DRIVER OPPORTUNITY PARTNERS I, LP v. ADAMS

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF PENNSYLVANIA

DRIVER OPPORTUNITY PARTNERS I, LP, )

Plaintiff,

VS. Civil Action No. 3:23-56

) Judge Stephanie L. Haines

J. MICHAEL ADAMS, ef al., )

Defendants.

OPINION

This action arises out of the attempt by Plaintiff Driver Opportunity Partners I, LP

(“Driver”) to nominate three candidates to the Board of Directors of Defendant Ameriserv

Financial, Inc. (“Ameriserv”)! for an upcoming director election at Ameriserv’s 2023 Annual

Meeting, which is currently scheduled for May 26, 2023. Ameriserv rejected Driver’s Nomination

Notice for failure to comply with the advance notice provisions of Ameriserv’s Amended and

Restated Bylaws (“Advanced Notice Bylaw”) and determined that Driver does not have the right

to nominate its candidates for the 2023 Annual Meeting. Pending before the Court is Driver’s

Motion for Preliminary Injunction (ECF No. 4) wherein Driver requests that the Court enjoin

Ameriserv from holding its 2023 Annual Meeting until after a decision on the merits of its claims

in this action. On April 14, 2023, Defendants filed a Memorandum of Law in Opposition to

Driver’s Motion for Preliminary Injunction (ECF No. 22), and on April 21, 2023, Driver filed a

Reply in Support of its Motion for Preliminary Injunction (ECF No. 31). On April 24, 2023,

1 Defendants J. Michael Adams, Jr., Amy Bradley, Allan R. Dennison, Kim W. Kunkle, Margaret

A. O’Malley, Daniel A. Onorato, Mark E. Pasquerilla, Sara A. Sargent, and Jeffrey A. Stopko are

named as Defendants because they are current directors on the Ameriserv Board, and accordingly,

are referred to by the parties as the “Director Defendants”.

Defendants filed a Supplemental Submission (ECF No. 32). The Court conducted a preliminary

injunction hearing on May 9 and 10, 2023 (ECF Nos. 51 and 52). The parties then filed post-

hearing briefs (ECF Nos. 54 and 55) on May 12, 2023, and this matter is now ripe for disposition.

Upon consideration of the testimony and evidence of record, the Court finds Driver has

failed to meet its burden to demonstrate it is likely to prevail on the merits of its claims or that it

will suffer immediate, irreparable harm if the Court does not issue a preliminary injunction.

Accordingly, the Court will DENY Driver’s Motion for Preliminary Injunction (ECF No. 4) for

the following reasons which constitute the Court’s findings of fact and conclusions of law.

L Factual and Procedural Background?

AmeriServ is incorporated under the laws of Pennsylvania, and its common stock is publicly

traded on the NASDAQ exchange under the ticker “ASRV.” Jd. at §3. According to its public

filings, between August 19, 2022 and January 10, 2023, Driver purchased 201,000 shares of

common stock in Ameriserv, and Driver affiliates own another 1,276,919 shares of Ameriserv

common stock, for a total ownership of 1,477,919 shares, representing 8.6% of the Ameriserv’s

outstanding common stock. Jd. at §2. Driver’s general partner is Driver Management Co., LLC,

the managing member of which is J. Abbott R. Cooper (“Cooper”). Jd. at 414.

A. Ameriserv’s Bylaws

Ameriserv’s Advance Notice Bylaw is found at Section 1.3 of its bylaws, and it sets forth

the advance notice requirements that Ameriserv requires of all candidates for its board of directors

nominated by a shareholder. To nominate a director candidate, the nominating shareholder must

2 There are few disputed facts in this case. Unless otherwise noted, the facts included in this section

are taken from the Joint Stipulation (ECF No. 34) that the parties filed in advance of the

preliminary injunction hearing. Additionally, the reference to “JX” is used by the parties and the

Court to refer to the Joint Exhibits admitted at the preliminary injunction hearing, which are filed

of record at ECF Nos. 56 and 57.

provide “timely written notice” to the Non-Executive Chairperson of the Company Board in

accordance with the requirements in Section 1.3(b) of the Advance Notice Bylaw (ECF No. 22-3

at pp. 9-10). The Advance Notice Bylaw identifies nine categories of information that any

shareholder seeking to nominate a director candidate must provide as to each candidate, including:

such other information regarding each nominee proposed by the Nominating

Shareholder as would have been required to be included in a proxy statement filed

pursuant to the proxy rules of the Securities and Exchange Commission had the

nominee been nominated, or intended to be nominated, by the Board of Directors.

Id. at Article 1, § 1.3(b)(vii)(hereafter, “proxy information”).

To be timely, “in the case of an annual meeting that is called for a date that is within 30 days

before or after the anniversary date of the immediately preceding annual meeting of shareholders,”

the written notice must be provided “not less than 90 days nor more than 120 days prior to such

anniversary date[.]” Id. In 2022, Ameriserv held its annual shareholder meeting on April 26, 2022

(ECF No. 22 at p. 5). Accordingly, the nomination window within which shareholders were

required to submit nomination notices in accordance with the Advance Notice Bylaw ran from

December 27, 2022 to January 26, 2023. Id. Under the Advanced Notice Bylaw, if the annual

meeting is not held within 30 days of the anniversary of the prior year’s meeting, then the

shareholder nomination period resets (ECF No. 22-3 at pp. 9-10, § 1.3(a)). The Advance Notice

Bylaw was adopted in its current form in 2013 (ECF No. 34 at 72).

Also of relevance to this matter, Ameriserv’s Bylaws contain what the parties refer to as

an “Interlocks Bylaw” at Section 2.14. Jd. at §73. The Interlocks Bylaw provides that: “[nJo

person shall be eligible for election, re-election, appointment or re-appointment to the Board ... if

such person is or within the preceding five years has been a director of any other depository

institution unless such person is approved by a majority of the Board...” (ECF No. 22-3 at pp. 9-

10, Article 2, § 2.14). There is no dispute that the Interlocks Bylaw was adopted in 2003 by a vote

of Ameriserv’s Board and not by a vote of shareholders (ECF No. 34 at 73).

B. Driver’s Nomination Notice and Ameriserv’s Deficiency Letter

As previously stated, in December 2022, Driver informed Ameriserv that it wished to

nominate three individuals as director candidates for Ameriserv’s Board of Directors at the

upcoming 2023 Annual Meeting. On January 9, 2023, AmeriServ asked Driver to have its

proposed nominees complete a nominee questionnaire and make themselves available for an

interview (ECF No. 22-3 at p. 4). However, Driver declined to participate in this voluntary

process.

Instead, on January 17, 2023, Driver delivered its Nomination Notice to Defendant

Dennison, the Chair of the Board of Ameriserv (ECF No. 34 at □□□ 26). In the Nomination Notice

(ECF No. 22-3 at pp. 25-40), Driver indicated it intended to nominate Cooper, Julius D. Rudolph

(“Rudolph”), and Brandon L. Simmons (“Simmons”) as nominees to be elected to the Board as

directors at the 2023 Annual Meeting (ECF No. 34 at §26). Cooper testified that Driver hired

outside counsel to collect the information Driver needed to provide in its Nomination Notice (ECF

No. 51 at pp. 15:11-16:13, 103:5-8, 103:17-104:1). Driver submitted the Nomination Notice on

January 17, 2023, and the parties do not dispute January 26, 2023 was the applicable deadline.

