United States District Court, Northern District of Illinois, E.D
September 21, 1983
TRECO, INC. AND WISCONSIN REAL ESTATE INVESTMENT TRUST, PLAINTIFFS,
LAND OF LINCOLN SAVINGS AND LOAN, FRANK J. KINST, THOMAS A. KINST, RONALD R. DRAJKA, ROBERT J. HAJEK, PHILLIP R. KASIK, WILLIAM KINST, WARREN H. MUCHOW, JOHN A. STORCEL, AND JOHN J. LACHAJEWSKI, DEFENDANTS.
The opinion of the court was delivered by: Bua, District Judge.
The above-captioned matter comes before the Court on
plaintiffs' motion for preliminary injunction seeking an order
requiring defendants to convene a special meeting of the
shareholders of the Land of Lincoln Savings and Loan. Pursuant to
notice, the matter was heard by the Court on September 19, 1983.
The Court, having considered plaintiffs' motion, defendants'
answer, memoranda, exhibits, and affidavits submitted in support
of and in opposition to said motion, and having heard oral
argument, does hereby enter the findings of fact and conclusions
of law pursuant to Rule 52(a) of the Federal Rules of Civil
Findings of Fact
1. Plaintiff Treco, Inc. ("Treco") is a Florida corporation
with its principal executive office in Jacksonville, Florida.
2. Plaintiff Wisconsin Real Estate Investment Trust ("WREIT")
is a common law business trust formed under the laws of the State
of Wisconsin with its principal executive office in Chicago,
3. WREIT is in "bad standing" with the Wisconsin Secretary of
State due to its failure to file an annual report required under
4. WREIT is doing business in Illinois without a certificate of
authority from the Illinois Secretary of State.
5. Defendant Land of Lincoln Savings and Loan ("Lincoln") is a
savings and loan association chartered under the laws of
Illinois. Deposits at Lincoln are insured by the Federal Savings
and Loan Insurance Corporation. Lincoln is regulated by the
Federal Home Loan Bank Board.
6. The nine individual defendants are all members of Lincoln's
Board of Directors.
7. Lincoln has 2,470,855 shares of stock outstanding. Treco and
WREIT each own 123,000 common shares of Lincoln. Together, Treco
and WREIT own approximately 9.956 percent of the outstanding
common shares of Lincoln.
8. Lincoln's directors are elected each year at the annual
Lincoln's next annual shareholders' meeting is currently
scheduled for October 26, 1983.
9. Lincoln's existing bylaws contain no provision providing for
cumulative voting. In order for the plaintiffs to obtain
representation on Lincoln's Board of Directors based upon their
stock ownership, plaintiffs must propose and have Lincoln's
shareholders adopt an amendment to Lincoln's bylaws to require
cumulative voting of shares at elections for members of the Board
10. Under Lincoln's current bylaws, an amendment to the bylaws
may be proposed by shareholders only at a special meeting of
shareholders called expressly for that purpose. Under Article II,
Section 3 of Lincoln's bylaws, the President of the Association
is required to convene a special meeting of shareholders if he
receives a written request for a special meeting from
shareholders holding not less than 20 percent of all the
outstanding common stock of Lincoln entitled to vote at the
meeting. The written request must state the purpose of the
meeting and must be delivered to the business office of Lincoln
addressed to the Chairman of the Board the President, or the
11. On September 15, 1983, plaintiffs, on behalf of
shareholders holding in excess of 20 percent of Lincoln's common
stock, delivered a written demand to defendant Thomas A. Kinst,
President of Lincoln, requesting him to call a special meeting of
Lincoln's shareholders for October 12, 1983, at 1400 Gannon
Drive, Hoffman Estates, Illinois. The stated purpose for the
special meeting was to consider and vote on a proposal to amend
Lincoln's bylaws to require cumulative voting in the election of
12. The defendants have refused to convene a special meeting of
Lincoln's shareholders, notwithstanding said demand.
13. Lincoln's bylaws further provide:
Section 12. Voting. On all matters including the
election of directors each stockholder shall be
entitled to one vote for each share held as specified
in the articles of incorporation of the association.
14. Lincoln's Articles of Incorporation provide:
Section 6. Permanent Reserve Shares . . . The holders
of the common stock shall exclusively possess all
voting power. On all matters each holder of common
stock shall be entitled to one vote for each share
held by such holder.
Section 13. Amendment of Charter. No amendment,
addition, alteration, change or repeal of these
Articles of Incorporation shall be made unless it is
first proposed by the board of directors of the
association, and thereafter approved by the
affirmative vote of not less than two thirds of the
total votes eligible to be cast at a legal meeting of
members, or, in the case of Section 12 hereof, by the
affirmative vote of not less than 75 percent of the
total votes eligible to be cast at a legal meeting of
15. To the extent that any of the foregoing findings of fact
are deemed to be conclusions of law, they are hereby adopted as
conclusions of law.
Conclusions of Law
On the above and foregoing findings of fact, the Court makes
the following conclusions of law:
1. The Court has federal question jurisdiction over this action
pursuant to 28 U.S.C. § 1331, because the Amended Complaint is
brought pursuant to 15 U.S.C. § 78aa (Counts I, II, V, VI, and
VII), 18 U.S.C. § 1965 (Count III), and the principles of pendent
jurisdiction (Count IV).
2. Venue is proper in this district pursuant to 28 U.S.C. § 1391(b)
and 15 U.S.C. § 78aa, in that the claims alleged herein
arose in this district.
