JACKSONVILLE, Fla. — CSX Corp. has filed a federal lawsuit against The Children’s Investment Fund (TCI) and 3G Capital Partners (3G), alleging violations of federal securities laws.
TCI and 3G are hedge funds that formed a group to nominate a slate of directors to stand for election at the 2008 CSX annual meeting.
CSX filed the lawsuit in the United States District Court for the Southern District of New York. CSX alleges TCI and 3G violated federal securities laws, including violations of Section 13(d) of the Securities Exchange Act of 1934.
The lawsuit alleges, in part, that TCI employed swap agreements in order to evade the filing requirements and that TCI’s disclosures concerning its 11.5 percent swap position in CSX shares are materially misleading because they fail to disclose that, by virtue of agreements, understandings or relationships with TCI, swap counterparties intend to vote CSX shares in accordance with TCI’s wishes.
The lawsuit also alleges that TCI and 3G’s disclosures concerning their formation of a Section 13(d) group are false and misleading. Therefore, material information that the investing public should have regarding the group and its intentions with respect to the Company is currently unavailable, CSX alleges.
“By virtually all measures the performance of CSX has been exceptional. Notwithstanding this, in an effort to avoid the disruption and expense of a proxy contest we’ve spoken with TCI on a number of occasions in an attempt to find common ground,” said Edward J. Kelly, III, presiding director of the CSX Board of Directors. “Based on these conversations the Board concluded that TCI is not simply interested in having a representative voice on the Board, but instead is seeking to achieve effective control of the CSX Board of Directors and dictate Company strategy.”
Because CSX believes the integrity of voting in its shares could be undermined by the violations of the TCI/3G group, the company has rescheduled the 2008 annual shareholder meeting to allow an opportunity to pursue this matter and provide adequate time for full and complete information to be made available to shareholders, the company said.
The CSX 2008 annual meeting of shareholders will be held in New Orleans on June 25. The close of business on April 21 is the new record date for determination of shareholders entitled to vote at the 2008 annual meeting.
“We filed this suit against TCI and 3G to ensure that all of our shareholders receive complete and accurate information about the group’s holdings, agreements, plans and motivations to which they are entitled under federal securities laws,” said Michael Ward, CSX chairman, president and CEO. “We are committed to protecting the interests of all CSX shareholders and continuing to execute on our successful and proven strategy to further enhance value.”