DealBook: Judge Sides With Einhorn and Halts an Apple Shareholder Vote

Eduardo Munoz/ReutersDavid Einhorn of Greenlight Capital argues that Apple violated securities regulations by bundling shareholder proposals.

9:26 p.m. | Updated

A federal judge on Friday ordered Apple to halt collecting shareholder votes on a contentious proposal to change some of its corporate charter, handing a victory to the hedge fund manager David Einhorn.

The ruling issued Friday touches on a fairly narrow legal point. But it signals a clear victory for Mr. Einhorn, who has taken up a fight with Apple over using some of the $137 billion in its corporate treasury to make additional payouts to shareholders.

Mr. Einhorn’s hedge fund firm, Greenlight Capital, has sued Apple in Federal District Court in Manhattan, arguing that the company improperly tied together several shareholder issues to be put for a vote into one proposal. Such bundling violated rules set by the Securities and Exchange Commission, lawyers for the hedge fund argued.

At the heart of the hedge fund’s complaint was that Apple combined a plan to eliminate its ability to issue preferred stock without shareholder approval with two other initiatives that Greenlight favored. By allowing the vote to proceed, lawyers for the firm argued, Greenlight was being forced to vote against its own interests.

The judge overseeing the case, Richard Sullivan, firmly agreed with that interpretation.

“Given the language and purpose of the rules, it is plain to the court that Proposal No. 2 impermissibly bundles ‘separate matters’ for shareholder consideration,” Judge Sullivan wrote in his order. The judge said at a hearing on Tuesday that he was leaning toward Mr. Einhorn’s point of view on the matter.

His ruling comes just days before the company’s shareholder meeting next Wednesday. It will also prevent Apple from accepting shareholder votes on Proposal No. 2, which had included Apple’s plans to eliminate its preferred shares. Some shareholder rights advocates have contended that preferred shares have been used as an anti-takeover tactic by boards and have pushed for their elimination.

Kevork Djansezian/Getty ImagesTim Cook, the chief of Apple.

Mr. Einhorn’s bigger goal has been to persuade Apple to return some of its billions sitting in cash to shareholders as a way to unlock the company’s value. Greenlight Capital has contended that the company has far more cash than it will ever need, and that preferred shares could provide additional payouts worth about $61 a share, while still leaving the company with an enormous war chest.

“We know they embrace innovation and can recognize it when they see it, even if it isn’t the kind of innovation people usually think of when they think of Apple,” Mr. Einhorn said in a conference call with analysts on Thursday.

Mr. Einhorn said that Apple should issue preferred shares, that would augment a stock dividend and buyback program that the company already has in place.

Although Apple was once the stock market darling for its meteoric rise, in recent months, share prices have sagged.

In a statement on Friday, Greenlight praised the judge’s ruling. “This is a significant win for all Apple shareholders and for good corporate governance,” the firm said. “We are pleased the court has recognized that Apple’s proxy is not compliant with the S.E.C.’s rules.”

Apple will now most likely have to break Proposal No. 2 into its separate elements and resubmit them to a vote.

“We are disappointed with the court’s ruling,” said Steve Dowling, a spokesman for Apple. “Proposal No. 2 is part of our efforts to further enhance corporate governance and serve our shareholders’ best interests. Unfortunately, due to today’s decision, shareholders will not be able to vote on Proposal No. 2 at our annual meeting next week.”

Apple had argued that the plan in its entirety was actually shareholder-friendly, and enjoyed the backing of prominent investors like the California Public Employees’ Retirement System.

Anne Simpson, the Calpers director of global governance, said in a statement: “We continue to support Apple in their efforts, and believe that the implementation of majority voting and shareholder approval for the issuance of new stock — preferred or otherwise — is worth waiting for.”

Ruling for Greenlight Capital in Battle With Apple

Photo Sharing Shows All Sides of USA Basketball

Step 1: Find a sleeping USA Basketball teammate. Step 2: Move stealthily into position. Step 3: Frame picture. Step 4: Click. Step 5: Tag the photo with “GotEm” or “gotem,” providing an exclamation point when warranted. Step 6: Post to Instagram, so anyone in the world with Internet access can see LeBron James wearing a not-so-manly sleeping mask, or Anthony Davis with an airline blanket pulled snugly around his neck.

Then, boom, “got ’em,” as Love would say.

Approached for an interview about the USA Basketball-Instagram trend he embraced and furthered, Love laughed. “I was about to post one right now,” he said.

Two weeks ago, Love had never heard of Instagram. Now, because of the photo-sharing Web site and other social networks, he considers himself the unofficial team photographer. In recent days, Love posted snapshots of himself dressed in preppy Ralph Lauren attire (Caption: “Getting my Justin Timberlake on”) and of Carmelo Anthony asleep with teammates celebrating in the background (“Weekend at Bernie’s. GotEm.”).

Love is far from alone. His teammate Deron Williams persuaded him to join Instagram. Chris Paul is on it, too, along with James, Paul’s brother and Anthony’s best friend.

Those who follow their feeds regularly could be forgiven for believing all the United States men’s national team players do is sleep.

Such self-documentation is nothing new, of course, not in this age of social media, of Twitter and Facebook and Instagram. But this is uncharted territory, too, a glimpse inside areas of the Olympics once closed to the public — like the team bus.

That means fans can now view drool frozen on James’s chin. Or see famous American basketball players dining together at Johnny Rockets, oversized sunglasses covering their eyes.

For all the comparisons between this United States team and the Dream Team from 1992, imagine a picture of Michael Jordan inside a casino or sprawled on the team bus. Imagine Magic Johnson in a sleeping mask, or Larry Bird giddily typing a “gotem” tag. As times changed, so did fans’ access to athletes, if not their actual relationships with them.

“It’s moving in a more accessible direction,” Love said. “Fans dig that. I dig that. It’s a way to share the experience with everybody. They almost feel like they’re with you here.”

Sports, at least from the behind-the-scenes perspective, were not always this way, not even in recent years when it was safe for an all-N.B.A. forward to catch a catnap without fear of a photo op. In those days, athletes might say “got ’em” when they scored an actual basket or won an actual game.

Nate McMillan, a United States assistant, played and coached in the N.B.A., and in all his years, he witnessed something for the first time this week: players preparing for naps by covering their faces with blankets.

“It’s reality,” McMillan said. “That’s what everybody wants now. They want reality TV. They want the instant photographs. The cameras are there, in our locker rooms, huddles, interviewing coaches during games. What happens on the bus was once sacred. Now, it’s part of what the fans want to see.”

The American team took its Instagram cues from Paul, who said his Los Angeles Clippers engaged in a similar practice throughout last season. Their photographs, Paul said, often ended up on “SportsCenter,” fueling the number taken.

Love saw the photo wars as another route to camaraderie, another way to bond. His favorite picture captured seven sleepers: Paul gripping a pillow in a bear hug, James Harden with that unsightly beard tucked into his chest, Russell Westbrook wearing sunglasses inside and even Coach Mike Krzyzewski in the background in what looks like the coach section of the plane.

“They got me yesterday,” Anthony said, his smile stretched as wide as a basketball court. “There will definitely be payback. It’s going to be trouble for Kevin.”