The opinion of the court was delivered by: OWEN
United Canso Oil & Gas Ltd. (the "Company") moves for a preliminary injunction to enjoin the United Canso Oil & Gas Ltd. Shareholders Committee (the "Committee") from making further proxy solicitations until defendants amend certain filings made by them with the Securities Exchange Commission (the "SEC"). Defendants are engaged in a proxy contest with incumbent management in an effort to replace the present Board of Directors with a slate nominated by the Committee. The election of the Board of Directors is scheduled to take place at the Company's annual meeting on June 23, 1980. Plaintiff seeks to require defendants to amend their Schedule 14B to disclose information required by Section 14(a) of the Securities Exchange Act (the "Act"), 15 U.S.C. § 78n(a), and Regulations 14a-11 and 14a-102, 17 C.F.R. §§ 240.14a-11 and 240.14a-102, promulgated thereunder, and to amend their Schedule 13D to disclose information required by Section 13(d) of the Act, 15 U.S.C. § 78m(d), and Regulations 13d-1 and 13d-101, 17 C.F.R. §§ 240.13d-1 and 13d-101, promulgated thereunder. After reading the voluminous materials submitted by the parties and hearing lengthy oral argument, I conclude that plaintiff has failed to meet its burden of showing
"(a) irreparable harm and (b) either (1) likelihood of success on the merits or (2) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly toward the party requesting the preliminary relief."
Jack Kahn Music v. Baldwin Piano & Organ Co., 604 F.2d 755, 758 (2d Cir. 1979). See also Sonesta International Hotels Corp. v. Wellington Associates, 483 F.2d 247, 250 (2d Cir. 1973).
Plaintiff focuses on two alleged non-disclosures in seeking this preliminary injunction. Rothschild Affidavit P 15. First, it is argued that the Committee failed to adequately detail in its SEC filings the date and circumstances surrounding the formation of the Committee.
In order to comply with Schedule 14B, 17 C.F.R. § 240.14a-102, the defendants were required to provide the following information:
Item 4: Further matters. (a) Describe the time and circumstances under which you became a participant in the solicitation and state the nature and extent of your activities or proposed activities as a participant.
17 C.F.R. § 240.14a-102. The Committee and each of its members have made the following disclosures in their amended Schedule 14B:
"Messrs. Duby, Clark, Conrad and Jacobsen, who had become owners of the issuer's shares in the summer of 1979, became aware at or about the time of United Canso's October 1979 Special Meeting of Shareholders that Messrs. Delp and St. Clair were, like them, concerned about the incumbent management of United Canso. On or about December 17, 1979, these shareholders, together with Messrs. Hohmann, Laycraft and Holland, formed the Shareholders Committee to consider the possible formation of a slate of candidates for election as directors of the issuer. Mr. Hohmann was contacted by Messrs. Delp and St. Clair, and Messrs. Laycraft and Holland were contacted by Mr. Duby. On or about February 12, 1980, the Committee determined to solicit proxies for the election at the next meeting of shareholders of the issuer of a slate of Committee candidates. Mr. Hiebert, who had been contacted by Mr. Duby, became a shareholder and joined the Committee on or about February 13, 1980. The Committee and its members intend to take all actions which they believe are necessary on its or their part towards the election of the Committee's candidates at the next meeting of the issuer's shareholders."
Plaintiff points to what it concedes is, at best, circumstantial evidence that the Committee was formed prior to December 17, 1979. That evidence amounts to little more than that (1) certain members of what became the Committee allegedly discussed the financial prospects of the Company in the Spring and late Fall of 1979, and that (2) Mr. Duby, the Chairman of the Committee, consulted with D. H. King & Co., Inc., a proxy solicitor firm, and Messrs. Debevoise, Plimpton, Lyons & Gates, the Committee's U.S. counsel, in mid-December 1979. On the basis of this evidence, plaintiff urges that the defendants be enjoined from soliciting proxies in connection with the June 23, 1980 election until their Schedule 14B is amended to reflect the fact that the Committee was actually formed in October and not in December 1979.
On the issue of the origins of the Committee, plaintiff has not shown that it has either a substantial likelihood of success on the merits or even a serious question going to the merits. Plaintiff's proof consists of circumstantial evidence, hearsay and rank speculation. In addition, the plaintiff does not even purport to be able to prove the "materiality" of the alleged omissions or misstatements. Plaintiff's Memorandum in Further Support of Its Motion for a Preliminary Injunction at 7. Instead, plaintiff is in the unsympathetic position of seeking to invoke the Court's equitable powers to correct claimed misstatements or omissions which plaintiff virtually concedes are not "material" to the Company's shareholders.
The broad remedial purposes of § 14(a) of the Act to insure "fair corporate sufferage" are in no way weakened by requiring a showing of "materiality" by the plaintiff. See Mills v. Electric Auto-Lite Co., 396 U.S. 375, 90 S. Ct. 616, 24 L. Ed. 2d 593 (1970). See also TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438, 96 S. Ct. 2126, 48 L. Ed. 2d 757 (1976). Contrary to the plaintiff's view, the materiality requirement does not simply fall away because the plaintiff seeks injunctive relief, as opposed to monetary damages. See Sonesta International Hotels Corp. v. Wellington Associates, 483 F.2d 247, 251 (2d Cir. 1973); Horizon Corp. v. Anselmi, 483 F. Supp. 653, 658 (D.D.C.1980); Plant Industries, Inc. v. Bregman, 490 F. Supp. 265 (S.D.N.Y.1980); Kass v. Arden-Mayfair, Inc., 431 F. Supp. 1037, 1047 (C.D.Cal.1977).
The Court is not convinced that the amendment that the plaintiff seeks to have the defendants make, i. e., a change of two months in the date of the formation of the Committee, is anything other than "nit-picking (which) should not become the name of the game." Kennecott Copper Corp. v. Curtiss-Wright Corp., 584 F.2d 1195, 1200 (2d Cir. 1978). See also Seaboard World Airlines, Inc. v. Tiger International, Inc., 600 F.2d 355 (2d Cir. 1979).
Plaintiff's second contention is that the Committee's Schedule 14B failed to name Page Petroleum Ltd. ("Page") as a "participant" in the Committee's proxy solicitation. The Committee's proxy statement discloses the following facts with reference to the so-called Page connection:
"Mr. Clark is President and Mr. Jacobsen is Executive Vice-President of Page. Both are directors of Page. In addition, Mr. Duby beneficially owns 110,000 Common Shares (less than 4% of the outstanding common shares) of Page (including 20,000 Shares owned by Engineered Project Management Ltd.), has acted from time to time as an engineering or ...