On February 22, 2013, the U.S. District Court for the Southern District of New York ruled in favor of Greenlight Capital, L.P., et al. ("Greenlight") in the matter of Greenlight Capital, L.P., et al v. Apple, Inc.
Greenlight brought suit against Apple, Inc. alleging the company had improperly bundled together several shareholder issues to be put for a vote into one proposal. In preparation for its annual meeting, Apple issued a definitive proxy statement and proxy card soliciting shareholder votes on a range of proposals. The defendants asserted that one of the proposals ("Proposal 2") violated the "unbundling" rules promulgated by the SEC which require that a proxy permit shareholders to vote separately on each matter presented for consideration.
Proposal 2 sought to: (1) facilitate voting for incumbent members of Apple's board of directors under California law; (2) revoke the board of directors' power to unilaterally issue preferred stock (requiring shareholder approval for any future issuance); (3) establish a nominal par value for Apple's common stock in an attempt to avoid state fees stemming from Apple's no par shares; and (4) eliminate certain obsolete provisions in Apple's restated articles of incorporation.
Section 14 of the Exchange Act governs shareholder proxy solicitations. Specifically, Rule 14a-4(a)(3), requires that "the form of proxy ... [s]hall identify clearly and impartially each separate matter intended to be acted upon, whether or not related to or conditioned on the approval of other matters." Further, Rule 14a-4(b)(1) requires that shareholders be given "an opportunity to specify by boxes a choice between approval or disapproval of, or abstention with respect to each separate matter referred therein as intended to be acted upon." Thus, these "unbundling" rules require distinct voting on each separate matter proposed.
In the court's memorandum and order, Judge Richard Sullivan stated that "given the language and purpose of the rules, it is plain to the Court that Proposal No. 2 impermissibly bundles "separate matters" for shareholder consideration." The order further states that the "present bundling of items forces shareholders ... to approve or disapprove a package of items and thus approve [or disapprove] matters they [would] not if presented independently." The bundling also denied shareholders the ability "to communicate to the [Board] their views on each matter put to a vote."