February 24, 2013
What's Up With That Apple Proxy Loss?
Posted by David Zaring

A federal district court just rules that Applee improperly bundled together too many different proposals into one proxy question, handing David Einhorn's Greenlight Capital a win - but what kind of a win was it?  Won't Apple just redo the proxy?  Yes, probably, says Larry Cunningham, whom we're mostly outsourcing to here:

The technical procedural machinery of corporate governance often works in strange ways to give shareholders avenues of redress that substantive fiduciary duty law cannot handle. Statutes, regulations, charters, bylaws, and contracts set the rules and allocate power in ways that all must respect. Apple’s proposed charter amendment has nothing to do with the wisdom or prudence of what to do with all that $140 billion in cash. But Einhorn and the Apple board do have differing business judgments and both are allowed to use all that machinery to battle for the policy they favor.

In a way, Einhorn and Apple’s CEO are both right. Einhorn won this technical round but the substantive power about the dividend policy remains firmly in the board’s hands.

The opinion is also interesting, because it awarded a preliminary injunction.  In the Second Circuit, those are common in proxy contexts (or so the opinion averred), but they aren't easy to get just as a general matter.  The district court gave this one because it concluded, and I'm quoting here, the plaintiffs had a "better than 50%" chance of prevailing on the merits.  That's not a very hard test to meet! 


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