Plaintiffs' Reply Memorandum, at 16. Plaintiffs further argue
that defendants' conduct is improper per se regardless of their
motives behind the June 22, 1983 amendments. Finally, plaintiffs
argue that assuming defendants' motives are relevant, "there can
be no genuine issue of fact under Federal Rule of Civil Procedure
57 that the primary purpose of such amendments was to prevent the
removal of the existing directors from office." Id. at 18.
6. Defendants argue that their decision to amend Lincoln's
bylaws on June 22, 1983 was a prudent decision made in the
interests of all shareholders. Defendants claim that they were
"confronted with a claim transmitted through a responsible
attorney that certain shareholders intended to call a special
meeting of the shareholders and to discharge the directors and to
liquidate the corporation." Defendants' Memorandum, at 8.
A. Plaintiffs' Emergency Motion for Declaratory Judgment
7. The relief plaintiffs seek for defendants' alleged unlawful
conduct described in Count IV of the Amended Complaint is an
injunction prohibiting defendants from enforcing the amendments
enacted at the June 22, 1983 directors' meeting. Amended
Complaint, Request For Relief, at 24, ¶ F. Since Count IV seeks
purely equitable relief, defendants do not have a right to a jury
trial on factual questions raised in Count IV of the Amended
Complaint. Schaefer v. Gunzburg, 246 F.2d 11, 13 (9th Cir. 1957).
8. Admittedly, defendants have aggressively resisted
plaintiffs' efforts to introduce cumulative voting at the October
26, 1983 annual meeting. Under certain circumstances, directors
of a corporation are liable for breach of their fiduciary duty
when they utilize corporate machinery for the purpose of
perpetuating themselves in office. See Holly Sugar Corp. v.
Buchsbaum, [1981-82 Transfer Binder] Fed.Sec.L.Rep. (CCH) ¶
98,366 at 92,238 (D.Colo. 1981); Podesta v. Calumet Industries,
Inc., [1978 Transfer Binder] Fed.Sec.L.Rep. (CCH) ¶ 96,433 at
93,560 (N.D.Ill. 1978); Coalition to Advocate Public Utility
Responsibility, Inc. v. Engels, 364 F. Supp. 1202, 1206-07
(D.Minn. 1973); Schnell v. Chris-Craft Industries, Inc.,
285 A.2d 437, 439 (Del. 1971); Lerman v. Diagnostic Data, Inc.,
421 A.2d 906, 914 (Del.Ch. 1980); Petty v. Penntech Papers, Inc.,
347 A.2d 140, 143 (Del.Ch. 1975); Condec Corp. v. Lunkenheimer Co.,
230 A.2d 769, 775-76 (Del.Ch. 1967).*fn2 In order to prevail on this
theory, however, a plaintiff must establish that the director's
improper motive (perpetuating himself in office) was the "sole or
primary purpose" of his conduct. Panter v. Marshall Field & Co.,
646 F.2d 271, 297 (7th Cir. 1981). Merely introducing evidence
that "a" motive of the director was to retain control is not
sufficient to rebut the normal presumption that a director's
actions are undertaken in good faith. Id. at 294.
9. Contrary to plaintiffs' argument, defendants' motives for
amending Lincoln's bylaws on June 22, 1983, are relevant to the
instant motion. Moreover, without the benefit of discovery or a
hearing, defendants' motives cannot be determined from the
pleadings. At this stage, there exists a genuine issue of
material fact as to the defendants' primary purpose in amending
Lincoln's bylaws on June 22, 1983. Therefore, plaintiffs'
emergency motion for declaratory judgment pursuant to Rule 57 of
the Federal Rules of Civil Procedure is denied without
B. Plaintiffs' Motion For Preliminary Injunction
10. The Court possesses broad discretion in granting
preliminary injunctive relief. This broad discretion is guided by
(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.
1981). The party seeking preliminary injunctive relief bears the
burden of persuading the Court that each factor weighs in favor
of such relief. Fox Valley Harvestore, Inc. v. A.O. Smith
Harvestore Products, Inc., 545 F.2d 1096, 1097 (7th Cir. 1976).
11. Plaintiffs have failed to demonstrate that each of the four
relevant factors weighs in favor of preliminary injunctive
relief. As more fully explained below, plaintiffs have failed to
demonstrate a reasonable likelihood that they will prevail on
Count IV of the Amended Complaint.
12. Not one of the cases relied upon by plaintiffs hold that
amending a corporation's bylaws to require a two-thirds vote for
shareholder initiated bylaw amendments constitutes a per se
violation of a director's fiduciary duty. Neither is the Court
persuaded to hold that defendants' conduct in this case amounts
to a per se breach of their fiduciary duty.
13. In order to ultimately prevail on their claim, plaintiffs
must introduce evidence sufficient to overcome the presumption
that the defendant directors' decision to amend the bylaws was
made in good faith. See Panter, 646 F.2d at 294. At this
juncture, plaintiffs have not met their burden of persuading this
Court that a reasonable likelihood exists that plaintiffs will
ultimately prevail on Count IV of the Amended Complaint.
Therefore, plaintiffs' motion for a preliminary injunction
prohibiting defendants from enforcing the amended bylaws at
Lincoln's shareholder meeting is denied.*fn4
14. 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.
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
Plaintiffs' emergency motions for declaratory judgment and a
preliminary injunction are denied.
IT IS SO ORDERED.