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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant [ ]
Filed by a party other than the registrant [X]
Check the appropriate box:
[ ] Preliminary proxy statement.
[ ] Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2).
[ ] Definitive proxy statement.
[X] Definitive additional materials.
[ ] Soliciting material under Rule 14a-12.
OREGON TRAIL FINANCIAL CORP.
--------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
STILWELL VALUE PARTNERS II, L.P.
STILWELL ASSOCIATES, L.P.
STILWELL VALUE LLC
JOSEPH STILWELL
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(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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The Stilwell Group
26 Broadway, 23rd Floor
New York, New York 10004
Phone: (212) 269-5800
Facsimile: (212) 269-2675
Email: Max OTFC@aol.com
Dear Fellow Oregon Trail Financial Corp. Shareholder:
On September 12, 2001, our Company brought a lawsuit against the Stilwell Group,
the Company's largest outside shareholder. The suit sought a preliminary
injunction seeking, among other things, to void all the proxies my Group had
collected from fellow owners. Thereafter, my Group also sought an injunction
against the Company seeking corrective disclosures in the Company's proxy
materials. On September 26, 2001, the court denied both motions, and the
election will proceed on Friday, October 12th. A copy of the Court's entire
opinion is enclosed for your information. I encourage you to read it.
I want to summarize what I believe this election is about. First and foremost,
it is about maximizing shareholder value.
-- In my estimation, the best way to maximize shareholder value is to
sell the Company at a price greater than book value (which was $17.55
per share as of 6/30/01).
-- Our platform calls for continuing share repurchases so long as the
Company trades below book value.
Secondly, the election is about electing Mr. Kevin Padrick to the Board.
-- Mr. Padrick is an accomplished businessman and attorney. He has
substantial business experience in both financial and real estate
enterprises; he was a partner at a prominent Oregon law firm; and he's
a member of the bar in four states. Come to the annual meeting and talk
with Kevin. I'm certain you'll be impressed.
-- Mr. Padrick will move for stronger board oversight of management; he
will be "beholden" to all shareholders.
Oregon Trail Financial is our Company. This is the direction I believe it should
take. If you agree, please return the BLUE AND WHITE PROXY CARD in the enclosed
envelope. I look forward to speaking with you if you attend the annual meeting.
Sincerely,
Joseph Stilwell
On behalf of the Stilwell Group:
STILWELL VALUE PARTNERS II, L.P.
STILWELL ASSOCIATES, L.P.
STILWELL VALUE LLC
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On August 16, 2001, the Stilwell Value Group (the "Group") filed with the
Securities and Exchange Commission (the "Commission") a definitive proxy
statement in connection with the election of its nominee to the board of
directors of Oregon Trail Financial Corp. ("Oregon Trail") at Oregon Trail's
2001 annual meeting of stockholders. Copies of the definitive proxy statement
were mailed to stockholders on or about August 16, 2001. Investors and security
holders are urged to read the definitive proxy statement and additional
definitive soliciting material because they contain important information.
Investors and security holders may obtain a free copy of the definitive proxy
statement and other documents filed by the Group with the Commission at the
Commission's website at www.sec.gov. The definitive proxy statement and these
other documents may also be obtained for free by writing to Mr. Joseph Stilwell
at 26 Broadway, 23rd Floor, New York, New York 10004, or by contacting D.F. King
& Co. at (212) 269-5550.
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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
OREGON TRAIL FINANCIAL CORP., )
an Oregon corporation, )
)
Plaintiff, ) CV 01-1346-JE
)
v. ) OPINION AND ORDER
)
STILWELL ASSOCIATES, L.P., a )
Delaware limited partnership; STILWELL )
VALUE PARTNERS II, L.P., a Delaware )
limited partnership; STILWELL VALUE )
LLC, a Delaware limited liability company; )
JOSEPH STILWELL, an individual; and )
KEVIN D. PADRICK, an individual, )
)
Defendants. )
)
-------------------------------------------------
This action arises from a proxy contest between defendant Joseph
Stilwell ("Stilwell")(1) and plaintiff Oregon Trail Financial Corporation
("OTFC"). This court has subject matter jurisdiction
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(1) Aligned with Stilwell are three related entities, defendants
Stilwell Associates, L.P., Stilwell Value Partners II, L.P., and Stilwell Value
LLC. In this opinion, I refer to them collectively as Stilwell.
1 - OPINION AND ORDER
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pursuant to 28 USC ss.1331. Pending before the court are the parties'
cross-motions for a preliminary injunction.
