Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_07-cv-01772/USCOURTS-cand-5_07-cv-01772-1/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 15:78m(a) Securities Exchange Act

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United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

JEANNE M. CALAMORE,

 Plaintiff,

 v.

JUNIPER NETWORKS INC.,

Defendant. /

No. C07-01772 MJJ

ORDER DENYING PLAINTIFF’S

APPLICATION FOR A TEMPORARY

RESTRAINING ORDER

INTRODUCTION

Before the Court is Plaintiff Jeanne M. Calamore’s Application For a Temporary Restraining

Order (Docket No. 4.) After considering Defendant Juniper Networks Inc.’s opposition, Plaintiff’s

reply, and the parties’ oral arguments at the hearing, the Court DENIES Plaintiff’s Application for

the following reasons.

FACTUAL BACKGROUND

Plaintiff Jeanne M. Calamore, who owns 140 shares of common stock of Defendant Juniper

Networks Inc., filed a complaint in this action on March 28, 2007 alleging violations of section 14(a)

of the Securities Exchange Act and SEC Rule 14a-9 involving Juniper’s 2006 proxy statement. 

Plaintiff contends that this proxy statement, which was used to solicit shareholder votes for approval

of a new 2006 Equity Incentive Plan (“Plan”), contained false or misleading statements and

omissions of material fact with respect to certain stock option backdating practices that Juniper has

since acknowledged existed. Plaintiff’s complaint, which is not brought as a class action or a

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stockholder derivative suit, does not seek damages, but instead seeks temporary and permanent

injunctive relief in the form of: (1) voiding the vote of shareholders for the 2006 Plan, (2) cancelling

the 2006 Plan and any securities (including stock options) issued pursuant to that Plan, (3) voiding

the issuance of any stock issued pursuant to the 2006 Plan, and (4) prohibiting the payment of any

consideration to replace cancellation or voiding of such securities.

Plaintiff now seeks a temporary restraining order that prevents Juniper from issuing any

further stock options or other common stock pursuant to the 2006 Plan.

LEGAL STANDARD

To prevail on a motion for a temporary restraining order, Plaintiff must show: (1) a strong

likelihood of success on the merits, (2) the possibility of irreparable injury to Plaintiff if preliminary

relief is not granted, (3) a balance of hardships favoring Plaintiff, and (4) advancement of the public

interest (in certain cases). See Rodde v. Bonta, 357 F.3d 988, 994 (9th Cir. 2004). Alternatively,

injunctive relief could be granted if Plaintiff “demonstrate[d] either a combination of probable

success on the merits and the possibility of irreparable injury or that serious questions are raised and

the balance of hardships tips sharply in [her] favor.” Id. These two alternatives represent extremes

of a single continuum, rather than two separate tests. Id. (citing Clear Channel Outdoor Inc. v. City

of Los Angeles, 340 F.3d 810, 813 (9th Cir.2003). As a result, the greater the relative hardship to the

party seeking the preliminary injunction, the less probability of success must be established by that

party. Id.

ANALYSIS

A. Irreparable Harm. 

Plaintiff contends that irreparable harm is shown because issuance of additional shares

pursuant to the 2006 Plan is imminent and “cannot be returned to shareholders.” Defendant counters

that Plaintiff is unable to show either the immediate or the irreparable nature of the asserted harm,

and further contends that the requested temporary restraining order would cause extensive harm to

Juniper’s ability to recruit and retain employees.

The Court is not convinced by Plaintiff’s arguments that the issuance of additional stock

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 The Court has tentatively set a preliminary injunction hearing in this matter for June 1, 2007.

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 Juniper convincingly demonstrates that any dilution of Plaintiff’s shares caused by further issuance of stock would

be remediable by money damages. In any event, Plaintiff insists that she does not seek any money damages in this matter,

so dilution of the value of her stock holdings cannot be basis of her claim of irreparable harm.

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under the 2006 Plan over the next seven weeks1 constitutes an irreparable harm either to her or to

other shareholders. Plaintiff credibly argues that, assuming she can establish her case on the merits,

the fact that the stockholder vote approving the 2006 Plan was solicited “under false pretenses”

constitutes a form of injury to her and other stockholders. However, ths injury took place in May

2006, and the temporary restraining order sought by Plaintiff does not directly seek to undo or void

the results of that stockholder vote. Instead, the temporary restraining order sought by Plaintiff

seeks only to restrain further issuance of shares under the 2006 Plan until the preliminary injunction

hearing. Plaintiff, however, fails to adequately establish that further issuance of stock under the Plan

will “result in immediate irreparable harm” to her or other stockholders. Plaintiff offers only the

conclusory argument that the harm is irreparable because the stock “cannot be returned to

shareholders,” but this fails to elucidate the irreparable nature of the alleged harm.2

 Plaintiff has not

established, and the Court does not see a basis for concluding, that the relief ultimately sought by

Plaintiff (voiding of the 2006 vote, the Plan, and stock issued under the Plan) will be less obtainable

or of less value if preliminary injunctive relief is not entered in this case. 

