Wenz v. Globecomm Sys., Inc.

• Decision Date: 14 November 2012
• Docket Number: No. 31747–12.,31747–12.
• Citation: 37 Misc.3d 1222,964 N.Y.S.2d 63,2012 N.Y. Slip Op. 52134
• Parties: Harvey WENZ and Joan Wenz, on behalf of himself and all others similarly situated, Plaintiffs, v. GLOBECOMM SYSTEMS, INC., David E. Hershberg, Keith A. Hall, Richard E. Caruso, Harry L. Hutcherson, Jr., Brian T. Maloney, Jack A. Shaw, A. Robert Towbin and C.J. Waylan, Defendants.
• Court: New York Supreme Court

37 Misc.3d 1222

964 N.Y.S.2d 63

2012 N.Y. Slip Op. 52134

Harvey WENZ and Joan Wenz, on behalf of himself and all others similarly situated, Plaintiffs,

v.GLOBECOMM SYSTEMS, INC., David E. Hershberg, Keith A. Hall, Richard E. Caruso, Harry L. Hutcherson, Jr., Brian T. Maloney, Jack A. Shaw, A. Robert Towbin and C.J. Waylan, Defendants.

No. 31747–12.

Supreme Court, Suffolk County, New York.

Nov. 14, 2012.

Faruqi & Faruqi, LLP, New York, for Plaintiffs.

Jaspan, Schlesinger, Garden City, for Plaintiffs, 300 Garden City Plaza.

Kramer, Levin, Naftalis, Esqs., New York, for Defendants.

Hamburger, Maxson, Yaffe et al Melville, for Defendants.

THOMAS F. WHELAN, J.

Upon the following papers numbered 1 to 13 read on this motion for an order enjoining defendants from holding the shareholder vote; Notice of Motion/Order to Show Cause and supporting papers 1–3; Notice of Cross Motion and supporting papers; Answering Affidavits and supporting papers 4–6; Replying Affidavits and supporting papers 7; Other 8 (plaintiffs' supplement to motion); 9 (Stipulation dated 10/18/12); 10 (plaintiffs' memorandum); 11 (defendants' memorandum); 12 (verification of Joan Wenz); 13 (affidavits of service); and after hearing counsel in support of and in opposition to the motion on November 13, 2012, it is

ORDERED that this motion (# 001) by Plaintiffs seeking an order enjoining Defendants from holding the shareholder vote on Proposal 2 and Proposal 4 scheduled to be held at the annual shareholder meeting of Globecomm Systems Inc. on November 15, 2012, until the Court hears Plaintiffs' motion for a preliminary injunction or Defendants disclose the information sought by plaintiffs is denied; and it is further

ORDERED that a preliminary conference is scheduled for December 14, 2012, at 9:30 a.m., in Part 45, at the courthouse located at 1 Court Street—Annex, Riverhead, New York.

The instant motion seeks to enjoin the shareholder vote scheduled to be held at the annual general meeting of shareholders of defendant Globecomm Systems Inc. (Globecomm) until such time as more complete disclosures regarding Proposal 2 and Proposal 4 are made to the shareholders. Proposal 2 seeks to amend Globecomm's 2006 Stock Incentive Plan to increase the number of shares of common stock issuable under that plan by 1,500,000 shares. Proposal 4 is a non-binding, advisory vote to approve Globecomm's executive compensation. As set forth in the Proxy Statement at issue, the purpose of the 2006 Stock Incentive Plan is “to allow the Company to continue to utilize equity incentives in acquisitions and to retain the services of key individuals who are essential to the Company's long term growth and financial success” (Proxy at 38, Ex. B to Monteverde Aff.) It is plaintiffs' position that the 46–page Proxy Statement filed with the Securities and Exchange Commission on October 5, 2012 is incomplete. In particular, plaintiffs believe that insufficient information has been disclosed to shareholders concerning the dilutive effect Proposal 2 may have on existing shareholders, in addition to the consideration by the Board of Directors of various analyses that have not been made available to shareholders. Plaintiffs are seeking this Court's assistance in postponing the Shareholder vote on the proposals to afford “the Board time to correct its breaches of fiduciary duty and avoid the potential protracted litigation ...” (Plaintiffs' Memorandum of Law, p 17).