BACKGROUND
Two seats on the six member Board of Directors will be filled at the
annual shareholder's meeting. Stilwell has urged OTFC's shareholders to reject
the nominees proposed by management and, instead, to support his nominee,
defendant Kevin Padrick. As the election draws near, the proxy contest has
become increasingly antagonistic. Five lawsuits have been filed this year
between the parties or their surrogates. In the present action, each side
accuses the other of violating federal securities law by making false or
misleading statements to OTFC's shareholders.
SUBSTANTIVE LAW
The Securities and Exchange Act of 1934 prohibits the solicitation of
proxies in a manner that violates rules established by the Securities and
Exchange Commission ("SEC") for the protection of shareholders. 15 USC
ss.78n(a).
17 CFR ss. 240.14a-9 (commonly known as Rule 14a-9) states in relevant
part that:
(a) No solicitation subject to this regulation shall be made by means of
any proxy statement . . . or other communication . . . containing any
statement which, at the time and in the light of the circumstances under
which it is made, is false or misleading with respect to any material
fact, or which omits to state any material fact necessary in order to
make the statements therein not false or misleading or necessary to
correct any statement in any earlier communication with respect to the
solicitation of a proxy for the same meeting or subject matter which has
become false or misleading.
The Rule gives some "examples of what, depending upon particular facts
and circumstances, may be misleading within the meaning of this section,"
including:
(b) Material which directly or indirectly impugns character, integrity or
personal reputation, or directly or indirectly makes charges concerning
improper, illegal or immoral conduct or associations, without factual
foundation.
2 - OPINION AND ORDER
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A fact is "material" if there is a substantial likelihood that a
reasonable shareholder would consider it important in deciding how to vote. TSC
Industries, Inc. v. Northway, Inc., 426 US 438, 449 (1976). The standard is an
objective one; it is not necessary to show that any votes were actually changed
by the alleged misrepresentation or omission. See id. Although the Supreme Court
has never expressly decided this question,(2) it seems clear that a
misrepresentation need not be intentional; if the shareholders have been
materially misled, equitable relief may be appropriate regardless of whether the
misrepresentation was deliberate.
In J.I. Case Co. v. Borak, 377 US 426 (1964), the Supreme Court held
that there is a private right of action to enforce violations of Rule 14a-9,(3)
and that the courts are empowered "to provide such remedies as are necessary to
make effective the congressional purpose," including injunctive relief. Id. at
430-34. If a court finds that there has been a violation of Rule 14a-9, the
court has very broad equitable powers to remedy the violation. Among other
things, the court may declare certain statements to be false or misleading;
order a party to make corrective disclosures; void any proxy procured with the
aid of a false or misleading statement; delay the annual meeting to allow time
for distribution of corrective disclosures, or for revoting, or to permit
shareholders to revoke existing proxies if they wish; set aside the results of a
tainted election, and order a new election; and award attorney fees and costs to
the prevailing party.
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(2) See Virginia Bankshares, Inc v. Sandberg, 501 US 1083, 1090, n 5
(1991).
(3) In recent years, the Supreme Court has limited private rights of
action for some securities law violations, but has shown no inclination to
overrule Borak.
3 - OPINION AND ORDER
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See, e.g., Kaufman v. Cooper Companies, Inc., 719 F Supp 174, 185-86 (SDNY 1989)
(voiding all proxies and rescheduling annual meeting to allow time to resolicit
proxies); Edelman v. Salomon, 559 F Supp 1178 (D Del 1983) (postponing annual
meeting and voiding tainted proxies).(4)
The more difficult questions are (1) the extent to which the court
should intervene in a proxy contest, and (2) the timing of that intervention.
This is largely left to the considered discretion of the district court.