On January 31, 2023, AmeriServ responded to Driver’s Nomination Notice (the

“Deficiency Letter”) (ECF No. 22-3 at pp. 42-44). In the Deficiency Letter, Ameriserv identified

four deficiencies with the Nomination Notice related to the proxy information required under

Schedule 14A. See 17 C.F.R. § 240.14a-101. Ameriserv first identified that Item 5(6)(1)(@1) of

Schedule 14A requires the disclosure of each nominee’s “present principal occupation or

employment and the name, principal business and address of any corporation or other organization

in which such employment is carried on...”. Jd. at § 240.14a-101. As to Rudolph, the Nomination

Notice failed to confirm that Rudolph’s listed address was his principal place of business, and as

to Simmons, the Nomination Notice failed to provide addresses for his listed employment or

confirm whether those addresses were the same as the address provided on the notice for Simmons.

As the second deficiency, Ameriserv stated that Item 5(b)(1)(vi) of Schedule 14A requires

the Nomination Notice to “[s]tate with respect to all securities of the registrant purchased or sold

within the past two years, the dates on which they were purchased or sold and the amount

purchased or sold on each such date.” Jd. at § 240.14a-101, Item 5 (b)(1)(vi). Driver’s Nomination

Notice states that “none of the Nominees have entered into any transactions in the securities of the

Company during the past two years” (ECF No. 22-3 at p. 31). However, Exhibit A of the

Nomination Notice disclosed numerous transactions by Rudolph, but the Nomination Notice did

not address this inconsistency. The Nomination Notice also failed to state whether McKnight

Realty Partners, of which Rudolph currently serves as CEO, or any of its principals or affiliates

has purchased or sold any securities of Ameriserv during the past two years.

As to the third deficiency, Ameriserv stated that Item 7(b) of Schedule 14A requires the

disclosure of the information required by Item 404(a) of the U.S. Securities and Exchange

Commission (“SEC”) Regulation S-K. Jd. at § 240.14a-101, Item 7(b). Item 404(a) requires the

disclosure of “any transaction, since the beginning of the registrant’s last fiscal year, or any

currently proposed transaction, in which the registrant was or is to be a participant and the amount

involved exceeds $120,000, and in which any related person had or will have a direct or indirect

material interest.” 17 C.F.R. § 229.404. The applicable definition of “related persons” includes

“any immediate family member...of any nominee for director...” Id., Instructions 1(a)(iii).

Ameriserv identified in its Deficiency Letter that the Nomination Notice completely ignored the

requirement to disclose related party transactions (the “related party transactions”) as to all

nominees, noting the Nomination Notice stated only that “no Participant or any of his, her or its

‘associates’ was a party to any transaction, or series of similar transaction. ..to which the Company

or any of its subsidiaries was or is to be a party...[exceeding] $120,000” (ECF No. 22-3 at p. 43).

The term “associates” is a defined term that includes only “any relative of such spouse who has

the same home as such person.” 17 C.F.R. § 240.14c-1(a)(3).

Lastly, as to the fourth deficiency, Ameriserv stated that “Item 8 of Schedule 14A requires

with respect to the Nominees and their associates, the disclosure of the information required by

Item 402 of Regulation S-K (Executive Compensation).” Driver’s Nomination Notice failed to

provide this required disclosure. 17 C.F.R. § 240.14a-101, Item 8.

As to the deficiencies in the Nomination Notice, Ameriserv indicated it would “appreciate

[Driver’s] prompt attention to [those] issues” (ECF No. 22-3 at. p. 44). The Deficiency Letter

cautioned however that the letter should not be interpreted to be confirmation or validation of the

sufficiency, timeliness or adequacy of the Nomination Notice in any respect (ECF No. 22-3 at p.

44) (see also ECF No. 51 at p. 127:7-22). There is no dispute that Ameriserv’s bylaws do not

require it to inform Driver of any deficiencies in its Nomination Notice and do not provide a “cure”

period or process to correct any deficiencies after the expiration of the nomination window

deadline (ECF No. 51 at pp. 129:11-16; 97:25-98:1-4),

C. Related Party Transaction Disclosures and Ameriserv’s Rejection of Driver’s

Nomination Notice

On February 10, 2023, Driver responded to AmeriServ’s January 31, 2023 letter regarding

the Nomination Notice (ECF No. 22-3 at pp. 46-49). In that letter, Driver disclosed that Rudolph’s

father had a $4 million line of credit with Ameriserv and his brother-in-law, identified incorrectly

as “Benyamin Dere,” had “several commercial mortgage loans from the Company in connection

with the purchase of rental units, which total, in the aggregate, approximately $8 million.” Jd. at

p. 48. At the preliminary injunction hearing, Rudolph testified he provided the related party

transaction information to Driver’s attorneys during the preparation of the Nomination Notice

(ECF No. 52, at pp. 33-34). In addition to providing this disclosure to Ameriserv, Driver also

provided Rudolph’s related party transaction information to the SEC as part of its preliminary

proxy statement on February 8, 2023 (ECF No. 34 at $39).

On March 7, 2023, AmeriServ wrote to Driver to inform it of its intent to nominate Richard

W. Bloomingdale, David J. Hickton, and Daniel A. Onorato for election to the Company’s Board

at the 2023 Annual Meeting. Jd. at §43. On March 15, 2023, AmeriServ wrote to Driver to reject

its Nomination Notice (the “Rejection”) (ECF No. 34 at §44, ECF No. 22-3 at pp. 51-61, JX-24).

Ameriserv stated it rejected the Nomination Notice because it failed to satisfy the requirements of

the Advance Notice Bylaw and that Driver’s failure to timely comply with the Advance Notice

Bylaw prevented Driver from seeking to elect its proposed nominees to the Board at the 2023

Annual Meeting. The Rejection also stated that Ameriserv looked into Rudolph’s related party

transaction disclosure and determined that the information Driver provided on February 10, 2023

was inaccurate in terms of (1) the number of lines of credit at issue, (2) the amount of the loans at

issue, and (3) the first and last names of Rudolph’s brother-in-law (ECF No. 52 at p. 52:1-20).

Ameriserv’s Rejection also explained Cooper would be ineligible to join the Board under the

Interlocks Bylaw because Cooper was set to be elected as a director to the board of the First of

Long Island Corporation, a depository institution, on April 18, 2023. AmeriServ also then publicly

filed its proxy soliciting material with the SEC (ECF No. 34 at §45, JX-25).

At the preliminary injunction hearing, Jeffrey Stopko, Ameriserv’s President and CEO,

and Allan Dennison, Chairman of Ameriserv’s Board, both testified regarding the decision to

reject the Nomination Notice, which was memorialized in meeting minutes from a March 14, 2023

Special Board Meeting (ECF No. 56-3 at pp. 294-297). The meeting minutes state that “[i]t

appears that Ameriserv has an opportunity to reject Driver’s notice of director nominations as a

result of non-compliance with the bylaw requirement to disclose certain required information.”

Id. at p. 294. As to the meeting minutes, Dennison testified as follows:

Q. Now, you described the prospect of rejecting Driver’s nomination notice as an

opportunity for the board. Why did you use the word opportunity?

