Neuberger Berman Real Estate Income Fund Inc. v. Lola Brown Trust 1B et al.: The Most Recent Showdown In The Closed-End Fund World: Shareholder Rights Plan

Closed-end funds have long been a target of arbitrageurs and other dissident shareholders. The Lola Brown Trust No. 1B and the Ernest Horejsi Trust No. 1B (collectively, the Trusts) tested new takeover waters by launching a tender offer to purchase just over 50% of the shares of Neuberger Berman Real Estate Income Fund Inc. Neuberger's Board adopted a shareholders rights plan by authorizing a dividend of one right (a Right) for each share of common stock of Neuberger outstanding at the close of business on October 7, 2004. Neuberger filed suit against the Trusts in the US District Court for the District of Maryland for violations of section 14(e) of the Securities Exchange Act of 1934. Shortly thereafter, the Trusts filed a counter-claim against Neuberger seeking injunctive relief and a declaration that the adoption of the Rights Plan violated sections of the 1940 Act. The Court upheld the adoption of the shareholder rights plan.