The suit was filed on Tuesday in the Delaware Chancery Court by Strategic Investment Opportunities LLC, the same entity that lost a case last week in the same court to submit Alden-backed board candidates against Lee’s incumbent directors.
At issue in this recent suit is what the Alden-back entity says is a breach by Lee of its own bylaws, adopted in 2019. Specifically, Alden claims, the bylaws require a majority voting standard in uncontested elections to the board of directors, and Lee Enterprises has said that the election next month, which is now uncontested, will be decided on a plurality standard. Instead of needing support from a majority of the voting stockholders, the board candidates simply need support from those shareholders who participate. And if they’re running unopposed, they effectively need just a single vote.
“Defendants have touted and continue to tout, including in the nomination action and in the proxy materials that the company would apply a plurality standard,” the suit stated. “[But] the 2019 amendment to the Bylaws provides for a majority standard in uncontested elections.”
Under the majority standard, Alden said, directors who get more “no” votes than favorable support have to submit their resignations pending board action. That standard doesn’t apply in the plurality vote. “By applying the plurality standard instead of the majority standard, defendants are effectively assuring that [directors] Ms. Junck and Mr. Moloney will be reelected and will not be required to submit resignations,” Alden stated.
Lee Enterprises, the suit states, considers this election to be contested because Alden’s attempt to nominate its own slate was still being decided, which Alden says is inaccurate.
“The stockholders must be informed of the correct voting standard, i.e., the majority voting standard, and must be given time to provide voting instructions or proxies under correct information,” Alden said. “The 2022 Annual Meeting should not be allowed to occur until corrective disclosures are made.
For its part, Lee responded with a statement of its own. “We are disappointed, but not surprised, that Alden continues to pursue increasingly desperate measures in an attempt to destabilize Lee and advance its grossly undervalued hostile proposal to purchase the company,” it said.
“We are applying the clear and plain language of our bylaws, which is not new, and our position that plurality voting applies at this meeting (because of Alden’s actions) has been abundantly clear in our disclosures for over a month now. Alden asked us last week to amend our bylaws to change the clear meaning of them in the middle of an election. The Board properly determined not to do so.”