A. Because clearly it was an opportunity to take an action in dealing with an activist

shareholder.

Q. And you viewed the ability to exclude any possibility that Driver could nominate

candidates as a good thing for the board, correct?

A. We viewed the current list of candidates that he was proposing were not appropriate

for the board, and that’s why we were able to reject the nomination.

ECF No, 52 at p. 85:1-19.

On March 16, 2023, Driver responded to the Rejection by refusing to withdraw its nominee

slate and threatening litigation against Ameriserv and its Directors if they refused to reverse the

decision to reject the Nomination Notice (ECF No. 22-3 at pp. 63-65). On March 17, 2023,

AmeriServ filed a Complaint for Declaratory Judgment in the Court of Common Pleas of Cambria

County, Pennsylvania against Driver, Cooper, Rudolph, and Simmons (ECF No. 34 at 948, JX-

27a). On March 22, 2023, Driver provided a further disclosure in response to the Rejection and

disclosed that Rudolph’s father “has two personal lines of credit with the Company which total $5

million” but continued to misidentify Rudolph’s brother-in-law as “Benyamin Dere” (ECF No,

22-3 at pp. 67-74).

On March 29, 2023, Driver filed this lawsuit requesting that the Court (1) declare its

Nomination Notice is valid; (2) enjoin the Ameriserv from rejecting Driver’s Nomination Notice;

(3) require the Ameriserv to “correct” its public filings with the SEC; (4) enjoin the Ameriserv’s

2023 Annual Shareholder meeting from going forward; and (5) declare that the Director

Defendants breached their fiduciary duties to Driver.

I. Standard of Review

“(T]he grant of injunctive relief is an ‘extraordinary remedy which should be granted only

in limited circumstances.’” Instant Air Freight Co. v. C.F. Air Freight, Inc., 882 F.2d 797, 800

(3d Cir. 1989) (quoting Frank’s GMC Truck Ctr., Inc. v. Gen. Motors Corp., 847 F.2d 100, 102

(3d Cir. 1988). To prevail, the plaintiffs must demonstrate that: (1) they are likely to succeed on

the merits of their claims, (2) they are likely to suffer irreparable harm without relief, (3) the

balance of harms favors them, and (4) relief is in the public interest. Issa v. Sch. Dist. of Lancaster,

847 F.3d 121, 131 (3d Cir. 2017). “All four factors should favor relief before an injunction will

issue.” S & R Corp. v. Jiffy Lube Int'l, Inc., 968 F.2d 371, 374 (Gd Cir. 1992) (citation

omitted). However, before reaching factors three (3) and four (4), the moving party must first

satisfy its burden with respect to factors one (1) and two (2). Ifa plaintiff fails to satisfy this

burden, this is the end of the inquiry, and a preliminary injunction will not issue. Reilly v. City of

Harrisburg, 858 F.3d 173, 179 (3d Cir. 2017), as amended (June 26, 2017).

II. Analysis

The Court has jurisdiction over this matter pursuant to 28 U.S.C. 31331 as federal courts

have exclusive jurisdiction over Driver’s Section 14(a) claim at Count I pursuant to the Securities

Exchange Act of 1934, 15 U.S.C. §78n(a), and SEC Rule 14a-9, 17 C.F.R. §240.14a-9. See 15

U.S.C. §78aa. Diversity jurisdiction also exists under 28 U.S.C. §1332(a). However, as a

preliminary issue, Ameriserv argues the Court should abstain from adjudicating Driver’s claims

and dismiss this case because the legal issues in this case involve novel questions of state law as

to the interpretation of Pennsylvania’s Business Corporation Law and these questions should be

heard in state court. Alternatively, Ameriserv contends that if the Court decides that it should

retain jurisdiction over Driver’s Section 14(a) claim at Count I, that claim should be stayed pending

resolution of litigation that was first filed in the Court of Common Pleas of Cambria County, but

has since been removed to this Court and is filed at 3:23-cv-67, Ameriserv Financial, Inc. y. Driver

Opportunity Partners I, L.P. et al.

As previously mentioned, Ameriserv initiated the parallel state court litigation to obtain a

declaratory judgment finding that Driver’s candidates could not stand for election because of

Driver’s failure to comply with the Advance Notice Bylaw. Ameriserv filed that action in state

court as both Ameriserv and Rudolph are Pennsylvania citizens. Driver’s removal alleges Rudolph

was fraudulently joined as a party to that action. Prior to that, on December 9, 2022, Driver

initiated a lawsuit against Ameriserv in this Court relating to a corporate books and records

inspection request, which is filed at Driver Opportunity Partners I, LP y. Ameriserv F. inancial,

Inc., 3:22-cv-237.

Thus, at this time, there are currently three different cases between these parties before the

Court which essentially turn on the same set of documents and events, and in each of these cases,

the parties have filed dispositive motions, including Ameriserv’s motion to remand the parallel

state court litigation filed at 3:23-cv-67. Given the immediacy of the injunctive relief requested

in this case, the Court first rules on the preliminary injunction motion and in due course will

address the remand motion pending in the case filed at 3:23-cv-67. Following that ruling, the

Court will revisit the issue of abstention in this case.

As to Driver’s request for injunctive relief, Driver contends that enjoining Ameriserv from

holding its meeting would maintain the status quo. Ameriserv contends that the Annual Meeting

has gone forward in the spring of each year for at least the past 30 years, and further, that Driver

clearly anticipated an annual meeting to be scheduled within 30 days before or after the 2022

3 Though allegations concerning the corporate books and records inspection request litigation filed

at 3:22-cv-237 have spilled into this case, the Court need not address the allegations in that case

to rule on the pending request for a preliminary injunction.

10

annual meeting, which was held on April 26, 2022, based on its calculation of the nomination

notice window. The Court agrees with Ameriserv and finds that, in seeking to enjoin the May 26,

2023 Annual Meeting, Driver seeks to alter the status quo.

For the reasons set forth below, the Court finds Driver has not demonstrated it is likely to

succeed on the merits of its claims or that it will suffer immediate and irreparable harm, and

accordingly, the Court will deny Driver’s request for a preliminary injunction.

A. Driver is not likely to succeed on the merits of its claims.

A showing of the likelihood of success on the merits is a “gateway factor,” which the

plaintiff must establish with the required specificity. Reilly, 858 F.3d at 179. As previously stated,

at Count I, Driver’s Complaint asserts a claim under Section 14(a) of the Securities Exchange Act

of 1934, 15 U.S.C. §78n(a), and SEC Rule 14a-9, 17 C.F.R. §240.14a-9. Driver seeks declaratory

and injunctive relief in its favor at Count II. Lastly, Driver asserts a claim against the Director

Defendants for breach of fiduciary duty at Count III. Ultimately, Driver has not shown that its

chance of success is “significantly better than negligible,” Reilly, 858 F.3d at 179, as to any of its

claims.

1. Driver is not likely to succeed on its claim for declaratory and injunctive relief at

Count I.

Though Driver’s Section 14(a) claim is asserted as Count I of the Complaint in this case,

resolution of that claim turns on the Court’s determination of the issues raised in Count II.

Therefore, the Court will first address Driver’s likelihood to succeed on its claim at Count II for

declaratory and injunctive relief against Ameriserv before addressing the derivative Section 14(a)

claim at Count I.

