consider the issue.”
While noting that the scope of future injunctive relief available to Alpha likely would be limited to enjoining further postponement of Cliffs’ special meeting, the Court nevertheless granted Alpha’s application for an expedited preliminarily injunction hearing. It found that Alpha had stated a sufficiently colorable claim (breach of the merger agreement) and that the parties had stipulated in the merger agreement that irreparable harm would occur in the event that any of the provisions of the agreement were breached. The Court granted limited discovery.
The full opinion is available here.