One line of cases holds that a proxy contest is not like a political
contest where anything goes. Rather, Congress has determined that shareholders
are entitled to receive only truthful information, and the courts are to
aggressively enforce that mandate. See, e.g., May, 229 F2d at 124. A second line
of cases counsels restraint. The court should try to avoid placing its finger on
the scale and tipping the election to one side or the other. See Kennecott
Copper, 584 F2d at 1200. The court must be wary of telling shareholders that the
views of one side or the other are correct, unless a statement is demonstrably
false or misleading. Instead, the court should generally focus on ensuring that
both sides have a fair opportunity to articulate their respective views to the
shareholders. Ultimately, it is the
----------
(4) See also Berkman v. Rust Craft Greeting Cards, Inc., 454 F Supp 787
(SDNY 1978) (postponing annual meeting); Gladwin v. Medfield Corp., 540 F2d 1266
(5th Cir 1976) (ordering new election); Central Foundry Co. v. Gondelman, 166 F
Supp 429, 446-47 (SDNY 1958) (voiding proxies obtained through the misleading
solicitation and rescheduling annual meeting); SEC v. May, 134 F Supp 247, 258
(SDNY 1955) (same), aff'd, 229 F2d 123 (2d Cir 1956); Krauth v. Executive
Telecard, Ltd., 890 F Supp 269, 297 (SDNY 1995) (requiring company to issue
revised proxy statement); Lebhar Friedman, Inc. v. Movielab, Inc., Fed Sec L
RepP. 93,162 (SDNY 1987) (voiding proxies obtained through misleading proxy
materials and requiring corrective disclosures); Telvest, Inc. v. Wisconsin Real
Estate Investment Trust, 489 F Supp 250, 255 (ED Wisc 1980) (voiding all proxies
previously obtained by either side) ; Chambers v. Briggs & Stratton, 863 F Supp
900, 907 (ED Wisc 1994) (voiding proxies procured prior to issuance of the
corrective disclosures).
At oral argument and in a subsequent letter, Stilwell asserted that no
court has ever ordered the type of relief sought by OTFC. Clearly Stilwell is
wrong.
4 - OPINION AND ORDER
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shareholders, not the court, who must decide the election. See Pantry Pride,
Inc. v. Rooney, 598 F Supp 891, 901-02 (SDNY 1984).
I lean towards this latter view, of judicial restraint. Just as there
probably will never be a perfect trial, it is unlikely that there will ever be a
perfect proxy contest. Simply because the court might have worded a statement
differently does not necessarily make that statement false or misleading.
Kennecott Copper Corp. v. Curtiss-Wright Corp., 584 F2d 1195, 1200 (2d Cir
1978). Rather, the court must consider the "total mix" of information available
to the shareholders, and whether any errors are likely to affect the outcome.
Judges also differ on whether the court should intervene before the
election, or wait until afterwards. In some circumstances, intervention before
the election is preferable. See, e.g., Electronic Specialty Co. v. International
Controls Corp., 409 F2d 937, 947 (2d Cir 1969) ("injunctive relief at an earlier
stage of the contest is apt to be the most efficacious form of remedy");
Chambers, 863 F Supp at 905-06 (that the court could later undo the damage by
voiding the results of the election is not an adequate alternative when it is
possible to avert the harm by providing the shareholders with the correct
information and voiding any proxies procured by the misleading solicitations).
In other circumstances, waiting until after the election is the preferred
course. See, e.g., D&N Financial Corp. v. RCM Partners Limited Partnership, 735
F Supp 1242, 1253 (D Del 1990) (court can always set aside the results, if found
to have been tainted, and order a new election); United Canso Oil & Gas, Ltd. v.
Clark, 497 F Supp 111, 115 (SDNY 1980) (same).
LEGAL STANDARD FOR ISSUANCE OF A PRELIMINARY INJUNCTION
The classic purpose of a preliminary injunction is to preserve the
status quo, or to prevent irreparable injury, pending a final determination on
the merits. Chalk v. U.S. Dist.
5 - OPINION AND ORDER
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Court Cent. Dist. of California, 840 F2d 701, 704 (9th Cir 1988). The moving
party must show either (1) a combination of probable success on the merits and
the possibility of irreparable injury, or (2) that serious questions are raised
and the balance of hardships tips sharply in its favor. Id. These are not
separate tests, but the outer reaches "of a single continuum." Los Angeles
Memorial Coliseum Comm'n v. National Football League, 634 F2d 1197, 1201 (9th
Cir 1980); Harper v. Farm Credit Admin., 628 F Supp 1030 (D Or 1985). Serious
questions are those sufficiently substantial to warrant further consideration by
the court and to present fair ground for litigation. See Gilder v. PGA Tour,
Inc., 936 F2d 417, 422 (9th Cir 1991). If the balance of hardships tips
decidedly toward the plaintiff, less likelihood of success on the merits is
required. Wilson v. Watt, 703 F3d 395, 399 (9th Cir 1983). The district court
must also consider the public interest, if applicable. American Motorcyclist
Association v. Watt, 714 F2d 962, 965 (9th Cir 1983).
