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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
UNION OF NEEDLETRADES, INDUSTRIAL :
AND TEXTILE EMPLOYEES ("UNITE"), :
THE SOUTHERN REGIONAL JOINT BOARD :
OF UNITE and THE MAY COMPANY :
INDEPENDENT SHAREHOLDERS COMMITTEE, : COMPLAINT
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:
Plaintiffs, :
:
-against- : 97 Civ. 3120 (JGK)
:
THE MAY DEPARTMENT STORES COMPANY, :
:
Defendant. :
:
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Plaintiffs Union of Needletrades, Industrial and Textile Workers
("UNITE"), The Southern Regional Joint Board of UNITE, and The May Company
Independent Shareholders' Committee, by their undersigned attorneys, allege upon
knowledge with respect to themselves and their own acts, and upon information
and belief with respect to all other matters, as follows:
NATURE OF THE ACTION
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1. Plaintiffs have brought this lawsuit to cure and to correct false
and misleading proxy materials distributed by defendant, and to prevent
defendant from exercising invalid discretionary authority wrongfully solicited
through such materials.
2. Plaintiffs are the proponents of a shareholder resolution that
would amend defendant's bylaws to eliminate defendant's "poison pill" plan and
require
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shareholder approval of any such plan adopted in the future. The resolution is
to be submitted to a vote at defendant's annual meeting of shareholders to held
on May 23, 1997. Defendant opposes the proposal.
3. Even though plaintiffs notified defendant eight weeks ago that
they are going to raise the poison pill resolution at the meeting and will be
soliciting proxies in connection therewith, defendant refused to include the
resolution as a line item on its proxy card, and has deprived its shareholders
of the opportunity to support or oppose the resolution.
4. Instead, defendant has mailed proxy materials to its shareholders
that seek discretionary authority to vote those proxies with respect to "any
other matter that may properly come before the meeting" -- including plaintiff's
proposal "should [it] be properly presented at the annual meeting."
5. Recognizing, however, that such discretionary authority is
invalid in light of its advance notice of plaintiffs' proposal, defendant plans
to send out a second set of proxy materials -- after defendant has solicited
discretionary authority to vote against the proposal, and after plaintiffs have
completed their own solicitation -- in which plaintiffs' proposal is set forth
as a separate line item on the proxy card. Defendant has asserted, however,
that all of the initial proxies it solicits that are not
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revoked will continue to confer discretionary authority upon it.
6. Defendant's manipulation of the proxy solicitation process
constitutes a violation of the Securities Exchange Act of 1934 (the "Exchange
Act") and the regulations promulgated thereunder by the Securities and Exchange
Commission ("SEC"). The failure of defendant to set forth plaintiff's proposal
as a separate line item on its proxy card, and defendant's claim to
discretionary authority with respect to such proposal, violate SEC Rules 14a-4
and 14a-9 because defendant knew of the proposal a reasonable time before
defendant commenced its proxy solicitation. In addition, the deceptive and
confusing two-step procedure contemplated by defendant is violative of SEC Rule
14a-9, and will only mislead and disenfranchise defendant's shareholders.
THE PARTIES
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PLAINTIFFS
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7. Plaintiff UNITE is an unincorporated labor organization with its
national headquarters located at 1710 Broadway, New York, New York 10019.
Pension trusts organized for the retirement benefit of members of UNITE own
approximately 53,418 shares of defendant's common stock.
8. Plaintiff The Southern Regional Joint Board of UNITE ("SRJB") is
an unincorporated labor organization with its headquarters located at 4405 Mall
Boulevard, Union
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City, Georgia 30291. SRJB is comprised of various UNITE local affiliates located
in the Southeastern region of the United States. SRJB, as successor-in-interest
to The Southern Regional Joint Board of the Amalgamated Clothing and Textile
Workers Union, is the beneficial owner of 50 shares of defendant's common stock.
9. Plaintiff The May Company Independent Shareholders' Committee
(the "Shareholders' Committee") is an unincorporated association formed by UNITE
and the SRJB for the purposes of advancing the shareholder proposal that is the
subject of this lawsuit. The headquarters of the Shareholders' Committee is
located at 2100 L Street, N.W., Washington, D.C. 20037.
