## Facts

- Metro-Goldwyn-Mayer, Inc. (MGM) was approaching its annual stockholders’ meeting, where stockholders would vote on the election of directors.
- Two competing groups sought control of MGM’s board by nominating competing slates of directors and soliciting stockholder proxies for the upcoming vote.
- The incumbent-management faction, associated with the O’Brien group (defendants), solicited proxies on behalf of the management slate.
- A dissident stockholder faction, associated with Philip Levin and other stockholders (plaintiffs), solicited proxies for the dissident slate and challenged management’s campaign methods.
- MGM’s proxy materials disclosed that MGM would “bear all cost in connection with the management solicitation of proxies.”
- In conducting the management solicitation, defendants used MGM resources and funds, including funds to retain attorneys, engage a public-relations firm, and hire professional proxy-solicitation organizations.
- Plaintiffs sued MGM and the O’Brien group seeking injunctive relief to stop defendants from continuing to solicit proxies using corporate funds and resources.
- Plaintiffs’ request for immediate relief focused on restraining the ongoing solicitation activity before the meeting, rather than seeking damages after the vote.

## Issues

1. May incumbent directors and management use corporate funds and facilities to solicit proxies in a contested election for directors when the solicitation is disclosed and plaintiffs do not show fraud, deception, or a violation of law?
2. Have plaintiffs met the requirements for a preliminary injunction to halt management’s proxy solicitation pending a final decision on the merits?

## Decision

- The court denied the application for a preliminary injunction.
- The court concluded that, on the record presented for preliminary relief, plaintiffs had not shown that defendants’ use of corporate funds for proxy solicitation was unlawful or otherwise improper in a way that justified emergency equitable relief.
- The court relied on the absence of a showing of fraud, misleading proxy materials, coercion, or other conduct that would warrant court intervention before the stockholder vote.
- The court treated the use of paid professionals (such as counsel, public-relations assistance, and proxy solicitors) as consistent with modern proxy contests for a corporation of MGM’s size, particularly where the expenditures were disclosed.
- The court found plaintiffs had not made the showing required to justify disrupting the impending stockholder meeting through a preliminary injunction.

## Legal Principles

- Incumbent management may use reasonable corporate funds and corporate facilities to solicit proxies in a contested director election when the effort is carried out in good faith, for corporate purposes, and without fraud or deception.
- Disclosure that the corporation will pay the costs of management’s proxy solicitation weighs against injunctive relief based solely on the fact of corporate payment.
- Courts are reluctant to enjoin an approaching stockholder vote absent a clear showing of illegality, materially misleading solicitation, coercion, or similar misconduct.
- A preliminary injunction requires a strong showing on the merits and a showing of irreparable harm; allegations that management has a tactical advantage because it can spend corporate funds are not, by themselves, enough.

## Conclusion

In Levin v. Metro-Goldwyn-Mayer, Inc., the court refused to issue a preliminary injunction stopping MGM’s management faction from using corporate funds and resources to solicit proxies in a contested election. Because the proxy materials disclosed that MGM would bear management’s solicitation costs and plaintiffs did not show fraud, deception, or other unlawful conduct warranting immediate judicial intervention, the court held that plaintiffs had not satisfied the demanding standards for preliminary injunctive relief.


Levin v. Metro-Goldwyn-Mayer, Inc., 264 F. Supp. 797 (1967)