Background
ATG Capital Opportunities Fund LP brought an action in the Delaware Court of Chancery involving Empery Digital, Inc., which was named as a nominal defendant. Ryan Lane and seven other defendants appealed the Court of Chancery’s judgment.
The dispute concerned disclosure requirements incorporated into Empery Digital’s bylaws, including the meaning of “participant” under Instruction 3(a)(v) to Item 4 of Schedule 14A. During the expedited proceedings, the appellants also advanced theories that ATG had to disclose an agreement, arrangement, or understanding with Brown regardless of whether Brown was a participant, and that SEC Rule 14a-9 required disclosure of ATG’s Bitcoin hedge.
The Court’s Holding
The Delaware Supreme Court, sitting en banc, affirmed the Court of Chancery’s interpretation of “participant” under Instruction 3(a)(v) to Item 4 of Schedule 14A as incorporated into Empery Digital’s bylaws.
The court also held that the Court of Chancery did not abuse its discretion by concluding that the appellants waived the two additional disclosure theories because they did not advance them until late in the expedited proceedings. The Supreme Court therefore affirmed the judgment in full.
Key Takeaways
- The Supreme Court upheld the Court of Chancery’s interpretation of “participant” under the federal proxy-schedule instruction incorporated into the company’s bylaws.
- Legal theories introduced late in expedited Court of Chancery proceedings may be treated as waived.
- The court affirmed without reaching the merits of the late-raised theories concerning Brown and ATG’s Bitcoin hedge.
Why It Matters
The order underscores that when corporate bylaws incorporate federal proxy-disclosure terminology, Delaware courts will interpret that language in resolving bylaw disputes. It also highlights the procedural discipline required in expedited litigation: parties risk waiver when they delay presenting potentially dispositive legal theories.