10. Plaintiffs are collectively referred to herein as the
"Proponents."
DEFENDANT
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11. Defendant The May Department Stores Company (the "Company") is a
Delaware corporation that maintains its headquarters at 611 Olive Street, St.
Louis, Missouri 63101. The Company operates numerous department stores
throughout the United States, including Lord & Taylor in this District.
12. The common shares of the Company are registered pursuant to
Section 12 of the Exchange Act, 15 U.S.C. (S) 78l, and are listed for trading on
the New York Stock Exchange.
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JURISDICTION AND VENUE
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13. The Court has jurisdiction over this case pursuant to 28 U.S.C.
(S)(S) 1331, 2201, 2202, and 15 U.S.C. (S) 78aa.
14. Defendant transacts business in this District and is subject to
personal jurisdiction here. Accordingly, venue is properly laid in this
District pursuant to 28 U.S.C. (S) 1391(b) and 15 U.S.C. (S) 78aa.
STATUTORY AND REGULATORY PROVISIONS
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15. Section 14(a) of the Exchange Act, 15 U.S.C. (S) 78n(a), provides
that it shall be
unlawful for any person . . . in contravention of such rules and
regulations as the [Securities and Exchange] Commission may prescribe as
necessary or appropriate in the public interest or for the protection of
investors, to solicit or to permit the use of his name to solicit any proxy
. . . in respect of any security . . . registered pursuant to section 78l
of this title.
16. SEC Rule 14a-4(a)(3), 17 C.F.R. (S) 240.14a-4(a)(3), provides
that a proxy card
[s]hall identify clearly and impartially each separate matter intended to
be acted upon, whether or not related to or conditioned on the approval of
other matters, and whether proposed by the registrant or by security
holders. No reference need be made, however, to proposals as to which
discretionary authority is conferred pursuant to paragraph (c) of this
section.
17. SEC Rule 14a-4(b)(1), 17 C.F.R. (S) 240.l4a-4(b)(1), provides in
pertinent part that a proxy card shall provide means
whereby the person solicited is afforded an opportunity to specify by boxes
a choice between
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approval or disapproval of, or abstention with respect to each separate
matter referred to therein as intended to be acted upon, other than
elections to office.
18. SEC Rule 14a-4(c)(1), 17 C.F.R. (S) 240.14a-4(c)(1), provides
that
[a] proxy may confer discretionary authority to vote with respect to . . .
[m]atters which the persons making the solicitation do not know, a
reasonable time before the solicitation, are to be presented at the
meeting, if a specific statement to that effect is made in the proxy
statement or form of proxy.
19. SEC Rule 14a-9(a), 17 C.F.R. (S) 240.14a-9(a), provides that
[n]o solicitation . . . shall be made by means of any proxy statement, form
of proxy, notice of meeting or other communication, written or oral,
containing any statement which, at the time and in the light of the
circumstances under which it is made, is false or misleading with respect
to any material fact, or which omits to state any material fact necessary
in order to make the statements therein not false or misleading . . . .
SUBSTANTIVE ALLEGATIONS
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THE PROPONENTS' ANTI-"POISON PILL" PROPOSAL
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20. On or about March 5, 1997, the Proponents timely notified the
Company, pursuant to Section 11, Article I of the Company's bylaws, of their
intention to bring various items of business before the annual meeting of
shareholders scheduled to be held on May 23, 1997. Among these items was a
shareholder proposal (the "Proposal") to be submitted for consideration by the
Company's shareholders at the annual meeting. The Proposal would require the
Company to eliminate its current shareholder rights
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agreement -- commonly referred to as a "poison pill" -- and obtain shareholder
approval for any future poison pill.
