JANA Master Fund, Ltd. v. CNET Networks, Inc.

954 A.2d 335 (Del. Ch. 2008)



Because a corporation's bylaws and charter are contracts among its shareholders, and because the construction of a contract is purely a question of law, judgment on the pleadings is an appropriate mechanism for resolving a dispute over a corporation's bylaws. Should a court conclude that a contract is reasonably or fairly susceptible of different interpretations or may have two or more different meanings, it is ambiguous, and the court must consult extrinsic evidence. Nevertheless, mere disagreement among the parties does not somehow create ambiguity.


Plaintiff shareholder of defendant corporation sought to replace two directors and expand the size of the corporation's board to create a new majority control. The shareholder moved for judgment on the pleadings under Del. Ch. Ct. R. 12(c), seeking a declaration that the corporation's notice bylaw did not apply to the nominations and proposals, which had not been made pursuant to the federal securities law.


Did the corporation’s bylaw apply to shareholder nominations and proposals not made pursuant to the federal securities law?




The court construed the bylaw and found that it applied only to proposals and nominations that a shareholder wished to have included in the corporation's proxy materials. Under the bylaw, a shareholder could seek to have an issue brought to a vote. The precatory nature of the bylaw recalled the precatory nature of Rule 14a-8. A shareholder who sought to make a proposal under the bylaw had to submit notice to the corporation in time to have the corporation include the proposal on its own form of proxy. The timing requirement only made sense in the context of Rule 14a-8 and did not mirror the advance notice bylaws that the court had previously found valid. The bylaw's last sentence purportedly grafted onto the bylaw all of the requirements of Rule 14a-8; however, those requirements exceeded the default rules under Delaware law and only applied in the context of Rule 14a-8. Following these contentions, the Court granted the shareholder’s motion.

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