## Facts

- Aerojet Rocketdyne Holdings, Inc. had an eight-member board split 4–4 between two director factions aligned with the CEO (Drake) and the executive chairman/large stockholder (Lichtenstein).
- During uncertainty surrounding a proposed acquisition, the board deadlocked on a company-endorsed nominee slate for the upcoming director election.
- Lichtenstein’s affiliated stockholder delivered a nomination notice proposing its own slate, initiating a proxy contest.
- The CEO-aligned faction issued company-branded communications criticizing the opposing faction and used corporate resources and advisors in connection with those communications.
- Outside counsel sent correspondence on company letterhead criticizing the opposing faction and asserting a litigation position in the company’s name, without a board majority authorizing that stance.
- The Lichtenstein faction sued seeking declaratory and injunctive relief to prevent either side from unilaterally using the corporation’s name, resources, or “voice” in the election contest.
- The court issued interim relief maintaining neutrality and, in the opinion, resolved competing proposed orders governing conduct during the ongoing proxy contest.

## Issues

1. Whether, with an evenly divided and deadlocked board, either director faction could unilaterally speak or act for the corporation, including using the corporate name, resources, or advisors, to support its election slate without authorization by a board majority.
2. Whether the court could order the corporation to create and fund an equalized proxy-contest/litigation fund (up to a set amount per faction) to “level the playing field” between competing slates.

## Decision

- The court held that neither faction had authority to speak or act on behalf of the corporation in the proxy contest absent authorization from a valid board majority or proper delegation.
- The court ordered corporate neutrality and barred either side from using the company’s name, branding, and resources to support any slate without board approval.
- The court allowed directors and slates to campaign and communicate with stockholders in their individual capacities and at their own expense, subject to fiduciary duties.
- The court denied the request to impose a court-mandated corporate fund to subsidize both slates’ campaign and related expenses.
- The court entered interim equitable relief governing disclosures and election-related conduct pending the stockholder vote.

## Legal Principles

- Corporate power, including the corporation’s public “voice” and use of corporate assets, is exercised by a board majority (or through valid delegation); an evenly split board cannot authorize partisan use of corporate machinery by either faction.
- In a director election contest driven by intra-board deadlock, maintaining corporate neutrality may be required to protect stockholder choice where no board majority has approved taking sides.
- Directors may solicit proxies and advocate as candidates or stockholders in their personal capacities, but they may not hold themselves out as speaking for the corporation or misappropriate corporate resources for factional advantage.
- The Court of Chancery will enforce limits of corporate authority and fiduciary constraints in election contests, but it will not redesign proxy-contest financing by ordering corporate subsidies absent a legal basis and a board decision.

## Conclusion

The court imposed a neutrality regime for a proxy contest arising from a 4–4 board deadlock, prohibiting either faction from unilaterally using Aerojet’s name or assets to advance its slate, while permitting individual-capacity campaigning, and it refused to compel the company to fund both sides’ election efforts through a court-created equalization fund.


In re Aerojet Rocketdyne Holdings, Inc., 2022 WL 2525971 (Del. Ch. 2022)