21. Under the Company's current poison pill, one right has been
declared for each common share of the Company's stock outstanding. Each right
entitles shareholders to purchase, under certain conditions, one four-hundredth
of a share of the Company's Junior Participating Preference Shares at a purchase
price of $150. The right will be exercisable if a person or group acquires
beneficial ownership of 20% or more of the Company's outstanding common stock or
has announced a tender offer upon consummation of which said person or group
would own 20% or more of the Company's outstanding common stock. Rights held by
the 20%-or-more holder will become void. The Company's board of directors may
redeem the rights for $.01 per share subject to adjustment.
22. The Company's poison pill is an anti-takeover device which
effectively prevents a change in control of the Company without the approval of
the board of directors. Triggering the poison pill affects the bidder by causing
substantial dilution to a person or group that attempts to acquire the Company
on terms not approved by the board of directors.
23. The Proponents believe that the poison pill forces potential
investors to negotiate acquisitions with management, instead of making their
offer directly to
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shareholders. The Proponents believe that shareholders should be able to decide
for themselves whether to accept an offer for their stock without interference
in the form of a poison pill.
24. The Company's board of directors twice has authorized a poison
pill without shareholder approval. The original poison pill, adopted in 1986,
was scheduled to expire in 1996; however, in 1994 the Company's board of
directors amended and extended the plan through 2004.
25. The Proposal provides as follows:
RESOLVED, that pursuant to Section 109 of the Delaware General
Corporation Law and Article XIII of the Company's By-Laws, the share
owners of The May Department Stores Company (the "Company") hereby
amend the Company's By-Laws to add the following article, such
amendment to be effective immediately upon approval by holders of a
majority of the outstanding shares of stock present, in person or by
proxy, at the meeting of share owners at which such resolution is
proposed:
The Company shall not adopt or maintain any rights plan or similar
agreement, commonly referred to as a "poison pill," which is designed
to impede, or has the effect of impeding, the acquisition of a block
of stock in excess of a specified threshold and/or merger or other
transaction between a significant share owner and the Company, unless
such plan or agreement has theretofore been approved by the holders of
a majority of the outstanding shares of stock at a general or special
meeting of share owners, and the Company shall redeem any such plan or
agreement in effect as of the date of adoption of this Article of the
By-Laws, including without limitation the Company's 1994 Rights
Agreement. Anything to the contrary notwithstanding, this Article may
not be amended, modified or repealed, except
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by holders of a majority of the outstanding shares of stock.
THE COMPANY'S EFFORTS TO THWART THE PROPOSAL
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26. The Company's management opposes the Proposal. Indeed, despite
the fact that the Proponents formally notified the Company eight weeks ago that
they intend to raise the Proposal at the annual meeting of shareholders on May
23, 1997, the Company has refused to set forth the Proposal, and include it as a
line item, on its proxy card.
27. On April 9, 1997, the Proponents filed a preliminary proxy
statement and a model proxy card with the SEC for its review. The Company was
aware of this filing, and previously had informed the Proponents that they
should designate the Proposal as line item "(e)" in their proxy materials.
28. On April 11, 1997, Michael R. Zucker, Director of Corporate and
Financial Affairs at UNITE, and head of the Shareholders' Committee, spoke with
Richard A. Brickson, the Company's Secretary. Zucker reiterated the Proponents'
intention to raise the Proposal at the shareholders meeting, and to solicit at
least a majority of the Company's outstanding shares in support of the Proposal.
Zucker informed Brickson that the Proponents had retained custodians to arrange
delivery of the Proponents' proxy materials to holders of at least a majority of
the Company's outstanding shares. Zucker requested that the Company
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include the Proposal as a line item on the Company's proxy card, but Brickson
refused.
29. Brickson stated that the Company intends to allow shareholders to
vote on the Proposal via management's proxy only after the Company has first
solicited discretionary authority, and after the Proponents have completed their
own solicitation of at least a majority of the outstanding shares of the
Company's stock. According to Brickson, the Company will then send out a second
round of proxy materials in which the Proposal is to be included as line item
"(e)."
30. Brickson asserted, however, that the discretionary authority
conferred by the initial proxies will continue to be valid, so long as they are
not superseded by subsequently executed proxies.
