*1 PIPER et al. v. CHRIS-CRAFT INC. INDUSTRIES, Argued No. 6, 1976 75-353. October Decided February 23, 1977* *Together 75-354, Corp. with No. First Boston v. Indus- tries, Inc., Corp. 75-355, et No. Punta al. v. Chris-Craft Industries, Inc., also on certiorari same court. *3 J., Court, C. opinion delivered the of the in which
Burger, Stewart, JJ., joined. and White, Marshall, Blackmun, Powell, Rehnquist, J., opinion concurring judgment, post, p. J., filed an in the 48. Stevens, dissenting opinion, J., post, p. filed a joined, in which Brennan, Pennoyer, Jr., Paul G. petitioners in argued the cause Zachary Shimer. him No. 75-353. With on the briefs David Peck W. argued in No. 75-354. petitioner cause Dean, John F. on the briefs were Arthur H. him With Warden, Sullivan, Louis Loss. John Arning, L. Charles W. and 75-355. Lloyd N. Cutler in argued petitioners the cause for No. Cohen, R. Manuel Louis F. him on the briefs were With Black, Lake, Helfer, Cohen, William T. Michael S. Stephen F. Waldman, Roger Jr., Ryan, James L. Kolasky, V. William J. J. John Wright, Dudley Phillips, C. Charles Alan Martin. all respondent cause for
Arthur L. Liman argued the kind, Simon H. him on the brief were three With cases. Rif Robinowitz, C. Auspitz.† and Jack Stuart for the Securities Ferber filed a brief †Harvey David L. Pitt and in all cases. urging Commission affirmance amicus curiae Exchange Burger opinion delivered the of the Mr. Chief Justice Court. granted
We certiorari 910 (1976), these U. S. cases, among other whether an ten- consider, issues, unsuccessful der corporation offeror a contest for control of a has an im- plied cause of action for under of the Se- § curities Exchange § Act added 3 of the Williams 1934, as Act of 15 U. C. 78n or under 457, (e), § Stat. S. Secu- Exchange (SEC) rities and Commission Rule CFR 10b-6, 240.10b-6 based on (1976), alleged antifraud violations the successful competitor, adviser, its investment and individ- constituting management uals target corporation.
I
Background factual background complex contest for con- including protracted trol, litigation culminating cases now before full us, understanding essential parties’ contending claims. petitions present
The three questions first impression, arising “sophisticated out of a and hard contest” for fought Piper control of Aircraft Pennsylvania-based Corp., a man ufacturer light aircraft. Piper’s management consisted principally members of family, who owned 31% Piper’s outstanding stock. Chris-Craft Inc., Industries, manufacturer of diversified recreational products, attempted *4 to secure voting Piper control of through cash and exchange Piper tender offers for common stock. Chris-Craft’s takeover attempt and failed, Bangor Punta Corp. (Bangor Bangor or with Punta), support of Piper obtained family, control Piper September 1969. Chris-Craft brought suit under Exchange Securities Act of 1934 and Rule 10b-6 alleging Bangor that Punta achieved control of target corporation as a result of violations of the federal securities Piper laws family, Punta, Bangor Punta’s First Boston underwriter, Corp., together who had sucess fully repelled attempt. Chris-Craft’s takeover
The struggle Piper began control in December 1968. At time, that began purchases making cash Piper common stock. By January 22, Chris-Craft had 1969, acquired 203,700 or approximately shares, Piper’s 13% 1,644,790 outstanding shares. On the next un following day, successful preliminary overtures to Piper by Chris-Craft’s Herbert president, Chris-Craft publicly announced a Siegel, cash offer for up tender 300,000 Piper to per $65 shares1 at share, approximately which $12 above the then-current market price. Responding promptly to Pi- Chris-Craft’s bid, per’s management met on day the same with the company’s investment banker, First Boston, and other advisers. On January Piper family decided oppose to Chris-Craft’s 24, part tender offer. As resistance its to Chris-Craft’s take- over Piper campaign, sent management several letters to the company’s January arguing stockholders during against 25-27, acceptance January On Chris-Craft’s offer. a letter to from president shareholders T. Piper, Jr., W. com- pany, Piper carefully stated Board “has studied this offer and is it inadequate convinced and not Piper’s the best interests of shareholders.” communicating addition to with shareholders, Piper agreement Corp. entered into Grumman Aircraft 29, whereby January agreed purchase 300,000 Grumman to Piper $65 unissued shares at per authorized but share. necessary increased the amount of stock for Chris- agreement Piper control thus rendered less vulner- Craft secure A Piper press release and letter able to Chris-Craft’s attack. announced the Grumman transaction but shareholders “put” option or either had a failed to state that Grumman plus back to sell the shares cost, interest, right offer that Chris-Craft 1 The tender indicated reserved cash 300,000 specified amount. purchase in excess shares *5 to Piper required proceeds was maintain the of the transac- in separate tion a fund free from liens.
Despite Piper’s opposition, Chris-Craft succeeded in ac- quiring 304,606 shares its expired the time cash tender offer on 3. To February Piper obtain the additional of stock 17% needed for exchange Chris-Craft decided to make an control, of offer Chris-Craft securities stock. Piper Although for filed registration preliminary a statement prospectus with February exchange the SEC late 1969, in go offer did until May into effect
In the purchases Chris-Craft made cash meantime, on open stock until market Mr. com- Siegel, pany’s expressly warned SEC president, officials that such when purchases, during pendency made of an ex- change offer, Siegel’s violated SEC Rule 10b-6.2 At Mr. di- immediately complied rection, Chris-Craft with the SEC’s outstanding purchases directive and canceled all orders for Piper stock.
While in exchange registration, Chris-Craft’s offer was in Piper March 1969 terminated the agreement with Grum- provides pertinent
2Rule part: 10b-6 “(a) It ‘manipulative deceptive shall constitute a or device or con- (b) any trivance’ as person, used section the act for “(1) is an prospective particular Who underwriter a or underwriter in securities, distribution of or
“(2) person is the Who issuer or other whose a behalf such distribu- being made, tion is or
“(3) broker, dealer, is person agreed or Who other who has participate participating distribution, directly is or in such or in- directly, by any instrumentality the use of means or interstate commerce, mails, facility any any or or of national securities exchange, either alone bid or persons, or with one or more other any purchase interest, any has account which he a beneficial security subject distribution, any security which of such or series, any any security, right purchase same class and such or to or any security attempt any person purchase right, to induce such participation until after he has completed his such distribution.”
7 and man entered into negotiations with Bangor Punta. Ban- had gor initially been by contacted First Boston about the of possibility Piper a takeover the of wake Chris-Craft’s cash initial offer in January. tender out of With Grumman Piper the family agreed May on picture, 8, to ex- 1969, their change stockholdings in Piper Bangor Punta 31% securities. also Bangor agreed use its best efforts to achieve control Piper by means of an exchange offer Bangor for Piper securities common A press release stock. day issued same announced the terms the agreement, including provision a the forthcoming offer exchange Bangor would involve securities to be judg valued, ment First Boston, per $80 “at not less than Piper share.” While awaiting effective date of its exchange offer, in mid-May Bangor 1969 purchased 120,200 Piper shares of stock in privately from off-exchange transactions negotiated, large three institutional purchases investors. All three were after made SEC’s issuance a 5May release an- nouncing proposed 1 provision upon Rule a which, 0b-13, becoming effective expressly November would pro 1969, hibit tender offeror purchases from making target company’s stock during pendency exchange offer. The release rule “in proposed SEC stated that the effect, interpretations 1 existing 0b-6,” a codification of under Rule provision Siegel invoked officials against SEC Mr. officials, aware Bangor although Chris-Craft a month earlier. pur the time of off-exchange release the three Federal later, brought than weeks an action in Less three the SEC “gun- Bangor press charging that release violated District Court 135, 17 CFR jumping” provisions, (c), Rule 77e U. S. C. § unregistered (1975), by stating specific dollar valuation § 230.135 allegations, admitting any of the securities. Without injunction against releases before permanent consented to a similar Bangor’s registration statement. effective date of Rep. 8595, 5, May Fed. Sec. L. Release CCH 4SEC No. 77,706, p. 83,617. ¶ made no
chases, attempt exemption secure an for the provided transactions from (f). Rule SEC, 10b-6 took no action SEC, however, concerning pur these chases as it had respect open-market Chris-Craft’s transactions.
With these three block 7 purchases, amounting to of% Piper stock, Bangor Punta in mid-May took the lead in the takeover contest. The upon contest then centered the com peting exchange offers. Chris-Craft’s first exchange offer, *7 which began in mid-May produce failed of tenders 1969, specified minimum number Piper (80,000). shares Mean Bangor exchange Punta’s which had while, offer, been an nounced on May July became effective on 8, 18. The regis tration materials Bangor which filed the SEC connection with the offer exchange included financial state ments, reviewed First representing that one of Boston, Bangor’s subsidiaries, Bangor & Aroostock Railroad $18.4 a value of million. (BAR), had This valuation was upon appraisal by based a 1965 investment bankers after proposed the BAR sale failed to materialize. The finan cial statements did not indicate that Bangor was considering the sale of the BAR purchase or that an offer to the railroad for $5 million had been received.5
In the phase final of the see-saw of competing Chris- offers, Craft modified previously the terms of its unsuccessful ex- change offer to make it more attractive. The revised offer suc- ceeded in attracting 112,089 Piper additional while shares, Bangor’s exchange which offer, July terminated on 29, re- sulted tendering 110,802 By shares. August 4, at the conclusion of both 1969, Bangor Punta owned offers, total while 44.5%, Piper owned 40.6% stock. The remainder stock, remained in 14.9%, the hands of public.
5Shortly after the contest completed, for control entered agreement into an million, thereby $5 to sell the BAR for resulting in a $13.8 million book loss.
After completion respective their exchange offers, both companies renewed purchases market of Piper stock,6 but Chris-Craft, after purchasing 29,200 shares for cash in mid- August, withdrew from competition.7 Bangor Punta contin ued making purchases cash September until by which time 5, it had acquired a majority interest in Piper. The final tally the nine-month takeover battle showed that Bangor Punta held over and Chris-Craft held of Piper stock. 50% 42%
II Before either side had achieved control, the contest moved from the marketplace to the Then began courts. more than years seven of complex litigation growing out of the contest for control of Piper Aircraft.
A Initial Suit Chris-Craft’s May May On 22, 1969, Chris-Craft suit both seeking filed dam- ages injunctive relief in the United States District Court *8 for the Southern District of alleged New York. Chris-Craft Bangor’s block purchases Piper of shares in 120,200 mid-May press violated Rule 10b-6 8 Bangor’s May and that $80 an of securities announcing Bangor valuation release, to be offered in forthcoming exchange violated offer, “gun-jumping” 15 77e and provisions, (c), § SEC U. S. C. 6 the ex respective pursuant to Since distributions securities these change completed point, legality offers had been purchases unchallenged. market is a matter in reason for withdrawal from the contest Chris-Craft’s view, by Judge Mansfield at one dispute. According espoused to one “ in the ‘shot its bolt' stage ensuing litigation, in the Chris-Craft had position in no by early February It was financial 1969 . . . . sense and above any Piper shares over purchase appreciable for cash amount 341, 2d 304,606 offer.” 480 F. response to its initial cash tendered (CA2 1973). sought (1976). 17 CFR 230.135 Chris-Craft Rule 135, SEC Piper purchased shares enjoin voting from Bangor accepting any from shares of Rule 10b-6 and violation exchange pursuant to the by Piper stockholders tendered offer.
B Injunction on Preliminary Court Decision District 19, 1969 August in- preliminary for a moved July 22, 1969, On 1969, August 19, filed opinion against Bangor. an junction relief. Tenney denied Judge Charles United District States press release May Tenney concluded, first, Judge and, second, provisions, gun-jumping not violated had not incon- were stock purchases block Bangor’s Rule 10b-6. sistent neither . effected purchases , . . Punta’s cash
“Bangor dealer, or through broker Exchange nor from pressures place market designed obviously were create price Piper, so distribution on the Supp. security.” 303 F. for this price artificially high supplied.) (Emphasis ir- concluded that neither Judge Tenney, accordingly, on the probable success reparable injury nor likelihood contest particularly since the established, merits had been open. was still control exchange Punta the Chris-Craft
“[B]oth control party gained has expired. Neither offers have to do so.” position in a both are still Piper, Id., at 199. *9 challenged the SEC were purchases, earlier which Chris-Craft’s Siegel purchases. Mr. 10b-6, open-market were
on the basis of Rule Supra, at behest. purchases at the SEC’s promptly stopped the C Court Appeals’ on Decision Preliminary Injunction
April On appeal, the Court of Appeals for the Second Circuit, en sitting affirmed Judge banc, Tenney’s of injunctive denial relief. 426 2d F. 569 (1970). opinion by Judge the court held Waterman, that Bangor properly had been allowed to continue soliciting Piper stock.
