MI Developments Wins Greenlight Appeal
A New York investment company and affiliates have lost their appeal of a shareholder oppression lawsuit they originally filed against the parent company of Magna Entertainment Corp., with the Canadian judges affirming lower-court awarded indemnity costs of $2.1 million.
The divisional court of the Ontario Superior Court of Justice published its opinion July 10 against Greenlight Capital Inc., a large shareholder in MI Developments which in 2005 brought civil charges against the latter for actions of the company, chairman Frank Stronach, and others.
The appeals court, which heard arguments for four days in late April, said Greenlight Capital failed to prove a lower Ontario court erred in ruling against the investment company, which is headed by chief executive officer David Einhorn. Greenlight in its original complaint listed a variety of alleged transgressions, including rejection of its own proposals to improve the financial health of MID and MEC, and “undue influence exercised” by Stronach over the parent company’s board.
“None of Greenlight’s allegations were proved, and Greenlight had made serious allegations of misconduct, impropriety, breach of fiduciary duty, and lack of professionalism …” wrote the appeals panel.
Greenlight, which owns more than 10% of MID’s Class A shares, filed the original action, in part in reaction to a July 2004 plan – subsequently withdrawn – that proposed MID would acquire 100% of MEC. The appeals judge agreed with the lower court ruling that “the proposed privatization was not oppressive.”
Greenlight also challenged nearly $300 million in loans issued by MID to fund redevelopment of MEC properties, Gulfstream Park and The Meadows.
MI Developments issued a three-paragraph press release July 10 noting the court decision, but did not include comments. Greenlight Capital, speaking through a New York public relations firm, declined to comment on the court decision.
The appeals court in its 17-page ruling lowered slightly the $2,169,000 indemnity costs awarded from the first case. MID and its chief executive officer, John Simonetti, were ordered to receive $829,514 -- $40,486 less than first awarded -- based on new calculations presented in oral arguments.
The court let stand other awards: $653,000 to Stronach and the family-run 445327 Ontario Limited, which according to court documents controls an aggregate 56.5% of all voting shares in MID; $561,000 to a special committee of MID directors charged to review certain transactions; and $85,000 to former MID CEO Brian Tobin, who was dismissed from the original complaint.
Greenlight was one of two minority shareholders which vowed to exercise dissent rights against a recent proposal to reorganize MID and MEC. A shareholder vote planned for July 24 was recently postponed indefinitely.
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