At Count II, Driver seeks a declaration under the Declaratory Judgment Act, 28 U.S.C.

2201, that Ameriserv’s rejection of the Nomination Notice is an invalid corporate action.

11

Pennsylvania’s Business Corporation Law (“BCL”) allows the court to review corporate actions

and to invalidate or enjoin enforcement of bylaws that are patently unreasonable or conflict with

specific statutory requirements. See id. 15 Pa. C.S. §§ 104, 1793. Relevant to this case, “Tt]he

BCL allows corporations to enforce advance notice provisions only if they are ‘fair and reasonable’

in light of corporate needs.” High River Ltd. P'ship v. Mylan Labs., Inc., 383 F. Supp. 2d 660,

665 (M.D. Pa. 2005) (quoting 15 Pa. C. S. § 1758(e)). If a company’s “bylaws provide a fair and

reasonable procedure for the nomination of candidates for election as directors, only candidates

who have been duly nominated in accordance therewith shall be eligible for election.” 15 Pa. C.S.

§ 1758(e); see also High River, 383 F. Supp. 2d at 663 (“[s]hareholders are allowed to nominate

candidates for election to the board, but the corporation is obligated to accept only those

nominations submitted in accordance with advance notice requirements of the corporate

bylaws...”).

Here, Driver argues it is likely to succeed on its claim at Count II because Ameriserv’s

Advance Notice Bylaw is unfair and unreasonable on its face and as applied by Ameriserv’s Board

of Directors. As set forth below, the Court disagrees and finds the Advance Notice Bylaw is fair

and reasonable both on its face and as applied.

a. The Advance Notice Bylaw is Fair and Reasonable.

Pursuant to Article 1, Section 1.3(b) of the Advance Notice Bylaw, only such persons who

are nominated pursuant to the procedures set forth in the bylaws are eligible to stand for election

to the Company’s board of directors. There is no dispute that the Advance Notice Bylaw was

adopted in its current form in 2013—almost 9 years before Driver acquired its interest in

Ameriserv. See Rosenbaum v. CytoDyn Inc., No. 2021-0728-JRS, 2021 Del. Ch. LEXIS 241, at

12

*4 (Ch. Oct. 13, 2021) (“No one disputes that the bylaw was adopted on the proverbial ‘clear

day.’”).4

Driver contends that it is not fair or reasonable for Ameriserv to require that a shareholder

give the same information to the incumbent Board as the Board would include in a proxy statement

to the shareholders because: 1) Ameriserv is then inserting itself into the role of the SEC; 2) it only

applies to candidate’s nominated by a shareholder, not those nominated by the Board; and 3) the

Board cannot use this section to disqualify shareholder nominees. Driver also complains it is

unfair to require it to make the related party transaction disclosures, describing the SEC proxy

disclosure requirements as a “legislative labyrinth” (ECF No. 53 at p. 8).

Driver’s arguments are unavailing. Advance notice bylaws routinely require a nomination

notice to include the SEC proxy statement information. See, e.g., Blackrock Credit Allocation

Income Tr. v. Saba Capital Master Fund, Ltd., 224 A.3d 964, 968, 980-81 (Del. 2020) (upholding

an advance notice bylaw that required shareholder nomination notices to “.. contain

information...‘that would be required to be disclosed in a proxy statement or other filing required

to be made in connection with solicitations of proxies for each election of directors in an election

contest pursuant to Section 14 of the [Securities Exchange Act of 1934]’”); Rosenbaum, at *4

(“[T]he Advanced Notice Bylaw [at issue] incorporates the disclosure requirements in Regulations

14A of the Securities Exchange Act of 1934.”).

Specifically, in BlackRock, the Delaware Supreme Court held that a shareholder’s board

nominees were ineligible to stand for election because the shareholder had failed to comply with

4 Though Driver correctly points out that Delaware does not have a statute requiring advance notice

bylaws to be “fair and reasonable” as does Pennsylvania’s BCL, Delaware case law appears to

evaluate advance notice bylaws under similar standards. See Strategic Inv. Opportunities LLC v.

Lee Enters., No. 2021-1089-LWW, 2022 Del. Ch. LEXIS 34, at *22 (Ch. Feb. 14, 2022) (“[t]he

court must determine whether the advance notice bylaw has afforded the shareholders a fair

opportunity to nominate director candidates”) (internal citation omitted).

13

the advance notice bylaw at issue, in part, by failing to provide complete information that “would

be required to be disclosed in a proxy statement.” BlackRock, 224 A.3d at 968, 981. In this case,

Cooper agreed that the required disclosure of proxy statement information is “not an uncommon

obligation found in financial institution bylaws” and is “pretty customary” (ECF No. 51 at pp.

99:12-100:22, 101:8). Further, Cooper testified Driver obtained outside counsel based in New

York, from the firm Olshan Frome Wolosky, LLP, and that these attorneys were specialized in this

field (“This is what they do.”) (ECF No. 51 at p. 15: 11-13). Accordingly, the Court finds Driver

has failed to provide evidence to support its contention that the Advance Notice Bylaw is unfair

or unreasonable on its face. See Rosenbaum v. CytoDyn Inc., No. 2021-0728-JRS, 2021 Del. Ch.

LEXIS 241 (Ch. Oct. 13, 2021) (entering judgment in favor of defendants because defendants’

advance notice bylaw had been in place for years before plaintiffs submitted their nomination

notice, and plaintiffs were well aware of, and understood, the advance notice bylaw, as the

evidence revealed “plaintiffs had parsed it carefully before submitting their Nomination Notice’).

b. The Advance Notice Bylaw is fair as applied.

Driver contends that the Advance Notice Bylaw is unfair as applied by the Board because

the Board waited until after the Nomination Notice Deadline to advise of the deficiencies in the

Nomination Notice, and even though Driver provided additional disclosures, Ameriserv still

rejected the Nomination Notice. The Court notes Driver did not wait until the eve of the deadline

to submit its Nomination Notice, but rather submitted it almost 9 days before the deadline.

However, Ameriserv did not advise Driver of the deficiencies in the Nomination Notice until

January 31, 2023, after the deadline passed. Additionally, regarding the deficiencies, Ameriserv

indicated it would “appreciate [Driver’s] prompt attention to [those] issues” (ECF No, 22-3 at. p.

14

44). It is plausible that Driver may have believed its Nomination Notice would be eventually

accepted if it corrected the deficiencies.

As to the enforcement of an advance notice bylaw, in Strategic Inv. Opportunities LLC v.

Lee Enters. the Delaware Chancery Court noted that:

“t]he court’s analysis does not necessarily end if a stockholder fails to comply with

the plain terms of an advance notice bylaw. If circumstances require, the court will go

on to consider whether the fiduciaries’ actions were unreasonable or inequitable.

Equity will prohibit, for example, attempts to ‘utilize the corporate machinery’ for the

‘purpose of obstructing the legitimate efforts of dissident stockholders in the exercise

of their right to undertake a proxy contest against management.’”

Id. at *22 (quoting Schnell v. Chris-Craft Indus., Inc., 285 A.2d 437, 439 (Del.1971)).

