and sure enough, Jenkens & Gilchrist is mentioned. It is such a shame that this is how that firm will be remembered.
Most of it didn’t interest me, but the case dealt with whether the plaintiffs’ state-law claim for tortious interference of contract was preempted under ERISA. The contract is a pension plan. I was more interested in the interference claim than the ERISA or preemption issues.
Investment firm Heartland Industrial Partners, L.P. held an ownership interest in Metaldyne Corporation and affiliates on Metaldyne’s directors and executive officers.
Heartland agreed to sell its interest to Ripplewood Holdings, another investment firm. Metaldyne was a public company at the time and filed proxy and information statements related to the deal. The filings failed to disclose that Metaldyne would be obligated to pay certain Metaldyne executives, the plaintiffs, $13 million as a result of the deal due to a change of control provision in Metaldyne’s SERP.*
Ripplewood threatened to back out when it found out about the payment obligation, so Heartland decided to declare the SERP invalid. Problem solved.
The Problem Arises
The central question of this particular case is whether the plaintiff’s complaint can be removed to federal court. After a lot of discussion of the type of civil procedure stuff I learned in law school and have since tried to forget, the more interesting question is whether there is a tortious interference claim**, which would involve Michigan law.
The Relevant Stuff To Me
Under Michigan law, one party’s complete repudiation of a contract is enough to establish breach. Declaration of refusal to perform will amount to breach of contract. The court here found the pleading of repudiation sufficient.
“ . . . without stating a reason, or giving plaintiffs any opportunity to be heard, [the Metaldyne Board] declared the Amended SERP invalid.”
*Supplemental Executive Retirement Plan
**In Michigan, a claim for tortious interference involved (1) a contract, (2), a breach of the contract, and (3) an unjustified instigation of the breach by the defendant.
Zynga tells where, but not what or when. Is this general disclosure enough?
After the SEC provided guidance on the use of social media, we may be starting to see companies embrace it.
In the Form 8-K for their latest earnings release, Zynga followed the guidance and let investors know that they would use a variety of channels to announce material information, including social media. They also provided the URLs for their Facebook, Twitter and blog pages.
It will be interesting to see how the SEC views this strategy since their guidance was not exactly a groundbreaking open invitation to use any and all websites with an Internet connection. The existing SEC guidance made clear that the SEC was not picky about how a company distributes information as long as the method gets the information to the general public. Does the Facebook page, Twitter feed or blog have a following that is wide enough that a post will be considered public dissemination? Even if you tell people that you will use those channels to make announcements? That is the question. As the SEC said in the latest release:
Regulation FD requires companies to distribute material information in a manner reasonably designed to get that information out to the general public broadly and non-exclusively. It is intended to ensure that all investors have the ability to gain access to material information at the same time. [emphasis added]
Companies should review the Commission’s existing guidance — it is flexible enough to address questions that arise for companies that choose to communicate through social media, and the guidance does so in a straightforward manner.
Here is how Zynga did it:
Our investors and others should note that we currently announce material information to our investors using SEC filings, press releases, public conference calls and webcasts. We use these channels as well as social media channels to announce information about the company, games, employees and other issues. Given the recent SEC guidance regarding the use of social media channels to announce material information to investors, we are notifying investors, the media, our players and others interested in the company that in the future, we might choose to communicate material information via social media channels and it is possible that the information we post on social media channels could be deemed to be material information. Therefore, in light of the SEC’s guidance, we encourage investors, the media, our players and others interested in our company to review the information we post on the U.S. social media channels listed below. . .
Any updates to the list of social media channels we will use to communicate material information will be posted on the Investor Relations page of the company’s website at http://investor.zynga.com.
Despite the hoopla around “SEC BLESSES SOCIAL MEDIA!!!!”, the big question is how the SEC will respond to this method when important information is released on some blog without a press release or Form 8-K announcing that the specific piece of information will be released at a particular time on that blog. I still think it is an open question as to whether a Zynga-type notice will save the release of material nonpublic information on a lightly trafficked blog.
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