Studebaker Corp. v. Gittlin

Facts

According to New York Law (§ 1315), a corporation is required to permit shareholders to inspect a list of the names and addresses of other shareholders (i.e., a shareholder list) if, in addition to other conditions, he owns or represents a minimum 5 percent of any class of outstanding shares. Gittlin (Defendant) owned 5,000 shares and obtained the authorization of 42 additional shareholders totaling 145,000 shares, an amount that exceeded 5 percent of Studebaker Corporation’s (Plaintiff) outstanding shares. These authorizations merely entitled Defendant to use the weight of these 145,000 shares toward meeting the 5 percent requirement in order to acquire the shareholder list, however it did not entitle him to vote the shares in a corporate election or otherwise at a shareholders’ meeting. Defendant gathered these 42 authorizations simply by asking for them either orally or in writing. He did not provide the 42 shareholders with extensive information on the corporation (as Rule 14a-3 requires of proxy solicitations) and the information that was provided to them was not filed first with the SEC prior to using it (as required of proxy solicitations by Rule 14a-6). Defendant then began a proceeding in New York State court to enforce his rights under § 1315 to inspect the shareholder list. The ultimate purpose Defendant had in obtaining the shareholder list was to take over control of the corporation by acquiring proxies of the shareholders on the list. However, to prevent their own ousters, the existing management, in the name of Plaintiff, filed the present suit in federal district court to enjoin Defendant’s use of these authorizations. Their contention was that the communications used to obtain these authorizations were proxy solicitations and, therefore, were obtained invalidly due to non-compliance with the above-noted SEC rules.