“Chris-Craft was free the time [at of the District Court’s to compete equally decision] Punta for the remaining Piper shares, and it did so. We do not understand Chris-Craft to allege prior misdeeds of Bangor Punta so determined the course of competi- tion . . . that Chris-Craft placed any real dis- Id., advantage.” at 573.
The court however, concluded, Bangor had violated SEC “gun-jumping” provisions 1 and Rule 0b-6, unless the purchases three block fell within an exemption established to the Rule.9
Chief Judge Lumbard in agreed injunctive dissent relief was but accepted also the District Court’s unwarranted, determination that Bangor had not violated securities laws.10 Id., at 579. 9Rule 10b-6 is part 2, supra. set out in Rule, among at n. other
things, prohibits security an issuer purchasing any or underwriter from subject which is the of a separate exemptions distribution. Eleven are created, however, including privately purchases negotiated “unsolicited . exchange . . effected neither from or [of on a securities nor stock] through (a) (3) (ii) (1975). a broker or dealer . . .” 17 CFR 240.10b-6 . judges separately. expressed Two Judge other wrote Moore doubts majority’s legal alleged concerning Bangor’s as to viola conclusions pass any He stated that he would than tions. issue other propriety injunctive Anderson, Judge relief. while denial concurring, expressed materiality separate concerning $80 views May press valuation estimate in the release.
12
The Court of Appeals remanded the case for pro- further ceedings, so that other among attempt could Bangor, things, to establish block purchases that its exemption fell within an to Rule 10b-6.
D Injunction District Court Decision on SEC August 25, 1971 private While Chris-Craft’s suit was pending, SEC sought injunction against an Bangor on the BAR account of Bangor’s registration omission in statement. SEC sought both an offer of rescission to shareholders who accepted Bangor’s exchange injunction against and an offer Bangor from violating the Act of 1933 1934 Securities and the Act. opinion by an con- Judge the District Court Pollack, Bangor’s registration
cluded that uninten- statement was tionally misleading by virtue of the failure to disclose the fact that an offer had been received the sale of BAR. Accordingly, required the court to offer Bangor rescission to tendering Piper shareholders; the Dis- however, trict grant injunction Court refused to future against violations of the securities laws on ground SEC had failed to Bangor establish that and its officials had “propensity or natural inclination to violate the securities law.” SEC v. Corp., Punta Supp. F. 1154, (1971).
E District Court Decision Liability 10,
December On remand from private the Court Chris-Craft’s Appeals, action also Judge came before Although Pollack. its sec- ond amended which added a claim on the based complaint, BAR both sought injunctive relief, omission, pretrial expressly hearing abandoned its prayer equitable relief; the case was thereafter treated solely for damages. Supp. an action 337 F.
n. 8.
Following trial before the District Court without a jury, *11 in Judge Pollack December 1971 dismissed Chris-Craft’s complaint against all opinion, defendants. an exhaustive concluded he that Chris-Craft had standing seek damages Rule 10b-6 Bangor’s 337 F. but violations, Supp., at unnecessary found it whether 14 (e) § decide could be by competitor invoked one for corporate against control 337 another. F. at Supp., 1134.11 the merits,
On the District Court Piper held that the communications Chris-Craft’s characterizing cash tender offer “inadequate” misleading. were not The court concluded the “more that rational” view was that the statements referred Piper’s to factors other than such as views as to the price, quality management. Chris-Craft’s at The Id., 1135. rejected also contention it had been court Chris-Craft’s that press in con- injured by the omission the Grumman release “put” in cerning option provision agreement. or Piper’s complete description District concluded that Court in New York Stock provision application a with the listing major acquisitions Exchange, coupled with Chris-Craft’s Chris- “put,” after undermined learning stock injured by the it or otherwise claim that was misled Craft’s of the Grumman transaction. Ibid. announcement Court press which the respect May release, With rules, of the “gun-jumping” had held violative Appeals a technically although held release, Court that District Chris-Craft misleading. not false or Moreover, was violation, by the injured disadvantaged failed to show that it was had Id., Piper stock. acquire in its efforts to release against ruling issue Judge Pollack avoided 10b-5, respect to Rule claims under antifraud merits of its on the Supp., 337 F. at 1134. standing assumed. was Chris-Craft’s which misleading
As to the claim of a Judge valuation of BAR, Pollack held that Chris-Craft failed to show either scienter required or causation as in action under the 1934 provisions. Act’s antifraud established, Scienter was not the court concluded, since the BAR omission negli was “mere omission or gent Id., misstatement fact.” at 1140. As the District Court specifically distinguished causation, this Court’s Co., decision Mills Electric Auto-Lite v. presumption U. S. 375 established which causa (1970), tion in 14 (a) minority §a suit challenging shareholders misleading proxy proxy materials. The omission case, directly statement the District Court reasoned, affected the shareholders on whose behalf the suit was brought: particular
“It Supreme context Court deemed under sufficient a set facts which *12 could be shareholders This does not aid Chris- misled. as it is effect seeking Craft recover because parties.” which a misstatement had third allegedly on 337 F. at 1139. Supp., (Emphasis original.) (Foot- omitted.) note
Given Mills, the differences between the instant case and the District Court on proof went to hold that of actual causation was required: proof
“There is no that a single exchanging Piper share- holder would have refrained from the exchange taken offer his shares from Chris-Craft of that instead from Bangor In Punta. as distinct from damage suit, for equitable one proof such is essential sus- relief, tain a 10b-5 (Emphasis claim.” in original.) Ibid.
On Chris-Craft’s Rule 10b-6 claim, Judge Pollack held that, although purchases the block any did not fall within exemption to the had no Rule, right recovery: Chris-Craft
“Even granting purchases the block resulted arithm
etically in Bangor Punta’s achievement of control, there no concluding basis for that, absent acquisition Punta’s of these Chris-Craft would blocks, goal Id., have achieved its of control.” at 1142. on findings respect Based its and Bangor the District Court in favor of Punta, Boston; also held First court firm specifically having exonerated “com- operated conduct which mitted, engaged any course of upon public as a or deceit Chris-Craft or the share- fraud of Piper.” holders at 1145. Id.,
F Liability Appeals Court Decision 16, 1973 March review of the Dis- appealed, sought and the SEC Punta. injunctive against Bangor relief trict Court’s denial panel wrote Court of each member Appeals, that Chris- panel agreed three separately. All members 14 (e) and § under damages to sue standing Craft had However, established. had been that a claim for dissent, Timbers’ Judge over Judges Gurfein Mansfield, against injunction of an the District Court’s denial sustained Bangor. Opinion Appeals Majority
Court of con question directly Appeals answered Court of Dis (e), which under standing Chris-Craft’s cerning *13 based Appeals of The Court decided.12 trict Court not had deci such 14(e)] and “on the statute itself holding [§ its question.” touched that has law as there is sional the Second noted that opinion 2d 480 F. 12 Rule standing under had “assumed” that Judge Pollack issue, that passing on avoided expressly Appeals 10b-5, Court of but the (e). 14 standing had under § that Chris-Craft determined since it 16
Circuit had on four occasions13 addressed the issue whether private a might implied cause of action under 14(e). § Although acknowledging represented no square that case a holding respect, the court interpreted the to in cases timate implied right “that such an of action would be reason able.” 480 F. at 360. The 2d, court then noted Chris- likely Craft could state a common-law claim court tort state ” ‘prospective “interference with a advantage.’ Ibid.
“We will infer from the silence the statute that Congress deny intended to remedy a federal liability extinguish a principles under established which, of tort normally law, doing proscribed attends the of a act.” Id., 360-361. respect to the legislative history
With §of 14 (e), Appeals expressly Court of acknowledged the focus of concern was congressional protection public sharehold- Given this purpose, ers. the court concluded: “We can conceive no more effective means further- general objective 14 ing § to grant than a victim violations of the standing statute to sue for damages. Particularly . . light . of the enforcement rationale Borak, I. Case Co. [J. S. 426 v.] U. [377 (1964),] we believe it is both necessary appropriate granted should be standing to [Chris-Craft] sue for damages.” 480 F. at 361. 2d, Specialty Co. 13Electronic v. Corp., Controls International 409 F. 2d (suit by target (1969) corporation
937
against
a
a tender offeror for
injunctive relief);
Int’l,
Comprehensive
Butler Aviation
Inc.
Designers,
v.
Inc.,
(suit
(1970)
2d
injunction
for a preliminary
F.
target
a
against
corporation
offeror);
Westinghouse
tender
Crane Co. v.
Air
Co.,
(1969) (action
Brake
17 The the 14 alleged court next reviewed violations sought for which Chris-Craft contrast to the damages. conclusions, Appeals District the Court of held that Court's Piper’s description “inadequate” of offer as the Chris-Craft “put” provision the Grum- failure disclose agreement (e). man constituted actionable 14§ violations F. Bangor Punta, at 364-365. As to the Court 2d, Appeals with Judge Pollack's determination that Chris- agreed injured by “gun-jumping” press Craft not been release had May BAR 8; hand, other held court that Bangor’s omission in was registration statement actionable. Appeals expressly rejected Judge The con- Court of Pollack's registration “unintentionally clusion that statement was that Appeals in error.” On the the Court of held contrary, disregard” failing Bangor Punta’s “showed reckless officers BAR negotiations, although the conceded to disclose the court were the officers not shown have had an “intent that Id., 369. Boston held cul- at First was likewise defraud.” registration its certification statement pable because complete responsi- to an abdication of its almost “amounted Id., . . .” bility . [as underwriter] District Appeals also with the disagreed The Court that Chris- analysis Although agreeing of causation. Court’s won takeover it would have failed to show Craft Co., Mills Electric Auto-Lite upon v. court relied battle,14 the reliance establishing presumption (1970), as 396 U. S. have would to whether Chris-Craft Court had looked The District Bangor abided the securities if had securing control even succeeded in agreed expressly Appeals causation, the Court of analysis of In its laws. certainty it would reasonable “failed show with had it not been controlling position have obtained 2d, None F. at 373. Boston. 480 First . .” violations . Uncer Note, generally Chris-Craft: found. See theless, causation (1976). 634, 650-658 Rev. (e), 76 Colum. L. of Section Evolution tain *15 applicable causation Mills, Chris-Craft. Under so the presume court “we must held, [Bangor’s] offer was not so considering the BAR appealing, loss, have attracted any 2d, takers.” 480 F. at 375. [Bangor] eventually acquired only
“Since about 51% of the outstanding Piper it shares, clear that 7 acquired its through exchange offer was critical % to its success. Reliance and causation have been shown.” Ibid.
In addition to the 14 (e) the Court claim, Appeals held that Chris-Craft could damages recover for Bangor’s violations; Rule 10b-6 purchases “pre- three block had a sumptively stimulating . . . effect . . . which pub- misled the lic.” 480 F. 2d, purchases Since those amounted to of Piper stock, arithmetically, apparent it is “[e]ven 7% [by purchases block Bangor . . . were essential Punta] Id., to achieve control.” at 379. Appeals
The Court of then remanded with directions to the District Court to award the amount of “the reduction in the appraisal value of Piper [Chris-Craft’s] holdings attributable to [Bangor taking majority Punta’s] position and reducing minority [Chris-Craft] posi- tion. . . .” at 380. Id., Damages were to be awarded against all jointly defendants severally. In addition, without discussing Chris-Craft’s abandonment of its claim for equita- ble the court instructed the District relief, enjoin Court period for a of at least years five from voting the Piper acquired shares through the exchange offer and in violation of Rule 10b-6. Ibid.
Finally, Judge Timbers, writing on this dissent issue, disagreed with the conclusion of Judges Mansfield and Gur fein the SEC request injunction against future violations Bangor Punta had properly been refused.