The Strategic Court specifically evaluated the issue of “as applied” Board conduct as

follows:

“There is also ‘no evidence of any manipulative conduct’ by the Board suggesting that

its enforcement of the Bylaws was not made even handedly and in good faith. The

Board did not, for example, ‘significant[ly] change [the] corporate direction or policy’

after the notice deadline had expired as in Hubbard v. Hollywood Park Realty Enters.,

Inc., Civil Action No. 11779, 1991 Del. Ch. LEXIS 9 (Ch. Jan. 14, 1991); set meeting

dates that made it impossible for a stockholder to give timely notice of a nomination

as in Lerman y. Diagnostic Data, Inc., 421 A.2d 906 (Del. Ch. 1980); amend the date

of the stockholder meeting to ‘obtain an inequitable advantage’ as in Schnell v. Chris-

Craft Indus., Inc., 285 A.2d 437 (Del.1971); or fail to announce an interpretation of a

bylaw that effectively thwarted a stockholders’ ability to present a stockholder

proposal until the nomination deadline had passed as in Mesa Petroleum Co. v. Unocal

Corp., C.A. 7997, 1985 Del. Ch. LEXIS 461, at *1 (Ch. Apr. 22, 1985).”

Id. at *36.

Here, Driver claims that Ameriserv used the Advance Notice Bylaw as a pretext to deny

shareholders their right to nominate and elect directors of their choosing (ECF No. 53 at p. 16).

However, there is no evidence that Ameriserv engaged in any manipulation or took any actions to

prevent Driver from complying with the Advance Notice Bylaw. Relying on the March 14, 2023

meeting minutes, Driver contends the Board was searching for any “opportunity” they could find

15

to reject Driver’s Nomination Notice, but the fact that the Board was aware it had the “opportunity”

to reject the Nomination Notice has no effect on Driver’s failure to comply with the requirements

of the Advance Notice Bylaw in its Nomination Notice. See Strategic at *36-37 (“Here, nothing—

and certainly no actions of the Board—precluded Opportunities from complying with the Bylaws’

requirements.”); Rosenbaum, at *48 (“Even though the Board delayed in responding to the

Nomination Notice, given the nature of the omissions, they rejected it on reasonable

grounds. There was no manipulation; there was no inequitable conduct.”). Ameriserv was

justified in rejecting the Nomination Notice for its failure to comply with the validly enacted

Advance Notice Bylaw.

Moreover, there is no dispute that Ameriserv’s bylaws do not provide for an opportunity to

cure any defects in the Nomination Notice or any obligation on the part of Ameriserv to timely

notify of deficiencies, let alone a duty to receive or credit supplemental disclosures received after

the nomination notice window closes. “If the bylaw is unambiguous in its language, [the court]

does not proceed to interpret it or to search for the parties’ intent behind the bylaw.” Pearson v.

Exide Corp., 157 F. Supp. 2d 429, 436 (E.D. Pa. 2001) (citing Hibbert v. Hollywood Park, Inc.,

457 A.2d 339, 343 (Del. 1983)). The court should only interpret “the bylaw as it is written,

and...give language which is clear, simple, and unambiguous the force and effect required.” Id.

To grant the relief Driver seeks, the Court would impose on Ameriserv a duty to allow for a cure

period and/or supplemental disclosures past the close of the nomination window when its bylaws

unambiguously do not provide for such remedies.

c. Ameriserv’s Rejection of the Entire Nomination Notice was Justified.

Driver contends that the Board unfairly applied the Advance Notice Bylaw by rejecting the

Nomination Notice as to Cooper and Simmons when the disclosure deficiencies related only to

16

Rudolph. In the case Rosenbaum v. CytoDyn Inc., No. 2021-0728-JRS, 2021 Del. Ch. LEXIS 241

(Ch. Oct. 13, 2021), which both parties cite to, the Delaware Chancery Court addressed this issue.

In that case, the nomination notice was deficient in two key respects, one of which being that it

failed to disclose who was supporting plaintiffs’ proxy contest, which the plaintiffs were required

to disclose under defendant’s advance notice bylaws. Jd. at *40. The court noted plaintiffs did

not make any statement as to supporters, “preferring instead to withhold the information based on

an unreasonable interpretation of their disclosure obligations under the Advance Notice Bylaw.”

Id. at *43. Some of the nominees were being supported by individuals/entities that they did not

disclose, but some did not have any supporters. The court noted that plaintiffs thus urged the court

to “undertake a nominee-by-nominee analysis when assessing the sufficiency of the Nomination

Notice.” Jd. at *43 n.188.

In examining this argument, the Rosenbaum court found that while “[p]laintiffs cite no

authority for the proposition that a Board must dissect a facially deficient nomination notice to

ascertain whether parts of it, with respect to individual nominees, might pass muster,” the

defendants similarly cited “no authority for the counter-proposition—that the Board can justify

rejecting a notice of one nomination based on deficiencies in the notice with respect to another

nomination (in this case, deficient disclosures regarding one nominee that do not apply to other

nominees).” Jd. The court concluded the plaintiffs had the “better of the argument,” stating that

“the Board is obliged to review a nomination notice carefully and with an open mind” and that

Just because it finds disclosures inadequate with respect to one nominee, that does not mean, or

justify a finding, that the entire notice is deficient.” Ultimately though, the Rosenbaum court found

that the “failures with respect to disclosing support for the nominations cut across the entire

Nomination Notice and justified the Board’s rejection of the notice in its entirety” as “the

17

Nomination Notice failed to provide information regarding supporters for any of the Plaintiffs’

Nominees.” /d. at *48 (emphasis in original).

Here, as to all three nominees, the Nomination Notice failed to make any disclosures as to

the nominees’ related party transactions. The Nomination Notice chose to disclose only that there

were no transactions for each of its nominees’ “associates”. There was no explanation in the record

as to why Driver chose to prepare its Nomination Notice to refer to “associates” rather than

disclose related party transactions. Rather than make the appropriate related party disclosures,

even ina general way, Driver chose to substitute the word “associates” and not address the related

party disclosures in any way. While it appears that only Rudolph had related party transactions

that should have been disclosed, the failure to provide either affirmative or negative information

as to the related party transactions of any of the nominees cuts across the Nomination Notice. See

Rosenbaum, at *48 (“[t]his fundamental failure affects the viability of each of their candidacies

and justified the Board’s rejection of the entire Nomination Notice.”’)

Moreover, regarding Cooper, Ameriserv determined he was ineligible to be a Board

member under its Interlocks Bylaw. The Interlocks Bylaw, like the Advance Notice Bylaw, was

passed on a “clear day” in 2003 by the Board. There is no dispute that, on April 18, 2023, Cooper

was elected to the board of directors of The First of Long Island Corporation, which is a depository

institution. Cooper has not sought nor obtained Board approval under the Interlocks Bylaw to

serve as a director.

Driver argues that the Interlocks Bylaw restrictions constitute “qualifications” for

Directors, which can only be set through a shareholder vote. However, Ameriserv’s Bylaws do

not require a shareholder vote to establish director eligibility. As summarized by Ameriserv, the

Interlocks Bylaw establishes a status-based eligibility requirement that prohibits individuals who

18

have served on the board of directors of another depository institution within five years from

serving on Ameriserv’s Board (ECF No. 22 at p. 51). Ameriserv contends the Interlocks Bylaw

was validly passed as it has nothing to do with a prospective director’s qualifications to serve,

rather it speaks to a prospective director’s eligibility. The Court agrees that the Interlocks Bylaw

speaks to the eligibility of a prospective director and that Ameriserv reasonably determined Cooper

was ineligible from serving as a director, absent approval from the Board which he did not seek,

As stated by the Court in Rosenbaum, “[w]here Plaintiffs ultimately went wrong here is by

playing fast and loose in their responses to key inquiries embedded in the advance notice bylaw.”