A court must tread carefully when the effect of the preliminary
injunction would be to "grant the moving party the full relief to which he might
be entitled if successful at the conclusion of a trial. This is particularly
true where the relief afforded, rather than preserving the status quo,
completely changes it." Tanner Motor Livery, Ltd. v. Avis, Inc., 316 F2d 804,
808-09 (9th Cir 1963). See also Krauth, 890 F Supp at 287. Nevertheless, there
is ample precedent acknowledging the court's authority to issue a preliminary
injunction in a proxy contest. See, e.g., Chambers, 863 F Supp at 905-07.(5)
----------
(5) To avoid this problem, I proposed to hold an immediate trial on the
merits, but Stilwell declined that invitation.
6 - OPINION AND ORDER
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DISCUSSION
I. Likelihood of Prevailing on the Merits
The threshold question is whether either party is likely to prevail on
its claims.
A. OTFC's Claims Against Stilwell
Throughout the proxy contest, Stilwell has made it clear he believes
OTFC should be sold, and the sooner the better. OTFC's present management
disagrees with Stilwell's plans for the company. It is not this court's province
to decide which of these views is "correct" or to tell the shareholders how to
vote their proxies in the upcoming election.
What does concern this court is that the debate has gone beyond the
merits of competing visions of the company's future, and descended into what, on
this record, appear to be unfounded personal attacks on the integrity of the
incumbent directors. It is also troubling that the state and federal courts have
been used as a vehicle to mount some of these personal attacks.
Stilwell first brought suit against director Charles Rouse, alleging
that the latter "unlawfully holds the office of director of OTFC," and demanding
that the court remove Rouse from office and also "impos[e] a fine against
defendant, in the maximum amount permitted under law . . ." Complaint, State ex
rel. Stilwell Associates, L.P. v. Rouse, Multnomah County No. 01-02-01777
(hereafter, "Rouse"). Stilwell has widely publicized these allegations, both in
materials sent directly to OTFC shareholders and also in newspaper
advertisements targeted at shareholders. In addition, Stilwell publicly accused
other OTFC directors of misconduct for their actions regarding Rouse.
There is a strong probability that OTFC will be able to establish, at
trial, that the allegations against Rouse (and the other Board members) were not
well founded. Judge Wilson recently entered summary judgment in favor of Rouse.
The transcript of the oral argument makes it clear that Judge
7 - OPINION AND ORDER
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Wilson did not consider it to even be a close question. During the briefing and
argument in the present action, Stilwell vigorously attacked Judge Wilson's
ruling, but none of his arguments gave this court any reason to doubt the
correctness of her decision.
Stilwell also filed suit against director Edward Elms, accusing him of
committing a felony-- perjury--and demanding that Elms be removed from office.
Stilwell Associates v. Elms, CV 01-740- JE (hereafter, "Elms"). Again, the
allegations were widely publicized by Stilwell in mailings to shareholders and
in newspaper advertisements. And, once again, the allegations do not appear to
have been well founded. I dismissed the Elms case for lack of jurisdiction, but
I would almost certainly have found in favor of Elms had there been a trial on
the merits.(6)
Stilwell argues that his statements to the shareholders, concerning
these lawsuits, were not false or misleading because he accurately summarized
the claims made in those lawsuits. However, Stilwell was not just "reporting"
the news, he was also "making" the news that he reported. A party to a proxy
contest may not escape the reach of Rule 14a-9 by filing a lawsuit containing
false or misleading statements, and then quote from his own lawsuit.
Stilwell cites Atlas Corporation v. Blasius Industries, 705 F Supp 190
(D Del 1988), but it is easily distinguished. The statements in Atlas concerned
a lawsuit then pending in the state court. The federal court understandably
declined to pass judgment upon the merits of a case, in another court, that had
yet to be decided. Here, by contrast, Judge Wilson has already ruled upon the
merits of the Rouse litigation, and I have already dismissed Elms (and am well
informed regarding the issues in that case).