Judge Timbers’ view, the District Court employed an im injunctive relief
proper legal denying standard in the SEC Bangor. against
Judge Concurring Opinion Gurfein’s Timbers’ Judge concurred
Judge “generally” Gurfein Judge standing, On the issue of opinion the court. in consid- approach with the District Court’s agreed Gurfein before considering matter as ering the one “causation Judge Under Gur standing.” at 393. question 2d, F. Bangor’s standing had because fein’s approach, necessary for As to shares were control. acquisitions negli- *16 Judge Gurfein was of the view that “mere scienter, “ equiv- 'recklessness that is would not suffice but that gence” . . .” Ibid. (Citation required is alent to wilful fraud’ . omitted.) Judge Timbers’
Judge disagreed, Gurfein however, to 10b-6 violations. He refused analysis alleged Rule embraced “stimulating effect” presumption indulge “the concluded rather that because [il- Timbers and Judge causation necessary for control purchases block were legal] F. 393. . . .” 480 at 2d, established. Bangor Punta, against to the action respect SEC With Mansfield, Judge for himself and Gurfein, writing Judge permanent grant Court’s refusal District upheld standard, of discretion” the “abuse Applying injunction. not so clear “the matter that concluded Gurfein Judge judgment for the judgment our substitute we should that a chancellor who sat as below Judge trial experienced Ibid. equity.” Dissenting Opinion Concurring and Judge Mansfield’s reached the “results” concurred in Mansfield Judge family’s Piper to the respect except with Judge Timbers, communi- that agreed Mansfield liability. Judge had that Chris-Craft concluded but (e), § violated cations infractions. from those resulting prove failed Co., Auto-Lite Electric Mills v. principles Applying Judge Mansfield stated: supra, result- it suffered some must show
“[Chris-Craft] at 401. 2d, to do.” F. This it has failed ing loss. opinion, majority by the addressed the other issues On under standing that Chris-Craft’s concluded Mansfield Judge enforcement vigorous solely policy on the rested 396. to scien at As provisions. 2d, of the antifraud F. to defraud had intent concluded that Judge Mansfield ter, test of following instead He formulated been shown. scienter: met if the would be requirement short,
“In scienter failed facts and knew the essential (1) officer corporate being or after (2) failed refused, to disclose them, disclosure, material failure possible of a put on notice where under circumstances himself of the facts apprise them and disclosed reasonably have ascertained could he extraordinary Id., effort.” any without of satisfied complained the actions He concluded standard. indulge the Judge Judge Mansfield declined Gurfein,
Like actually op- Bangor’s Rule 10b-6 violations presumption *17 attractive; he exchange deceptively offer erated to make its party that where a achieves solely ground concurred on the the securities through laws, party violations of control competitor.15 injured of a matter law to an liable as G Opinion Court on District Relief 6, November on took Judge Pollack evidence
Pursuant
the remand,
Appeals’
of
the Court
Although concluding
damages.
decision, petitions for
were
Following
Appeals’
of
review
the Court
Boston, Bangor Punta,
Piper
and the
de
in this Court
First
filed
(1973).
(cid:127)21 mandate required the use of “hypothetical he deter figures,” mined that Chris-Craft’s damages were to be measured comparing the value of its Piper prior holdings and subse quent to Bangor’s achieving control. Supp. 384 F. 507, 512 (1974). Employing this he method, concluded on the basis of expert testimony that the fair market value of Piper stock as day Bangor achieved control was per Id., $48 share. at 517. After ascertaining that the value of Chris-Craft’s takeover opportunity amounted to of the fair market 5% value of the stock, per id., $2.40 share, 523, District Court awarded Chris-Craft, based on holdings its of 697,495 damages of Ibid. $1,673,988. The District shares, Court also granted pre an award of judgment interest and entered an consistent with the mandate of the injunction, from Appeals, barring Bangor voting illegally Court acquired Piper years. shares for Id., five at 526.
H Court Appeals’ Opinion Relief 11, 1975
April Ap phase the final the Court litigation, calculated Chris- damages on the issue and peals reversed to the District Court. further remand damages Craft’s without between as the difference Appeals damages fixed The Court shares and paid actually had what Chris-Craft been have minority block could large which the price at control. gained Punta point after the earliest sold at in the amount produced formula Application total or a by Chris-Craft, Piper share held per $36.98 court (1975). 2d 516 F. $25,793,365. er prejudgment recompute District Court instructed int This Id., at 191. damages award. on the revised est based inter pre judgment Chris-Craft’s increased computation new $10 million. approximately $600,000 from est *18 under review. now is which judgment this It is III The Williams Act which Act, turn to an examination the Williams We first use of cash response growing to the adopted in 1968 in corporate takeovers.16 achieving a means for tender offers as had attempts corporate takeover Prior to the 1960’s, un- regulated typically proxy either solicitations, involved C. § 15 U. Exchange Act, 78n, 14 of the S. § der Securities to the subject registration exchange securities, offers proliferation 77e. The requirements of the 1933 Act. made and requests are publicized in which offers, cash tender shares of stock conducted for tenders of campaigns intensive corporate number of substantial at a fixed removed a price, require- existing disclosure from the reach of control contests Rep. generally S. securities laws. See ments of the federal (hereinafter 2-4 Senate (1967) Cong., Sess., 90th 1st 550, No. 2-4 2d Cong., Sess., 90th Rep. No. Report); H. R. Report). House (1968) (hereinafter Harrison Senator remedy gap regulation, in federal
To subject tender 1965 to introduced a bill in October Williams requirements. original The offerors advance disclosure in re years next two 2732, evolved over the proposal, S. in positions expressed and other sponse SEC York parties private industry from and the New terested Cong. (1967) (remarks Rec. 854 Exchange. Stock legislation Williams). subsequently enacted, As Sen. the Commis a statement with requires takeover bidders to file “background other indicating, among things, sion of funds or and amount identity” offeror, the source making the purchases, used other consideration to be securing tender offers as devices for cor proliferation of cash Hayes Taussig, analyzed & Tactics of Cash in detail porate control 1967). (Mar.-Apr. Rev. 135 See also Bids, Harv. Bus. Takeover Corporate Offers for 2-10 Einhorn, Tender Control H. Aranow & E. (1973).
23 extent of the offeror’s holdings the target corporation, and the plans offeror’s with respect target to the corporation’s business or corporate structure. 15 § U. 78m (d)(1). S. C.
In addition to disclosure protect which requirements, all target the shareholders, provides Williams Act other bene fits for target shareholders who elect to tender their stock. First, stockholders who accept the tender offer are given the right to withdraw their shares during the first seven days of the tender any offer days and at time 60 after from the commencement of offer. (d)(5). § 78n Second, where the tender offer is for less all outstanding than shares and more requested than the number shares are Act tendered, requires securities be tendered taken up pro rata offeror during 10 first days of the offer. 78n (d)(6).17 § This according provision, to Senator Williams, was specifically designed pres reduce sures on target to deposit shareholders hastily their shares when the takeover bidder its makes tender offer on a first- come, first-served 113 Cong. (1967). basis. Rec. 856 Finally, provides Act during the course of the if, paid offer, amount for the target shares increased, tendering all additional con shareholders are receive the if they price before the even tendered their stock sideration, (7). gener (d) § increase was announced. 15 U. S. C. 78n See 1 ally Bromberg, p. Law: Fraud 6.3 120.2 (551), § A. Securities (1975).
17 proposed pro requirement applied had rata SEC throughout Hearings 510 before Sub the duration of offer. S. Banking and Cur committee Committee on on Securities Senate (hereinafter Hearings). rency, Sess., (1967) 1st Senate Cong., 90th 200 Cohen, Purchases of generally Corporate A Bids and See Note on Takeover Loss, Stock, 149, (1966). L. Securities Bus. Law. 153-154 See also 6 1969). open-ended proposal came under Regulation (Supp. This finally hearings, Congress enacted legislative in the substantial criticism 10-day requirement. The acceptance 10-day pro on the limitation rata York Ex practice followed the New Stock period to the was identical Hearings change. Senate specific benefits providing requiring disclosure
Besides Act contains a also the Williams shareholders, tendering is the basis Chris-Craft’s which broad antifraud prohibition, Exchange Act, the Securities claim. Section C. 15 U. S. Act, Stat. 3 of the Williams by § added provides: 78n (e), any *20 to make any person for be unlawful “It shall omit to state fact or of a material statement untrue to make the state- necessary in order fact any material under the circumstances light in the of made, ments in engage or to they made, misleading, which are prac- or manipulative acts or any fraudulent, deceptive, or request or any tender offer connection with in tices, security hold- any of or solicitation tenders, for invitation any request, offer, to or in favor of such opposition in ers or invitation.” conduct of a directed at expressly provision
This making engaged those persons, including of range broad to influence seeking or otherwise offers tender opposing offer. of the tender or the outcome of investors decision Report 11. Senate tender offerors cases is whether
The issue these threshold by the regulated are whose activities Chris-Craft, such as against cause of action have a Act, Williams the statute on a claim anti regulated parties under other frustrated the bidder’s parties have fraud violations other target corporation. Without control of to obtain efforts of into the none the other Act, action reading such a cause be reached. issues need
IV itself. analysis with the statute begins, Our course, provision 10 makes no whatever (b), 14 like (e), Section explicitly provided such as those private action, cause a g., 12, 1934 Acts. E. 15 of the 1933 and sections other §§ 11, 20 77l, 77o; 16, §§ §§ 15 U. 77k, 18, S. C. Act, 15 U. S. C. 78p, §§ 78t. Act, 78r, This Court 78i, has nonetheless held that in some private circumstances a cause of action can be implied with respect to the 1934 Act’s antifraud even provisions, though the relevant provisions are silent as to J. remedies. I. Borak, Case Co. v. U. 426 (1964) S. (§ 14(a)); Superintendent v. Bank Ins. ers & Co., Cas. 404 U. 136,S. n. 9 (1971) (§ (b)). Life reasoning these holdings where that, congressional purposes are likely to be private undermined absent enforce- private ment, remedies may implied be par- favor of the ticular class intended to protected by the statute. For in J. Case example, I. Co. v. Borak, supra, recognizing an im- plied right of action in favor of a shareholder complaining of a misleading proxy solicitation, the Court concluded as to such right: shareholder’s
“While
14 (a)]
specific
makes no
[§
to private
reference
right of action, among
purposes
its chief
protection
is ‘the
investors,’
certainly
which
implies the availability of
*21
judicial relief where necessary to achieve that
result.”
legislative we prohibition (e). Once statutory specific lying the must then determine we identify legislative purpose, implied by judicial interpretation creation whether to effec- necessary by Chris-Craft of action asserted cause goals. Congress' tuate
A
intent
divining
history
legislative
Reliance
to be taken
step
observed,
often been
as has
Congress is,
Rose,
Air Force
U. S.
v.
cautiously. Department of
v.
United States
dissenting);
(1976)
J.,
388-389
(Blackmun,
(1953) (Jackson,
Comm’n,
“This will by requiring Federal securities laws protection under the to stockholders pertinent disclosure of information corporation obtain control persons seek to when privately through open offer or market tender a cash Rec. 854 Cong. of securities.” purchases negotiated supplied.) (1967). (Emphasis *22 protection emphasized eight was of investor
The same theme day on the the measure by Williams months later Senator by the passed Senate: was for provide protection securities federal laws]
“[The by requiring full disclosure American investors millions of information in connection with the public offering trading of securities. These laws have worked well providing public with adequate information on which to base intelligent investment decisions.
“There are, some areas however, remaining still where full disclosure is necessary protection investor but not required by present law. One such pur- area is the chase acquisition direct or by tender offers of sub- stantial blocks of publicly securities of held companies. . provides
“S. 510 . protection in . investor these Id., areas.” (Emphasis at 24664. supplied.) Indeed, finally the bill as enacted Congress styled was provision: a disclosure “A provide bill to for full disclosure corporate equity ownership of securities under the Securi- Exchange ties Act of 1934.” generally Bromberg, See A. supra, 6.3§ at 116.2. (121),
Confirming legislation the view that designed fill large “a rather gap Manuel statutes,” securities then Chairman of before the Cohen, testified Sen- SEC, ate Subcommittee Securities: provide general approach of this bill is . . .
