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February 11, 2004.


The opinion of the court was delivered by: RICHARD HOLWELL, District Judge


Plaintiff; The MONY Group, Inc. ("MONY" or `the Company"), seeks a preliminary injunction against defendants Highfields Capital Management L.P. ("Highfields"), Longleaf Partners Small-Cap Fund ("Longleaf "), and Southeastern Asset Management Inc. ("Southeastern"),*fn1 enjoining defendants from mailing to other shareholders proxy solicitation materials that include a duplicate of the proxy card previously sent to shareholders by plaintiff. Plaintiff argues that, as a result of the inclusion of this proxy card, defendants are required to comply with Securities and Exchange Commission ("SEC") proxy rules, 17 C.F.R. § 240.14a-2 et seq., that require those who solicit proxies to file a proxy statement with the SEC and provide shareholders with a copy of that statement. Defendants contend that under Rule 14a-2(b)(1) they are exempt from compliance and, further, that mere inclusion of a duplicate copy of the Company's proxy card with their solicitation materials does not operate to remove them Page 2 from the exemption. Plaintiff, having learned of defendants9 intention to include the proxy card in a shareholder mailing, came before the court on February 3, 2004, to apply for a temporary restraining order ("TRO"). At the conclusion of a hearing, the court (Preska, J.) granted a TRO to the extent of restraining defendants from including proxy cards in any mailing to shareholders, including any copy of MONY's original proxy card. A hearing on plaintiff's motion for a preliminary injunction was held on February 6, 2004, at which time the court extended the TRO until February 11, 2004, pending a ruling on the preliminary injunction motion.

The sole issue now before the court is whether defendant Highfields may include a copy of the MONY proxy card in its mailing to shareholders and remain within the exemption provided by Rule 14a-2(b)(1).*fn2 The court has original jurisdiction over the action pursuant to the Securities and Exchange Act of 1934 as amended, 15 U.S.C. § 78n(a).


  The instant dispute arises out of MONY's negotiation with AXA Financial Inc. ("AXA") culminating in a deal whereby AXA agreed to acquire MONY in a $1.5 billion all-cash transaction. Pl's Mem. of Law in Supp. of Pl's Req. for a T.R.O. ("Pl. Mem"), 2. Under the agreement, stockholders would receive $31 per share of MONY common stock. Id. at 3. The agreement was approved by MONY's Board of Directors and was publicly announced on September 17, 2003, after which only the approval of holders of Page 3 the majority of shares entitled to vote was required for AXA's acquisition of MONY to go forward. Id. MONY mailed a proxy statement and a proxy voting card to its shareholders on January 8, 2004, and announced a special meeting of MONY stockholders to be held February 24, 2004, at which time the agreement would be considered and voted upon. Id.: Reply Affirmation of John F. Collins ("Collins Reply Aff."), Ex. 2.

  Following the announcement of the proposed sale, Highfields publicly raised objections to and criticisms of the terms of the agreement On January 29, 2004, Highfields publicly released but did not mail the complete text of a letter to MONY shareholders. That letter urged shareholders to vote against the sale of MONY to AXA, on the grounds that the proposed sale is ill-timed; that the per-share price is too low; that the solution to MONY's underperformance is replacing poor management, rather than putting itself up for sale; and that management self-interest, rather than shareholders' best interests, is driving the proposed sale. The letter further states that Highfields is exercising its right of appraisal by informing MONY of its appraisal demand and voting against the agreement, and encourages shareholders to do the same. Ex. to Order to Show Cause for a TRO & Prelim. Inj.

  Prior to preparing the letter, counsel for Highfields contacted the Office of Mergers and Acquisitions in the Division of Corporation Finance of the SEC to informally inquire whether that office had a position on whether Highfields could include a copy of MONY's proxy card in the solicitation materials to be sent by Highfields to the MONY shareholders. Johnson Aff. 2-3. Counsel was advised that the Office of Mergers and Acquisitions had adopted a "nonpublished position" to the effect that a soliciting Page 4 party could provide a copy of a company's proxy card in a mailing to shareholders provided that certain conditions (discussed below) were met. Id. Thereafter, Highfields prepared a mailing to MONY shareholders consisting of its letter of January 29, 2004; a copy of the proxy card MONY had previously sent to shareholders; and a separate page referencing the enclosed proxy card and encouraging shareholders to use the card to vote against the merger and to return the card to a third party, Corporation Election Services, that had been retained by MONY to process the proxy cards. It is the enclosure of this page and proxy card that is the subject of plaintiff's motion for preliminary injunction.


