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Hedge Funds Can Vote At CSX Meeting

Publication Date: 
June 12, 2008
The New York Times
Floyd Norris

Professor Joseph A Grundfest is mentioned in a New York Times story about a judge's decision to give two hedge funds the right to vote in a proxy fight.

A federal judge ruled Wednesday that two hedge funds seeking to win a proxy fight at the CSX Corporation had violated securities laws by not disclosing their positions and intentions many months before they did.

But Judge Lewis A. Kaplan of Federal District Court in Manhattan nonetheless ruled that there was nothing effective that he could do. He refused to bar the hedge funds from voting their shares, as CSX had requested, at the annual meeting on June 25.


Judge Kaplan all but invited CSX to appeal his decision to the United States Court of Appeals for the Second Circuit. The judge said he believed that he could not stop the funds from voting their shares, largely because of a Second Circuit precedent. If he could have done so, the judge said, he would have issued such an injunction.


The fight pitted the two best-known legal scholars in the area — professors who have written major papers jointly — against each other. A former member of the S.E.C., Joseph Grundfest, who is now a law professor at Stanford, argued that a victory by the hedge funds “would render compliance” with the disclosure requirements “essentially voluntary.”

Wall Street lined up behind the hedge funds, arguing that it could create chaos if the disclosure requirements were broadened.