3. Defendants' refusal to convene a special shareholders'
meeting and defendants' alleged violations of federal law
described in the Amended Complaint derive from a common nucleus
of operative facts. Additionally, these claims are such that
plaintiffs would ordinarily expect them to
be tried in one judicial proceeding. Given the important policies
of conservation of judicial energy and the avoidance of
multiplicity of litigation, the Court exercises its discretion,
pursuant to the doctrine of pendent jurisdiction, to accept
jurisdiction over plaintiffs' claim for preliminary injunctive
relief. See Rosado v. Wyman, 397 U.S. 397, 405, 90 S.Ct. 1207,
1214, 25 L.Ed.2d 442 (1969); United Mine Workers v. Gibbs,
383 U.S. 715, 725, 86 S.Ct. 1130, 1138, 16 L.Ed.2d 218 (1966).
4. The Court possesses broad discretion in granting preliminary
injunctive relief. This broad discretion is guided by four
factors: (1) a reasonable likelihood of success on the merits,
(2) irreparable harm to the plaintiff, (3) a balance of the
threatened injury to the plaintiffs against harm to the
defendants, and (4) the public interest. Machlett Laboratories
Inc. v. Techny Industries, Inc., 665 F.2d 795, 796-97 (7th Cir.
5. Plaintiffs have demonstrated that each of the four relevant
factors weighs in favor of preliminary injunctive relief. By
refusing to grant plaintiffs' written demand to call a special
shareholders' meeting, made on behalf of more than 20 percent of
Lincoln's outstanding shares, there is a substantial likelihood
that defendants have violated Article II, Section 3 of the
Association's bylaws and Section 3-2(a) of the Illinois Savings
and Loan Act, ch. 17 Ill.Rev.Stat. § 3072(a).
6. Due to the impending time constraints imposed by the October
26, 1983 annual meeting, plaintiffs will suffer irreparable harm
should the Court refuse to grant immediate injunctive relief.
Refusing to grant preliminary injunctive relief, although
maintaining the status quo, would inhibit the Court's ability to
render a meaningful decision on the merits. See Canal Authority
of State of Florida v. Callaway, 489 F.2d 567, 576 (5th Cir.
7. After balancing the threatened injury to plaintiffs against
possible harm to defendants, the Court finds that plaintiffs
would be irreparably harmed if a preliminary injunction were
denied because plaintiffs would be unnecessarily frustrated in
their attempt to obtain representation on Lincoln's Board of
Directors at the October 26, 1983 annual meeting. Defendants,
although admittedly put to the expense of calling a special
shareholders' meeting, will not suffer irreparable harm.
8. Regarding the final factor to be considered in granting a
preliminary injunction, plaintiffs' attempt to obtain
representation on Lincoln's Board furthers the legitimate public
interests of corporate democracy and participation by
shareholders in the management of corporations which they have an
9. Defendants argue that convening a special shareholders'
meeting for the purpose of amending the bylaws to permit
cumulative voting is prohibited by Lincoln's Articles of
Incorporation as set out in the Court's findings of fact,
paragraph 14, supra. Specifically, the Articles provide that
"each holder of common stock shall be entitled to one vote for
each share held by such holder." Plaintiffs' proposal for
cumulative voting, however, is not inconsistent with Lincoln's
Articles. Under cumulative voting, each shareholder will retain
the same total number of votes as before cumulative voting.
Cumulative voting merely allows each shareholder to cumulate his
votes and cast them for a single director. Therefore, the Court
holds that Lincoln's Articles do not prohibit plaintiffs'
proposed amendment to the bylaws.
10. Defendants further argue that WREIT lacks capacity to sue
in the instant case because (1) it is in "bad standing" under
Wisconsin law and (2) it has failed to register with the Illinois
Secretary of State as a foreign corporation doing business in
Illinois. WREIT's "bad standing" is due to its failure to file an
annual report required by Wisconsin law. WREIT's right to proceed
as a plaintiff in this action, therefore, will be conditioned
upon its full compliance with applicable Wisconsin law and upon
its compliance with Illinois' registration requirements for
foreign corporations. See
DeSilva Construction Corp. v. Herrald, 213 F. Supp. 184, 191-92
11. Defendants also argue that Treco lacks capacity to sue in
the instant action due to its failure to file a 1983 annual
report as required by Florida law. Treco, however, has produced
a certificate establishing its present validity and good standing
under Florida law. Accordingly, the Court finds that Treco has
capacity to sue in the instant action.
12. To the extent that any of the foregoing conclusions of law
are deemed to be findings of fact, they are hereby adopted as
findings of fact.
Accordingly, based on the foregoing findings of fact and
conclusions of law, plaintiffs' motion for preliminary injunction
is hereby granted and pursuant to Rule 52(b) of the Federal Rules
of Civil Procedure it is hereby ordered that:
1. Defendants are directed to convene a special meeting of
Lincoln's shareholders on October 12, 1983, for the purpose of
considering an amendment proposed by plaintiffs to Lincoln's
bylaws requiring cumulative voting of shares in any election for
Lincoln's Board of Directors.
2. Defendants are further ordered to mail notice of the special
meeting to all of Lincoln's shareholders by the close of business
on September 22, 1983, and to set the record date for the special
meeting at September 21, 1983.
Pursuant to Rule 65, bond is hereby set in the amount of
Pursuant to Rule 52(b), the Court reserves the right to amend
the above findings and/or conclusions or make additional findings
and/or conclusions upon motion of either party made no later than
ten days from today and the Court may amend the judgment
IT IS SO ORDERED.
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