A Delaware court has ruled against Empery Digital, Inc. in a dispute over stockholder nominations. The Court of Chancery denied the defendants' request for an interlocutory appeal regarding the rejection of a nomination notice from ATG Capital Opportunities Fund LP. This decision, made on September 14, 2026, holds significant implications for corporate governance and stockholder rights.
The case stems from ATG Capital's attempt to nominate a slate of directors for Empery’s 2026 annual meeting. Empery’s Board rejected this nomination, leading ATG to file a lawsuit. The court's ruling emphasizes the importance of adhering to bylaws and the rights of stockholders to participate in corporate elections.
Background
ATG Capital Opportunities Fund LP, a stockholder of Empery Digital, submitted a notice to nominate candidates for the company's Board of Directors at the upcoming annual meeting. However, the Board rejected this notice, claiming it was deficient. In response, ATG sued Empery, arguing that the rejection was improper.
During the trial, the defendants contended that ATG's nomination notice failed to disclose another stockholder as a participant in the proxy solicitation and did not mention ATG's short position in a Bitcoin exchange-traded fund. However, the court found that the nomination notice complied with Empery’s advance notice bylaws and that the Board acted inequitably by rejecting it without a valid contractual basis.
The Ruling
The court ruled that the defendants' application for an interlocutory appeal was denied. Vice Chancellor Lori W. Will stated, "Interlocutory appeals should be exceptional, not routine, because they disrupt the normal procession of litigation." The court noted that the defendants failed to meet the necessary criteria for such an appeal, which requires a substantial issue of material importance that merits appellate review.
The court also emphasized that the rejection of the nomination notice was not supported by the bylaws' plain text and that the Board's justifications were either unsupported or raised for the first time during the trial. The ruling underscored that the Board's actions breached its fiduciary duties, stating, "The Opinion resolves a central legal question: whether ATG’s Nomination Notice is valid and whether its nominees may stand for election to Empery’s Board."
Impact
This ruling has significant implications for corporate governance, particularly regarding stockholder rights and the enforcement of bylaws. By affirming the validity of ATG's nomination notice, the court reinforces the principle that boards must adhere to their bylaws and cannot arbitrarily reject nominations without a solid contractual basis.
The decision may also set a precedent for future cases involving stockholder nominations and the interpretation of corporate bylaws. It highlights the importance of transparency and adherence to established procedures in corporate governance. The ruling allows ATG's nominees to stand for election at Empery’s annual meeting, thereby empowering stockholders and ensuring their voices are heard in corporate decision-making.
What's Next
The court's decision can be appealed, but the denial of the interlocutory appeal means that the defendants must wait until the case concludes before seeking further review. The upcoming annual meeting on October 14, 2026, will proceed with ATG's nominees on the ballot, allowing stockholders to vote on the candidates.