In a pre-emptive move, Emmis Communications Corp. is asking a Marion Superior Court judge to declare legal its plan to strip preferred shareholders of their right to collect millions of dollars in dividends.

The Indianapolis media company filed a lawsuit on Friday that would prevent preferred shareholders unhappy with the plan from challenging its validity in court later, if the judge rules in favor of Emmis.

A judgment could come soon, as company shareholders are set to vote on the plan at an April 2 special meeting.

“Unless resolved, the controversy could create uncertainty, and cause potentially irreparable harm to Emmis and/or the holders of the common stock,” Emmis wrote in its suit.
 
If successful, the tactic might cause Emmis’ long-slumping common stock to spring higher. Company shares were trading for a mere 86 cents each Monday morning, weighed down by massive liabilities stemming from the company’s issuance of $140 million in preferred stock 13 years ago.

The move is the latest step in Emmis’ quest to free itself from the burdensome requirements of the preferred stock. The shares are supposed to pay 6.25 percent, but the financially strapped company has been exercising its right to suspend payments since October 2008. From then through early December 2011, $26.7 million in unpaid dividends piled up as liabilities on Emmis’ balance sheet.

In addition to being asked to weaken the rights of preferred shareholders, investors at the meeting will consider authorizing a reverse stock split that would push the price of the company’s shares above $1 each. NASDAQ has been threatening to delist the shares because they have closed below the $1 threshold since July.

Since the announcement of the plan early this month to conduct the split, Emmis shares have slowly risen from a price of 68 cents each.

The changes to be voted on at the special meeting in April require two-thirds approval of the preferred shareholders.

Listed as defendants in Emmis’ lawsuit are preferred shareholders Zazove Associates LLC in Nevada, Corre Opportunities Fund LP in New York, DJD Group LLLP in Florida, Kevan A. Fight of Ohio, and First Derivative Traders LLP in Pennsylvania.

Together, they own more than 811,000 shares of preferred stock.