Plaintiff’s primarily effort to establish irreparable harm appears to be her contention that

misrepresentations that deny shareholders the ability to cast a fully informed vote on a plan, by their

very nature, constitute irreparable injury. But the very cases that Plaintiff relies on show that

Plaintiff’s argument misses the mark. Both Wininger v. SI Mgmt L.P., 33 F. Supp. 2d 838, 848

(N.D. Cal. 1998) and Krauth v. Executive Telecard, 890 F. Supp. 269, 287 (S.D.N.Y. 1995) involved

situations in which the district court was considering preliminary injunctive relief to prevent

distribution of an upcoming proxy statement before the shareholder vote had taken place. This

Court sees far less rationale for preliminary injunctive relief where the shareholder vote has already

taken place, and Plaintiff fails to show that the temporary relief she seeks would operate to prevent

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 In considering the extent of the harm that would be caused if a temporary restraining order does not issue, this

Court also finds relevant that Plaintiff's lawsuit seeks relief on behalf of herself alone – the action is not a shareholder

derivative suit nor a class action. Plaintiff nonetheless asserts that the Court should take into account the aggregate harm

caused to all other stockholders, citing J.I. Case Co. v. Borak, 377 U.S.426, 432 (1964) for the proposition that "[t]he injury

which a stockholder suffers from corporate action pursuant to a deceptive proxy solicitation ordinarily flows from the damage

done the corporation, rather than from the damage inflicted directly upon the stockholder." As a preliminary matter, the Court

notes that Borak faced a distinctly different type of lawsuit, as the action was filed "as a class action on behalf of himself and

all other Case shareholders who are similarly situated." See J.I. Case Co. v. Borak, 317 F.2d 838, 842 n.6 (7th Cir. 1963),

aff'd, 377 U.S. 426 (1964). However, even accepting Plaintiff’s premise for purposes of resolving this Application, Plaintiff

has not adequately linked the general (and already suffered) injury to the stockholders as described in Borak to any specific,

incremental injury that has yet to occur and would be effectively prevented by issuance of a temporary restraining order. 

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further injury to her or other stockholders in the interim that is irreparable in nature.3 

 The Court also has serious reservations about granting a temporary restraining order when

the record before it does not establish the immediacy of the alleged harm that would otherwise

result. Though the record reflects a likelihood that Juniper will continue a standard practice of using

stock options in connection with employment offers and performance-based compensation, there is

little evidence in the record indicating that the number of shares that would be issued between today

and the date of a preliminary injunction hearing is particularly significant compared to the number of

shares already issued since the Plan was adopted in May 2006. Moreover, it is undisputed on the

record before the Court that the next options grant to directors of 120,000 shares will not take place

until May 2007, and will only begin vesting on a monthly basis in June 2007, after the preliminary

injunction hearing set in this case.

B. Balancing Of The Hardships

In contrast to the general harm that Plaintiff articulates but fails to adequately link to the

issuance of further stock options, the harm that Juniper will suffer from Plaintiff’s requested

temporary restraining order is considerable and backed by evidence. Juniper persuasively argues

that a grant of the temporary restraining order would cause a serious disruption to its recruiting and

retention capabilities, and corporate reputation, in a competitive labor market, as well as cast a cloud

over numerous employment contracts and employment offers already in existence. Gaynor Decl., ¶

¶ 1-7. Also weighing against grant of the temporary restraining order is that the requested

injunctive relief does not, contrary to Plaintiff’s assertions, appear to merely preserve the status quo,

as Juniper has regularly engaged in business practices of using stock options to recruit and retain

employees. 

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 Juniper does not specifically address the issue of material omissions in its opposition, instead indicating that it

“intends to address this point more fully in opposing plaintiff’s request for a preliminary injunction.” 

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Moreover, to the extent that Plaintiff is correct that this Court should consider harm not only

to herself but to other shareholders, the Court concludes on this record that the harm that the

temporary restraining order would cause to Juniper’s reputation, recruiting and retention would

ultimately cause a harm to Juniper’s shareholders as well. Weighing the balance of hardships, the

Courts finds that this factor weighs considerably against the issuance of a temporary restraining

order. 

C. Likelihood of Success on the Merits.

The Court finds, on the record before it, that Plaintiff has raised serious questions regarding

the contents of the 2006 proxy statement and its impact on the 2006 shareholder vote approving the

Plan, particularly her contention that it omitted material facts regarding earlier practices at Juniper in

which stock options were not granted at fair market value.4

 Given that Juniper announced only four

days after the May 2006 shareholder vote that its audit committee was starting an investigation into

backdating issues with the assistance of independent counsel, and that Juniper was also responding

to a request for information on backdating to the U.S. Attorney, there are serious questions about

whether Juniper had in its possession, before the vote took place, material information about its past

stock option practices that it failed to disclose to shareholders. However, the Court also notes that

the force of Plaintiff’s arguments on the merits, and therefore the Court’s evaluation of Plaintiff’s

likelihood of success on the merits, is somewhat uncut by portions of the record currently before the

Court that indicate the backdating practices in question may have ceased as early as 2003. Such a

fact, if established, would reduce the materiality of the alleged omissions in the 2006 proxy

statement. Nonetheless, the Court finds that Plaintiff has raised serious questions regarding her

likelihood of success on the merits. 

D. Public Interest.

Plaintiff has not advanced any argument that the temporary restraining order she seeks

advances the public interest, and the Court finds that the record before it does not indicate that this

factor would weigh in favor of granting interim injunctive relief at this time.

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CONCLUSION

The Court finds that Plaintiff has not made an adequate showing under the standards

articulated by the Ninth Circuit for temporary restraining orders. See Rodde v. Bonta, 357 F.3d 988,

994 (9th Cir. 2004). In particular, Plaintiff has made an insufficient showing of irreparable and 

immediate harm. Moreover, the record before this Court indicates that balance of hardships favors

not issuing interim injunctive relief at this time. For all of the reasons set forth above, as well as

those articulated by the Court at oral argument, the Court DENIES Plaintiff’s Application.

IT IS SO ORDERED.

Dated: 4/12/07 

MARTIN J. JENKINS

UNITED STATES DISTRICT JUDGE

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