By Nate Raymond
NEW YORK Feb 19 David Einhorn's hedge fund has
shown a "likelihood of success" if his legal attack against
Apple Inc goes forward, a U.S. judge said, though he
made no immediate ruling on fund's request to block a
shareholder vote on a proxy proposal next week.
U.S. District Judge Richard Sullivan on Tuesday reserved
decision on a lawsuit by the fund, Greenlight Capital, to stop a
Feb. 27 shareholder vote on an Apple proposal to end the
issuance of preferred stock without investor approval.
"Candidly I do think the likelihood of success is in favor
for Greenlight," Sullivan said at a court hearing in New York.
The hedge fund sued Apple earlier this month as part of
Einhorn's broader attempt to get the company to send a bigger
chunk of its $137 billion in cash to shareholders.
The lawsuit contends Apple improperly "bundled" three
proposed amendments to its charter into one proxy proposal, a
violation of regulatory rules.
Sullivan did not specify when he would rule on Greenlight's
injunction request, though he cited the impending date of the
vote. He said he would now focus on whether Greenlight would be
irreparably harmed if the vote moves forward.
Steve Dowling, a spokesman for Apple, declined comment. A
spokesman for Einhorn did not immediately respond to a request
The proxy proposal Einhorn has targeted, Proposal No. 2,
would amend Apple's charter to provide for majority voting for
directors, establish a par value for Apple stock and eliminate
Apple's power to issue preferred shares without shareholder
Mitchell Hurley, a lawyer for Greenlight, said Apple had
violated U.S. Securities and Exchange rules that prohibit
shareholders from voting for a proposal where they support only
some but not all of the item. Einhorn says he supports two of
those amendments but not the preferred stock amendment.
"In other words, it will result in precisely the kind of
harm the rules were designed to prevent," Hurley said.
Apple contends Proposal No. 2 doesn't bundle material
matters together or force shareholders into an unfair choice.
"The SEC had no objection and no comment" on the proposal,
said George Riley, a lawyer for Apple.
While Sullivan said Greenlight may have shown it would
likely succeed on the merits of the case, the judge during the
hearing questioned whether an injunction was appropriate. The
proposal became public in late December, yet Einhorn didn't sue
Apple until Feb. 7.
"I'm not sure that necessarily is going to get you over the
hump for irreparable harm," Sullivan said.
A separate lawsuit against Apple heard at Tuesday's hearing
was filed by a different investor, Brian Gralnick. The lawsuit
seeks to block not just a vote on Proposal No. 2 but also an
advisory "say-on-pay" vote on executives compensation.
Sullivan indicated Tuesday he would rule against Gralnick on
his request for an injunction.
Apple shares ended regular trading on Tuesday down 17 cents
The case is Greenlight Capital LP, et al., v. Apple Inc.,
U.S. District Court, Southern District of New York, 13-900.