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(6) During the briefing in Elms, the parties filed extensive deposition
transcripts and other materials setting forth the evidence and their respective
contentions in considerable detail.
8 - OPINION AND ORDER
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Furthermore, even if Stilwell's original statements regarding the Rouse
and Elms cases are regarded as true, because they accurately reported his
allegations, Rule 14a-9 also applies to statements that--though true at the time
they were made--have been rendered false or misleading by subsequent events.
Stilwell's allegations against Rouse, Elms, and other OTFC directors clearly
imply wrongdoing on their part. Even assuming that Stilwell originally advanced
these allegations in good faith, the shareholders are entitled to know that the
allegations have since proven to be meritless.
Stilwell argues that his proxy statements contained adequate
disclaimers, i.e., by reciting that Rouse, Elms, and OTFC denied any wrongdoing.
Such disclaimers are of only limited utility. Allegations of wrongdoing
frequently "stick" despite being accompanied by a denial. Indeed, the image of
wrongdoing often persists even after charges are dropped or an accused is found
not guilty. Moreover, Stilwell repeated these allegations on several occasions
without accompanying disclaimers, or his allegations were in large type and
prominent while the disclaimers were in small print and buried in a larger
document. Under the circumstances, these disclaimers are not sufficient to
remove the possible taint flowing from these repeated allegations of wrongdoing.
At trial, there is a strong probability that OTFC could also show that
this course of conduct by Stilwell was part of a calculated attack upon the
integrity of the incumbent directors and management. This strategy is amply
demonstrated by the letter from Stilwell dated August 29, 2001, which contains
numerous allegations of misconduct, and also some clear misstatements or
omissions.(7)
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(7) For instance, Stilwell concedes that the Board members do not
"automatically re-elect themselves every year" (emphasis in original) as he
asserted in that letter. Stilwell's paraphrasing of Rouse's deposition
testimony, concerning the reasons he liquidated his business, is also suspect.
As even Stilwell concedes, the testimony was ambiguous, and could be interpreted
in a manner quite different (and more favorable to Rouse) than Stilwell has
portrayed. Stilwell's subsequent corrective disclosure was inadequate; the
context of Rouse's statement can be determined only by examining the
9 - OPINION AND ORDER
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It might be argued that some of these misstatements, individually, are
not sufficient to affect the election. However, OTFC is justifiably concerned
about the cumulative effect of these statements which, when taken together,
appear calculated to convey an image of impropriety on the part of the incumbent
directors. The "total mix" of information presented to the shareholders has been
skewed by these allegations.
Stilwell also argues that the challenged statements are not "material"
because this proxy contest will turn upon economic issues. However, that
argument is undercut by Stilwell's decision to feature these allegations so
prominently in communications such as the August 29 letter to the shareholders.
Stilwell's own conduct demonstrates that he believed these allegations to be
material.
Stilwell's affirmative defenses merit little discussion. There is no
evidence that OTFC unduly delayed bringing this action, to Stilwell's detriment.
If anything, the record demonstrates that Stilwell repeatedly urged OTFC to
delay filing this action. Nor would it have been improper for OTFC to delay
filing this action until Judge Wilson ruled in the Rouse case; a federal judge
would have been very reluctant to pass judgment on the merits of a pending state
court action. For the reasons discussed more fully below, I also am unpersuaded
by Stilwell's "unclean hands" defense.
In summary, there is a strong probability that, at trial, OTFC will
succeed on its claim against Stilwell for violation(s) of Rule 14a-9.
B. Stilwell's Claims Against OTFC
Stilwell seeks a preliminary injunction against OTFC for alleged
violations of Rule 14a-9.
----------
several pages of testimony on either side. Stilwell also overstated the facts
somewhat by asserting that the Board members "award themselves free shares and
free options on shares every year." The letter also repeated Stilwell's
allegations of serious misconduct by Rouse and Elms.
10 - OPINION AND ORDER
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1. Forcing a Quick Sale
Stilwell complains about the following statements:
** Stilwell "want[s] to force a quick sale of Oregon Trail and
its 100-year old community bank."
