Judge: Apple shareholder suit shows 'likelihood of success'

The judge hearing arguments over a proxy proposal says he sees merit in case, but he does not immediately issue a ruling on whether to block the shareholder vote.

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A federal judge said today he sees merit in an activist hedge-fund manager's lawsuit against Apple but did not issue a ruling on whether to block next week's shareholder vote on a proxy proposal.

U.S. District Judge Richard Sullivan declined to immediately rule on a request by Greenlight Capital to stop a February 27 vote because he wasn't sure the plaintiff would suffer "irreparable harm" if the vote was allowed to be held as scheduled.

"Candidly, I do think the likelihood of success is in favor for Greenlight," Sullivan said today in a New York court, according to a Reuters account of the hearing.

Apple's proxy includes a proposal that would eliminate its ability to issue "blank check" preferred stock without investor approval. Greenlight Capital, which is run by the famed short-seller David Einhorn, seeks an injunction to prevent Apple from bundling that provision with several other items up for investor consideration.

A representative for Greenlight Capital declined to comment. CNET has also contacted Apple for comment and will update this report when we learn more.

In its response to Greenlight Capital's request, Apple accused Einhorn of attempting to hold investors "hostage" in his effort to get the electronics giant to share more of its massive cash reserves with investors.

"Shareholders should not be held hostage to plaintiffs' attempts to coerce Apple into an agreement that serves plaintiffs' financial interests," Apple said in February 13 filing.

Einhorn has said Apple has a "mentality of a depression," likening the company to people who have experienced trauma and "sometimes feel they can never have enough cash."

The company has defended its management of its cash reserves, which totaled more than $137 billion in cash and securities as of December, saying it has already delivered $10 billion of its plan to return $45 billion to shareholders over three years. It re-initiated a dividend last year and also has plans to buy back stock.