Einhorn wins ruling against Apple in cash pile fight

A U.S. judge handed outspoken hedge fund manager David Einhorn a victory in his battle with Apple Inc on Friday, blocking the iPhone maker from moving forward with a shareholder vote on a controversial proposal to limit the company's ability to issue preferred stock.

U.S. District Judge Richard Sullivan in Manhattan granted a motion by Einhorn's Greenlight Capital for a preliminary injunction stopping the vote on that proposal.

The vote was scheduled for Feb. 27 as part of the company's annual stockholders' meeting.

Greenlight sued Apple on Feb. 7 as part of a broader pitch to unlock more of Apple's $137 billion in cash for shareholders. Einhorn has argued Apple should issue preferred stock with a perpetual 4 percent dividend.

The lawsuit itself challenged a measure called Proposal No. 2 that Apple put forward that would eliminate Apple's power to issue preferred shares without a shareholder vote.

At issue is Apple's "bundling" of the measure on the preferred shares with two other unrelated matters into a single proxy proposal.

Greenlight said it supported two proposed the amendments but not the one on preferred shares.

Sullivan said Greenlight and another investor who also sued Apple "are likely to succeed on the merits and face irreparable harm if the vote on Proposal No. 2 is permitted to proceed."

Representatives for Apple did not immediately respond to requests for comment.

For Einhorn, the decision could provide leverage as he pursues his pitch for Apple to issue what he has called "the iPref," preferred stock with a perpetual dividend that he contends would reward investors and help boost the company's share prices.

In a statement, a spokesman for Greenlight called the ruling a "significant win for all Apple shareholders and for good corporate governance."

The lawsuit was centered on a narrow issue of whether Apple violated U.S. Securities and Exchange Commission rules by "bundling" the preferred shares item with two other unrelated matters into one proxy proposal.

Greenlight's lawyers contended the SEC rules were intended to protect shareholders from being forced to vote for a proxy proposal involving materially different issues that the investors might not entirely support.

Apple had argued Proposal No. 2, which only dealt with amendments to its charter, constitute a single matter and wasn't bundled. Sullivan called the company's arguments "unavailing."

"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," Sullivan wrote.

The judge separately declined to block a vote from going forward on a separate proxy proposal, Proposal No. 4, which sought an advisory "say on pay" vote on Apple executives' compensation.

The proposal had been challenged by investor Brian Gralnick of Pennsylvania, who contends Apple did not disclose enough details about how it made its compensation decisions.

Sullivan rejected that argument, saying Apple's disclosures were "plainly sufficient under SEC rules."

Arnold Gershon, a lawyer for Gralnick at Barrack, Rodos & Bacine, did not respond to a request for comment.

Apple shares closed up 1.06 percent at $450.81 on the New York Stock Exchange on Friday.

The case is Greenlight Capital LP, et al., v. Apple Inc., U.S. District Court, Southern District of New York, 13-900.