The opinion of the court was delivered by: STEWART
Plaintiff, an owner of 275 shares of Class C Preferred Stock of defendant Management Assistance, Inc. ("MAI"), commenced this class action on August 1, 1978 seeking to enjoin defendants from voting proxies solicited by a proxy statement mailed to all stockholders of MAI on June 28, 1978. The proxy statement was issued in connection with MAI's proposed redemption of the Class C stock.
The complaint also seeks to enjoin the proposed redemption and damages for violation by defendants of the Securities and Exchange Act, §§ 14(a) and 10(b), 15 U.S.C. §§ 78n(a) and 78j(b)
The gist of plaintiff's claim is that the proxy statement was deceptive and misleading in that it failed to disclose information which would establish that the redemption price was too low.
The complaint was accompanied by an order to show cause seeking a temporary restraining order and a preliminary injunction of holding the stockholders' meeting which was scheduled to be held (and was held) on August 10, 1978. On August 5, 1978, MAI mailed a Supplementary Proxy Statement to its stockholders advising them of plaintiff's lawsuit and containing additional information relating to those matters as to which plaintiff asserted misrepresentation or non-disclosure. After hearings, we denied the motion for temporary and preliminary relief (Memorandum Decision dated August 10, 1978) and the Court of Appeals on August 17, 1978 denied plaintiff's application for a stay of the stockholders' meeting. At the meeting, the stockholders overwhelmingly approved the proposed redemption.
In June 1979, plaintiff's motion to certify a class, as expanded by defendants' cross-motion to certify a broader class, was granted. The class was thereafter given appropriate notice. Discovery by defendant has included taking the deposition of plaintiff in October, 1978 and requiring the production of documents by plaintiff. On the other hand, plaintiff has engaged in no discovery.
In December, 1979, defendants moved for summary judgment. Oral argument on the motion was heard in November, 1980. We now grant the motion and dismiss the complaint.
The proxy statement in issue dated June 27, 1978, was sent by MAI to its stockholders on June 28, 1978. Under the certificate of incorporation, the company was obliged to redeem the Class C Preferred Stock for $ 10.00 per share in four annual installments of $ 2.50 per share payable in the years 1981-84. The stock was entitled to a contingent dividend in the maximum amount of $ 40.00 per share which was based upon a specified percentage of Cash Flow From Operations (as defined at p. 63 of the proxy statement) of defendant Genesis One Computer Corporation ("GOCC"), which is a wholly-owned subsidiary of MAI. Since the issuance of the Class C stock in 1974, contingent dividends in the amount of 40 cents had been paid (32 cents in 1976 and 8 cents in 1977). The proxy statement set forth management's belief that no funds would be available for dividends on the stock in 1978.
In order to provide more flexibility for future business operations, according to the proxy statement, the company proposed to redeem the preferred in the immediate future for $ 10.50, subject to stockholder approval at a meeting scheduled for August 10, 1978.
Plaintiff filed its complaint on August 1, 1978. On August 5, defendants mailed a Supplementary Proxy Statement to the stockholders advising them of the complaint, asserting that it had no merit, but setting forth additional data which the complaint alleged was necessary to make the proxy statement not misleading. The Supplementary Proxy Statement also stated that the polls would remain open until August 18, 1977 so that stockholders would have adequate time to consider the new material and could, if they desired, change their vote.
The shareholders voted to approve the redemption proposal of the outstanding Class C shares, 87.96 percent of Class C stockholders voting for and 2.93 percent against redemption; of the outstanding common stock, 66.89 percent voted for and .89 percent against.
Defendants attach to the motion for summary judgment extensive affidavits and exhibits asserting factual data with respect to the matters challenged in the complaint. Defendants also rely heavily upon the lengthy deposition of plaintiff, which is replete with concessions by plaintiff that he had no factual basis to support particular charges, including the fraud allegation, in the complaint.
In opposition to the motion, plaintiff filed after several adjournments an incomplete draft brief. Later, after defendants had filed a reply brief, plaintiff untimely filed a completed brief (which we have considered despite its untimeliness). Finally, plaintiff thereafter filed an application asking that proceedings on the motion be held in abeyance while plaintiff conducted discovery in an effort to raise factual issues with respect to the fact matters set forth in defendants' affidavits.
No affidavits as to factual matters were offered by plaintiff in response to the motion for summary judgment nor has plaintiff provided us with any basis for concluding that discovery at this late date would be reasonably likely to produce relevant information which would raise questions of fact sufficient to require denial of the motion. The application is therefore denied.
Turning to the motion for summary judgment, plaintiff has failed to establish a genuine issue as to any material fact. No affidavit of fact was submitted in opposition to defendants' affidavits. In his deposition, plaintiff conceded on numerous occasions that various allegations of the complaint were based solely on conjecture and speculation. Indeed, plaintiff's answering brief (p. 81) states that "(extensive) discovery will be required to establish truth or untruth of all of plaintiff's fact allegations" and (p. 28) that only after discovery "will it be determined how close plaintiff Howell and his attorney came to the true facts".
Consequently, plaintiff may succeed in its opposition to the motion only by showing that defendants are not "entitled to judgment as a matter of law" (Rule 56, F.R.Civ.P.). Plaintiff's claim is basically that the proxy statement and the supplementary proxy statement were misleading in failing to disclose allegedly material facts.
Initially, it is contended that the supplementary proxy statement is illegal and void because it was sent to stockholders without the court's consent after this action had been commenced. We are aware of no impropriety in defendants' issuance of the supplemental statement, which was considered at the hearing on the motion for a preliminary injunction, and upon which we relied in part in denying the motion. The purpose of a proxy statement is, of course, to put before stockholders all facts necessary for an informed decision. Where, as here, the supplemental statement contributed to this objective and did so in a proper manner, the absence of court approval would seem immaterial. Courts have conditioned approval of proxy statements on the filing of supplements, see Sonesta International Hotels Corp. v. Wellington Associates, 483 F.2d 247, 255 (2d Cir. 1973); Corenco Corp. v. Schiavone & Sons, Inc., 488 F.2d 207, 214-15 (2d Cir. 1973); and have approved over ...