Id. at *4. Driver’s alleged harm caused by the rejection of its Nomination Notice is a direct result

of its failure to comply with Ameriserv’s valid nomination process. The record shows Driver

failed to meet the requirements of the Advance Notice Bylaw, and Ameriserv appropriately

rejected Driver’s Nomination Notice for failing to comply with its Advance Notice Bylaw.

Accordingly, the Court finds Driver is not likely to succeed on its claims at Count II.

2. Driver is not likely to succeed on its Section 14(a) claim.

At Count I, Driver alleges that Ameriserv disseminated intentionally false and misleading

statements in its March 15, 2023 DEFA 14A proxy soliciting material (ECF No. 1 at §89).

Specifically, Driver alleges that Ameriserv’s March 15, 2023 Letter and Press Release contained

materially false or misleading information by stating that Driver’s Nomination Notice “does not

constitute valid notice of nominations for the Annual Meeting” and “Driver does not have the right

to nominate any candidates for election as directors at the Annual Meeting.” Id. at 990. Driver

also contends AmeriServ’s public representations regarding Driver’s nomination of Cooper as

being noncompliant with AmeriServ’s Interlocks Bylaw and Cooper being ineligible to serve as a

director of AmeriServ also were intentionally false and misleading statements. Jd. Driver

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contends these statements were made for the purpose of deceiving shareholders into believing that

they should not or could not vote for Cooper or the other Driver nominees and/or that Driver’s

nominees for election to the Board were improper. Jd.

Ameriserv correctly states that “it is only possible for these statements to be false if Driver

is correct that the Company’s Advance Notice Bylaw is unfair and unreasonable, that the Company

applied its Advance Notice Bylaw unfairly and unreasonably, and that the Interlocks Bylaw is

invalid” (ECF No. 22 at p. 27). Based on the Court finding that Driver is not likely to succeed on

its claims as to Count II, the Court likewise finds that Driver is not likely to prevail on its claim at

Count I because it is not likely that Driver will be able to show that Ameriserv’s proxy filings

contain materially false statements.

In its Post-Hearing Brief (ECF No. 53), Driver shifts its Section 14a argument to assert

Defendants’ alleged “false” and “misleading” description of the pending litigation is not detailed

enough. Specifically, Driver complains that the statement fails to advise shareholders of all the

risks that might occur if the Court denies Driver’s request for a preliminary injunction and permits

the 2023 Annual Meeting to go forward, but later holds Driver’s Nomination Notice was valid and

the election results are invalidated. Ameriserv advised its shareholders in its definitive proxy

statement as follows:

“Tw]hile it is not free from doubt, we believe that a ruling rejecting the request to delay

the Annual Meeting but deferring final decision on the validity of the Purported

Nomination Notice until after the Annual Meeting will have no effect on the outcome

of the meeting. We cannot make any assurances, however, that a court would not

invalidate the results of the Annual Meeting and require us to conduct a new meeting

in which we include the Driver Group’s candidates as director nominees.”

(ECF No. 56-3 at pp. 207-208).

In its own proxy statement, Driver informed the shareholders as follows:

20

“The Company has unfortunately taken, what we believe to be, a baseless and

unfounded position that our nomination of director candidates for election to the Board

is invalid in an apparent effort to further entrench themselves in the face of the

shareholder franchise. As stated above, we have filed a complaint to litigate this matter

in an expedited fashion to determine if our director nominees are eligible to stand for

election at the Annual Meeting, and we intend to prosecute this litigation vigorously.

The outcome of this litigation may affect our ability to properly deliver proxies

submitted to us on the enclosed WHITE universal proxy card...

a ok

Shareholders should understand, however, that all shares of ASRV Common Stock

represented by the enclosed proxy card will be voted at the Annual Meeting as marked

by the shareholder, pending the results of the Pennsylvania litigation with respect to

the validity of our director nominations. We believe that a court ruling on whether to

delay the Annual Meeting prior to a final decision on the validity of our director

nominations will occur before the Annual Meeting, so we believe that shareholders

will have sufficient time to submit a new proxy card should our nominations be

deemed invalid for any reason. In the event that the Court issues a ruling rej ecting the

request to delay the Annual Meeting but deferring final decision on the validity of our

director nominations until after the Annual Meeting, the Company has disclosed that

no proxies voted in favor of the Driver Nominees will be recognized or tabulated at

the Annual Meeting. However, depending upon the outcome of the litigation, the

results of the Annual Meeting may be invalidated and the Company may be required

to conduct a new meeting in which it includes our Driver Nominees as director

candidates. If the Court finds our nominations to be invalid for any reason, we intend

to supplement or update these proxy materials to inform shareholders.”

(ECF No. 56-3 at pp. 299, 304).

At this stage, the Court finds Ameriserv’s proxy statement sufficiently describes the

pending litigation and the possible outcomes of this litigation, and further, the statement is

consistent with Driver’s own description in its proxy statement of the pending litigation and

possible outcomes. Accordingly, the Court finds Driver is not likely to succeed on its Section

14(a) claim.

3. Driver is Not Likely to Succeed on its Breach of Fiduciary Duty Claim Against the

Director Defendants at Count ITI.

Driver argues it is likely to succeed on its breach of fiduciary duty claim at Count HI

because the Director Defendants’ duties “require them to refrain from taking steps to improperly

21

interfere with the stockholder franchise for the purpose of entrenchment, including the right to

nominate directors for election,” and the Director Defendants “rejected Driver’s Nomination

Notice in bad faith and in breach of the Board’s fiduciary duty of loyalty” (ECF No. 4 at pp. 47-

48). However, under the BCL, a corporation’s “board of directors...and individual directors” owe

fiduciary duties “solely to the business corporation and not to any shareholder...” 15 Pa. CS. §

1717. Fiduciary duties “may be enforced directly by the corporation or may be enforced by an

action in the right of the corporation [(derivatively)],” but they “may not be enforced directly by a

shareholder.” Jd.; see also Malmros v. Jones, No. CIV.A. 03-3489, 2004 WL 632726, at *1 □□□□□

Pa. Feb. 27, 2004) (“Under 15 Pa. C.S.A. Section 1717, enacted when the Pennsylvania legislature

amended the BCL in 1990, a member of a corporate board of directors has a fiduciary duty only

to the corporation and not to individuals.”); Stilwell Value Partners I, L.P. v. Prudential Mut.

Holding Co., No. 06-4432, 2007 U.S. Dist. LEXIS 59653, at *28 (E.D. Pa. Aug. 15, 2007) (“The

intent of the statute [Section 1717 of the BCL] was to supplement the corporate constituency

provisions and clarify that lawsuits predicated on an independent fiduciary duty to shareholders

may not be brought.”); Minielly v. Acme Cryogenics, Inc., No. 15-6164, 2016 U.S. Dist. LEXIS

40905, at *23 (E.D. Pa. Mar. 28, 2016)(“[s]hareholders lack standing to sue the board of directors

on their own behalf.”).