** "Joseph Stilwell, an investor from New York, and his Group
want to force a sale of your Company."
These statements do not appear to be false or misleading. On the
contrary, Stilwell's own proxy materials state:
"WE BELIEVE A VOTE FOR THE GROUP NOMINEE IS A VOTE TO BEGIN
THE PROCESS TO SELL THE COMPANY."
* * * *
"If elected, the Group Nominee . . . will work diligently
toward a sale of the Company." Ex. 1, page 4 (Stilwell proxy
materials)
2. Beholden to Stilwell
Stilwell complains about the following statements:
** "We are concerned that Mr. Stilwell's nominee will only pursue
Mr. Stilwell's personal agenda."
** "Padrick is beholden to the Stilwell Group."
** "Stilwell is asking you to vote for his handpicked director."
These statements appear to be within the range of fair argument given
the circumstances, including the relationship and financial arrangements between
Stilwell and Padrick.
11 - OPINION AND ORDER
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3. Impact of Stilwell's Lawsuits on Company Profits
Stilwell complains about the following statement:
** "Without the expenses caused by Stilwell and his many lawsuits
aimed at gaining control of your Company, your COMPANY'S
EARNINGS WOULD HAVE INCREASED 71% [for the quarter ended March
31, 2001]"
The record is not sufficient to make any determination regarding this
statement. It is also unclear whether the parties are using the same definition
of "expenses."
4. Seeking Reimbursement from the Company
Stilwell complains about the following statements:
"A Vote for Padrick Could Cost the Company Up to an Additional
$300,000 in Legal Fees and Other Expenses.
"If Padrick is elected, [T]HE GROUP INTENDS TO SEEK
REIMBURSEMENT FROM THE COMPANY FOR THOSE EXPENSES INCURRED BY
THE GROUP IN CONNECTION WITH PROXY SOLICITATION, AS WELL AS
ALL EXPENSES INCURRED BY THE GROUP SINCE [November 17,
2000]....
* * * *
"THE ONLY WAY YOU CAN ENSURE THAT THE COMPANY IS NOT ALSO
SADDLED WITH THE STILWELL GROUP'S EXPENSES IS TO SAY 'NO' TO
ITS CANDIDATES BY VOTING FOR MANAGEMENT'S NOMINEES."
These statements do not appear to be false or misleading. Stilwell does
not deny that he intends to seek reimbursement if he prevails. Although a vote
for Padrick won't guarantee that Stilwell is reimbursed--since it must still be
approved by the Board--a vote against Padrick all but ensures that Stilwell
won't be reimbursed. Which is all that this says.
I conclude that Stilwell is unlikely to prevail, at trial, upon his
claim that OTFC has violated Rule 14a-9. Accordingly, I deny his motion for
preliminary injunction.
12 - OPINION AND ORDER
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13 - OPINION AND ORDER
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II. Irreparable Harm
Since OTFC has established that it is likely to prevail at trial on its
claim that Stilwell violated Rule 14a-9, the court must decide what provisional
relief, if any, to grant in advance of trial. OTFC has asked this court to void
all proxies previously obtained by OTFC. The argument in favor of this remedy is
that (1) the proxies were procured with the aid of false or misleading
statements, so they should be thrown out, and (2) inertia (or fatigue from
repeated solicitations) may deter voters from actively revoking a proxy already
cast. Stilwell argues that voiding the previously obtained proxies could
potentially disenfranchise the shareholders who supported him,(8) and that OTFC
has not shown irreparable harm warranting immediate relief because the court can
always set aside the election results following a trial.
If the election proceeds as scheduled, there are three possible
outcomes. First, Stilwell may lose, in which event the question of relief
becomes largely academic. Second, Stilwell might win by such a wide margin that
it would be unlikely the results were materially altered by the disputed
statements. Or, lastly, the result may be very close, in which case the disputed
statements might assume greater importance. In that event, however, the court
has discretion to set aside the results if it concludes the outcome of the
election was influenced by the violation of Rule 14a-9.
Although it is a close question, I will deny OTFC's request to void the
proxies that Stilwell has already procured. Voiding of proxies is a strong
remedy generally reserved for the most egregious cases. The court's principal
role in a proxy contest is to ensure that the shareholders have a fair
----------
(8) To avoid that danger, at oral argument I suggested the possibility
of invalidating all outstanding proxies and sending the shareholders a new
ballot allowing them to vote for either side's candidate. However, the parties
were unable to agree on what materials would accompany that ballot and other
logistical issues.
