Simon Property Group, Inc. v. Taubman Centers, Inc., Case Number 02-74799 (E.D. Mich. 6/9/2003)

• Decision Date: 09 June 2003
• Docket Number: Case Number 02-74799.
• Parties: SIMON PROPERTY GROUP, INC., et al, Plaintiff(s), v. TAUBMAN CENTERS, INC., et al, Defendant(s).
• Court: U.S. District Court — Eastern District of Michigan

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SIMON PROPERTY GROUP, INC., et al, Plaintiff(s), v. TAUBMAN CENTERS, INC., et al, Defendant(s).

Case Number 02-74799.

United States District Court, E.D. Michigan, Southern Division.

June 9, 2003.

ORDER

VICTORIA A. ROBERTS, District Judge

I. INTRODUCTION

This matter is before the Court on Plaintiffs' Emergency Motion to Modify the Court's May 20, 2003 Order. On May 20, 2003, the Court granted Defendants' Motion to Suspend Injunction Pending Appeal. Plaintiffs' motion is prompted by Defendants' lobbying of the Michigan Legislature for amendments to the Michigan Control Share Acquisitions Act. The proposed amendments could render this Court's prior rulings and the pending appeal moot. Oral argument was heard on Friday, June 6, 2003.

The Court DENIES Plaintiffs' motion.

II. ARGUMENTS

House Bill 4764 ("HB 4764") was introduced on May 27, 2003 in the Michigan State Legislature (the "Legislature") and referred to the Legislature's Committee on Commerce. Among other things, it proposed that the Michigan Control Share Acquisitions Act ("Michigan Control Share Act"), MCL 450.1790, et seq., be amended to provide that:

! ". . . formation of a group, before or after the date of the amendatory act . . ., does not constitute a control share acquisition of shares. . . held by members of the group . . ."

! either shareholders or directors can grant voting rights to control shares acquired in a control share acquisition.

! only the directors can propose amendments to the articles of incorporation.

Pl. Exh A, HB 4764 at Secs. 791(6), 798(1), 611(3).

Defendants admit they have actively lobbied for the proposed amendments. They submitted memoranda for the Legislature's consideration in support of their position. While Plaintiffs have lobbied against such amendments to the Michigan Control Share Act, they contend they had no knowledge of Defendants most recent efforts, which presumably had some sway in the drafting and consideration of HB 4764.¹

Plaintiffs assert that Defendants' lobbying violates the Court's May 20th Order. Defendants were ordered to "refrain from engaging in any activity to impede Simon's tender offer." Order at p. 8. Plaintiffs argue that modification of the Court's Order is now required, because Defendants' appeal to the Legislature is designed to thwart Simon's tender offer. Plaintiffs propose that the Court modify its May 20th Order to allow Simon to solicit votes to call a special shareholder's meeting, and to allow a vote to be held at that meeting on whether to amend the "excess share provision" in the Taubman Centers, Inc. (TCI) Articles of Incorporation.² The remaining restrictions imposed in the Order, as to both Plaintiffs and Defendants, would stand.³

Without such a modification, Plaintiffs assert that they and TCI shareholders would be substantially injured because their voting rights may be nullified by the proposed legislation before the Sixth Circuit rules on the pending appeal. Plaintiffs opine that, if shareholders vote before enactment of the proposed amendments, Plaintiffs will have a colorable argument that it has "vested rights" against which the proposed amendments cannot be retroactively applied.

Defendants would not be irreparably injured by this "limited" modification of the Court's Order, argue Plaintiffs, because the vote can be reversed if the Sixth Circuit rules in Defendants' favor. And, the Court's grant of a preliminary injunction will be preserved for appellate review.

Defendants deny that their lobbying efforts are within the scope of activities prohibited by the letter or spirit of the Court's May 20th Order. In any event, Defendants argue that such a prohibition would constitute a prior restraint in violation of Defendants' First Amendment rights. Defendants argue that their advocacy in favor of legislation is protected speech, even if it directly impacts on prior and future rulings of the Court.

