Levin v. Metro-Goldwyn-Mayer, Inc.

264 F.Supp. 797 (S.D.N.Y. 1967)

Facts:

  • P and D were both shareholders of the company (MGM) and sought control through election of their respective board of directors.
  • The board of directors were elected at the annual shareholder’s meeting.
  • D (Metro) used company funds to hire outside consultants who would help campaign for their preferred directors.
  • MGM had placed an internal limit on shareholder solicitation funds of $125,000.
  • P sough an injunction for the use of these funds.

Issue:

  • Whether funds may be used to campaign or solicit shareholder votes for directors.

Holding:

  • Yes, the injunction will not be sustained.
  • There is no existing statute on which to prohibit this activity; and nothing indicates that Ds were guilty of fraud or any misrepresentation.
  • Moreover, it hadn’t even been proven that Ps were full harmed by the solicitation efforts.
  • The Directors of the company permitted solicitation but set a limit on its expenditures.  There is no rule of regulation on which the court could base an injunction.  Their behavior is a valid business judgment which the court shall defer to.

 

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