Federal district court enforces advance notice bylaws in denying injunctive relief sought by shareholder

A recent decision from the United States District Court for the District of Maryland in the case Brancous, LP1 v. Braemar Hotels & Resorts Inc., et al. (Case No. 1:25-cv-03971-SAG) is drawing attention in the corporate governance and shareholder activism space. This December 11, 2025 decision marks the first time a federal court has ruled on the application of SEC Rule 14a-19 in the context of a rejected director nomination. White & Case advised Braemar Hotels & Resorts Inc. in connection with the annual meeting and prevailed in the litigation.

Background

The dispute concerned an attempt by Brancous, LP1 ("Brancous"), a shareholder of Braemar Hotels & Resorts Inc. ("Braemar" or the "Company"), to submit a director nomination notice more than four months after the Company's advance notice deadline had passed. Braemar, a Maryland corporation focused on luxury hotels and resorts, rejected Brancous's nomination as untimely and cited several other deficiencies within the notice. Brancous did not go on to file a proxy statement, solicit proxies, or take any other steps towards mounting a proxy fight.

Over a month after the Company rejected Brancous's nomination notice, Brancous filed a complaint in the United States District Court for the District of Maryland¹ asserting federal securities claims and breaches of fiduciary duties under Maryland law, and moved for a temporary restraining order and preliminary injunction to halt the annual meeting, invalidate other shareholder votes that had then been cast, and force the company to include its nominees.² On December 11, 2025, the Court denied this request in an oral ruling³, denying injunctive relief and agreeing with Braemar's arguments in full.

The Court's Decision

Clear Advance Notice Bylaw Upheld

A key aspect of the Court's decision was its endorsement of Braemar's advance notice bylaw. The bylaw was clear that only nominations submitted by the stated deadline would be considered, and it specifically provided that postponing or rescheduling the annual meeting would not reopen the nomination window. The Court enforced this clear language. This clarity in the bylaws was central to the outcome and serves as a reminder to companies of the importance of precise bylaw drafting.

The facts also showed that another Braemar shareholder was able to comply with the nomination process set forth in the bylaw. That shareholder submitted a timely nomination, and their nominee was added to the Company's board. This fact undermined any claim that the process was unfair or that the deadline was unworkable, and demonstrated that the Company's procedures were reasonable for those who acted diligently.

Rule 14a-19 Claim Inapplicable Without A Contested Election

The Court held that Brancous's federal securities claims were unlikely to succeed because those rules "do not apply to the situation here."⁴ Brancous had alleged that the Company's failure to include the Brancous nominees on its proxy card and refer to Brancous proxy materials violated SEC Rules 14a-19, 14a-3, and 14a-9. In response, the Company argued that those rules were inapplicable because there was not a "contested election," since Brancous had not filed a proxy statement or solicited proxies.⁵ The Company further relied on SEC guidance that a company need not include a dissident shareholder's nominees on its proxy card where a company determines that the nominations did not comply with advance notice bylaw requirements.⁶ In ruling on Brancous' likelihood of success on the merits of its securities claims, the Court held: "I believe that defendants' analysis of those rules is correct[.]"⁷

Maryland Business Judgment Rule Applies

The Court further held that Brancous was unlikely to prevail on its fiduciary duty claim because "the business judgment rule is dispositive."⁸ Brancous's theory was that the Company's directors breached their fiduciary duties in rejecting the Brancous nomination, pointing to the board's decision to postpone its annual meeting (and corresponding election) from July to December. The Court found that, even crediting Plaintiff's allegations of supposed wrongdoing in connection with the movement of the dates for the election, this did not "amount[] to the type of fraud or bad faith that is required to overcome the business judgment rule" applicable to Maryland directors.⁹

Delay Independently Precludes Emergency Relief

The Court found that Brancous's delay in nominating and in pursuing relief was an "independent" basis to deny relief,¹⁰ which also undermined the required elements of irreparable harm and that a balancing of the equities favored injunctive relief.¹¹ The Company wrote to Brancous that it was rejecting the nomination notice on October 30, 2025, and Brancous did not move for emergency injunctive relief until December 5, 2025 – ten days before the Company's annual meeting was set to take place. The Court held that this delay showed "this is clearly a case in which there was a lack of diligence or an intentional strategy at play here that led this case to be filed way significantly after it should have been," which finding was fatal to Plaintiff's request for emergency relief.¹²

Key Takeaways

• For activists, the decision reinforces the need to comply with both company bylaws and SEC proxy rules. The court supported the SEC's guidance that Rule 14a-19's universal proxy requirements only apply in a contested election—meaning the activist must actually file a proxy statement and solicit proxies. In this case, Brancous did not do so, and that failure was fatal to its claims. Without a contested election, the company was not required to include Brancous's nominees on its proxy card or treat the situation as a proxy contest.
• The ruling also highlights the importance of acting promptly. Activists who delay challenging a nomination rejection or seeking court relief are unlikely to succeed, as courts are reluctant to grant emergency relief when the activist's own delay created the urgency. At the same time, companies should not wait until the last minute to notify shareholders of deficiencies in their nomination notices. Prompt communication is essential to avoid claims of unfairness or gamesmanship.

In summary, Brancous, LP1 v. Braemar Hotels & Resorts Inc. provides important guidance for both companies and activists. The decision underscores the enforceability of clear advance notice bylaws, the necessity for activists to file proxy materials and solicit proxies if they want to trigger Rule 14a-19 protections, and the need for both sides to act without delay. As universal proxy rules continue to evolve, careful planning and strict compliance are more important than ever. For more information, please contact your White & Case team.

_{1 Brancous, LP1 v. Braemar Hotels & Resorts Inc., et al. (Case No. 1:25-cv-03971-SAG), Dkt. 1.
2 Id., Dkt. 5.
3 Id., Dkt. 19.
4 Id., Dkt. 19 at 34:4-9.
5 Id., Dkt. 9 at 17 (citing Universal Proxy, Sec. Exch. Act Release No. 34-93596, 68 Fed. Reg. 68330, Inv. Co. Act Release No. IC-34419, 2021 WL 5545055 (Nov. 17, 2021) and SEC, CD&I Proxy Rules and Schedules 14A/14C, Question 139.06).
6 Id., Dkt. 9 at 18 (citing SEC, CD&I Proxy Rules and Schedules 14A/14C, Question 139.04)
7 Id., Dkt. 19 at 34:7-8. 
8 Id., Dkt. 19 at 34:10-11.
9 Id., Dkt. 19 at 34:11-17.
10 Id., Dkt. 19 at 32:21-33:3, 33:22-23.
11 Id., Dkt. 19 at 33:23-34:1, 34:20-35:1, 35:16-18.
12 Id., Dkt. 19 at 33:1-3.}

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