Beneficial Ownership, Equity Swaps and Proxy Contests: CSX v. The Children's Investment Fund (Introduction)

We will begin a series of posts today (and running over the next several days) on the issues arising out of CSX v. The Children's Investment Fund, currently pending in the Southern District of New York.  The case arises in the context of a proxy contest launched by some hedge funds, with the funds seeking to elect five out of 12 directors to the CSX board.  The shareholder meeting will be held on June 25.  The Funds collectively hold over 8% of CSX and have filed a Schedule 13D disclosing the existence of a group and its purpose.  At issue, however, is whether the group formed at an earlier date (a factual issue) and whether the Funds can be deemed to own beneficially shares purchased as a hedge by counterparties in an equity swap.  The latter issue is apparently one of first impression in US courts.  The case has so far generated two amicus briefs, a letter from the Division of Corporation Finance at the SEC, and three days of hearings.  The judge (Judge Kaplan) is expected to rule shortly. 

We begin the posts with an overview. 

Numerous documents filed in the case, including the complaint, various motions and legal memorandum, and an assortment of amicus briefs (including the letter from the Division of Corporation Finance) and some of the expert legal opinions can be found at the DU Corporate Governance web site.