Darden Restaurants is again facing a backlash from its own shareholders.
A class action lawsuit was recently filed against the company by pension funds for the City of Birmingham, AL.
This group of shareholders is alleging that recent changes to the company's corporate bylaws was an attempt to block investors from voting on a plan to sell or spin off its Red Lobster dining chain, according to the Wall Street Journal.
Darden's original announcement to spin off Red Lobster came last December, and although it has been met with significant objections, especially from activist investor Starboard Value LP, the decision reportedly does not require a shareholder vote.
"When directors of a public company take such brazen action to insulate themselves from stockholder voting on important corporate matters…the only logical conclusion is that the board is motivated by entrenchment," the suit states.
Darden has changed its corporate bylaws and now requires shareholders who are submitting proposals or nominating directors to disclose more information about their plans, their compensation, and their discussions with other shareholders. It also gave the board more power to schedule the timing of shareholder meetings. The board may adjourn any meeting indefinitely and ignore nonbinding shareholder proposals that aren't submitted using the "new and onerous" requirements, according to the lawsuit.
The Starboard hedge fund owns approximately 5.5% of Darden shares. It is planning to hold a nonbinding shareholder vote on the Red Lobster spin-off. Starboard is also reportedly planning to fight for Darden's board at its annual meeting.