By Nate Raymond
Feb 25 (Reuters) - Symantec Corp has won the dismissal of a
lawsuit accusing it of not disclosing enough information about
its compensation practices before a "say-on-pay" vote, in what
marked the first ruling of its kind in a flurry of similar class
Judge James Kleinberg of California Superior Court in Santa
Clara County granted Symantec's dismissal motion on Friday. The
lawsuit is similar to about two dozen others challenging proxy
disclosures by large corporations in the run-up to shareholder
votes on executive compensation matters.
Kleinberg's ruling is not binding on judges in other states,
but it could have an outsize impact on other say-on-pay cases.
Although the judge granted leave to amend the lawsuit, his
order left little room to actually do so, said Sarah Good, a
partner at Pillsbury Winthrop Shaw Pittman who has been
following the say-on-pay litigation.
There "is really not an opening for plaintiffs to file an
amended complaint overcoming the challenges raised in the
order," she said in an email.
The cases like the one against Symantec typically allege
that companies failed to disclose material information about
compensation practices in proxy materials circulated before
advisory votes on executive pay. Those say-on-pay votes were
mandated every three years under the Dodd-Frank Act of 2010.
Settlements have included further disclosures about the
companies' compensation practices, no cash for investors and
attorneys fees that in one instance reached $625,000.
As part of the litigation strategy, the lawsuits, almost all
of which have been filed by the plaintiffs' law firm Faruqi &
Faruqi, seek to enjoin those shareholder votes from going
While judges have twice granted injunctions, they have also
denied them in eight of the cases, according to a client alert
Pillsbury published last week. The plaintiffs have dropped some
of the cases after injunction demands were denied. In others,
including the Symantec case, they have kept going.
The lawsuit against Symantec was filed in September by
shareholder Natalie Gordon, who contended the company circulated
materially misleading and incomplete proxy materials in
connection with its say-on-pay vote.
The plaintiff moved for a preliminary injunction, but
Kleinberg denied the motion in October. Symantec subsequently
sought dismissal of the lawsuit.
SAME DAY RULING AS GREENLIGHT
Kleinberg in his ruling said that because shareholders
approved the say-on-pay proposal in October after he declined to
enjoin the vote, investors can no longer assert claims about
lacking disclosures directly.
The judge said the plaintiff had not shown how the court
could provide any remedy if he were to rule that the company
violated its duties to shareholders due to insufficient
And while the complaint had also accused Symantec directors
of self-dealing and unjust enrichment, Kleinberg said only a
derivative lawsuit brought on behalf of the company could assert
On top of that, Kleinberg said the plaintiff had not
sufficiently alleged the company had not disclosed material
information to investors. She had, for example, contended the
proxy did not provide enough detail of a competitive market
assessment analysis conducted by a consulting firm hired by
"However, Plaintiff fails to allege how the omission of this
information would have altered the total mix of information
available to the Symantec shareholders through the Proxy,"
Juan Monteverde, the Faruqi partner heading up all the
cases, did not respond to an email seeking comment.
Representatives for Symantec did not respond to requests for
The ruling was entered the same day a federal judge in New
York enjoined a shareholder vote on a proxy proposal at Apple
Inc's annual shareholder meeting last week in a high-profile
case by David Einhorn's Greenlight Capital.
U.S. District Judge Richard Sullivan in the same opinion,
though, denied a bid by another Apple investor represented by
the plaintiff's firm Barrack, Rodos & Bacine to enjoin a
separate say-on-pay vote.
In a memo to clients Monday, Wachtell, Lipton, Rosen & Katz
said that with the 2013 proxy season under way, the Apple and
Symantec rulings "offer poignant reminders that many companies
will likely face shareholder disclosure challenges this proxy
"Companies should carefully consider the risks posed by
these potential challenges in crafting their proxy disclosures,"
Wachtell said in the memo.
The case is Gordon vs. Symantec Corporation, et al,
California Superior Court, Santa Clara County, 12-231541.
For Gordon: Juan Monteverde and David Bower, Faruqi &
For Symantec: Dean Kristy and Kevin Muck, Fenwick & West.
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