31. On April 14, 1997, counsel for the Proponents wrote to the
Company, again stating that the Proponents would be soliciting at least a
majority of the outstanding shares of the Company's stock, and had retained
custodians to arrange delivery of the Proponents' proxy materials to holders of
at least a majority of the outstanding shares. The letter informed the Company
that, in light of the Company's advance notice of the Proposal, it would be
inappropriate for the Company to seek discretionary authority with respect to
the Proposal, and that such
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authority could not be ratified after the fact by the Company's contemplated
second round of proxy materials.
32. In a letter dated April 17, 1997, counsel for the Company stated
that the Company disagreed with the Proponents regarding its ability to solicit
discretionary authority with respect to the Proposal. On that same date, the
Company filed its definitive proxy materials with the SEC and began soliciting
proxies.
33. The Company's proxy materials disclose the Company's intention to
vote against the Proposal, but do not give shareholders an opportunity to vote
on the Proposal separately. Instead, the Company seeks discretionary authority
to vote on "such other business as may properly come before the meeting" --
including the Proposal "should [it] be properly presented at the annual
meeting."
34. On April 29, 1997, the Proponents filed their definitive proxy
materials with the SEC, and commenced their solicitation of at least a majority
of the Company's outstanding shares.
DECLARATORY AND INJUNCTIVE RELIEF IS NECESSARY
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35. A declaratory judgment is appropriate because a definite and
concrete dispute exists between the parties relating to the Company's legal
rights and obligations arising under the Exchange Act and the rules promulgated
thereunder.
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36. Injunctive relief is appropriate to restrain the Company from its
violations of the Exchange Act and the SEC's rules promulgated thereunder.
37. The Proponents have no other or adequate remedy at law.
CLAIM FOR RELIEF
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(FOR INJUNCTIVE AND DECLARATORY RELIEF
UNDER SECTION 14(A) OF THE EXCHANGE
ACT, AND SEC RULES 14A-4(A), 14A-4(B),
14A-4(C), AND 14A-9(A))
38. Paragraphs 1 through 37 are repeated and realleged.
39. At the time its initial proxy materials were mailed, the Company
had known for a reasonable time of the Proposal and the Proponents' intention to
raise it at the shareholders meeting.
40. The Company, however, failed to give its shareholders a separate
opportunity to vote on the Proposal, and wrongly sought discretionary authority
which, if obtained, it will use to vote against the Proposal.
41. The Company's proxy materials are false and misleading in that
they solicit an invalid discretionary authority to vote proxies with respect to
the Proposal.
42. The Company's manipulation of the proxy solicitation process
through the deceptive and confusing two-step procedure contemplated by the
Company will mislead and disenfranchise its shareholders.
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43. The Company has acted intentionally, recklessly, or negligently.
44. The Company's actions violate Section 14(a) of the Exchange Act
and SEC Rules 14a-4(a), 14a-4(b), 14a-4(c), and 14a-9(a).
PRAYER FOR RELIEF
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WHEREFORE, plaintiffs pray that this Court:
1. Grant plaintiffs declaratory relief declaring that defendant's
proxy materials and its contemplated two-step solicitation process are violative
of Section 14(a) of the Exchange Act and SEC Rules 14a-4(a), 14a-4(b), 14a-4(c),
and 14a-9(a);
2. Grant plaintiffs injunctive relief:
a. prohibiting defendant from exercising discretionary authority in
voting proxies with respect to the Proposal; or
b. in the alternative, if the annual meeting already has been held,
voiding all proxies obtained by defendant in the first round of
solicitation and directing the Company to retabulate the vote on the
Proposal without counting such proxies;
3. Grant plaintiffs an award of the costs and disbursements of this
action, including attorneys' fees; and
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4. Grant plaintiffs such other and further relief as shall be just
and proper.
Dated: New York, New York
April 30, 1997
FRIEDMAN & KAPLAN LLP
By: /s/ Eric Seiler
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Eric Seiler (ES-5437)
Lance J. Gotko (LG-5443)
875 Third Avenue
New York, NY 10022-6225
(212) 833-1100
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