Donald Yacktman and his money management firm have won an early round in their court fight with the independent directors of the Yacktman funds.
Maryland Circuit Court Judge Albert J. Matricciani, Jr. ruled on Oct. 16 that a shareholder meeting in which Yacktman wants to oust the independent directors of his funds may proceed as planned on Nov. 24. The judge also ordered the four directors not to use fund assets to pay legal fees or other costs in connection with a proxy fight between Yacktman and the directors. Use of the funds' assets to pay those expenses may subject the funds to an SEC enforcement action, Matricciani said in his three-page order.
The ruling is temporary and must be confirmed at a hearing whose date has not yet been set. Yacktman said in a letter to shareholders last week that he was "pleased" by the ruling and called it a "significant step in the right direction" in his attempt to oust the four independent directors: Jon D. Carlson, Thomas R. Hanson, Stephen E. Upton and Stanislaw Maliszewski.
Yacktman last month started a proxy campaign to fire the directors, saying they had overstepped their authority with respect to managing the funds. Yacktman asked shareholders to vote the current independent directors out and elect another slate which Yacktman backs.
The directors subsequently moved to cancel the shareholders' Nov. 24 meeting. Yacktman then sued in Maryland state court to insure that the meeting would take place as scheduled. Although Yacktman and his firm are based in Chicago, the funds - which include the Yacktman fund and the Yacktman Focused fund - are incorporated in Maryland.
Maliszewski, the spokesman for the independent directors, said the directors intend to fight the temporary restraining order the Maryland court imposed. Maliszewski says the SEC has told the directors they can use fund assets for their expenses arising from the proxy fight.
In addition to filing their court case, the independent directors have counterattacked in the proxy fight. In a proxy statement filed with the SEC, the directors said they were "concerned" about a variety of business practices at Yacktman's firm, Yacktman Asset Management, including alleged violations of the funds' code of ethics. Yacktman has denied the directors' allegations of improper conduct.