Following a bench trial, the Massachusetts Superior Court ruled in favor of the Eaton Vance parties.
Retained by counsel to the Eaton Vance parties (Skadden Arps; Ropes & Gray; and Goodwin Procter)
Hedge fund Saba Capital Management (Saba) challenged investment management firm Eaton Vance, several of its closed-end funds, and the funds’ trustees in a matter involving certain Eaton Vance fund bylaw amendments, including an amendment requiring challengers in proxy contests to receive a majority of outstanding shares (Majority Rule Amendment) in order to replace incumbent trustees.
Counsel for the Eaton Vance parties retained Cornerstone Research to support John Coates of Harvard Law School.
The judge cited Professor Coates’s expert testimony, noting “I credit Prof. Coates’ opinion that [the opposing expert’s] regression analysis is not reliable because of the flaws Prof. Coates described.”
Professor Coates analyzed the performance of the Eaton Vance funds relative to peers and the impact of tender offers on funds that Saba had previously targeted. Professor Coates also demonstrated flaws in the regression analysis put forward by Saba’s expert, which purported to show that it is impossible in practice to achieve a majority of outstanding shares in closed-end funds like the Eaton Vance funds.
Several issues were decided at summary judgment, leaving only the legality of the Majority Rule Amendment in question. Following a bench trial, the Massachusetts Superior Court ruled in favor of the Eaton Vance parties. The judge concluded that the Majority Rule Amendment did not violate the Investment Company Act of 1940 or the funds’ Declarations of Trust. The judge also cited Professor Coates’s expert testimony, noting “I credit Prof. Coates’ opinion that [the opposing expert’s] regression analysis is not reliable because of the flaws Prof. Coates described.”