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The grant of injunctive relief is appropriate if the moving party is able to demonstrate: (1) a reasonable likelihood of succeeding on the merits; (2) irreparable harm if preliminary relief is denied; and (3) an inadequate remedy at law. If the moving party fails to demonstrate any one of these three threshold requirements, the emergency relief must be denied. However, if these threshold conditions are met, the Court must then assess the balance of harm — the harm to Plaintiffs if the injunction is not issued against the harm to Defendants if it is issued — and, where appropriate, also determine what effect the granting or denying of the injunction would have on nonparties (the public interest).
During the February 29 and March 8 Board meetings of the Emmis Communications Corporation (“Emmis”), the Board discussed details of Proposed Amendments for consideration by the Company’s shareholders. The Proposed Amendments would, inter alia: (1) eliminate Emmis's obligation to pay Preferred Stock dividends accumulated since October 2008; (2) change the Preferred Stock from "Cumulative" to "Non-Cumulative"; (3) eliminate the right of Preferred Shareholders to elect directors in the event of nonpayment of dividends; (4) remove the restrictions on Emmis's ability to pay dividends or make distributions on or repurchase its Common Stock or other junior stock prior to paying accumulated dividends or distributions on the Preferred Stock; and (5) eliminate the right of the holders of the Preferred Stock to require Emmis to repurchase all of their shares upon certain going-private transactions. Emmis filed a preliminary proxy statement on March 13, 2012, in which it disclosed the exact terms of the Proposed Amendments and its expectation that the holders of two-thirds of the Preferred Stock would vote in favor of the Amendments, based on the terms of the TRS and Retention Plan Trust Voting Agreements. On April 16, 2012, Plaintiffs filed their Complaint as well as the instant motion for injunctive relief, alleging that Defendants' acquisition of Preferred Stock through TRS transactions and the reissuance of Preferred Stock to the Retention Plan Trust violated various federal securities laws as well as the laws governing the conduct of Indiana corporations.
Under the circumstances, should the court grant the Plaintiffs’ motion for injunctive relief?
The court noted that the grant of injunctive relief was appropriate if the moving party was able to demonstrate: (1) a reasonable likelihood of succeeding on the merits; (2) irreparable harm if preliminary relief is denied; and (3) an inadequate remedy at law. The court held that the plaintiffs failed to establish that they have a reasonable likelihood of success in proving that Defendants' acquisition of Preferred Stock through the TRS transactions constituted a breach of Section 3.3 of the Articles. The court also held that the plaintiffs failed to demonstrate a likelihood of prevailing on the merits with regard to establishing that Defendants' acquisition of TRS Preferred Stock or reissuance of Retention Plan Preferred Stock breached Section 7.3 of the Articles. Moreover, the court rejected the plaintiffs’ argument that once the amendments became effective, it will be too difficult to complete an after-the-fact valuation of the Preferred Stock. According to the court, it was not so difficult or uncommon for courts to engage in conducting an after-the-fact valuation of the Preferred Stock. In addition, there was no indication that Defendants would be financially unable to compensate Plaintiffs in money damages, if necessary, based on such a valuation. Thus, the court held that any damage Plaintiffs were likely to suffer in the absence of injunctive relief was not irreparable and can be adequately compensated for by an award of monetary damages, should they ultimately prevail after a full assessment of the evidence pursuant to controlling legal principles.