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January 23, 1997


The opinion of the court was delivered by: IRENAS

 IRENAS, District Judge:

 Plaintiff instituted this action on November 12, 1996, seeking a judgment declaring that defendants have failed to make all of the disclosures required by Schedules 13D and 14A of the Securities Exchange Act of 1934, 15 U.S.C. §§ 77b et seq. (the "Exchange Act"); that plaintiff may reject defendants' nomination to the board of directors for want of these disclosures; and that plaintiff may refuse defendants' request for a shareholder list. Defendants counterclaimed on November 25, 1996 to compel plaintiff to reinstate a board of director seat it eliminated on July 19, 1996. Also on November 25, 1996, defendants applied to the Court for immediate injunctive relief against plaintiff.

 In conferences held in Chambers on December 2 and 16, 1996, the parties agreed to complete discovery and depositions on an expedited basis and appear before the Court on January 3, 1997 for a final proceeding to resolve all issues. In accordance with Federal Rule of Civil Procedure 65(a)(2), the parties further agreed that submitted exhibits, deposition transcripts, and trial briefs would comprise a complete and final record for this Court's factual and legal determinations. Having reviewed the record and heard the oral arguments of counsel, the Court now makes the following findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52(a).


 A. Dramatis Personae

 IBS Financial Corp. ("IBSF") is a savings and loan holding company owning Interboro Savings & Loan Association ("Interboro"). IBSF's shares are publicly registered pursuant to the Securities Exchange Act of 1934, 15 U.S.C. §§ 77b et seq. (the "Exchange Act"), and actively traded. Defendants together own approximately 8.5% of the outstanding shares of IBSF common stock.

 Seidman & Associates, L.L.C. (SAL) is a limited liability company managed by Lawrence B. Seidman ("Seidman"). SAL's members are Seidman, Seidcal & Associates, L.L.C. ("Seidcal"), Sonia Seidman ("Mrs. Seidman"), and two other individuals. SAL's investments include not only IBSF stock but also shares of Cali Realty, Atlantic Gulf Communities, AmeriCredit, and PennFed Financial Services. Pursuant to SAL's operating agreement, Seidman as managing member has exclusive and broad investment powers. See SAL Operating Agreement at §§ 1.1, 11.1. A majority in interest, however, may remove or replace Seidman as managing member with or without cause upon payment of a removal penalty. See id. § 11.3. Seidcal currently owns a 71.43% interest in SAL but takes no active role in its affairs. See Cali Dep. at 13, 17, 29-30, 35-36.

 Seidman & Associates II, L.L.C. ("SAL II") is also a limited liability company managed by Seidman. SAL II's members are Mrs. Seidman and Seidcal. SAL II's investments include shares of IBSF and shares of Wayne Bancorp. SAL II's operating agreement grants Seidman as manager exclusive and broad investment powers. See SAL II Operating Agreement at §§ 1.1, 11.1. A majority in interest, however, may remove or replace Seidman as manager with or without cause. See id. § 11.3. At present, Seidcal owns a 75% interest in SAL II but takes no active role in its affairs. See Cali Dep. at 13, 17, 29-30, 35-36.

 Federal Holdings, L.L.C. ("Federal") is a limited liability company managed in part by Seidman. Federal's members are Charisma Partners, L.P. ("Charisma") and nine individuals. Federal's only investments are shares of IBSF stock. Under Federal's operating agreement, Seidman is investment manager and enjoys exclusive and complete power to buy, sell, and vote Federal's stock. See Federal Operating Agreement at § 10.1. The operating agreement names Kevin Moore ("Moore") administrative manager and clothes him with the authority to make non-investment decisions and remove Seidman as investment manager for cause. See id. §§ 10.1, 10.3. Neither Charisma, 8th Floor, nor Moore takes an active role in Federal's investment affairs.

 Seidman Investment Partnership, L.P. ("SIP") is a New Jersey limited partnership run by Seidman through Veteri Place Corp. ("Veteri"), SIP's general partner. Seidman is Veteri's sole officer and sole shareholder. SIP's limited partners include SAL, Kaplus Hanover Associates, the Ketron Family Trust, and three individuals. SIP's only investments are shares of IBSF stock. As general partner, Seidman (through Veteri) makes all of SIP's investment decisions. See SIP Amended Limited Partnership Agreement at §§ 12, 14(a).

 Last year, defendants nominated Ernest Beier, Jr. ("Beier") and Dennis Pollack ("Pollack") to IBSF's board of directors. This year, defendants nominated Beier and Whitman to IBSF's board of directors. In addition to their above-listed roles, Seidman, Whitman, Di Paolo, Pollack, and Beier each own IBSF stock individually.

 Michael Mandelbaum ("Mandelbaum"), Jeffrey Greenberg, Steven Greenberg (together, "the Greenbergs"), Richard Baer ("Baer"), Brent Wolmer ("Wolmer"), and Mrs. Seidman are each IBSF shareholders who have agreements with Seidman regarding their shares. Mandelbaum and the Greenbergs have each agreed in writing that Seidman may buy, sell, and vote their IBSF shares until specified dates. Baer, Wolmer, and Mrs. Seidman have orally agreed to sell and vote their IBSF shares as Seidman directs. These oral agreements are at-will and may be terminated at Baer, Wolmer, and Mrs. Seidman's discretion.

