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Kuebler v. Vectren Corp.

United States District Court, S.D. Indiana, Evansville Division

August 22, 2018

MICHAEL KUEBLER, et ah, Plaintiffs,
v.
VECTREN CORPORATION, et al. Defendants.

          ENTRY ON PLAINTIFFS' MOTION FOR PRELIMINARY INJUNCTION

          RICHARD L. YOUNG, JUDGE

         Vectren Corporation ("Vectren") and CenterPoint Energy, Inc. ("CenterPoint") entered into a merger agreement under which Vectren becomes a CenterPoint company and agrees to pay its shareholders $72.00 cash per share for each share of common stock held. As required by federal securities laws, Vectren filed several proxy statements with the Securities and Exchange Commission in connection with the merger. Litigation then ensued. The court consolidated seven different lawsuits and appointed Michael Kuebler, James Danigelis, and Michael Nisenshal ("Plaintiffs") as lead plaintiffs. Now before the court is Plaintiffs' motion for a preliminary injunction which seeks to enjoin the upcoming shareholder vote set for August 28, 2018. For the reasons set forth below, the court DENIES Plaintiffs' motion.

         I. Background

         The following facts are undisputed. On April 21, 2018, Vectren, an energy holding company, and CenterPoint, a public utility holding company, entered into a merger agreement. Under the agreement, Vectren becomes a CenterPoint company and agrees to pay its shareholders $72.00 cash per share for each share of common stock held. On June 18, 2018, as required by federal securities law, Vectren filed a 172-page preliminary proxy statement with the SEC related to the merger. (See Filing No. 35, Preliminary Proxy Statement, Ex. Al). On July 16, 2018, Vectren filed its definitive proxy statement. (Filing No. 35, Definitive Proxy Statement, Ex. A2). The definitive proxy statement provides that there will be a shareholder meeting on August 28, 2018 at which point the shareholders will be asked to approve the merger.

         The filing of the proxy statements resulted in seven different lawsuits.[1]The thrust of the lawsuits was that Vectren and its board of directors (collectively "Defendants") violated Sections 14(a) and 20(a) of the Securities Exchange Act of 1943, 15 U.S.C. §§ 78a et seq., by omitting material information in the proxy statements, rendering them false and misleading. On July 10, 2018, Plaintiffs Kuebler and Danigelis both moved for a preliminary injunction. After the court consolidated the lawsuits, [2] on August 15, 2018, the court conducted a hearing on the pending motion for a preliminary injunction, and on August 17, 2018, both parties filed their proposed findings of fact and conclusions of law. The motion is now ripe for a decision.

         II. Legal Standard

         There are two phases to obtaining a preliminary injunction. Girl Scouts of Manitou Council, Inc. v. Girl Scouts of United States of America, Inc., 549 F.3d 1079, 1085 - 1086 (7th Cir. 2008). First, the moving party must initially show "(1) that [it] will suffer irreparable harm absent preliminary injunctive relief during the pendency of [the] action; (2) inadequate remedies at law exist; and (3) [it] has a reasonable likelihood of success on the merits." Whitaker by Whitaker v. Kenosha Unified School District No. 1 Board of Educ, 858 F.3d 1034, 1044 (7th Cir. 2017) (citation omitted). If the moving party survives the threshold phase, then the court balances the harms between the parties and considers any effects on the public interest. See Id. Preliminary injunctions are considered an extraordinary remedy and should only be issued in cases clearly demanding them. See Girl Scouts of Manitou Council, Inc., 549 F.3d at 1085 (citation omitted).

         III. Discussion

         Plaintiffs argue that the court should preliminarily enjoin the shareholder vote until Defendants supplement their disclosures. However, Plaintiffs have failed to make a threshold showing that there is a likelihood of success on the merits and that irreparable harm will occur absent injunctive relief.[3]

         A. Likelihood of Success on the Merits

         To prevail on a claim under Section 14(a) and Rule 14a-9 of the Securities and Exchange Act, a plaintiff must show (1) the proxy statement contains a material misrepresentation or omission, (2) the defendant was negligent, and (3) the proxy statement was an essential link in the merger or acquisition. Lone Star Steakhouse & Saloon, Inc. v. Adams, 148 F.Supp.2d 1141, 1151 (D. Kan. 2001). An omission is material "if there is a substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote." TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976). This requires "a showing of a substantial likelihood that, under all the circumstances, the omitted fact would have assumed actual significance in the deliberations of the reasonable shareholder" or that "the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the 'total mix' of information made available."[4] Id.

         Defendants' definitive proxy statement is 172 pages. (Filing No. 35, Definitive Proxy Statement, Ex. A2).[5] It contains, among other things, a twelve-page summary of the background of the merger (id. at 16 - 28), a four-page summary of Vectren's Board of Director's recommendation for the merger (id. at 28 - 32), and-most relevant to Plaintiffs challenges-an eight-page summary of the fairness analyses performed by Merrill Lynch, Pierce, Fenner & Smith Inc. ("Merrill Lynch"), Vectren's financial advisor (id. at 32 - 39). That summary covers the three types of financial analyses Merrill Lynch performed to evaluate the $72.00 per share merger consideration: (1) a Selected Publicly Traded Companies Analysis, (2) a Selected Precedent Transactions Analysis, and (3) a Discounted Cash Flow Analysis.[6] See Id. The proxy statement also provides certain management projections including Vectren's projected net income, depreciation and amortization, EBITDA, and capital expenditures for the years 2018 through 2027. Id. at 40-41.

         Plaintiffs argue that Defendants have violated Section 14(a) and Rule 14a-9 by omitting three pieces of information from their proxy statements: (1) Vectren's unlevered cash flow projections; (2) the financial analyses performed by Merrill Lynch; and (3) the presence of any Don't Ask, Don't Waive ("DADW") provisions within the confidentiality agreements between Vectren and potential bidders.

         At least on the present record before the court, Plaintiffs have failed to make a threshold showing that there is a substantial likelihood that the disclosure of the three pieces of information would have assumed actual significance in the deliberations of the reasonable shareholder or would have been viewed by a reasonable investor as having significantly altered the "total mix" of information made available. See TSC Industries, Inc., 426 U.S. at 449. Plaintiffs have not offered any evidence that the three pieces of omitted information are material or would somehow alter the "total mix" of information. Plaintiffs have not submitted a declaration or an affidavit. They have not offered an expert to opine on the materiality of the three pieces of information. They have not submitted any documents for the court to consider. Instead, they have relied on case law and argument to show that these omitted statements render Defendants' proxy statement misleading, seemingly as a matter of law. However, there is no per se rule that financial information must be included in a ...


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