United States District Court, S.D. New York
STEPHEN W. SILBERSTEIN, Plaintiff,
AETNA, INC., et al., Defendants.
MEMORANDUM & ORDER
ALISON J. NATHAN, District Judge.
On April 8, 2014, following oral argument, this Court denied Plaintiff Stephen W. Silberstein's motion for a preliminary injunction on the ground that he had failed to demonstrate irreparable harm. The reasons for that ruling are set forth below.
In this action, Plaintiff alleges that Aetna, Inc. ("Aetna") and certain of its officers and directors (collectively, "Defendants") violated Section 14(a) of the Exchange Act, 15 U.S.C. § 78n(a)(1), and the SEC's Rule 14a-9, 17 C.F.R. § 240.14a-9, which prohibits false or misleading statements and omissions in proxy materials. His claims center on Aetna's response to two proposed shareholder resolutions involving the company's political spending.
In its 2012 and 2013 proxy statements, Aetna opposed two shareholder resolutions proposed by the Service Employees International Union ("SEIU") and the Unitarian Universalist Association of Congregations ("UUAC"), respectively. The SEIU's 2012 proposal noted that while Aetna disclosed certain categories of its political contributions, including the nondeductible portion of its trade association dues, Aetna did not disclose "which individual candidates or ballot measures its trade associations and other financially-supported tax-exempt groups support or oppose and with which levels of monetary support." Def. Ex. 2 at 82. As a result, the SEIU's proposal called for Aetna to issue an annual report describing its policies for indirect political contributions and disclosing any contributions made through tax-exempt entities and trade associations. Id. Aetna opposed this proposal, noting among other things that it published an annual "Political Contributions and Related Activity Report" and that it complied with "all state and federal laws concerning the disclosure of its political and lobbying activity." Id. at 83. The SEIU's proposal was defeated at Aetna's annual meeting. Am. Compl. ¶ 52.
The UUAC's 2013 proposal called for greater oversight of Aetna's political spending by the company's board and audit committee. Def. Ex. 1 at 77. In advocating for its proposal, the UUAC stated that Aetna had given $4 million to the U.S. Chamber of Commerce for attack ads, which Aetna described as "voter education initiatives, " and $3 million to the American Action Network ("AAN"), "a social welfare organization that sponsors ads regarding political candidates." Id. Aetna opposed this resolution as well, stating that it published annual political contribution reports containing "extensive information about its political contributions, " and that the board "has a robust oversight role over the Company's political contributions, policies and practices." Id. at 78. It also noted that the Zicklin Index, which "is intended to provide a comprehensive portrait of disclosure practices of the largest U.S. public companies, " ranked Aetna fifteenth on a list of 200 companies. Id. Like the SEIU's proposal, the UUAC's proposal was defeated at Aetna's annual meeting. Am. Compl. ¶ 63.
Plaintiff filed a complaint on December 10, 2013, alleging that Aetna's responses to the SEIU and UUAC proposals contained false and misleading statements and omissions. For example, Plaintiff claims that the political contribution reports themselves were inaccurate because they omitted contributions to tax-exempt organizations, such as AAN; that the 2012 report mischaracterized Aetna's donation to the Chamber of Commerce; and that, judging from tax filings by the Democratic and Republican Governors Associations, Aetna's political contribution reports repeatedly misstated its contributions to those and other organizations over a period of years. Am. Comps. ¶¶ 25-37. Plaintiff also claims that given these errors and omissions, Aetna's representations in its proxy statements as to its "extensive" disclosures and "robust" oversight were false or misleading. Id. ¶¶ 41-42; Pl. Br. at 11-13. He therefore asks the Court to void the 2012 and 2013 votes and to require Aetna to resubmit the defeated resolutions after correcting any errors in its proxy statements and political contribution reports and advising its shareholders about those errors. Am. Compl. at 20-21. He also asks the Court to appoint an individual at Aetna to ensure that the company's future political contribution reports are complete and accurate. Id. at 21.
After commencing this action, Plaintiff learned that at Aetna's 2014 annual meeting, shareholders will vote on two resolutions similar to the ones proposed by the SEIU and UUAC in 2012 and 2013. As a result, he filed a motion for a preliminary injunction on March 6, 2014, seeking to enjoin Defendants from:
sending any proxy materials for [Aetna's] upcoming 2014 Annual Shareholder Meeting or holding that meeting until such time as the Company has amended its 2010, 2011, and 2012 Political Contribution Reports to accurately reflect all of its political contributions, including its contributions to section 501(c)(4) and 501(c)(6) organizations, has issued an accurate and complete 2013 Political Contribution Report, and has advised shareholders about the specific errors and omissions in its previous reports.
Dkt. No. 22. That motion is fully briefed, and the Court heard oral argument on April 8, 2014.
"A plaintiff seeking a preliminary injunction must establish  that he is likely to succeed on the merits,  that he is likely to suffer irreparable harm in the absence of preliminary relief,  that the balance of equities tips in his favor, and  that an injunction is in the public interest." Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20 (2008). The "extraordinary and drastic remedy" of a preliminary injunction "should not be granted unless the movant, by a clear showing, carries the burden of persuasion." Grand River Enter. Six Nations, Ltd. v. Pryor, 481 F.3d 60, 66 (2d Cir. 2007) (quoting Moore v. Consol. Edison Co., 409 F.3d 506, 510 (2d Cir. 2005)) (internal quotation mark omitted). Regardless of the strength of the movant's showing on the other three factors, a failure to demonstrate irreparable harm is dispositive: "the moving party must first demonstrate that such injury is likely before the other requirements for the issuance of an injunction will be considered." Rodriguez ex rel. Rodriguez v. DeBuono, 175 F.3d 227, 234 (2d Cir. 1999) (quoting Reuters Ltd. v. United Press Int'l, Inc., 903 F.2d 904, 907 (2d Cir. 1990)) (internal quotation marks omitted). For the following reasons, Plaintiff has not sufficiently demonstrated that he is likely to suffer irreparable harm in the absence of a preliminary injunction. Therefore, even assuming that he is likely to succeed on the merits of his claims, he is not entitled to the relief he seeks.
Plaintiff suggests that irreparable harm "necessarily follows" from a showing that Aetna made material omissions and misstatements in its 2012 and 2013 proxy statements. Pl. Br. at 16. For several reasons, this argument is not persuasive.
To begin, Plaintiff's argument is undermined by eBay Inc. v. MercExchange L.L.C., 547 U.S. 388 (2006). In eBay, the Supreme Court rejected a rule, previously recognized by some lower courts, that a plaintiff seeking a permanent injunction against patent infringement need only show that its patent was valid and had been infringed. Id. at 393-94. That is, the Court denied that irreparable harm flowed directly from a likelihood of success on the merits, and insisted that lower courts instead apply traditional equitable principles when deciding whether to issue injunctive relief. Plaintiff argues that eBay does not apply outside the patent context or to preliminary injunctions, Pl. Reply at 8 n.5, but the Second Circuit specifically rejected that argument in Salinger v. Colting, 607 F.3d 68 (2d Cir. 2010), stating that eBay "applies with equal force... to preliminary injunctions" and is applicable to all cases, regardless of subject matter. Id. at 77-78 & n.7. Indeed, the court of appeals explicitly dismissed as "not binding precedent" the very case that Plaintiff cites to suggest that eBay does not apply to false advertising cases. See id. at 77 n.6 (discussing Time Warner Cable, Inc. v. DIRECTV, Inc., 497 F.3d 144 (2d Cir. 2007)). Accordingly, ...