BLACKROCK CREDIT ALLOCATION INCOME TRUST, BLACKROCK NEW YORK MUNICIPAL BOND TRUST, BLACKROCK ADVISORS, LLC, RICHARD E. CAVANAGH, KAREN P. ROBARDS, MICHAEL J. CASTELLANO, CYNTHIA L. EGAN, FRANK J. FABOZZI, HENRY GABBAY, R. GLENN HUBBARD, W. CARL KESTER, CATHERINE A. LYNCH, ROBERT FAIRBAIRN, and JOHN M. PERLOWSKI, Defendants-Below, Appellants,
SABA CAPITAL MASTER FUND, LTD., Plaintiff-Below, Appellee.
December 4, 2019.
Closed January 29, 2020.
Below: Court of Chancery of the State of Delaware. C.A. No.
William M. Lafferty, Esquire, D. McKinley Measley, Esquire,
Thomas P. Will, Esquire, Morris, Nichols, Arsht & Tunnell
LLP, Wilmington, Delaware. Of Counsel: Tariq Mundiya,
Esquire, (argued) Sameer Advani, Esquire, Alexander L.
Cheney, Esquire, Brittany M. Wagonheim, Esquire, Willkie Farr
& Gallagher LLP, New York, New York for Appellants BlackRock
Credit Allocation Income Trust and BlackRock New York
Municipal Bond Trust.
Carmella P. Keener, Esquire, Rosenthal, Monhait & Goddess,
P.A., Wilmington, Delaware. Of Counsel: Carol S. Shahmoon,
Esquire, Gregory E. Keller, Esquire, (argued) Shahmoon Keller
PLLC, New York, New York for Appellee.
SEITZ, Chief Justice; VALIHURA and TRAYNOR, Justices.
issue we confront in this case is whether under their
respective bylaws, two closed-end investment funds, BlackRock
Credit Allocation Income Trust (" BTZ" ) and
BlackRock New York Municipal Bond Trust (" BQH",
and with BTZ, the " Trusts" ), properly excluded
their shareholder, Saba Capital Master Fund, Ltd. ("
Saba" ), from presenting its slate of dissident trustee
nominees for election at the respective annual meetings. The
Court of Chancery held that such exclusion was improper. It
reasoned that the supplemental questionnaires that Saba's
were asked to complete (the " Questionnaire" and
collectively, the " Questionnaires" ), exceeded the
bylaws' scope and, thus, the Trusts were " not
permitted to rely on the five-day deadline for Saba's
compliance with that request."  It also held that
laches did not bar Saba's claims for equitable relief.
appeal, the Appellants contend that the Court of Chancery
erred by issuing an injunction requiring the Trusts to count
the votes for Saba's nominees at the respective annual
meetings, since they claim that Saba's nominees were
ineligible for election because of their failure to timely
provide supplemental information in accordance with the clear
and unambiguous bylaws. Appellants also contend that the
court erred in holding that Saba's claims for equitable
relief were not barred by laches.
appeal, the parties continue to dispute whether the
Questionnaire is the type of " necessary" and
" reasonably requested" subsequent information that
falls within the meaning of Article I, Section 7(e)(ii) of
the Trusts' bylaws. But, importantly, the parties both
agree that at least part of the Questionnaire is within the
bounds of Section 7(e)(ii), and part is not. It is also
undisputed that Saba, upon receipt of the request for
supplementation, did not contact the Trusts or seek relief
from the deadline. Instead, it let the deadline pass and then
complained, raising a number of excuses for not complying
with the deadline. We agree with the Vice Chancellor that
Section 7(e)(ii) is clear and unambiguous. But we disagree
that Saba should be excused from complying with the
Bylaws' clear deadline. Further, we affirm the Vice
Chancellor's holding as to laches. Accordingly, we
AFFIRM in part, and REVERSE
in part, and REMAND for further proceedings.
Defendant-Appellants BTZ and BQH are Delaware statutory
trusts registered as closed-end investment funds under the
federal Investment Company Act of 1940 .
Defendant-Appellant BlackRock Advisors, LLC advises the
Trusts. The individual Defendant-Appellants comprise the
Trusts' boards of trustees (the " Boards" ). We
refer to BTZ, BQH, BlackRock Advisors, LLC, and the
individual Defendant-Appellants, collectively, as the "
Saba, a Cayman Islands company, holds shares of both Trusts.
Saba is managed by Saba Capital Management, L.P., whose
managing member is Boaz Weinstein.
Article I, Section 7 (" Section 7" ) and Article
II, Section 1 (" Section 1" ) of the bylaws of BTZ
and BQH (collectively, the " Bylaws" ) are relevant
to this appeal. Both sets of Bylaws are identical with
respect to those sections.
