Both sides are saying they won, but Wall Street analysts argue that Indianapolis-based Simon now has the upper hand in its hostile takeover bid for Bloomfield Hills, Mich.-based Taubman. Yesterday, Michigan District Court Judge Victoria Roberts gave a split verdict in the lawsuit between the two REITs.

She declared Taubman successful in defending its 1998 Series B share issuance and its board’s rejection of the Simon/Westfield takeover bid. But she also declared Taubman’s efforts to thwart Simon’s attempt to amend the Taubman charter was a breach of fiduciary duty and that Robert Taubman violated the Michigan Control Shares Act by forming a voting block against the Simon/Westfield bid.

David Simon told Legg Mason REIT analyst David Fick that he sees the court ruling as a victory, and expects Simon to call a shareholder meeting shortly to set aside Taubman’s excess share provision, paving the way for Simon to grab control of the company. The court’s injunction against Taubman compels them to allow Simon to call such a meeting with only 25 percent of shareholders tendering proxies.

"Simon interprets the court’s ruling to mean that all of the shares in the Taubman family’s control group (33.6 percent) cannot be voted," Fick said in his report on the ruling. "But Taubman sees it differently—they believe the judge invalidated only the votes (some 3 percent) of those shares that were added to the Taubman family’s existing voting shares as part of the control agreement."

A layman’s reading of the court ruling indicates the Taubman family will be able to vote their 30 percent interest, and only 3 percent of the votes they acquired are invalid. This is still perilously close to a blocking position, Fick said. "We see the likelihood of a takeover as 50 percent," he said. "Simon’s side has the morally correct position, but Taubman may prevail under the law. As David Simon said to us last night, hopefully at some point the Taubman board will realize its support for the Taubman family runs counter to shareholder interests and will force Bobby Taubman to engage in a serious process. In the meantime, it is too early for investors to know conclusively whether Taubman will (1) stand pat, (2) sell to Simon, (3) find another suitor, or (4) take itself private. All of these outcomes remain on the table."

Much legal wrangling lies ahead as both parties attempt to interpret the ruling to their own advantage. "Even if the Taubman interpretation wins the day, Simon can continue its more gradual efforts to nominate new Taubman board members and gradually hope that the newly elected board members would view the $20 Simon/Westfield bid more fondly," said Thomas Wiesel Partners analyst Paul Morgan in his report.

Legg Mason holds interest in the securities of Simon Property Group.