January 17, 2006
Delaware Court Rejects Bally’s ‘Poison Pill’ Motion
According to this press release from the investment fund plaintiff, the Delaware Court of Chancery denied a motion by Bally Total Fitness last week for expedited discovery in furtherance of the company seeking a determination that its “poison pill” has been triggered.
According to the release, the Court concluded that Bally failed to show that it would suffer irreparable harm if its motion was not granted. In addition, the Court said that Bally had waited too long to bring its motion – and that it would be unfair to subject the plaintiff to “the heavy machinery of expedited discovery” before Bally’s annual stockholder meeting, which is scheduled to take place on January 26th.
The Court’s decision arose out of a counterclaim filed by Bally shortly before midnight on January 9th in an action originally brought before the Court in December 2005 by the fund to challenge the legality of certain provisions contained in Bally’s “poison pill” plan that purport to prevent one or more stockholders collectively holding in excess of 15% of Bally’s stock from, among other things, acting in concert to run a proxy contest.
I’m not familiar with the case – but it sounds like relatively aggressive behavior that should be interesting to watch (but not precedent setting from a legal perspective). It may suggest some skepticism by the Court as to the merits of Bally’s claim. Bally’s claim (as I understand it) was a very aggressive use of the pill and one with which the Court would not lightly agree. It would have been a bigger deal had the Court granted expedited discovery.