Levin v. Metro-Goldwyn-Mayer, Inc.

Delaware Court of Chancery · Corporations

CorporationsCharter amendmentsStockholder votingInjunctive reliefProxy contests8 Del. C. § 242temporary restraining orderirreparable injury

Facts

Metro-Goldwyn-Mayer's directors proposed a charter amendment under 8 Del. C. § 242 to split the company's three million outstanding common shares two-for-one and increase authorized common stock from three million to eight million shares. At the special stockholders' meeting on May 24, 1966, the judges of election certified that 1,294,809 shares voted in favor of the amendment, 860,450 against, and 366,170 were not voted, so the proposal passed. Plaintiff, a director who opposed the proposal, challenged the conduct of the meeting and vote count, including the treatment of management proxies, the counting of a 100,000-share Baldwin Securities proxy, and the ruling that his alternative advisory proposal was out of order. He sought temporary injunctive relief, but did not clearly allege how he faced immediate and irreparable injury.

Issue

Whether the plaintiff established a right to temporary injunctive relief restraining Metro-Goldwyn-Mayer from filing and implementing a charter amendment approved under 8 Del. C. § 242, based on alleged irregularities in the stockholder meeting and proxy count. The court also had to consider whether the challenged proxies and meeting rulings likely invalidated the apparent stockholder approval.

Rule

A restraining order may issue only in a proper case to preserve the status quo and prevent immediate and irreparable injury, loss, or damage, and it should not be granted unless justified by both the facts and applicable law. In assessing the likelihood that a required stockholder vote was obtained, Delaware courts look to substance rather than form, presume prima facie authentic proxies should normally be accepted, and avoid disenfranchising stockholders unless their purported vote is meaningless; the court must also balance the hardship to the defendant against the benefit to the plaintiff.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Red Mesa Biologics, a Delaware corporation based in Phoenix, approved a charter amendment at a special stockholder meeting to increase authorized common shares to facilitate a split. Nina Patel, a director-stockholder in Seattle who voted against the amendment, seeks a temporary restraining order blocking the filing, alleging only that implementation would be "unfair" and would dilute her influence, but she identifies no imminent noncompensable harm.

How should the court most likely rule on Nina's request for a temporary restraining order?

Explanation. A restraining order is a drastic remedy that issues only in a proper case to preserve the status quo and prevent immediate and irreparable injury, loss, or damage. Under the majority opinion, a plaintiff challenging a duly adopted charter amendment must show more than generalized unfairness or dissatisfaction with the vote. Because Nina does not identify a concrete immediate irreparable injury, the court should deny temporary relief. (Derived from Levin v. Metro-Goldwyn-Mayer, Inc. (n.d.).)