CSX v. TCI; Second Circuit Requests Supplemental Briefing

On July 31, 2008 the Second Circuit requested the parties to file supplemental papers by August 20 (the hearing on the appeals is scheduled for August 25) to:

1. Discuss the issue of whether CSX's request for injunctive relief concerning the 6.4% of CSX's shares acquired by TCI/3G during the period of non-compliance with Exchange Act Section 13(d), as found by Judge Kaplan, has become moot by reason of the shareholders' meeting having now been held on June 25, 2008.

2. Advise the Court of the results of the vote at the June 25th meeting.

3. Address the extent, if any, that invalidating the votes of the 6.4% of CSX's shares held by TCI/3G would have affected the outcome of the vote taken at the June 25 shareholders' meeting.

These are all sensible questions. I wouldn't read too much into the Court's putting them to the parties, although if I were TCI/3G I might be thinking "can we focus on Judge's Kaplan's findings of liability, please?"

I can't imagine the Court not passing on CSX's request for a sterilization of the "tainted" shares if the answer to number 3 is that the voting of the tainted shares (assuming they were voted for TCI/3G's slate!) did not affect the outcome of the vote.

TCI/3G will repeat their position that once Judge Kaplan concluded their 13D and proxy statement disclosures were not materially misleading, then game over and there is no warrant for considering sterilizing the "tainted" shares. They have made this point, so the fact that the Court asks the questions also has to be disconcerting to TCI and 3G. Or, since CSX strenuously argued for sterilization nothwithstanding Judge Kaplan's reliance on Treadway (in which the Second Circuit denied sterilization once the required disclosures are made), I suppose it too may be disconcerted that the question has been asked ("didn't the Court get it the first time?").