Section 7, entitled " Nomination of Directors,"
sets forth the method by which shareholders can nominate
trustees to the Board. The section begins by stating that
" [o]nly persons who are nominated in accordance with
the following procedures
shall be eligible for election as directors of the
Fund."  Section 7(f) further states that
" [n]o person shall be eligible for election as a
director of the Fund unless nominated in accordance with the
procedures set forth in this Section 7 of this Article
nominating directors for election, under Sections 7(a)-(c),
stockholders are required to give timely written notice of a
nomination (a " Nomination Notice" ). Section 7(d)
enumerates what a Nomination Notice must contain, which
includes " information to establish to the satisfaction
of the Board of Directors that the Proposed Nominee satisfies
the director qualifications as set out in Section 1 of
Article II."  It must also contain information
required by federal securities laws, including information
relating to whether the nominee is an " interested
person" under the Investment Company Act of 1940 (the
" 1940 Act" ), and information " that would be
required to be disclosed in a proxy statement or other
filings required to be made in connection with solicitations
of proxies for election of directors in an election contest
pursuant to Section 14 of the [Securities Exchange Act of
Section 7(e)(ii), the provision in the Bylaws at issue here,
reads as follows:
A shareholder of record, or group of shareholders of record,
providing notice of any nomination proposed to be made at an
annual meeting or special meeting in lieu of an annual
meeting shall further update and supplement such notice,
if necessary, so that:
(i) the information provided or required to be provided in
such notice pursuant to this Section 7 of this Article I
shall be true and correct as of the record date for
determining the shareholders entitled to receive notice of
the annual meeting or special meeting in lieu of an annual
meeting, and such update and supplement shall be delivered to
or be mailed and received by the Secretary at the principal
executive offices of the Fund not later than five (5)
business days after the record date for determining the
shareholders entitled to receive notice of such annual
meeting or special meeting in lieu of an annual meeting; and
(ii) any subsequent information reasonably requested
by the Board of Directors to determine that the Proposed
Nominee has met the director qualifications as set out in
Section 1 of Article II is provided, and such update and
supplement shall be delivered to or be mailed and received by
the Secretary at the principal executive offices of the Fund
no later than five (5) business days after the
request by the Board of Directors for subsequent
information regarding director qualifications has been
delivered to or mailed and received by such shareholder of
record, or group of shareholders of record, providing notice
of any nomination.
1 of Article II, entitled " Number and
Qualifications," provides an expansive list of
qualifications that prospective trustees must meet to serve
on either of the Boards. This section lists trustee
requirements and restrictions relating to limits on
directorship positions, potential conflicts, criminal
offenses, prohibited conduct, and various ineligibility
provisions contained in certain federal securities
laws. The parties agreed in the proceedings
below " that some of those qualifications relate to
parallel requirements under the Investment Company Act of
The Nominations Dispute
about March 30, 2019, Saba delivered a timely Nomination
Notice to the Trusts pursuant to Section 7 to nominate four
individuals for election to both of the Trusts' Boards.
The Nomination Notice, according to the Court of Chancery,
generally contained the information required under Section 7,
" albeit at a high level and without much context or
Approximately three weeks later, on April 22, 2019, the
Trusts' counsel, Willkie Farr & Gallagher LLP ("
Willkie" ), emailed Saba in separate emails requesting
additional information. Willkie's transmittal email
Pursuant to Article I, Section 7 of the bylaws of the Fund, I
am writing on behalf of the Board of Trustees of the Fund
(the " Board" ) to request additional information
with respect to the nominees submitted by Saba Capital Master
Fund, LTD (the " Shareholder" ) for election at the
Fund's 2019 shareholder meeting. Please have each of the
proposed nominees complete and sign the attached
questionnaire and return it to my attention with a copy to
Janey Ahn, Secretary of the Fund.
The Board and the Fund each reserves all rights and remedies
with respect to the subject matter of this correspondence,
including without limitation the right to request additional
information from the Shareholder or from the
Shareholder's proposed nominees.
Although it referred to Section 7 generally, the email did
not specifically reference Section 7(e)(ii) or the
five-business-day response deadline. As explained below, the
attached Questionnaire contained a mix of questions, with a
significant number of them directly relating to the Section 1
qualifications. Under Section 7(e)(ii), the responses were
due on April 29, 2019.
did not respond to the information request before the due
date. On the morning of May 1, 2019, seven business days
after making the information request, Willkie emailed Saba on
behalf of BTZ declaring that because the Questionnaires have
not been completed and returned, " the ...