There is no longer any ambiguity about greenmailing in Ohio now that Gov. Mike DeWine has signed a new law that includes language codifying a 2024 ruling by former Franklin County Ohio Court of Appeals Judge Daniel Hawkins.
The manipulative practice known as greenmail — a financial term that combines the words greenback and blackmail — occurs when enough shares in a company are bought to threaten a takeover, forcing the company owners to buy them back at a higher price in order to retain control.
DeWine Jan. 8 signed into law the Fight Organized Retail Crime & Empower Law Enforcement (FORCE) Act, House Bill (HB) 366, which includes an amendment clarifying that Ohio’s anti-greenmail statute (Ohio Revised Code Section 1707.043) did not, and was never intended to, apply to or penalize the exercise of rights by Ohio shareholders, according to a Jan. 17 filing by Macellum Capital Management LP.
Macellum Capital and Ancora Holdings, activist investors, were defendants last year in a case presided over by Hawkins in which they were accused by the Texas-based Corpus Christi Firefighters’ Retirement System of engaging in a greenmail campaign by manipulating the trading price of publicly traded equity securities for Columbus, Ohio-based retailer Big Lots Inc., in violation of Ohio’s anti-greenmail statute.
Justice Hawkins — who this month ascended to the Ohio Supreme Court — dismissed the case last March, ruling that the plaintiffs failed to provide sufficient evidence that the investors’ actions rose to the level of “manipulative practices” under the law.
The court determined that shareholder activism — such as nominating board members, filing proxy statements, and engaging in settlement talks — did not constitute an attempt to deceive or defraud Big Lots.
“This court acknowledges that while the statute may colloquially be referred to as Ohio’s Anti-Greenmail statute, the statute does not actually contain the term “greenmail,” nor does it define the term “manipulative practices,” according to Hawkins’ order.
Rather, the court’s role is to interpret the statute as it is written, he wrote, and when a term is undefined, the court must give the term its “plain and ordinary meaning.”
Some experts praised the order for being a victory for shareholder rights and a clarification of Ohio’s anti-greenmail statute.
That’s how Macellum Capital sees it now, too.
In its Jan. 17 filing — which regards an appeal of Hawkins’ 2024 ruling filed by the Texas firefighters group — said that the amendment signed into law on Jan. 8 confirms that the anti-greenmail statute — “both as originally enacted and as clarified by the recent amendment — does not cover the type of conduct at issue in this case.”
“Instead, it was intended to apply only to a party that engages in the specific manipulative practice of greenmail, consistent with the trial court’s decision and the interpretation of the Ohio Division of Securities,” according to the filing, which notifies the Ohio Court of Appeals about the new amendment.
State Rep. Brian Lorenz (R-60) said during a Dec. 11, 2024 session of the Ohio House of Representatives that the amendment clears up Ohio’s legislation in the greenmail statute.
“Current law opened the door to litigation against Ohio’s investors since it does not define a ‘manipulative practice’ like greenmail,” said Lorenz. “The amendment merely aligns the definition of ‘manipulative practice’ with interpretation from Justice-elect Hawkins’ decision and the Ohio Division of Securities’ amicus brief.”
The new law is set to take effect April 9.