“[T]he required is to make a deci investor, person who to examine and to assess the relevant opportunity sion, Hearings 15. facts . . . .” Senate would tend suggestion legislation to the response potentially off warding management entrenched to aid Cohen testified: bids, takeover Chairman beneficial concerned we are not is that principal point “But concerned hurting either side. We are assisting with just pawn in a form today who investor lost . The investor is somewhere . . warfare. industrial *23 only concern and our con This is our the shuffle. Id., (Emphasis supplied.) cern.” Congress was intent history thus shows legislative The operating theretofore upon regulating takeover bidders, com target protect order to the shareholders covertly, benefici not the intended tender offerors were panies. That the statements illustrated graphically of the bill was aries support legislation, of the cosponsor Kuchel, of Senator “cor he described bidders, takeover whom requiring to disclose their pirates,” and “takeover porate raiders” activities. our financial those individuals
“Today there are businesses proudest our who seek to reduce community control corporate They shells. seize but nothing into away or trade sources, unknown sell corporation among the remains split up assets, and later the best is that collusion tragedy The such themselves. management financially raped without can be corporation any knowledge acquisi- having or shareholders may thus act under corporate . raider . tions. . secrecy the shares needed obtaining a cloak while put capture him on road to a successful (1967). (Emphasis 857-858 company.” Cong. Rec. supplied.) stages legislative debate,
At different Senator Kuchel specific attempts attention to takeover called the Senate's companies. During two the floor debate on against directed Senator Kuchel described one take- day S. 510 passed, over contest: attempt
“If company] had would succeeded, [the have found itself under the control of a combination without no- including significant foreign interests, prior opportunity without an for exami- tice the company, into the surrounding nation circumstances the tender offer, any and without regard rights its stock- holders.” Id., at 24665. (Emphasis supplied.) *24 the Moreover, Senate Subcommittee heard testimony the of Professor on speaking behalf of himself Hayes, and his co-author of a comprehensive study on takeover attempts,18 who stated:
“The major two protagonists—the bidder and the de fending management—do not any need protec additional tion, in our opinion. They have the resources and the arsenal of moves and countermoves which can adequately protect their interests. the investor—who is Rather, the subject of these entreaties of major both protagonists—is the one who needs a more champion . .” . . effective Senate Hearings (Emphasis supplied.) In the face of legislative history, Appeals the Court of understandably rely did not upon the legislative materials support implied an of cause for damages action in favor of Chris-Craft. In this Chris-Craft and Court, however, SEC contend that Congress clearly to protect intended tender part offerors as of “pervasive a regulation scheme of federal of tender offers.” of support legisla reading their they history, enacting legis tive that in emphasize, first, Congress upon lation establishing policy was intent a regulation. in Congress par evenhandedness takeover “ ticularly anxious, argues, tipping To avoid of regulation balance . . . .’” neutrality
Congress policy was indeed committed to a in contests for does control, policy but its of evenhandedness or to whether go purpose legislation either Neutral private implicit a cause of in statute. action directed legislation ity but one characteristic is, rather, of investors. protection purpose—the toward different Congress to concerning the need Indeed, statements Bids, supra, n. 16. Hayes Taussig, & of Cash Takeover Tactics are con attempts posture takeover maintain neutral “Pro Report entitled, in the section Senate tained totality, these statements Taken their Investors.” tection protection was the Congress had mind confirm what war form of industrial “pawn[s] in a shareholders, purpose “plac[ing] expressed the Report The Senate fare.” bidder,” the takeover equal footing an investors offeror tender favoring either Report without Senate neutrality policy of express existing management. This new highly important, suggests intent to confer scarcely prompted activities participants whose rights upon the class the first legislation in instance. “equal analysis Congress’ Moreover, shows closer strong criticisms response were footing” observations *25 offers.19 inhibit tender unduly would proposed legislation the in proposals embodied the disclosure originally As introduced, com target in the avowedly pro-management 2731 were S. generally Note, defeat takeover bids. See pany’s efforts Early Re the An Evaluation Amendments: The Williams Subsequent committee (1970). L. 23 Vand. Rev. turns, could takeover bids that indicated, first, however, hearings, second, often serve that entrenched and, a useful function, weapons in battles equipped with considerable management, fending possibly tended to be successful in off bene control, attempts. specifically takeover called ficial Several witnesses into since efficacy proposed legislation the question, moment, pretty are unbalanced in their view the “scales management.” Sen very much unbalanced favor Hearings ate plainly sponsors legislation of this were sensitive suggestion favor one measure would side they made it clear that contests;
other however, control 19Requiring detailed at the tender to reveal information offeror fortify quest analysis, the critics’ would, under outset of the for control rebuffing management’s position efforts. contestants’ the legislation was designed solely to get needed informa- tion to the investor, the constant focal point com- mittee hearings. Senator Williams articulated this singleness of purpose, even while advocating neutrality:
“We have taken extreme care to avoid tipping the scales either in favor of management or in favor of the person making the takeover bids. S. 510 designed is solely to re- quire disclosure investors.” full fair benefit of 113 Cong. (1967). Rec. 24664 (Emphasis supplied.) Accordingly, congressional policy of “evenhandedness” nonprobative quite disparate proposition that Williams Act was intended to rights confer for money dam- ages upon injured takeover bidder. policy
Besides the Chris-Craft em evenhandedness, phasizes that implied matter of private causes of action was raised written submissions to the Senate Subcom mittee. Specifically, points Chris-Craft to the written state ments of Professors Israels and who made reference Painter, to J. I. Case Co. v. Borak, (1964). U. S. 426 contends, therefore, Congress private aware actions implicit were in 14 (e).
But this conclusion places weight passing more on the reasonably reference to Borak than can be carried. Even accepting the value written statements received without *26 comment by the committee and cross-examination,20 without by the statements do implied private not refer actions 20Only legislative Term last we indicated that in the similar materials history Act of the 1934 were of limited value. hearings legislative
“Remarks of this kind made in the course of debate or drafting of responsible or the persons preparation other than for the Hochfelder, 425 Ernst v. weight.” a bill are entitled to little Ernst & 185, (1976). U. 204 n. 24 S. Statutory Con- Sands, on Statutes generally
See 2A C. Sutherland 1973). (4th 48.06, p. 203 ed. struction § For Professor Israels’ example, statement on
offeror-bidders. subject reads: private could seek similar relief before or litigant “[A] acceptance such as the his significant after fact (Emphasis tender securities.” Hearings Senate 67. supplied.) Professor Painter in his written submission re-
Similarly, Id., “injured investors.” at 140. Neither Israels ferred potentially nor Painter or even alluded to remedies discussed bidders. available takeover to a case
More statements referred important, these direct remedy which the was afforded shareholders—the Borak, intended legislation. of the beneficiaries emphasized proxy § Court (a), provision, expressly for 377 U. adopted protection investors,” “the S., relief.21 The very persons seeking class of there at brought emphasizes suit The dissent that Borak involved a derivative corporation, on direct cause behalf of the addition to the shareholder’s corporations primary of action. not the beneficiaries of Since were § (a)—the proxy provision involved in Borak—the dissent concludes requirement Borak itself fails articulated “especial to meet the class” subsequent Post, our at 66-67. But this is a decision in Cort v. Ash. misreading Borak; there, deceptive proxy the Court observed (a) injure corporation following solicitations violative of 14 § sense: damage practiced “The suffered results not from the deceit on [the practiced alone but rather from the deceit individual shareholder] S., group.” 377 U. at 432. the stockholders as a focusing on all stockholders—the owners The Borak Court was thus (a). as a corporation—as the beneficiaries of Stockholders § plainly “especial proxy class” for class therefore constituted which provisions reading comports Borak with the state- were enacted. This question presented in that case: ment only question of whether 27 of the Act authorizes consider “We corporate to a stock- action for rescission
a federal cause of merger. S., . . .” 377 U. respect consummated holder with to a (Emphasis supplied.) *27 in difficulty identifying objec-
Court found no the legislative if concluding tive and that remedies should be available necessary purpose.” make effective the congressional “to involve, at 433. Borak did not and the statements in Id., history upon by relied do not im- legislative Chris-Craft parties as plicate, interests such offeror-bidders who scope of the are outside the concerns articulated in the legislation.22 evolution of this in rely upon
Chris-Craft and the SEC also statements history they legislative demonstrate that which, suggest, Act Congress adopting Williams was concerned parties particular than shareholders. First, they place other emphasis upon a statement Chairman Cohen his Senate only persons that are not the con testimony “shareholders From this tender of statement, they argue cerned.” sphere were within the con congressional ferors likewise was however, cern. In that Chairman Cohen colloquy, plainly referring persons to need disclosure: in the everybody “As soon as there is a takeover bid, consider people There are who gets market excited. they professional or themselves amateur arbitragers, permits.” Sen- play possibility begin games Hearings ate referring other actors Chairman Cohen
Thus, benefit who would including arbitragers, the marketplace, of those the needs referring was not disclosure. He from disclosure, to make proposed legislation required by the offerors themselves. tender treat Congress’ intent emphasizes connection, In this are both solicitations, since way proxy in the same tender offers not however, does argument, This corporate control. seeking for devices of action cause have a should that Chris-Craft
support proposition since, that held, it has nor then had damages, since this Court than that capacity other suing ain fight, proxy insurgents in a defeated occa- is no damages. There action shareholder, cause of have a aof question in this case. sion to resolve *28 emphasizes it
Finally, perceives what as the express Commission’s concern with plight of takeover bid- ders faced with "unfair tactics by entrenched management.” The SEC Chairman speak indeed did in the Subcommittee Hearings of the to “regulate improper practices need by man- agement and others opposing a tender offer . . ." Senate . Hearings 184. But in so he doing, pleading was not cause bidders; takeover on the he testified that contrary, imposing disclosure upon duties management would “make it much easier for stockholders to evaluate the offer on its merits.” (Emphasis Ibid. supplied.) by extending the statute’s short, coverage to solicitations
in opposition to tender Congress was to broaden seeking offers, scope protection afforded to shareholders confronted with competing claims. Senator was Williams, example, fully aware that in a contest for disclosure by full control, all contestants was protect needed to shareholders:
“In the rather common existing situation where man- or agement parties third contest a offer, tender share- may holders exposed to a bewildering variety conflicting appeals and arguments designed persuade them either to accept reject or to tender offer. The experience of the with proxy fights SEC ample offers evidence type this situation can best be con- and shareholders most trolled, adequately informed, if both sides to argument are subject to the full and fair disclosure rules of the Federal securities laws.” 113 Cong. (1967). Rec. 855-856 (Emphasis supplied.) very passages on Furthermore, which Chris-Craft relies as evidencing SEC concern for tender Chairman offerors, Cohen any criticized analysis which upon legis- focused lation’s impact on management or the takeover bidder:
“Moreover, type analysis lays almost exclusive stress the respective interests of the offeror and the existing upon rather than management, protection the stockholders . . . who are left to pawns be treated as in an game elaborate between the offerors and the man agement perhaps other competing interests.” Senate Hearings (Emphasis supplied.) The legislative history thus shows that purpose sole protection Williams Act of investors who are confronted with a tender offer. As we stated Rondeau Paper v. Mosinee Corp., purpose 58: S.,U. “The *29 public Williams Act is to insure that who shareholders by are confronted a cash tender offer for their stock will not required respond be to adequate without informa- tion . . . .” no in legislative We find hint on history, respondent which heavily so Congress that contem- relies, plated private a by cause of for damages action one several contending by offerors a successful bidder or against losing a contender against target corporation. suing
The dissent is however, that Chris-Craft suggests, Piper under as a (e) injuries § for sustained in its status capacity as as in its as a defeated tender shareholder, well Post, suggestion, In Chris- at 56-59. to that offeror. contrast is based standing position Craft’s in this Court on the issue designed to Act was ground on narrow that the Williams rival con- but only target company shareholders, protect not 43, Respondent 36-40, Brief for well. for control as testants not has Chris-Craft that clear, therefore, It is 46-48, 50-54. (e) Piper a shareholder. standing under as § asserted en- actively a tender offeror divine. As is not hard to reason not Chris-Craft competing Piper for stock, gaged the deci- with confronted target of a shareholder posture Consequently, stock. its tender or retain of whether sion dis- for the a need alleged scarcely have could Chris-Craft fact Act. short, the Williams closures mandated means as a Piper stock necessarily acquired Chris-Craft that standing nothing to its adds Piper taking over why the Court of probably explains This arguments.23 it rested Chris-Craft’s at no time Appeals intimated opinion Its Piper as a stockholder. standing its status respect hardly clearer: could respect is of first impression “This a case statutory damages for right tender to claim offeror pre holding And our adversary. violations his done the defeated harm mised on the belief more stock pay it for the contestant is not that had to control.” it needed got but it less stock than (Emphasis supplied.) F. at 362. 2d, post, dissent, cited in Moreover, items of its status n. as attributable 57-58, under actually upon related Piper are, analysis, shareholder as a Chris-Craft’s status contestant these circumstances to “loss control alleged corporation. First, of a control would otherwise presumably which Chris-Craft premium,” as a on its to Chris-Craft face, relates enjoyed, have who to its as a shareholder per but status se, shareholder of value as alleged loss control. gain Second, failed *30 stock “exceptionally large Piper block” of “locked-in,” to a particular these circumstances to a under likewise relates Piper shareholder, namely one whose efforts secure kind of in necessarily acquisition major resulted the stock control in In holdings company. Ap the the regard, Court precise fails to approach upon goals focus served dissent’s the by Act, indispensable inquiry the an under Borak. Chris- Williams Both Bangor were, sure, Piper and Punta be shareholders once each Craft attempt target company. the upon gain had embarked an control of in the Act’s bene But neither offeror-bidder stood the shoes of intended person investor, [designed] provide the the ficiaries. bill is “[T]his decision, required opportunity to is examine and to who to make a Hearings sup (Emphasis . . . .” Senate facts assess relevant meaningful in short, In dissent overlooks fact no plied.) Punta, offeror, as a a either or tender sense was Chris-Craft Piper. “target shareholder”
peals plausibly assumed that dispose order to its holdings Chris-Craft would have to file a registration state ment with since SEC, Chris-Craft would presumably engaged in a distribution of Piper stock. 516 F. 2d, 188-189. no ordinary Piper shareholder would contrast, have had to comply with the 1933 Act’s registration require ments order to sell stock, his typical since the shareholder is not “an issuer, underwriter, dealer.” U. 77d (1). S. C.
