Federal Appeals Court Upholds Emmis' Victory In Shareholder Suit

Upheld

The U.S. Court of Appeals for the Seventh Circuit has affirmed a District Court decision in favor of EMMIS COMMUNICATIONS in a suit brought by dissident shareholders including CORRE OPPORTUNITIES FUND, LP.

The shareholders objected to a move made by EMMIS that ended up with the company, holding 2/3 of its own Preferred Shares, voting to convert those shares to common stock, which allowed the company to avoid having to pay $26.7 million in accrued and unpaid dividends that had been suspended from 2008 through 2012.  On appeal, the shareholders argued that the shares were no longer "outstanding" for voting purposes and that the shares were not held in a fiduciary capacity so the trust should be ignored; the appeals court said that EMMIS was allowed to vote its shares the way it wanted under INDIANA law.  "For EMMIS, which wanted to recapitalize by going private," the court asserted, "the alternative to changing the preferred stock’s terms might have been reorganization under Chapter 11, which would have allowed the value of that stock to be written down. Maybe that’s why owners of more than 2/3 of the preferred stock freely sold to (or agreed to swaps with EMMIS; they voted with their wallets that the terms they were getting were better than the likely outcome of standing pat on the shares’ original contractual rights."

"It has been a long road, but we are incredibly gratified that the 7th Circuit upheld (District Court) Judge (SARAH EVANS) BARKER's ruling, and denied the arguments made by dissident preferred shareholders," said EMMIS Chairman/CEO JEFF SMULYAN.  "We were always confident in our stance, and we are pleased the courts have agreed."

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