Defendants further argue that Plaintiffs' proposed modification of the stay Order would cause Defendants irreparable harm, because Plaintiffs would be poised to take down shares within a few hours of a Sixth Circuit ruling, while Defendants would be restrained under the stay Order from taking corporate measures to oppose the tender offer.

Since Plaintiffs filed their motion, HB 4764 was further modified by the Commerce Committee and the Michigan House of Representatives. On June 4,2003, the bill was voted out of the Committee with a modification that 1) allowed shareholders (as well as directors) to propose an amendment to the articles of incorporation, and 2) omitted language giving retroactive effect to a provision that would establish that formation of a group is not a control share acquisition. House Substitute for HB 4764 at Secs. 611(3), 791(6). On June 5, 2003, however, the bill was further modified in the House and passed with retroactive language reinserted. House Substitute for HB 4764 at Secs. 791(6), 798a.

III. APPLICABLE LAW AND ANALYSIS

A. Defendants' Lobbying Efforts Do Not Violate The Court's Order

An order prohibiting a certain form of speech can constitute a "prior restraint" in violation of the First Amendment:

The term prior restraint is used "to describe administrative and judicial orders forbidding certain communications when issued in advance of the time that such communications are to occur." Temporary restraining orders and permanent injunctions — i.e., court orders that actually forbid speech activities — are classic examples of prior restraints.

Alexander v. U.S., 509 U.S. 544, 550 (1993) (citations omitted).

In antitrust cases, the United States Supreme Court has upheld the right of a business to advocate for or against legislation even if it will have the effect of hindering competition. In Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961), the United States Supreme Court expressly rejected a claim that defendants' publicity campaign, aimed at influencing legislation that would be contrary to its competitors' interest, violated antitrust laws. Noting the implications of such a finding on the legislative process and constitutional rights the Court stated:

In a representative democracy such as this, these branches of government act on behalf of the people and, to a very large extent, the whole concept of representation depends upon the ability of the people to make their wishes known to their representatives. To hold that the government retains the power to act in this representative capacity and yet hold, at the same time, that the people cannot freely inform the government of their wishes would impute to the Sherman Act a purpose to regulate, not business activity, but political activity, a purpose which would have no basis whatever in the legislative history of that Act. Secondly, and of at least equal significance, such a construction of the Sherman Act would raise important constitutional questions. The right of petition is one of the freedoms protected by the Bill of Rights, and we cannot, of course, lightly impute to Congress an intent to invade these freedoms.

Noerr, 365 U.S. 127 at 529-530 (footnote omitted).

Likewise, in California Motor Transport Co. v. Trucking Unlimited, 404 U.S.508, 510 (1972), where defendants were accused of instituting state and federal proceedings for the purpose of eliminating their competition, the Court stated:

We conclude that it would be destructive of rights of association and of petition to hold that groups with common interests may not, without violating the antitrust laws, use the channels and procedures of state and federal agencies and courts to advocate their causes and points of view respecting resolution of their business and economic interests vis-a-vis their competitors.

See also Massachusetts Nurses Assoc. v. Dukakis, 570 F. Supp. 628, 636 (D. Mass. 1 983) ("[T]he First Amendment to the United States Constitution protects individuals' rights to petition their federal and state legislatures to seek to convince the legislatures to pass laws which will be in their interest.").

The principle discussed in Noerr Motor Freight and California Motor Transport applies here. This Court's May 20th Order did not expressly or impliedly prohibit Defendants from lobbying the Legislature, nor could it have. Defendants have a First Amendment right to attempt to change the law, even if such efforts directly impact matters pending before the Court. Indeed, Plaintiffs do not dispute that prohibiting Defendants from such activity would be an unconstitutional prior restraint. Consequently, the Court finds that Defendants' lobbying activity did not and does not violate the stay Order.

B. Modification Of The Stay Order Is Not Warranted

Despite their request that the Court deem Defendants' actions to be a direct violation of the May 20th Order, Plaintiffs do not request that the Court modify its Order to preclude Defendants from proceeding with their lobbying efforts. Rather, Plaintiffs request that the Court allow them to proceed with a shareholder vote on the excess share provision "to permit the [TCI]...