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 The lawsuit comes as activist investors step up the pressure on
Darden, which is struggling to reverse customer declines amid a
broader slump in the casual-dining industry.
Hedge fund and activist investor Starboard Value LP, which owns
roughly 5.5 percent of Darden, has urged the company to reconsider
its intention of unloading the struggling seafood chain and called
for a special shareholder vote on the matter.
Barington Capital Group LP, which represents a group of shareholders
that hold more than 2 percent stake, wants the company to split
itself in two, separating mature and struggling chains such as Red
Lobster and Olive Garden from faster-growth restaurants.
Neither was involved in the lawsuit.
According to the Journal, the lawsuit, filed in Florida by pension
funds for the City of Birmingham, Alabama, seeks to invalidate
changes made last month to the company's bylaws.
The lawsuit claims that Darden now requires shareholders who file
proposals or nominate directors to disclose more information about
their intentions, and their discussions with other shareholders. It
can also now adjourn any shareholder meeting indefinitely.
Darden said in a statement that the lawsuit has no merit and the
company will vigorously defend against it.
"The changes do not impair our shareholders' ability to call a
special meeting, nominate individuals for election to the board or
propose new business in accordance with our bylaws and applicable
law," Darden said. "These bylaw amendments are valid, legal and in
the best interest of Darden and the company's shareholders."
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Influential proxy advisors Institutional Shareholder Services and
Glass Lewis on Friday expressed support for Starboard's request to
convene a special meeting of shareholders to vote on Darden's
intention to spin off Red Lobster. Darden, which canceled an analyst
and investor meeting slated for March, has said it prefers to have
one-on-one discussions with investors.
Darden, the largest U.S. operator of full-service restaurants, is
struggling to turn things around. Sales at established restaurants
tumbled 8.8 percent at Red Lobster and 5.4 percent at Olive Garden
in the third quarter ended February 23.
Red Lobster suffered double-digit percentage declines in customer
visits in each month of the latest quarter, chalking up nine
straight months of falling traffic.
(Reporting by San Francisco newsroom; editing by Gunna Dickson)
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