Consequently, elements of damages mentioned in dis peculiar sent are to Chris-Craft not as a “target shareholder” of Piper, but as a defeated tender offeror “injured” by its adversaries’ alleged violations of the securities laws.24
B Our conclusion as to legislative history is confirmed analysis Ash, in Cort v. 422 U. (1975). S. 66 There, Court identified four factors as “relevant” in determining whether private remedy implicit is in a statute not ex pressly providing one. The first is plaintiff whether the “ ‘one the class for whose especial benefit the statute was Id., enacted (Emphasis . . . .’” at 78. original.) pre As viously indicated, examination of genesis the statute and its shows that beneficiary is not an intended surely Williams is not especial one “for whose benefit Act, the statute was enacted.” Ibid. To the Chris- contrary, Craft is member of the class whose in Congress activities protection tended to regulate of an en benefit tirely party distinct whose class, shareholder-offerees. As a previously purposefully conduct unregulated brought scarcely under federal control Chris-Craft can statute, lay “beneficiary” claim con Congress to the status of whom protection. sidered need
24 holding is, course, pass on light our there no occasion to actually underlying petitioners Appeals’ determination the Court sin bid. law their efforts to defeat Chris-Craft’s violated the securities infra, also at 43 n. 30. See in Cort v. Ash
Second, inquired we whether there was “any legislative intent, explicit indication of or either to implicit, remedy deny create such a or to one.” Ibid. Although the historical materials are barren of any express intent deny remedy to tender offerors as a there class, we have no noted, indication Congress intended is, damages remedy create a in favor of the loser contest for control. Fairly we think the legislative read, documents evince the narrow intent to curb unregu- expression lated activities tender offerors. The of this pervades which purpose, the legislative negates history, claim that tender offerors were intended to have addi- weapons tional form implied of an cause of action particularly private if a damages action confers damages, advantage no expressly protected class of shareholder- a matter we offerees, Infra, discuss later. at 39. argues, Congress intended stand however,
ing under to encompass § tender offerors since the statute, § unlike (b), does not contain the lan limiting “in guage, connection with purchase or sale” of securi ties. in 14 Congress broadly proscribed § (e), fraud Instead, ulent “in any activities connection with offer tender . . . any opposition solicitation . . . or in any favor of such offer. . . .”
The omission of purchaser-seller requirement does not mean, however, that Chris-Craft has standing to sue for damages under 14 (e) § in its capacity as a takeover bidder. may It well be that Congress desired to protect, among others, shareholder-offerees who decided not to tender their stock due to fraudulent misrepresentations persons opposed to a takeover attempt. See generally A. Bromberg, Securities Law: Fraud 6.3 p. (1021), (1969). 122.17 See also Senate Report 2; House Report 3. These might who shareholders, enjoy protection of § 10 (b) under Blue Chip Stamps Drug Stores, v. Manor 421 U. S. (1975), could perhaps *32 a claim 14 (e), though they state under even did not tender their But if securities.25 increased conferred protection, any, upon the class of shareholder-offerees elimination of purchaser-seller scarcely interpreted restriction be as giv- can ing protection entirely separate to the and unrelated class persons designed regulate. whose conduct the statute is to
Third, Cort v. Ash tells us that we must ascertain whether it is with the underlying purposes legis “consistent of the imply remedy lative scheme to a for plaintiff.” such S.,U. at We conclude it is mech not. As a disclosure especially anism protecting aimed of target shareholders Act corporations, consistently the Williams cannot be inter preted monetary remedy upon par as a conferring regulated to ties, particularly where the award would not redound Although direct benefit it is correct protected class. say indirectly damages $36 that the million award benefits who became Chris-Craft shareholders those shareholders equally is exchange it they accepted offer, when Chris-Craft’s Piper shareholders injures award those true that stock and who, Punta’s exchanged Bangor their shares who large necessarily bear a would shareholders, Punta Bangor Punta. against any judgment burden of part Act are the by the Williams protected be sought The class hardly be it can hence target corporation; shareholders by judgment are served as a class interests that their said Moreover, Bangor Punta. against Chris-Craft favor activities very party whose damages are awarded not sue did curb; intended Congress defeated as a but shareholder, injured Piper of an capacity offeror. tender of dam- threat ever-present that an agree we
Nor can control battle in a contestant a successful against ages for sharehold- protection additional significant provide will express no present issue, and we course, do cases, of These it. view The deterrent if general.
ers in such awards any, value, precision. likely, never be ascertained with can More however, prospect may prejudiced is the that shareholders may tender offers never be if because some made there *33 of massive claims for what courts sub- possibility damages 14 sequently (e).26 hold to be an actionable violation of § may contestant who “wins the battle” for control Even a up exposed costly in suc- a “war” a later and well wind victory. defense of its Or at worst—on Chris-Craft’s cessful theory—the target or the damages victorious tender offeror corporation subject to a might large judgment, substantive plus costs of high litigation. we that shareholder if en conclude short, protection, damages
hanced at awards such as Chris-Craft con all directly other, tends can more be achieved with less for, closely more precise congres means tailored to the drastic Act. goal underlying sional the Williams under the Cort v. Ash we must decide Fourth, analysis, traditionally cause of relegated whether “the action one [is] Despite pervasiveness state law . U. at S., . . .” regulation, Appeals federal securities the Court of concluded in these cases complaint give that Chris-Craft’s would rise to cause action principles under common-law of interference liability Piper family petitioners is instructive in this regard. Several able judges, federal including Judges Tenney District Judge Pollack and Chief Lumbard of Circuit, the Second have expressly concluded that the defendants did not violate the securi ties in Judge Mansfield, laws their efforts to defeat Chris-Craft’s bid. Pipers (e), while of the view that had violated was convinced § injury their violations had not caused legal to Chris-Craft. The inevitably pervade uncertainties ques this area of the law call into tion whether “deterrence” goal, violations is a meaningful except possibly respect flagrant to the most sort of violations which person no reasonable could consider lawful. flagrant Such cases of mis conduct, however, apt frequency, are not to occur with and to the extent serious, injunctive that the violations are obvious and relief at an earlier stage apt is to be remedy. contest the most efficacious form of prospective
with a commercial advantage. Congress Although of course, free to create a in is, remedial scheme favor of con in testants tender we we v. offers, conclude, as did in Cort Ash, that “it entirely appropriate relegate is in this instance to and others in situation to whatever [the offeror-bidder] [that] remedy is id., created law,” state at least to the extent damages offeror seeks been having wrongfully denied a opportunity” “fair compete control another corporation.
C What we thus far I. Case have said unlike suggests J. that, Borak, supra, judicially creating Co. v. action favor to ensure fulfillment unnecessary Congress' purposes the Williams Act. Even adopting though operates SEC this context same under the practical recognized by Borak, restraints the Court institu *34 tional alone do to the limitations not lead conclusion in cause any party interested a tender offer should have a against competing First, of action for bidder.27 damages a 27 in the suggests “intimate involvement dissent SEC’s Post, 64. We passage Act, respect.” entitle its views to [s] note, first, position is not consistent with present that the of the SEC (e). 14 testimony legislative evolution of Chairman SEC § voice, however, presumed a its agency spoke if the consistent Even the narrow value when “expertise” in field is of limited the securities-law namely resolution, judicial peculiarly legal issue one reserved by judicial interpretation implied a of action should whether cause relat- Indeed, prior cases litigants. in our particular a class of favor of understandably invoked action, the has implied of Court ing to causes supported rule, SEC when deference” even “administrative Borak, U. S. 377 Co. Case v. J. I. particular case. reached in result 6S. Co., 404 U. & Cas. Ins. Bankers (1964); Superintendent v. 426 Life where, in instances applicable appropriately (1971). That is more rule interpreta- consistent, official binding, rendered here, agency has unlike g., time. E. v. States United long period a of its statute over tions v. (1975); Udall 694, 719 Dealers, S. 422 U. Securities National Assn. of (1965). 1, 16-17 Tallman, 380 U. S.
42 Specialty in Electronic Co. v. Judge Friendly observed Corp., (CA2 1969),
International Controls 2d F. corporate injunc stage preliminary control contests the post-contest lawsuits, tive rather than “is the when relief, time can be given.” Furthermore, awarding damages relief best protected other class of parties than the shareholders has only upon if the con remote, bearing implementing any, policy of shareholders who must decide gressional protecting sug whether to tender or retain their stock.28 we Indeed, as may of this nature well be gested earlier, damages award pro of many inconsistent with interests members of the only tected class and of indirect value to shareholders who accepted the offer of the defeated takeover exchange contestant.