 1. Applicability of Rule 14a-2(b)(1)

  The heart of the instant dispute is the scope of the exemption provided under Rule 14a-2(b)(1) to the filing and disclosure requirements contained in Rules 14a-3 to 14a-6, all of which were promulgated under section 14(a) of the Securities Exchange Act of 1934, 15 U.S.C. § 78n(a). Those rules require any party who would solicit a proxy from a holder of a security to file with the SEC detailed information about the solicitation, and about the party making the solicitation. That information — the substance of which is specified in SEC Schedule 14A — must then be delivered to the security holders in a proxy statement that has been previously filed with the SEC. The presentation of the information in the proxy statement, and the form and contents of any proxy voting card included with a proxy solicitation, are governed by the rules. These rules apply whether Page 5 the proxy is solicited on behalf of the board of directors of the registrant of the security, or on behalf of some other party.*fn3

  In 1992, the SEC adopted several amendments to its proxy rules, among which was the exemption to the proxy solicitation disclosure requirements embodied in Rule 14a-2(b)(1). According to the SEC Release accompanying the amendments, the changes "reflect a Commission determination that the federal proxy rules have created unnecessary regulatory impediments to communication among shareholders and others and to the effective use of shareholder voting rights." Regulation of Communication Among Shareholders, Exchange Act Rel. No. 31326, 1992 SEC LEXIS 2470, *8 (October 16, 1992). The exemption was meant to address concerns expressed to the SEC that "it is generally not possible for a shareholder to know with certainty that a communication will or will not be deemed to constitute a solicitation" subject to the disclosure rules, id. at *21 (compliance with which, the SEC notes, is costly, id. at *15), and that "the scope of the definition of solicitation under the proxy rules does have a chilling effect on discussions of management performance, out of fear that the communication could after the fact be found to have triggered disclosure and filing obligations under the federal proxy rules." Id. at *22. Ultimately, "[i]n most instances management . . . would be the only party willing to assume the regulatory costs, resulting in a one-sided discussion of the merits of the matters put to a vote." Id. at *23. The SEC received proposals from the public of ways that the rules could minimize "the potential for abuse both by. insurgents and by management" when a proxy fight arises, and Page 6 "weighed the benefits" of those proposals in adopting a provision that exempts from the proxy solicitation disclosure rules:
Any solicitation by or on behalf of any person who does not, at any time during such solicitation, seek directly or indirectly, either on its own or another's behalf; the power to act as proxy for a security holder and does not furnish or otherwise request, or act on behalf of a person who furnishes or requests, a form of revocation, abstention, consent or authorization. . . .
17 C.F.R. § 240.14a-2(b)(1). The provision goes on to make ten categories of "interested persons" ineligible for the exemption, none of which is relevant to the instant dispute.

  The parties agree that the mailing at issue in this matter constitutes solicitation materials under Rule 14a-1, which defines solicitation to include a "request to execute or not to execute, or to revoke, a proxy" and "the furnishing of a form of proxy or other communication to security holders under circumstances reasonably calculated to result in the procurement, withholding or revocation of a proxy." 17 C.F.R. § 240.14a-1 (l)(1). The parties disagree as to whether the exemption in Rule 14a-2(b)(1) applies. Plaintiff asserts that it does not apply to defendants' proposed solicitation, because the inclusion of a copy of MONY's proxy card constitutes the "furnish[ing of] a form of revocation" that makes the mailing a non-exempt solicitation. Defendants counter that the exemption applies, arguing that (1) the duplicate proxy card is not a "form of revocation" and (2) even if it were a "form of revocation," the mailing would still be exempt because defendant does not seek the power to act as proxy, which is the necessary condition for taking a solicitation outside the exemption. The instant case is apparently the first to present a federal court with this precise question. Page 7

 2. Applicable Legal Standard

  "To obtain a preliminary injunction, a plaintiff must show a threat of irreparable injury and either (1) a probability of success on the merits or (2) sufficiently serious questions going to the merits of the claims to make them a fair ground of litigation, and a balance of hardships tipping decidedly in favor of the moving party." Motorola Credit Corp. v. Uzan, 322 F.3d 130, 135 (2d Cir. 2003) (citing Time Warner Cable v. Bloomberg L.P., 118 F.3d 917, 923 (2d Cir. 1997) (internal punctuation omitted). See also Fisher-Price, Inc. v. Well-Made Toy Mfg. Corp., 25 F.3d 119, 122 (2d Cir. 1994) (same); Jackson Dairy, Inc. v. ...

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