 Seidcal is composed of several members of the Cali family. Brant B. Cali is Seidcal's administrative manager, but Seidcal's operating agreement provides that a majority in interest shall manage and conduct Seidcal's business affairs. See Seidcal Operating Agreement at § 11.1. According to Brant Cali, the lion's share of Seidcal's funding probably derives from three Cali family "seniors," namely John J. Cali, Angelo Cali, and Ed Leshowitz, who are not themselves Seidcal members but whose children are Seidcal members.

 Charisma's general partner is 8th Floor Realty Corp. ("8th Floor"); its limited partners are individuals whose identities have not been revealed. Moore is 8th Floor's vice president.

 Defendants SAL, SAL II, Federal, SIP, Seidman, BCI, BPL, Di Paolo, Whitman, Beier, and Pollack comprise an unincorporated entity known as the "IBSF Committee to Maximize Shareholder Value" (the "Committee"). As the name suggests, the Committee aims to maximize the value of their IBSF shares.

 B. Factual History

 At last year's Annual Meeting, the Committee waged an unsuccessful proxy campaign to elect two independent directors--Whitman and Pollack--to IBSF's board. IBSF's incumbent nominees prevailed and were duly reinstalled as members of the board in 1996. After losing, Seidman reportedly vowed to try again this year. See Complaint at P 12 (quoting Jonathan D. Epstein, Insurgent in N.J. Proxy Fight Sues Thrift Board for Libel, Amer. Banker, Dec. 21, 1995, at 14). IBSF concedes that its board expected as much. See Plaintiff's Counterclaim Mem. Law at 12.

 On July 19, 1996, director Frank G. Lockhart ("Lockhart") informed the IBSF board that he intended not to seek reelection. That same day, the board of directors amended its bylaws to reduce the size of the board from seven to six. As a consequence, one rather than two seats will come up for election at this year's Annual Meeting. *fn1"

 At their depositions, director Thomas J. Auchter ("Auchter") and chairman Joseph M. Ochman, Sr. ("Ochman"), offered three reasons for the reduction of the IBSF's board. First, the directors thought that the holding company's board need not be so large given that Interboro's board of directors performs the vast majority of the companies' day-to-day tasks. Director Ochman testified that the board had discussed such a decision on several occasions over the past two years, although IBSF has submitted no evidence or board minutes documenting these discussions, and director Auchter made no mention of these discussions.

 Second, Ochman testified, reduction of the board was part of a long-range plan to maintain flexibility in case future acquisitions necessitated adding directors to the holding company's board. However, at its prereduction size of seven directors, IBSF could feasibly and legally expand its membership to nine to accommodate acquisition candidates. See Ochman Dep. at 11-12, 18 (reporting an acceptable range from five to fifteen directors). Moreover, Ochman testified that acquisition candidates would also request seats on Interboro's board of directors, which remains unreduced at seven directors. See id. at 33-34.

 Third, Auchter and Ochman conceded that the elimination of a board seat was also meant to hinder the Committee's efforts in establishing a presence on IBSF's board. Ochman testified, "In the event there was any proxy contest, [it would be] in the best interest[s] of all shareholders to have only one nominee for directorship rather than two." Ochman Dep. at 13. He elaborated,

The dissident group of shareholders were advocating very clearly in their material and press releases that we should hire an investment banker and put the company up for sale through an auction. The board believed then and firmly believes today that that is absolutely not in the best interest of all our shareholders and that long range, that we can build the franchise, develop the company further and maximize the shareholder value.

 Id. at 15. A statement attributed to Ochman in the American Banker summarizes this sentiment: "The board's decision last month to eliminate a seat, reducing membership to six, is one way to stop the [dissident] group, [Ochman] said." Joanna Sullivan, Thrift Sues Investors Group Seeking Seat to Push for Sale, Amer. Banker, Nov. 19, 1996, at 10.

 The Court considers this third rationale for eliminating Lockhart's board seat the primary motivation behind the IBSF board's decision. Viewed in the abstract, the board's efficiency and flexibility rationales appear bona fide and amply justify the elimination of a board seat. Viewed against the backdrop of the impending proxy contest, however, these two justifications seem suspiciously pretextual. Each rationale arose for the first time in depositions taken after the Court alerted the parties to the viability and caselaw applicable to defendants' third counterclaim. In addition, the board's flexibility rationale suffers from the above-mentioned inconsistencies, and its efficiency rationale lacks the testimonial or documentary corroboration one might expect.

 In contrast, no such doubt can be cast on the board's third rationale for eliminating Lockhart's seat. Before defendants interposed their counterclaims, Ochman explained that the board's decision was meant to thwart the Committee's efforts at establishing a presence on the IBSF board. See Sullivan, supra, at 10. Both Auchter and Ochman admitted as much in their depositions. Indeed, at his deposition, Ochman explained at great length how such a strategy serves the best interests of IBSF and its shareholders. See Ochman Dep. at 15. Given these circumstances, this Court can only conclude that the IBSF board eliminated Lockhart's directorship primarily to hinder the Committee's proxy solicitation efforts.

 On October 7, 1996, uninformed of the reduction in board size, the Committee notified IBSF of its nomination of Whitman and Beier for the two directorships it thought up for election. The Committee's nomination submission also supplied information required by Article 9.3 of IBSF's Certificate of Incorporation, and formally requested a IBSF's shareholder list in connection with the proxy solicitation. *fn2" By letter dated October 31, 1996, IBSF responded, itemizing claimed deficiencies in the Committee's nomination submissions, and allowing the Committee several days in which to "cure" them. The Committee responded to IBSF's request but did not cure all of the claimed deficiencies. IBSF then instituted the instant action on November 12, 1996.

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