We therefore conclude that as a defeated Chris-Craft, damages of action for implied tender has no cause offeror, 14(e). § under V the Court of holding § addition to its under (e), damages under
Appeals held liable purchases cash off-exchange Rule 10b-6 because its May Appeals stock in Although Court of imposed joint upon and several all defendants with liability respect to the injury by Bangor’s achieving con- occasioned supra, trol our Piper, holding IV, in Part that no cause under action for lies favor of Chris- holding shareholder-offerees, Our is a limited one. the class Whether *35 protected by (e), implied 14 have an cause of action under 14 is § us, target before and we intimate no view on the matter. Nor is the corporation’s standing only in to sue issue in this case. hold that a We offeror, tender suing bidder, in capacity its as a takeover does not have standing (e). to sue for under 14§ precise holding many
Our disposes of made in dissent. observations Thus, argument the respect standing for to the “exclusion” from “persons simply enforcement,” post, 62, most in interested effective is light today’s holding. unwarranted in of narrow
43 except all petitioners Bangor removes Punta Craft, necessarily liability re- any potential from these cases. The issue that of is whether Chris-Craft has a cause action dam- mains by of the against Bangor alleged alone virtue latter’s ages it does Rule 10b-6 violations. We hold that not. 29 antimanipulative provision designed Rule 10b-6 is an securities market distri- protect during orderliness prohibits The Rule in butions stock. essence issuers whose tampering is in of distribution from process stock market or by rights purchase either stock purchasing completed. pur- until stock the distribution has been The prevent is to stimulative an pose trading Rule in its in order to create unnatural issuer own securities appearance activity. gen- of market See and unwarranted & Corporate erally Tender Einhorn, E. Aranow H. Offers Appeals 131 and its (1973). held, the Court Control Here, stock purchases holding is the cash unchallenged, constituted pendency exchange offer during Bangor’s purchase” Bangor stock within purchases “right [s] of Rule 10b-6.30 meaning violations, of Rule 10b-6 questioning finding
Without standing fails strenuously argues that Chris-Craft Bangor Stores, Drug Manor Chip Stamps Blue v. applied test 10b-6 of Rule concern The (1975).31 U. 723 421 S. manip- to foreclose Bangor circumstances, these suggests, Punta price Bangor would affect which trading ulative distributed being were Punta securities Bangor since stock, 29 supra. part in n. forth 10b-6 is set Rule pur cash whether consider no occasion to therefore have We view 10b-6, express no and we actually violated Rule chases Rule secondary importance, since issue is of question. type of transaction. expressly covers now 10b-13 Newport Birnbaum rule, v. the Birnbaum Chip, applied In Blue we (1952), denied, 343 U. S. (CA2), cert. Corp., F. 2d Steel purchasers sellers 10b-5 to Rule standing under limited which securities. *36 purchased Chris-Craft neither offer. Because exchange
in the Bangor’s it is under Bangor nor sold securities, foreclosed, under Rule 10b-6. suing from analysis, provide Rule 10b-6 would accepted Bangor’s analysis, If we actually pur persons who remedy for an entire class of no who either those investors securities, namely, or sold chased “rights” represented in turn bought Piper stock, or sold which then in This class Bangor stock distribution. purchase af potentially under the be theory, securities SEC’s would, acquisitions since off-exchange purchases, by Bangor’s fected under the during have, a distribution rights acquire stock artificially for potential least the 10b-6, of Rule SEC’s view theory Thus, Bangor’s price rights. those raising any purchased who investors foreclose, among would others, be this would after the unlawful Piper stock acquisitions; might for the stock price paid though true even Bangor’s effects of to reflect the stimulative shown this case purchases. block off-market, respect, complain from Blue where the readily distinguishable Chip, situation, unlike that purchases all; no of stock at ants made stock, common purchaser here Chris-Craft was a very respect Bangor to which class securities with was held to Rule 10b-6 violations. have committed
We these cases do not call conclude, however, definitive of the law of 1 standing 0b-6, resolution under Rule would have do. Nor do appropriate us we find it to do so the unusual presented under circumstances here. Birn the Court of Appeals, although sensitive to the First, baum issue, did the benefit of our decision in Blue have Chip in resolving standing Second, issue. in this Court both Chris-Craft and United in its amicus brief States, 14 (e)’s prohibition contend that broad certiorari, “manipulative practices” acts in tender offers embraces proscribed specific acts under the more of Rule mandate Respondent Brief for 56; 10b-6. Brief United States as *37 Amicus Curiae 16-17. this extent the Thus, issue of Rule 10b-6 standing fully explored by has not been the parties, be cause of their initial misconception as to Chris-Craft’s stand ing damages (e). to sue for 14§ under
Although judgment standing we reserve on the broader issues under in of arising 10b-6, that, Rule we hold the context for cases, standing these Chris-Craft is without to sue Bangor’s alleged on account of Rule Our 10b-6 violations. holding upon parties is based one critical the them factor: As selves have framed the issues for litiga resolution this is express Chris-Craft outside concern of clearly the tion, At no complained Rule 10b-6. time has of or Piper which for suggested price paid even the it shares by Indeed, Rule 10b-6 Bangor’s was influenced violations. shareholder; standing not Piper Chris-Craft does assert as a claims in its of contrary, damages because, the view the it by it of opportunity gain Piper control lost case, cor Bangor’s 10b-6 Assuming virtue Rule violations. Rule 10b-6 is theory, rectness this the fact remains that corporate for concerned with contests control. directed at or upon precise is a narrowly goal— rule focused This technical of secu orderly distribution an market maintaining Thus, manipulative influences. or from artificial rities free did not come framed, Chris-Craft have been the issues as investor vic posture of a hoodwinked the courts noted, complaint, its as we manipulation; market by timized control of a gain corporation, lost a chance is that it 10b-6. of Rule specific concern the bounds of beyond claim close by the is buttressed respect in this Our conclusion 15 1934 Act, § 9 Rule 10b-6 relationship of things, prohibits among other 78i. Section 9, § U. S. C. if forbidden securities, own their issuers in transactions de- are transactions though the even regulations, by SEC 78i§ stock. issuer’s market stabilize signed to Rule brief that its amicus suggests The SEC (a)(6). 10b-6 promulgated pursuant to the Commission's author ity (a)(6),32 § under as § 10 well under the 1934 (b) Act. It statutory contends view this that, bifurcated only purchaser Piper Chris-Craft need stock to origin, standing only have under Rule 10b-6, requires § since aggrieved security” an party purchased “any have sold af- fected violation. (e). § 15 U. S. C. 78i Under purchase Bangor Chris-Craft’s failure to Punta stock view, purchases its since shares satisfied irrelevant, “any security” requirement of 9.§ provides
Unlike cause of (b), however, express § *38 injured persons action for unlawful market by activities. (e). specifi-
U. of § S. 78i that cause action is framed C. Yet, of cally “any person purchase in favor who shall or sell such any security price at a which was act by affected or . Con- (Emphasis supplied.) transaction . . ." Ibid. actually gress upon focused in the amount § therefore subject paid been the investor for stock that had an activity. seen, as we have manipulative not, This re- complaint. the seeks no gravamen Chris-Craft’s It covery Piper stock; for improper premium exacted for it compensation rather desires for opportunity its lost Piper. control We therefore conclude on its claimed that, basis for Chris-Craft cannot avail relief, itself of Rule 10b-6. (a) (6) provides: Section 9
“(a) It any shall be person, directly indirectly, by unlawful for or the any use of instrumentality the mails or means commerce, or of interstate any facility any or of exchange, any national securities or for member of a exchange— national securities
“(6) any To effect either persons alone or one or with more other any series of purchase security reg- transactions sale of and/or istered on exchange purpose pegging, national securities for the fixing, stabilizing security or price of such contravention of such regulations may necessary rules and prescribe as the Commission appropriate public protection interest or for of investors.”
VI Our resolution of these issues makes it unnecessary ad- questions dress other parties raised petitions in their for certiorari. Since we have concluded that Chris-Craft can- not avail itself of 14 (e) § or Rule 10b-6 in its suit for dam- it is unnecessary to ages, consider the Court of Appeals’ hold- ings with respect scienter, the calculation causation, damages, imposition joint and several the lia- liability, bility of underwriters in 14 (e) actions, and award of prejudgment interest.
Apart from awarding however, Ap- Court of damages, peals also enjoin ordered the District Court to Punta from voting illegally acquired Piper period shares for a years. compliance five directive, Judge Pol- lack on injunction remand entered an remain effect period years of five from November 12, the date on judgment which was entered. Supp., F. at 528-529. On Appeals the Court of appeal, portion affirmed that District Court’s order.
We hold under presented the circumstances that, here, injunction pre- should not have been As we granted. viously prior liability to the trial indicated, expressly any injunctive waived claim to relief. The case was *39 exclusively in District without as a Court, jury, tried the 1141- damages. 8, suit for 337 F. at 1136 n. Supp., 1137, See 379. Under 18, 2d, 355, n. 480 F. 1142, Accord, our that Chris-Craft does circumstances, holding these Rule 14 or (e) of action for under § have cause was premised as it injunction 10b-6 renders that inappropriate, inap- damages.33 upon impermissible the award 33 proposition a suit general upon intimate no as a view whether We action for relief, distinguished from an equity injunctive as in (e) 14 either tender offeror under damages, of a § would lie favor Rule 10b-6.
48 injunction particularly
propriateness is acute in this years four where the order was entered after litigation, almost regard the contest for control had ended and where no given protected to the interests of the class of shareholder- many indirectly of whom would be at offerees, least disadvan- taged by the award.34 judgment Appeals the Court of
Accordingly,
Reversed. Mr. Justice concurring Blackmun, judgment.
I concur in judgment. For the reasons set out Mr. Justice Stevens’ I dissenting post, p. willing am opinion, 53, begin premise with the that respondent Chris-Craft had it “standing” possessed implied the sense that an right 14 (e) § under Act of Exchange to sue Securities 15 U. C. 78n (e). § S. Unlike the how- dissenters, 1934, I not conclude, Appeals’ do from that the Court of ever, this, liability I judgment as to is to be affirmed. Since am of opinion respondent prove petitioners’ failed to vio- I lations of the securities injury, agree laws caused its the Court that judgment below should be reversed.1
34The fact that
parties
separately
injunction
did not
enumerate the
issue in
petitions
their
for certiorari
preclude
does not
review. The
Court has in the exercise
traditionally
of its discretion
examined matters
importance
not specifically assigned
parties.
g.,
error
E.
Carpenters v.
States,
United
(1947);
330
395,
U.
412
Sibbach
S.
Wilson
v.
Co.,&
1,
16 (1941);
Eby,
S.U.
Mahler
(1924).
v.
264 U. S.
Cf.
(d) (2); Oregon
this Court’s Rule 40
rel.
ex
State Board
Corvallis
v.
Sand &
Co.,
Gravel
(1977); Mapp Ohio,
U. S. 363
v.
I For the sake of it is useful to briefly review clarity, acts that constituted violations of the securities laws and to identify the violators.
Three violations of 14 (e) § were isolated by the District Court and the Court Appeals. The first occurred when W. T. Jr., wrote the letter of Piper, January 27 to the Piper shareholders and therein described the Chris-Craft offer as “inadequate and not in the best Piper’s interests of share- holders.” Petitioner First Boston reviewed that letter. Chris- Craft alleged that description of its offer was a misstate- ment of material fact. In addition, the letter omitted to reveal opinion First Boston’s price Chris-Craft was offering Piper shares was fair, and it to failed disclose the pending negotiations with Corporation. Grumman Aircraft second (e) § violation occurred Piper press with the release and letter to on January its shareholders 29. The sins in this were those of Although instance omission: the release and agreement they letter discussed the with were Grumman, silent option about return the to shares Grumman’s keep plus obligation at cost interest, Piper’s and about proceeds separate sale from fund free liens. petitioners Bangor the courts determined that
Finally, material fact state a Punta and Boston omitted First Railroad & Aroostook relating Bangor to the value filed in in the connection (BAR) financial statements re did not papers Specifically, Bangor’s exchange offer. only $5 million been offered Bangor veal that had carried BAR was in the face the facts BAR, sale of other offer that no $18.4 books at Bangor’s million, forthcoming. appeared found courts § to these violations, addition Exchange complied with Securities had not This (1976). 240.10b-6 17 CFR 10b-6,
Commission Rule *41 50 May in 1969 made its three Bangor privately when
occurred Piper purchases stock, awaiting while negotiated large exchange effective date of its offer. accepted on the summary
This reveals that, premises, facts Pipers were both of misstatements material guilty (e) by omitting violated 14 Bangor and of that omissions; 10b-6 violated Rule facts; to material that state Piper stock; blocks of and that purchases large its omitted to reveal material Bangor, facts, First like Boston, regard and with both in connection with the letters the BAR negotiations.
II were causation a securities law case proving Standards Co., in Mills Electric Auto-Lite 375 396 S. established v. U. States, United Ute Citizens v. 406 (1970), Affiliated It must the misstatement (1972). be shown U. S. been recently That term most has omission is “material.” “the omitted fact would Court mean that defined in the deliberations significance have assumed actual Northway, Industries, shareholder.” TSC Inc. v. reasonable Inc., materiality (1976). Assuming U. S. Mills is if established, proved that causation would be held misleading proxy an “essential solicitation at issue there was link accomplishment in the of the transaction.” atS.,U.
Because cases involving problems omissions create difficult proof hence the Court reliance, elaborated causation, Ute on the Mills test Citizens: Affiliated pri “Under the circumstances of this involving case, marily disclose, positive proof a failure reliance is recovery. prerequisite necessary All that is the facts withheld material in the sense that might investor have considered them im reasonable . portant making in the of this decision. . . This ob and this withholding to disclose a material ligation fact establish requisite element of causation in fact.” 406 U. at 153-154. S., Ute Citizens, did not abolish the
Affiliated course, require ment of causation failure-to-disclose cases. It pro simply vided the link causal between the omission of in material formation and the shareholder’s act of purchasing or selling *42 stock.
