In this action for breach of contract, Plaintiff institutional investors held cumulative preferred stock of Spanish Broadcasting System (“SBS”), a Delaware corporation, with dividends payable quarterly if so declared by the board of directors. If the dividends were unpaid for four consecutive quarters, a voting rights trigger in the shares’ Certificate of Designation (“Certificate”) allowed the holders of the preferred stock to call a special meeting and elect two additional directors to SBS’s board. In addition, the Certificate prohibited SBS from incurring additional debt after such a triggering event.
During 2009, SBS began to fail to make dividend payments. Plaintiffs alleged a triggering event occurred no later than July 2010. Plaintiffs did not at that time assert their rights under the Certificate, nor did they when SBS incurred additional debt in publicly announced transactions during 2011 and 2012. Plaintiffs brought suit for breach of contract and breach of the covenant of good faith and fair dealing. SBS argued that no triggering event occurred until after the debt transactions, and raised defenses including laches and acquiescence.