7:47 p.m. | Updated
In the battle between Apple and the hedge fund manager David Einhorn, score a point for the billionaire who is taking up the mantle of shareholder advocate.
A federal judge said on Tuesday that he was leaning toward Mr. Einhorn’s contention that Apple had violated securities regulations by bundling several shareholder proposals into one matter.
A lawsuit by Mr. Einhorn’s Greenlight Capital, filed this month in Federal District Court in Manhattan, argues that Apple improperly grouped a vote to eliminate the company’s ability to issue preferred stock at will with other initiatives that Mr. Einhorn supports.
While the judge overseeing the case, Richard J. Sullivan, did not immediately grant Mr. Einhorn’s request for a halt to the vote, he said that the facts of the case favored the investor’s interpretation.
“I think success on the merits lies with Greenlight,” Judge Sullivan said at the end of a nearly two-hour hearing. Earlier in the hearing, he implied that he believed Securities and Exchange Commission rules prohibited the bundling of disparate shareholder initiatives.
Spokesmen for Greenlight and Apple declined to comment after the hearing.
Though a small point in the skirmish between Apple and Mr. Einhorn, the judge’s comments may provide some ballast to the hedge fund manager’s call to other investors. Mr. Einhorn’s bigger goal is to persuade Apple to return some of its $137 billion cash trove to shareholders.
He has asked Apple to issue preferred shares, which would pay out billions of dollars in dividends over time. His lawsuit revolves around the technology giant’s proposal to eliminate “blank check” preferred shares that the company can issue without a shareholder vote. He argues that the company improperly bundled the plan with two other corporate governance changes that he supports.
Apple has said that it will consider Mr. Einhorn’s request, but that it has no plans to amend the shareholder proposal.
Judge Sullivan is expected to decide within days whether to grant a preliminary injunction, given the Feb. 27 cutoff for voting on Apple’s shareholder proposals.
A lawyer for Mr. Einhorn, Mitchell P. Hurley of the firm Akin Gump, argued during Tuesday’s hearing that his client would suffer “irreparable harm” if the vote were allowed to proceed, because he would be forced to vote against two matters he would ordinarily support.
During questioning, however, Judge Sullivan expressed skepticism about the need to take immediate action.
A lawyer for Apple, George Riley of O’Melveny & Myers, said in court that if shareholders approved the disputed initiative, the company would wait for the judge to rule before adopting the new measures in its corporate charter.
Judge Sullivan also questioned why Mr. Einhorn had waited so long to act. He filed suit on Feb. 6, over a month after Apple first disclosed its shareholder proxy.
DealBook: Court Gives Investor an Edge in a Lawsuit Against Apple
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DealBook: Court Gives Investor an Edge in a Lawsuit Against Apple