In the case of a suit a tender offeror to recover dam- ages suffered as a result securities law violations its competitors, causation is a far more complex issue. It is for enough the offeror to prove that the competitor’s violations caused the shareholders target of the corporation to act way. certain the addition, offeror must show that the shareholders’ reactions to the misstatements or omissions caused the injury for which it demands remuneration. Even though the Ute Citizens presumption satisfies Mills-Affiliated requirements the proof for of the first element of causation, the any absence of evidence that the might violations have altered the outcome of the contest for control would leave me unable to hold that the securities law violations caused disappointed the contestant’s injury—its ultimate failure to acquire target control the corporation.
III I Applying principles present these to the cannot litigation, say respondent proved that the any actions of that petitioners injury. Pipers caused its of mis- guilty were press in the they statements letters and releases that issued of omissions those With to both their regard materials. the presumed misstatements and most that can be omissions, Piper that more of the shareholders would have tendered is occurred. To when the violations January, to Chris-Craft and to assume that Chris-Craft would have ac- go further, to succeed in its contest for enough more shares quired to the facts. The Chris-Craft offer simply contrary control, as insofar it invited tender completely successful, was tendered. eventually shares were 304,606 shares and 300,000 finan- Chris-Craft’s strong the evidence Furthermore, Bangor Punta to the limit. strained had been cial resources January. for control as the contest not even entered had been left with have likely Chris-Craft would just It is Piper family the and that Piper shares block a substantial only the company, given control would have retained were time the violations that existed facts failed Chris-Craft Under circumstances, committed. of which injury caused Piper actions prove complains. any prove that action Neither did Chris-Craft injury. The reasons its Boston caused Punta or First regard as to proof of causation rejecting Pipers, to First equal force apply with January violations, Slightly press releases. role those letters Boston’s BAR negotiations. relevant are considerations different omit sale was proposed information about Because *43 finan Bangor’s registration materials, Bangor’s ted from it than ac looked better may have somewhat position cial shareholders presumes if one that the But even tually was. they if not done so Bangor tendered would have who knowing of what way known is still no had the there truth, point onward. taken from that course the contest would have opinion of Chris-Craft’s negative If had a the shareholders their shares to retain they might have elected management, third management. Or a own incumbent their and continue have might Or appeared. Bangor have might contestant These un acquisition program. for its secured to use cash advantage taking demonstrate that even certainties Citizens of causa Ute finding presumption, Mills-Affiliated compelled. logically far from injury tion of Chris-Craft’s was be held may Boston It nor First follows that neither negotiations. of the BAR of nondisclosure liable on account the Piper large blocks Bangor’s purchases Finally, the I find conclusive As to this, stock must be considered. fact, noted ante, by Court, at 45, that no time “[a]t has Chris-Craft complained of or even suggested the price paid which it Piper for shares was by influenced Bangor’s Rule 10b-6 price violations.” If the of the shares was unin- and sufficient fluenced, shares were still held the public to make control a real possibility for Chris-Craft, there was a failure to prove causation. Cf. Paper Rondeau Mosinee v. Corp., 422 U. S. 64 (1975). 49,
For these I reasons, concur in judgment of the Court.3 Mr. Justice with whom Justice Brennan Stevens, Mr. joins, dissenting. passed Williams Act was protection in-
vestors. The question threshold in this is whether the case
2 The Rule 10b-6 question violations do not raise the disclosure facts, manipu of material nondisclosure since that market Rule deals with Thus, lation. on feature, presump Ute Citizens Mills-Affiliated tions do not even enter the case. recovery The dissenters note that Chris-Craft’s included elements actually dependent proof were not it would injury acquired Piper. have control Since I view the ultimate Piper, be the frustration control of Chris-Craft’s efforts to obtain recovery opinion Court, ante, cf. I should think that have included elements unrelated to the failure achieve control. Furthermore, injury merely opportunity even if the the diminished success, proof inadequate. I find would still of causation Because January complete success, its Chris-Craft’s offer was financial practically exhausted, presumption resources were that more shareholders would have tendered but for the violations committed Pipers Similarly, and First Boston was rebutted. the uncertainties surrounding probable BAR effect of the omissions on the share *44 presume impossible decisions make it to that Chris-Craft’s holders’ by Finally, chances of success were lessened that violation. the fact price by alleged Piper shares was uninfluenced Rule 10b-6 that the injury negates possibility diminished-opportunity on a violation theory. theory surely I just on a failure-to-succeed would therefore as as prove causation under either find a failure to view of Chris-Craft’s injury. to retain seeking who of stock is large of a block
holder is of the investors corporation control one acquire of a to protect. was intended statute on the by concentrating framed issue can The critical Bangor The conclusion July offers exchange pro- by prior is established (e) violated § Punta’s offer that viola- for review.1 When open not and is now ceedings Piper stock 556,206 owned shares tion Chris-Craft occurred, shares acquire sufficient additional attempting to and was viola- Punta’s control. result As a constitute ways: in two injured it was claims that Chris-Craft tions, and Piper impaired,2 stock was of its investment the value additional shares opportunity purchase enough it lost has no holds that Piper.3 Chris-Craft to control The Court injury either no matter recover for damages “standing” litigation. history chapter in the this monumental the third This is groups of certiorari trials, appeals, and three three three been There have granted questions by petitions presented the certiorari petitions. Only the purpose of before For the 5, 1976, 425 are us. April on S.U. premise petition accept the standing issue, must analyzing we ing guilty violating 14 10b-6. are Rule defendants alleged: complaint, “The In 64 of its second amended ¶ sharply foregoing the defendants . . . acts of conduct courses holdings Piper App. . . decreased value of . .” Chris-Craft’s F-26. opinion Appeals In liability, specific its the Court of noted: “The injury [by sustained was a reduction the value of Chris-Craft] [its] Piper holdings Id., . ." . . at A-60. alleged Chris-Craft also that “but for acts of unlawful herein, defendants described Chris-Craft would achieved control of have acquire. Piper,” paid or at least would have less stock it did ¶ complaint separate F-26. 65, App. of these Second amended view ante, allegations suggestion, it is a little to understand the difficult injuries 35-37, suing in its that Chris-Craft not sustained status correctly Appeals regarded the Court of shareholder. fact that adequate as an Chris-Craft’s status as a tender offeror relief basis for does rejection particularly its imply shareholder, claim as since the Appeals compensation included awarded Court of for the Piper holdings. impaired its value of
how flagrant Bangor may Punta’s violation have no been, matter how direct the causal connection between that violation and Chris-Craft’s and no matter how serious the injury, I injury. disagree holding. seriously
No one
questions
premise
that
im-
Congress
private
created a
plicitly
right
action when it enacted
in
beyond
1968.4 Also
question
propo-
serious
is the
sition that
the members of the
which Congress
class
was
especially
may
private
interested
that
protecting
invoke
remedy
that
of a
cor-
target
shareholders
and, further,
poration are members of that class. The Court nevertheless
may
holds that
protected
recover because the
may
though they
class does not include tender offerors even
also
shareholders;
at least
that
to the ex-
and,
implicitly,
tent
injured
shareholder,
Chris-Craft was
status as a
its
injury
its
is not of a kind that
statute
intended
I
persuaded
avoid.
am
that both
are erroneous.
holdings
I first consider
Chris-Craft’s
status as
shareholder
why
I explain
rights
Finally,
then its
a tender offeror.
as
I *46 target corporation may injured by Shareholders a be in quite ways. They a fraudulent tender offer two different may their for exchange inadequate shares consideration misrepresentation. on may reliance Or retain they their be by shares and harmed fact that other share- holders to unworthy were induced surrender control to new- legislative history (e) persuades comers. The me intended to Congress protect the shareholders from potential both of these harms.5 to Since Chris-Craft claims legislation, In its discussion of the need for the Committee House Report stated: therefore, severely public must,
“The shareholder informa- limited tion, many decide what course of action he should take. He has alterna- immediately they hope tives. He can tender of his all shares and are all However, outstanding purchased. if the offer is for less than all the only instances, shares, perhaps part them he will be taken. In these company, management remain a shareholder in the under will a new good helped knowing which has to install it he without whether will company. or bad for the shareholder, alternative, may
“The as another to see if a better wait develops, late, offer but if he tenders risk his he runs the that none of shares may will be taken. He also sell his shares in the market or hold hope them and for the knowledge best. is Without of who the bidder plans and do, what he the shareholder cannot reach an informed decision. He is forced does, to take a chance. For no matter what he adequate he does it without rationally information to enable him to decide possible what is the best precisely course of action. This is the kind of dilemma which our designed Federal securities are prevent. laws competence integrity company's “The and management, of a and of the persons management positions, seek who importance are of vital to stock- Secrecy holders. expectations this area is inconsistent with the people publicly corporations who invest in the im- securities of held pairs public confidence in securities as a medium investment. H. R. Rep. (1968) (hereinafter Cong., Sess., No. 90th 2-3 2d House Report). urged during “It was hearings takeover bids should not be
discouraged they purpose providing because a useful serve check have suffered type the latter it harm,6 has asserted a cause of by action created the statute. 14 patterned
Section after 14§ which regulates (a), management. entrenched but inefficient recognized It was also these many reasons, bids are made always other and do not reflect a improve desire to management company. The bill avoids tipping regulation the balance of management either in favor of person making favor of the designed require the takeover It bid. full and fair disclosure for the benefit of investors while at the same providing time management equal fairly opportunity offeror and present Id., their case.” at 4. recovery impaired Chris-Craft’s included for the value of holdings, its premium measured the loss of the control its stock would violations, have commanded but defendants’ the additional loss resulting position of value *47 from its as a locked-in holder of an exceptionally large only damages block. These elements relate to of the actually by stock distinguishable owned Chris-Craft and therefore are damages capacity from suffered in its as a tender which offeror are by opportunity measurable the It loss of the to exercise control. is not only to damages correct to characterize these items of related Chris- as contrary, ante, Craft’s status as a tender at 36-37. On the offeror. See any large premium equally owner anof block would lose the control market, previously and would suffer block could have commanded on the For company passed hostile hands. a further loss if the had into damages this family of instance, have claimed members of the could had Piper and Chris-Craft they kind if had remained shareholders illegally gained control. standing because be denied suggests that Chris-Craft should
The Court to circumstances “actually under these damages related the it seeks are (em Ante, at 36 . . . .” a for control status as contestant Chris-Craft’s imply that may be intended phrase phasis original). The italicized items these could recover offeror was not also a tender a shareholder who should why offeror a tender explain so, the fails to damages. If Court of respect neutrality goal with of congressional like relief. The be denied blocks holding large control persons impaired if be to tender offers would challenge their control. who rights offerors granted greater than tender were damages may that a shareholder’s hand, mean Court On the other the hold of its the size may attributable recovery not include elements this itself to lends opinion the paragraph of (The ings. remainder of “ordinary” share “typical,” or distinguishing between interpretation 58 may It is clear that a shareholder
proxy contests.7
recover
14
not himself
(a)
though
§
in a suit under
even
he was
de
I
misrepresentation.8
do not
why
ceived
the
understand
very
At the
any
should receive
narrower construction.9
blocks.)
large
on
re
holders, and
of
This restriction
the
owners
covery
Congress
be unsound. There
no reason to think that
would
remedy
anything
intended
less than a “make
for share
would have
whole”
Act
purpose
If I
the
holders.
am correct that
Williams
shareholders,
others,
integrity of the
in the
protect the interests of
infra,
determining
5, supra,
process
corporate control, see
n.
damages recovery
provide
some measure
67-68, this kind
could
large shareholder
these interests.
value to the
the
Reports refer to
cash
the
and the House Committee
Both
Senate
proxy
as
to a
contest.
tender offer
similar
Co.,
375, minority shareholders
Auto-Lite
U. S.
Mills v. Electric
proxy
merger
ground
that a
solicitation
brought
aside
suit
set
obviously
merger;
misleading.
brought
suit was
before
had been
they
misrepresentation, and in fact
plaintiffs were then aware of
1968),
(CA7
was con
merger,
2d
which
against
403 F.
voted
minority
share
This
held
despite their votes.
Court
summated
relief,
relief,
specifying that
to some
and while not
entitled
holders were
will,
course,
possibility.” 396
“[m]onetary
be a
relief
also
noted that
term
S.,
proxy
to a
in the
solicitation related
U.
at 388.
