GEORGIA-PACIFIC v. GREAT NORTHERN NEKOOSA, Civ. No. 89-0264-P.

• Decision Date: 22 December 1989
• Docket Number: Civ. No. 89-0264-P.
• Parties: GEORGIA-PACIFIC CORPORATION, et al., Plaintiffs, v. GREAT NORTHERN NEKOOSA CORPORATION, et al., Defendants.
• Court: U.S. District Court — District of Maine

727 F. Supp. 31

GEORGIA-PACIFIC CORPORATION, et al., Plaintiffs, v. GREAT NORTHERN NEKOOSA CORPORATION, et al., Defendants.

Civ. No. 89-0264-P.

United States District Court, D. Maine.

December 22, 1989.

Stuart J. Baskin, Kenneth M. Kramer, Robert E. Richardson, Shearman & Sterling, New York City, David A. Soley, Robert H. Stier, Jr., Bernstein, Shur, Portland, Me., for plaintiffs.

Bernard W. Nussbaum, William C. Sterling, Jr., Paul Vizcarrondo Jr., Wachtell, Lipton, New York City, Robert A. Moore, Verrill & Dana, Portland, Me., for defendants.

GENE CARTER, Chief Judge.

ORDER DENYING PLAINTIFFS' APPLICATION FOR A TEMPORARY RESTRAINING ORDER AND A PRELIMINARY INJUNCTION

In this action, arising out of Georgia-Pacific's attempt to take over, by a cash tender offer, the Great Northern Nekoosa Corporation, Georgia-Pacific seeks relief declaring unlawful and enjoining certain impediments to Georgia-Pacific's offer which was commenced on October 31, 1989 and which has been twice rejected by the Great Northern Board of Directors. These allegedly unlawful impediments include Great Northern's "poison pill" stock purchase rights plan, which provides, inter alia, that within 90 to 120 days the corporation must hold a referendum of the shareholders on whether to accept an offer and redeem the poison pill. A special shareholders meeting has been scheduled for March 20, 1990, the 120th day after Georgia-Pacific demanded it. Before the Court now is Georgia-Pacific's Application for a Temporary Restraining Order and a Preliminary Injunction to accelerate the Great Northern shareholder referendum on Georgia-Pacific's offer to a date thirty days from demand and to require Great Northern to provide Georgia-Pacific with seventy-two hours notice prior to consummating any transaction that would materially alter the status quo. Because it has had the benefit of not only full briefing of these issues but also argument of able counsel for both parties and the nonparty shareholders, the Court will address the motion as one solely for a preliminary injunction. See Fed.R.Civ.P. 65.

In this circuit, in order for a plaintiff to obtain preliminary injunctive relief, the Court must find

(1) that the plaintiff will suffer irreparable injury if the injunction is not granted; (2) that such injury outweighs any harm which the granting of injunctive relief would inflict on the defendant; (3) that plaintiff has exhibited a likelihood of success on the merits; and (4) that the public interest will not be adversely affected by the granting of the injunction.

Stanton by Stanton v. Brunswick School Department, 577 F.Supp. 1560, 1567 (D.Me.1984). In considering an application for an injunction, "the Court is to bear constantly in mind that an `injunction is an equitable remedy which should not be lightly indulged in, but used sparingly and only in a clear and plain case.'" Id. (quoting Plain Dealer Publishing Co. v. Cleveland Type. Union # 53, 520 F.2d 1220, 1230 (6th Cir.1975). Application of these principles makes plain that Georgia-Pacific is not entitled to preliminary injunctive relief in this case.

The Great Northern rights plan incorporating the provision for a shareholder referendum within 90 to 120 days was put into effect a year before the Georgia-Pacific's tender offer and the instant litigation. There is no requirement that rights plans provide for such a referendum, and there has been no showing that a rights plan permitting such a referendum only after a period of 90 to 120 days is in any way unreasonable. As Great Northern's counsel pointed out, the SEC has used similar waiting periods for presentation of proposals at annual corporation meetings. See SEC Rule 14a-8, 17 C.F.R. § 240.14a-8. Moreover, in the abstract the 90 to 120 day time frame is reasonable to allow time to set and publicize a record date for the meeting, to prepare proxy materials, and to allow shareholders to gain information to make an informed judgment before the meeting.

The Great Northern rights plan also authorizes the Board of Directors to schedule the special shareholders meeting before the 90 day to 120 day period specified in the rights plan. Georgia-Pacific argues that it is unreasonable¹ in this instance for the Board to adhere to the 120 period and thus seeks acceleration of the meeting. Although this may not be the most compelling case imaginable for use of a poison pill, since Georgia-Pacific is not a green-mailer, see Ivanhoe Partners v. Newmont Mining Corp., 535 A.2d 1334, 1342 (Del. 1987), and the offer is not discriminatory, see Desert Partners, L.P. v. USG Corp., 686 F.Supp. 1289, 1299 (N.D.Ill.1988), there has been no showing on the specific issue raised by this motion that the Board's decision to hold the shareholders meeting 120 days after demand was unreasonable. The reasons given by Great Northern's Directors for using the pill are that they do not think the offer is high enough given the long term plans of the company and that, upon the advice of counsel, they think that the proposed takeover will result in antitrust violations. Certainly, 120 days is not a patently unreasonable amount of time for the directors to marshal and present to the shareholders the information on their position regarding the offer. This is particularly so when Maine law suggests that the Directors of a corporation, in considering the best interests of the shareholders and corporation, should also consider the interests of the company's employees, its customers and suppliers, and communities in which offices of the corporation are located. See 13-A M.R.S.A. § 716. Moreover, the Directors have filed suit in the District of Connecticut to test their antitrust claim and that litigation is proceeding on an expedited basis and may well be finished by the end of January. By setting the shareholders meeting 120 days from the date of demand, the Board made it far more likely that the antitrust litigation would be resolved and that the shareholders would have a sound informational basis when deciding whether to accept the tender offer.

The Court notes that in the complaint Georgia-Pacific has not challenged the purported illegality of the provision for setting the date of a special shareholders meeting under the rights plan nor...