What if Proxy Contests Were Decided by Asking Who Had More Facebook Friends?

Quigley Corp. v. Karkus, No. 09-1725, 2009 U.S. Dist. LEXIS 41296 (E.D. Pa. May 15, 2009):

The Quigley Complaint alleges that the Defendants are attempting to obtain control of the company by means of materially false statements in proxy materials. In the Complaint Quigley contends that the Karkus Defendants have concealed Mr. Ligums’ participation in the proxy contest … .

In addition, however, Quigley presents a variety of evidence that Mr. Ligums has extensive personal and professional connections with other members of the Karkus group.

Quigley notes—and Mr. Ligums acknowledges—that the website for Mr. DeShavo’s construction business includes a testimonial from Mr. Ligums. Further, Mr. Ligums also testified that his son holds a $ 300,000 recorded mortgage on Mr. DeShavo’s home. Quigley asserts that it is also relevant that Mr. Ligums is Facebook “friends” with Mr. DeShavo and one or more of Mr. DeShavo’s children. Quigley also highlights—and, again, Mr. Ligums acknowledges—that Messrs. Leventhal, DeShazo and Karkus were invited to Mr. Ligums’ daughter’s wedding.

What do you want to bet it was an associate, rather than a partner, who had the bright idea of checking on Facebook? The court? It was all for naught, though, as the court dropped a footnote:

For purposes of this litigation, the Court assigns no significance to the Facebook “friends” reference. … Regardless of what Facebook’s apparent popularity or usefullness may say about the nature of 21st century communications and relationships, the site’s designers’ selections of icons or labels offer no substance to this dispute. Indeed, the Court notes that electronically connected “friends” are not among the litany of relationships targeted by the Exchange Act or the regulations issued pursuant to the statute. Indeed, “friendships” on Facebook may be as fleeting as the flick of a delete button.

I wouldn’t endorse it as a general hard-and-fast rule, but this seems like a sensible conclusion. There’s a reason I refer to Facebook “friends” as “contacts” in my scholarship. The social reality of a Facebook friending is, on average, a lot less significant than a $300,000 mortgage.