The district court in High River Ltd. P’ship v. Mylan Labs., Inc., 383 F. Supp. 2d 660 (M.D.

Pa. 2005) addressed claims similar to those in this case, including a breach of fiduciary duty claim

against individual directors. In that case, the district court held that plaintiff, a major shareholder,

had no right to maintain its claim that a corporation’s advance notice bylaw amendments were not

fair and reasonable against individual corporate directors and board members. The district court

found that the amended advance notice bylaws represented an action of the corporation, not the

22

directors, under the BCL. The duty imposed on directors to act in good faith ran solely to the

corporation and could not be enforced directly by the shareholder pursuant to Section 1717.

Here, Ameriserv argues that Driver is not likely to succeed on its breach of fiduciary duty

claim because Section 1717 of the BCL expressly precludes such a claim. In reply, Driver

contends that its fiduciary duty claim seeks to remedy the harm that the Director Defendants’

alleged improper and inequitable conduct caused to Driver, describing this as “harm which is

independent of any harm those actions caused the Corporation” (ECF No. 31 at p. 13).

A shareholder may bring an individual action “[i]f the injury is one to the plaintiff as a

stockholder and to him individually, and not to the corporation, as where the action is based on a

contract to which he is a party, or on a right belonging severally to him, or on a fraud affecting

him directly.” Stillwell at *28, quoting In re Penn Cent. Sec. Litig., 347 F. Supp. 1324, 1326 (E.D.

Pa. 1972). Driver asserts the harms it alleges in Count III stem from the acts of the individual

Director Defendants to reject the Nomination Notice in bad faith and entrench themselves in office.

Driver relies on the case Jewelcor Megmt., Inc. v. Thistle Grp. Holdings, Co., 60 Pa. D. & C.4th

391 (Com. Pl. 2002) to argue that Pennsylvania permits individual shareholders to maintain a

breach of fiduciary duty claim against directors based on alleged interference with shareholder’s

electoral rights.

The district court in Stilwell Value Partners I, L.P. vy. Prudential Mut. Holding Co., No.

06-4432, 2007 U.S. Dist. LEXIS 59653 (E.D. Pa. Aug. 15, 2007) thoroughly examined the

statutory history of this section of the BCL, including the Draftmen’s Comment to Section 1717,

which states as follows:

“This section reaffirms the statutory concept (see e.g. 15 Pa.C.S. §§ 1712, 1715 and

1716) that the directors’ duty is owed solely to the corporation. It therefore limits

standing with respect to an asserted breach of duty by directors to the corporation itself

or to shareholders suing as such in a secondary or derivative action ...”

23

Id. at *27-28.

Here, as in Stillwell, the Director Defendants do not stand in a fiduciary relationship to

Driver, and therefore, Driver lacks standing to bring a breach of fiduciary duty claim against the

Director Defendants. See Stillwell at *24 (“Defendants contend that [the breach of fiduciary duty

claim] asserted against the director defendants must be dismissed because the director defendants

do not stand in a fiduciary relationship to plaintiff and, pursuant to section 1717 of the

Pennsylvania Business Corporation Law (“BCL”), plaintiff lacks standing to bring a direct claim

for breach of fiduciary duty against the corporation’s directors. I agree.”). Further, the Stillwell

court specifically found that the Jewelcor case “is of limited persuasiveness because it is a case

from the Pennsylvania Court of Common Pleas, does not discuss the language of the BCL, and

relies principally on a case from Delaware.” Jd. at *32.

The basis for Driver’s claim at Count II against the Director Defendants appears to be

their status as shareholders of Ameriserv, and Count III is entitled “Breach of Fiduciary Duties-

Rejection of Nomination Notice.” Despite its characterization to the contrary, the sole basis for

Driver’s claims against the Director Defendants is their alleged fiduciary duty to Driver as a

shareholder and “there simply is no duty running from the directors to the shareholders” under

these circumstances. Jd. at *33 (“... the language of the BCL...explicitly precludes an action by

a shareholder for breach of fiduciary duty by a corporation’s directors.”).> Accordingly, the Court

finds Driver is not likely to succeed on its breach of fiduciary duty claim at Count III.

5 Compare with Copland v. Fischer & Porter Co., 32 Pa.D.&C. 4th 57, 62-63 (C.P. Bucks 1996)

(finding plaintiffs stated a claim against individual defendant shareholders by alleging that

defendants improperly used their controlling vote to take actions that ultimately diluted the profits

that should have been received by all the shareholders, as “any losses suffered by the plaintiffs as

set forth in their complaint, were exclusively at the hands of the individual defendants, and any

recovery thereof, if warranted, should similarly come exclusively from the individual

24

B. Driver has failed to show it will suffer immediate and irreparable harm if an

injunction does not issue.

Irreparable harm is harm that “cannot be redressed by a legal or an equitable remedy

following a trial.” Instant Airfreight Co. v. C.F. Airfreight, Inc., 882 F.2d 797, 801 (3d Cir. 1989),

A failure to demonstrate irreparable injury must necessarily result in the denial of a preliminary

injunction. Jd. (quoting In re Arthur Treacher’s Franchisee Litig., 689 F.2d 1137, 1143 (3d Cir.

1982)). The Court finds Driver has failed to demonstrate it will suffer irreparable harm if an

injunction does not issue.

In the event Driver were to succeed on its claims, it is well within this Court’s equitable

powers to order that new corporate elections take place with the inclusion of its slate of nominees.

See Goldstein v. Lincoln Nat’] Convertible Secs. Fund, Inc., 140 F. Supp. 2d 424, 437-41, 447

(E.D. Pa. 2001) (directing that new corporate elections take place after finding that the board of

directors unlawfully applied an advance notice provision to preclude plaintiffs

nominees), vacated in part on other grounds, 140 F. Supp. 2d 424, No. 01-2259, 2003 WL 1846095

(3d Cir. Apr. 2, 2003)). To that end, Ameriserv’s proxy statement advised shareholders that

“Twhhile it is not free from doubt, we believe that a ruling rejecting the request to delay the Annual

Meeting but deferring final decision on the validity of the Purported Nomination Notice until after

the Annual Meeting will have no effect on the outcome of the meeting. We cannot make any

defendants”). Here, the rejection of the Nomination Notice pursuant to the Advance Notice Bylaws

was done by Ameriserv. See also, High River, 383 F. Supp. 2d at 665 (M.D. Pa. 2005)

(“[n]otwithstanding the motivations of the individual board members, the advance notice bylaws

represent an action of the corporation, not the directors. See id. §§ 1502, 1721.”) (emphasis in

original). Further, the relief Driver seeks is against Ameriserv, not the Director Defendants. See,

id. (“[nJor may High River maintain its claims against the individual members of the Mylan Board

for breach of fiduciary duty, malfeasance, and misfeasance. Relief from enforcement of the

bylaws, if available, must be sought from the corporation itself.”) (internal citations omitted).