This motion for preliminary injunctive relief was commenced by order to show cause dated November 2, 2012 (Whelan, J). The order directed that service of the papers “by overnight mail of a copy of this order together with the papers on which it is based upon the parties herein on or before November 6, 2012, shall be deemed good and sufficient service.” At oral argument held on November 13, 2012, the return date of the motion, it was admitted by the plaintiffs that service was not effectuated in keeping with the terms of the order to show cause.

It is well established that the failure on the part of a plaintiff or other party who moves for an order by interposition of an order to show cause to timely serve all of the parties in the manner directed by the court is a jurisdictional defect and warrants denial of the motion ( see U.S. Bank Natl. Assoc. v. Hickey, 53 AD3d 544, 862 N.Y.S.2d 87 [2d Dept 2008]; Contimortgage Corp. v. Garrett, 32 AD3d 977, 820 N.Y.S.2d 887 [2d Dept 2006]; Scharmann's, Inc. v. 388 West Broadway, LLC, 258 A.D.2d 262, 685 N.Y.S.2d 33 [2d Dept 1999]; see also Mittleman & Son Meat Processing, Inc. v. Meat Packers & Butchers Supply Co., Inc., 272 A.D.2d 531, 708 N.Y.S.2d 897 [2d Dept 2000] ). A motion not properly served must be denied as the court is without jurisdiction to determine the merits thereof ( see Bianco v. Ligneci, 298 A.D.2d 482, 748 N.Y.S.2d 503 [2d Dept 2002]; Golden v. Golden, 128 A.D.2d 672, 513 N.Y.S.2d 171 [2d Dept 1987] ).

Here, the plaintiffs failed to provide due proof that timely service on the individual defendants, as directed by the order to show cause, was effected. Since a company acts only through its directors ( see Arnold v. Socy. For Sav. Bancorp, 678 A.2d 533, 540 [Del 1996] ), injunctive relief is not possible if service is not made upon the directors.

The untimely service of the motion, on November 11, 2012, the day before oral argument, on three of the eight directors does not provide this Court with jurisdiction to entertain the motion. Pursuant to CPLR 6311 a motion for a preliminary injunction may be served with or after the service of the summons. A court has no authority to issue a preliminary injunction unless the underlying action has been properly commenced ( see eg Hart Is. Comm. v. Koch, 150 A.D.2d 269, 541 N.Y.S.2d 790 [1st Dept 1989] ). A preliminary injunction is not a free-standing remedy and without timely service in keeping with the mandates of the Order to Show Cause, the application must be denied.

Additionally, the application for preliminary injunctive relief is not supported by an affidavit as required by CPLR 6312(a) ( see Weinstein, Korn & Miller, New York Civil Practice ¶ 6312.01[4] [2012] ). The required affidavit must show that the underlying action falls within one of the grounds for a preliminary injunction specified in CPLR 6301. To the contrary, by stipulation dated October 18, 2012, the plaintiff and defendant Globecomm Systems Inc. agreed that plaintiff would not submit on this motion “an affidavit from or the live testimony of (i) Plaintiff Harvey Wenz, (ii) any fact witness, or (iii) any expert.” In keeping therewith, no affidavit is submitted describing any claim of injury of any kind.

A review of the underlying Amended Class Action Complaint, in particular the Wherefore declarations thereof, discloses that it does not request permanent injunctive relief and that only tort relief is sought, that is, breach of fiduciary duties by the Directors, aiding and abetting by the Corporation in connection with the issuance of the Proxy, and an award to plaintiffs and the Class of appropriate damages. While a request is sought for a preliminary injunction (“enjoining defendants from consummating the Shareholder vote on Proposal 2 and/or 4 unless and until the Company provides adequate disclosure regarding its cost and effects to Globecomm shareholders”), no request for a permanent injunction is set forth in the complaint.

The statute, CPLR 6301, specifies two circumstances in which preliminary injunctive relief may be granted. The first is when a defendant threatens to harm plaintiff's rights in the subject of the action and such harm could render the judgment ineffectual. The “subject of the action” category is usually a specific res in which the plaintiff has a pre-existing interest ( see eg Dinner Club Corp. v. Hamlet on Olde Oyster Bay Homeowners Assn., Inc., 21 AD3d 777, 801 N.Y.S.2d 25 [2d Dept 2005]; F.F. Shore & Co. v. Romaner, 1 A.D.2d 690, 146 N.Y.S.2d 788 [2d Dept 1955] ). The second category is...