Brigade Leveraged Capital Structures Fund Ltd. v. PIMCO Income Strategy Fund
466 Mass. 368
Mass.2013Background
- Defendants are two closed-end Massachusetts business trusts (PIMCO Income Strategy Fund I & II) whose identical bylaws require shareholder meetings “on at least an annual basis” while listed on the NYSE; NYSE rules separately require an annual meeting each fiscal year.
- Plaintiffs (Brigade) are large preferred-shareholders who sought to nominate trustees for the 2011 meeting after the Funds announced postponing the expected December 2011 meeting to July 31, 2012.
- Brigade sued seeking a declaration and injunction that § 10.2 requires an annual meeting within 12 months of the prior meeting; the Superior Court granted summary judgment for Brigade and ordered an earlier meeting.
- A single justice stayed that order, interpreting the bylaws to require only one annual meeting per fiscal year; the Funds then held the July 31, 2012 meeting (mooting the injunctive relief).
- On appeal the Supreme Judicial Court construed the bylaws as a contract, found ambiguity about timing, and resolved it in favor of shareholders: annual meetings must be held no later than 30 days after the anniversary of the prior annual meeting (i.e., within 395 days).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Meaning of “on at least an annual basis” in § 10.2 | Requires an annual meeting in or within 12 months of the last meeting (≈ every 12 months) | Requires only one annual meeting per fiscal year (NYSE compliance suffices) | Ambiguous on face; construed against drafter and shareholders: must be held no later than 30 days after the anniversary of the prior meeting (effectively within ~395 days) |
| Whether bylaws incorporate NYSE fiscal-year timing | Bylaws require twelve-month intervals regardless of fiscal year | Bylaws only obligate compliance with NYSE rule (one meeting each fiscal year) | Bylaws do not incorporate NYSE timing by reference; courts will not imply incorporation absent clear language |
| Effect of notice/nomination provisions on timing (§ 10.6) | Nomination timing supports twelve-month interval rule | § 10.6 shows trustees can schedule >13 months out without breaching | § 10.6 read with § 10.2/10.6(a) implies an "annual period" ending 30 days after anniversary; later meetings are "special meetings in lieu" with different notice rules |
| Whether ambiguity should be resolved for shareholders | N/A (Brigade position) | N/A (Funds position) | Ambiguity resolved against the drafter (Funds) and in favor of protecting shareholders’ electoral rights |
Key Cases Cited
- Go-Best Assets Ltd. v. Citizens Bank of Mass., 463 Mass. 50 (2012) (summary judgment review standard)
- Chokel v. Genzyme Corp., 449 Mass. 272 (2007) (articles/bylaws construed as contract)
- General Convention of the New Jerusalem in the United States of Am., Inc. v. MacKenzie, 449 Mass. 832 (2007) (bylaws interpretation rules; use of extrinsic evidence)
- State St. Trust Co. v. Hall, 311 Mass. 299 (1942) (declaration of trust as contract between trustees and shareholders)
- Southern Union Co. v. Department of Pub. Utils., 458 Mass. 812 (2011) (contract ambiguity standard)
- Benalcazar v. Goldsmith, 400 Mass. 111 (1987) (construing ambiguous contract provisions against the drafter)