14 - OPINION AND ORDER
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opportunity to cast an informed vote. The parties agree that a shareholder may
revoke a prior proxy simply by signing and returning a new proxy. OTFC has
advised the court that it plans to send shareholders proxy cards along with a
request to execute the new proxy.
It is preferable that corporate disputes be resolved in the board room,
not the court room. Accordingly, my primary concern is to ensure there is
sufficient time (1) for OTFC to circulate materials discussing the recent
developments in this case and a proxy card, and (2) for a shareholder to mail,
and the administrative entity to receive and process, a new proxy changing the
shareholder's vote, if that is desired. The annual meeting has been rescheduled
for October 12, which should provide sufficient time, albeit with little room to
spare because of the federal holiday on October 8.
I will not order Stilwell to send corrective disclosures at this time,
although he certainly has that option. Either party may, of course, quote from
or otherwise make reference to this opinion, taking care that any such
references are not misleading.
Although I have found that certain statements by Stilwell were likely
false or misleading, no one should infer from this that the court endorses
either side in this proxy contest. Quite the contrary, it is my desire to avoid
influencing this contest, to the extent possible. Ultimately, the votes that
count should be those cast by shareholders and not by judges.
CONCLUSION
Stilwell's motion (# 13) for preliminary injunction is DENIED, since
Stilwell has not shown that he is likely to prevail on the merits at trial.
OTFC's motion (# 7) for preliminary injunction is DENIED, because OTFC has not
shown that it will be irreparably harmed unless immediate relief is granted. The
rescheduling of the annual meeting should allow sufficient time for the mailing
of additional materials and for shareholders to alter their votes if they wish
to do so.
15 - OPINION AND ORDER
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IT IS SO ORDERED.
Dated this 26(TH) day of September, 2001.
/s/ John Jelderks
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John Jelderks
UNITED STATES MAGISTRATE JUDGE
16 - OPINION AND ORDER
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P R O X Y
THIS PROXY IS SOLICITED BY THE STILWELL GROUP IN OPPOSITION TO THE BOARD OF
DIRECTORS OF OREGON TRAIL FINANCIAL CORP.
OREGON TRAIL FINANCIAL CORP.
2001 ANNUAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints Joseph Stilwell and Spencer L. Schneider, or
either of them, as proxies with full power of substitution, to vote in the name
of and as proxies for the undersigned at the 2001 Annual Meeting of Oregon Trail
Financial Corp. (the "Company"), and at any adjournment(s) or postponement(s)
thereof, according to the number of votes that the undersigned would be entitled
to cast if personally present on the following matters:
1. ELECTION OF DIRECTORS - To elect KEVIN D. PADRICK as a director of the
Company
__FOR __WITHHOLD
To withhold authority to vote for the election of Kevin D. Padrick, place an X
next to Withhold or strike out Mr. Padrick's name above.
2. APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT ACCOUNTANTS FOR THE
FISCAL YEAR ENDING MARCH 31, 2002:
For ___ Against ___ Abstain __
IMPORTANT: PLEASE SIGN AND DATE ON THE REVERSE SIDE.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned Shareholder. Unless otherwise specified, this proxy will be
voted "FOR" the election of the Group Nominee as Director and "FOR" the
appointment of Deloitte & Touche LLP the independent accountants. This proxy
revokes all prior proxies given by the undersigned.
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the meeting, or any adjournments or postponements
thereof, as provided in the proxy statement provided herewith. The proxies may
exercise discretionary authority only as to matters unknown to the Group a
reasonable time before their proxy solicitation.
Please sign exactly as your name appears hereon or on your proxy cards
previously sent to you. When shares are held by joint tenants, both should sign.
When signing as an attorney, executor, administrator, trustee, or guardian,
please give full title as such. If a corporation, please sign in full
corporation name by the President or other duly authorized officer. If a
partnership, please
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sign in partnership name by authorized person. This proxy card votes all shares
held in all capacities.
Dated:
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(Signature)
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(Signature, if jointly held)
Title:
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PLEASE SIGN, DATE, AND MAIL THIS PROXY CARD TODAY.