In re Aerojet Rocketdyne Holdings, Inc.

Aerojet Rocketdyne Holdings, Inc. (Aerojet) had an eight-member board split 4-4 between two factions. One group included Aerojet’s chief executive officer, Eileen Drake (the Drake faction) (defendants); the other was led by Warren Lichtenstein, Aerojet’s executive chair and founder of Steel Partners Holdings L.P. (Steel), a major Aerojet stockholder (the Lichtenstein faction) (plaintiffs). In January 2022, Steel delivered a letter nominating a seven-member slate for election, including four incumbent directors. After the nomination, the Drake faction issued a press release—purporting to speak on Aerojet’s behalf—criticizing Lichtenstein’s decision to launch a proxy contest. The Lichtenstein faction filed suit challenging this action, arguing that neither faction had unilateral authority to act on Aerojet’s behalf or to use corporate resources in the contested election. The Delaware Court of Chancery found that the Lichtenstein faction stated a colorable claim and issued an interim ruling meant to maintain Aerojet’s neutrality pending the election. The court then directed each side to submit proposed forms of order. The Lichtenstein faction’s proposed order barred either faction from using Aerojet’s name or resources to support a slate without full board approval but allowed directors to speak in their individual capacities. The Drake faction’s proposed order contained a provision requiring Aerojet to establish a $20 million fund to cover up to $10 million of proxy-solicitation expenses for each side. The faction argued that such a provision was necessary to level the playing field, as the Lichtenstein faction had greater resources. The Drake faction also cited an expert report by Professor Guhan Subramanian, who opined that market practice and a socially optimal outcome supported such a provision.