25

assurances, however, that a court would not invalidate the results of the Annual Meeting and

require us to conduct a new meeting in which we include the Driver Group’s candidates as director

nominees” (ECF No. 56-3 at pp. 207-208). Ameriserv’s CEO Stopko also testified that “if we had

to re-hold an annual meeting, we would refile proxies, refile proxy cards, get a new record date

and...I think the phrase is a do-over” (ECF No. 52, p. 67:13-16).

Driver contends that if the Court later orders a new election with AmeriServ’s proxy

statements amended to list Driver’s nominees, in the next proxy fight, Ameriserv will argue that

shareholders should vote for the incumbent Board’s candidates because they already voted for

them in the previous election. Driver also argues the Court would likely be called upon to address

a quagmire of issues, such as the validity of any acts of the Board that included the invalidly

elected directors.

At this time, the Court agrees with Ameriserv’s position that such issues are speculative

and do not justify issuance of a preliminary injunction. See Capobianco vy. First Nat’l Bank, 372

F. Supp. 416 (M.D. Pa. 1974) (in evaluating a motion for preliminary injunction following the

rejection of a nomination notice and proposed slate of directors pursuant to an advance notice

bylaw, the concern that the defendant would make business decisions harmful to the plaintiff if

the meeting to elect directors was not enjoined was speculative and did not constitute irreparable

harm);° ECRI v. McGraw-Hill, Inc., 809 F.2d 223, 226 (3d Cir. 1987) (“Establishing a risk

6 Driver raises the upcoming vote on cumulative voting in support of its claim of irreparable harm.

However, cumulative voting will be subject to a referendum shareholder vote at the annual

meeting, therefore, whether Driver’s nominees are considered has no bearing on any shareholder

vote regarding cumulative voting. Further, whether Driver’s nominees are considered will not

affect the procedure or right of any shareholder to vote, including Driver, on whether to retain

cumulative voting. Driver has already been able to communicate with Ameriserv’s shareholders

regarding its views on this issue in advance of the 2023 Annual Meeting, and its proxy statement

expressly urges shareholders to vote against amending the articles to eliminate the ability to

exercise cumulative voting. The Court agrees with Ameriserv’s position that it is speculative to

26

of irreparable harm is not enough.”). Further, though Driver specifically identified that there is a

monetary cost associated with nominating a competing slate of directors, such a harm precludes

its claim for injunctive relief. See Instant Air Freight Co., 882 F.2d at 801 (“If a harm iS

compensable with money damages, it is not irreparable harm.”).

Driver relies on a number of cases to contend that denying shareholders the right to vote

their shares or frustrating shareholders attempts to obtain representation on the board of directors

constitutes irreparable harm. See AHI Metnall, L.P. by Ahi Kan., Inc. v. J.C. Nichols Co., 891 F.

Supp. 1352, 1359 (W.D. Mo. 1995); Danaher Corp. v. Chi, Pneumatic Tool Co., 1986 U.S. Dist.

LEXIS 24022, at *1 (S.D.N.Y. June 18, 1986); Treco, Inc. v. Land of Lincoln Sav. & Loan, 572

F. Supp. 1447, 1448 (N.D. Ill. 1983); Int’? Banknote Co. v. Muller, 713 F. Supp. 612, 627

(S.D.N.Y. 1989).

The Court generally agrees with this basic corporate principle. However, the cases relied

on by Driver are readily distinguishable as they do not involve challenges to advance notice

bylaws, or involve invalid, after the fact advance notice bylaws. For example, in Metnall, the court

granted a preliminary injunction to invalidate a requirement that only shareholders possessing 20%

or more of the shares could nominate director candidates. Jd. at 1356-58. In Danaher, the court

granted a preliminary injunction to prevent the company’s management from postponing or

cancelling the annual meeting of shareholders in an effort to prevent a controlling shareholder

from voting. In Treco, the court granted the motion for preliminary injunction when shareholders

delivered a written demand to call a special meeting to consider and vote on a proposal to amend

the company’s bylaws to require cumulative voting in the election of the company’s directors, but

even assume cumulative voting will be eliminated by a shareholder vote at the 2023 Annual

Meeting.

27

defendants refused to convene a special meeting. While Jnt’l Banknote does relate to an advance

notice bylaw, the court granted a preliminary injunction in that case after finding the company

only adopted its 45-day advance notice bylaw less than 24 hours after receiving a Schedule 13D

filed on behalf of shareholders seeking to change the corporate management.

Driver’s recitation of cases involving a shareholder’s right to vote for certain candidates or

obtain board representation entirely ignores that Driver’s own actions have prevented it from

engaging in a contested proxy election in this case. The BCL expressly allows a board to enact an

advance notice bylaw, and the disclosures required by Ameriserv’s Advance Notice Bylaw are

“customary”. The evidence shows Driver chose not to make the disclosures required by the

Advance Notice Bylaw by the close of the nomination window. Ameriserv’s rejection of the

Nomination Notice was fairly based on Driver’s clear failure to comply with the validly enacted

Advance Notice Bylaw. Injunctive relief is not warranted as the circumstances in this case fail to

trigger the need for the Court to protect the shareholder’s voting rights. Driver’s inability to have

its director nominees considered for election at the 2023 Annual Meeting is entirely a result of its

own failures, not as a result of Ameriserv’s conduct.

Driver also complains it will suffer ongoing irreparable harm because Ameriserv has

deprived it of the right to communicate with their fellow shareholders. At the preliminary

injunction hearing, Driver indicated it would be providing shareholders with its proxy statement

which describes its position in this litigation within the week of May 11, 2023 (ECF No. 51, p. 24:

21). Itis not clear what other communications Driver intended to make to shareholders regarding

the 2023 Annual Meeting. Further, as previously stated, there does not appear to be a risk that the

shareholders will be uninformed as to the issues in this litigation as both parties have presented

shareholders with proxy statements explaining their positions.

28

The circumstances in this case also do not present a situation where the harm is irreparable

because it would be difficult to “unscramble the eggs” after the 2023 Annual Meeting takes place.

See Ronson Corp. v. Liquifin Aktiengesellschaft, 483 F. 2d 846, 851 (Gd Cir. 1973) (finding harm

to be irreparable after tender offer was consummated); Wurtzel v. Park Towne Place Apartments

Ltd. P’ship, 62 Pa. D. & C.4th 330 (Com. Pl. 2001) (enjoining limited partnership from merging

with an entity affiliated with the general partner when a supermajority of the limited partners did

not approve the merger as required by the limited partnership agreement). Here, if Driver were to

succeed on its claims, the Court would order new corporate elections take place with the inclusion

of its slate of nominees. Both the parties have provided shareholders with proxy statements

advising of this possibility. As Driver has failed to show it will face immediate, irreparable harm

without the issuance of an injunction, the Court will deny its request for such extraordinary relief.

VI. Conclusion

A party seeking a preliminary injunction “must meet the threshold for the first two “most

critical’ factors: it must demonstrate that it can win on the merits (which requires a showing

significantly better than negligible but not necessarily more likely than not) and that it is more

likely than not to suffer irreparable harm in the absence of preliminary relief.” Reilly, 858 F.3d at

179 (3d Cir. 2017). The Court finds Driver has failed to satisfy its burden as to these first two

factors, and accordingly, Driver’s Motion for Preliminary Injunction (ECF No. 4) is hereby

DENIED. An appropriate order will follow.

Date: i, f cree

□ Stephanie L. Haines

United States District Judge

29