If the defect
merger,
accounting
so that the shareholders would
could be ordered
otherwise,
them”;
coming to
represented
“receive
value that was
monetary
merger resulted
relief
“if the
reduction
would
available
earnings
holdings.” Id.,
earnings
their
at 388-389.
potential
holding
This
in J. I.
Mills was consistent
earlier statement
*48
Borak,
Case
“The which stockholder ordinarily damage deceptive proxy to a done solicitation flows from the directly damage upon corporation, rather than from the inflicted prac results from the deceit damage stockholder. The suffered not practiced on the stockholders ticed him alone from the deceit but rather group.” Id., as a at 432. 9 an species that either just of solicitation The tender offer is one may of a in a contest control group or an use incumbent outside may destiny corporation corporation. to direct the Power acquiring shares, by majority by acquiring proxies for a obtained proxies and typically by a combination of themselves, the shares or more
59 least, the Court should allow all injured by shareholders a 14 § violation of (e) assert to a damages against claim wrongdoer. Neither the extraordinary size of Chris-Craft’s in Piper investment nor the fact the stock had stock, been for only owned few months, a should deprive Chris- Craft of the right to remedy assert a available to the other members of the shareholder class 14§ which (e) plainly was designed protect. to
II if Even we disregard ownership Chris-Craft’s stock in Piper only and focus on its status as a tender it offeror, remains clear to me that its rights legal were by invaded the defend ants’ violation of (e). compelled § This conclusion is fair (a) a evaluation of legislative purpose light of the rationale of J. I. Case Co. v. U. Borak, S. (b) respect 426; opinions for the of the Securities and Exchange Commission and the judges numerous who federal have recognized § is little more than a restate ment of Rule it 10b-5 unless has broadened the class of potential litigants may who cash challenge defective tender offers to include rival contestants well as control shareholders.
A Act had a Court held that the 1934 Borak unanimous action for implicitly bring authorized shareholder (a). Such rescission or for a violation remedy protection for the regarded as essential impos it made practical investors10 because considerations solicitations, broadly purchases. prohibits actual fraudulent Section 14 misguided casting a merely protect from the individual shareholder protect sale, importantly making but more vote or from an ill-advised decision consequences vital of a entity from the corporate as a whole procured fraud. consistently used opinion the Court noteworthy the Borak It that in describe the “shareholders” than the word “investors” rather word protected class. *49 proxy to the requirements
sible the SEC enforce statement completely effectively.11 practical applies concern and This processed even greater with force tender offers which are expedited on highly a schedule.12 injury pursu corporate “The which a suffers from action stockholder ordinarily damage deceptive proxy
ant to a from the solicitation flows directly upon damage corporation, done the rather from the inflicted than prac damage the the stockholder. suffered results not from deceit the practiced on ticed on him alone but rather from the deceit stockholders sweep the group. as actions are not within a To hold that derivative private relief. to a denial of the section would therefore be tantamount necessary provides supplement proxy a Private enforcement of the rules pos damage litigation, the in antitrust treble to Commission action. As injunctive sibility effective of civil or relief serves as most requirements. The proxy Commission weapon in the enforcement of the annually 2,000 each proxy that and advises it examines over statements permit an inde necessarily expedited. Time does not must be them and proxy the material the set pendent examination of facts out con acceptance representations the results in Commission’s this contrary material value, to other on at their face unless tained therein Indeed, respondent’s complaint, the allegations it. on the file with manipulation alleged market proxy material failed to disclose unlawful manipula Corp.] and unlawful stock Tractor this American [the apparent until after tion would not have to the Commission been merger. therefore,
“We, it is the that the circumstances here believe under duty necessary provide courts alert such remedies are be S., congressional purpose.” to make at 432-433. effective U. introduced, required initially “As the disclosure the bill would have days Exchange and Commission 5 statement to filed the Securities be and offer the staff of the Securities before tender was made to allow com Exchange opportunity material for to review the Commission urged pliance requirements. hearings applicable At the it was with the necessary might delay prior in some cases review was not and authority and the offer when time of the essence. In view of appro Exchange to take responsibility Commission Securities inadequate misleading priate action in the information event offer, acceptance of tender public disseminated to solicit requires only approved statement bill as the committee Exchange time the at the Commission file with the Securities
61 In both proxy and tender offer the contests, remedy which will most effectively deter violations of the statute is un questionably private the damages action.13 Under these cir cumstances, the Court Borak, stressed in supra, “it is the duty of the courts to be alert to provide such remedies as are necessary to make effective congressional the purpose.” U. atS.,
If private remedy must implied to ensure full com pliance with the statute, remedy the must be available to the litigants who are most vitally interested in effective enforcement. This is the essence of Borak the which holding was given emphasis by its quotation from Deckert Inde v. pendence Corp., 311 U. 282, S. 288:
“ power ‘The implies power the to make ef- enforce fective the right recovery afforded by the Act. And power the right make the of recovery effective im- plies power the any to utilize procedures actions or normally available to the litigant according to the tender public.” 550, offer is first made Rep. Cong., S. No. 90th (1967) (hereinafter Sess., 1st Report). Senate passage In the from Borak set in n. described out Court possibility damages injunctive weapon” civil relief as “a most effective Exchange efficacy the enforcement the Securities Act. The by “private Rights enforcement of the antitrust laws and the Civil Acts attorneys general” precisely premise. rests on pari example, rejecting
For we have stated that cases the in delicto defense, premised recognition purposes on a
“were antitrust laws by insuring private ever-present are best that the served action will be an anyone contemplating to deter business behavior violation of threat may plaintiff reaps who the reward of treble antitrust laws. The morally reprehensible defendant, encourages be no less than the but law overriding public policy competition. A his suit to further the in favor of regard parties more fastidious for the relative moral worth of the would only seriously undermining private the usefulness of action as result in Perma International of antitrust enforcement.” v. bulwark Mufflers 134, 139. Parts 392 U. S. Corp., ” 433-434 case.' particular S., U. exigencies original). (emphasis from to gain who have the most litigants potential pro if its to lose the statute—and most
enforcement the rival plainly ignored impunity—are can be visions better are in a much Surely the contestants contestants. a mere greater much incentive—than have a position—and challenge prohibited conduct and to to detect shareholder *51 in Congress recognizes Act. Once one by Williams the method of private litigation as a heavily on rely to tended Con clear that equally it seems the implementing statute, interested effec persons the most would not exclude gress the to enforce from the class authorized tive enforcement that such au logical it seem assume Nor does law. new benefit of brought actions for the only reach thority would system adversary It fundamental our is shareholders. the provides guar the the best litigant selfish interest that the I see no effectively asserted.14 claim will that a antee right the to recover management incumbent deny reason injuries as the share as well as for such own losses for its all, insiders are often may suffered. After those holders have statute was en specific of the target conduct to regulate.15 acted
14 requirement standing in its is of the constitutional This the basis Carr, v. 369 U. As one of the draftsmen aspect. See Baker S. it, policeman so as one put “there is no effective whose of the 1934 Act by degree he pocketbook is to which enforces the law.” Stock affected (72d Cong.) Practices, Hearings on S. Res. Exchange Res. 84 and S. Banking (73d Cong.) the Senate Committee on and Res. 97 before S. Sess., Exchange Currency, Cong., pt. 15, 2d National Act of 73d Securities (1934). 1934, p. Kuchel, testimony by following Senator described Consider the who legislation: himself as a coauthor integrity management controlling persons competence and
“The yet, pur- prospective And importance stockholders. are of vital and often do not on a tender offer need not reveal their chasers cash If management is included within protected an class, outside tender offeror has an equally strong argument inclusion. For the legislative history also indicates that Congress was concerned about by misconduct insiders as well just outsiders. And as management effectively will most challenge violations so it is equally invader, clear that company attempt committed to an to acquire control a target company will be most guardian zealous shareholders’ interests in having management comply with I the law. find ample of congressional evidence interest competition fair between outsiders and insiders making and opposing tender offers shareholders of target company. That persuades evidence me that both contenders are included persons protected within the class of (e).16 intentions, commitments, their their corporate even identities to the only prevented shareholders. Not making the shareholder from decision, may informed investment corporation but both he and the easily unknowing corporate become the victims of the so-called raider.
“Today, community there are those individuals in our financial who proudest nothing corporate seek to reduce our businesses into but shells. They sources, corporation seize control with unknown sell or trade *52 away among assets, split up the remains themselves. best and later the financially tragedy corporation that the can
“The of such collusion is any knowledge having management the shareholders raped the without vehicle, pur- acquisitions. a the Using the cash tender offer as commonly, or, names even more made in so-called street chases can be corporate number. an undisclosed account Swiss banks for secrecy obtaining the shares in may a cloak of raider thus act under liquidation capture of to a successful put needed to him on the road on Securities Hearings the Subcommittee company.” on 510 before the S. Sess., Cong., Currency, 1st Banking 90th on of the Senate Committee (1967). 42-43 pirate” and “take-over “corporate raider” terms such as The use of they implied misleading because argument this case was in the con rival as between be neutral intended to the Act was not Williams abundantly from both clear thing that control. One testants for Act history is that the was legislative and its language of the statute management. in favor tip intended the scales to B The lower with along SEC, consistently have courts, taken a broad view of standing under 14 (e). §
In the appeal in liability this SEC’s amicus case, in memorandum argued Second Circuit that “if rival company in a contest corporate standing control has no to sue for violations the securities laws, enforcement re Congressional legislation cent strug to assure in fairness such gles hampered will be ...." Memorandum Amicus SEC as Curiae in In (CA2), p. No. 72-1064 its brief before Court, SEC continues to insist that more neces “[e]ven sary in private rights sup are such of action [than Borak] plement Commission actions to effectuate the Congressional purposes enacting Act,” the Williams Brief for SEC Amicus pages Curiae 12. It devotes a full 55 its brief arguing providing private remedy in this case is neces sary to insure enforcement of the and is Act consistent congressional expertise intent. The in the securi SEC’s field, ties and its intimate passage involvement its Act, respect. entitle views
The Courts Appeals have expansive also taken an view of standing 14 (e). Shortly § under 14 (e) after passed, example, Judge Friendly pointed out section’s only possible addition to existing case law was its possible impact on standing, and indicated that both non- tendering shareholders and the corporation have standing, Specialty Electronic Co. v. International Controls Corp., 2d 937, (CA2 1969). F. 940-941, Accord, Smallwood v. Brewing Pearl Co., 489 (CA5 2d 1974). F. an other Second Circuit the court commented that 14§ case, “should any serve resolve doubts about standing tender cases, offer even where an offeror is not . . .
position of a forced
Westinghouse
seller.” Crane
Air
Co. v.
Co.,
Brake
65 issues, agreement several there was standing. Judge on in his Mansfield, separate opinion, explained: “The federal securities laws are on subject silent private party’s standing Indeed, neither sue. pur § 14 nor 10 Rule (b) § 10b-5 state that sellers, or exchangers securities have chasers, right implied to sue. their However, standing long to sue has I judicially recognize since been established would . . . . standing solely ground CCI’s on the vigorous en provisions through private forcement the anti-fraud . . litigation private . calls for of a implication similar right against action in favor of a contestant defeated the successful bidder for control for caused damages especially the latter’s violation of that . in view section, . . willingness permit corporation of our target against 14 480 2d (e).” seek relief the offeror under F. § (CA2 1973). (Citations omitted.) 396 341, heavily decisions, has relying First these Circuit, The offerors, to obtain to tender standing also extended 421, File 424— Co., Co. v. Nicholson 482 F. 2d H. K. Porter appar the Fifth Circuit has them (1973), and cited 425 Co., supra, at Brewing Smallwood Pearl v. approval. ent 20.17 n. 596, 17 standing restricting under cases as referred to two been have We 1975); (CA9 Corp., 225, 232 528 F. 2d Hi-Shear 14(e): Klaus v. cases, (CA5 1974). In Genesco, both Inc., F. 2d 750
Sargent 492 v. protected share- misrepresentation to however, no harmful there was noted, “whether was not Sargent the issue Hence, as the court holders. the duties created plaintiffs enforce appropriate plaintiffs were these Id., were violated. those duties rather, (e),” but whether [§] misled. was Klaus, the tender offeror who 28. it at 770 n. 2d, F. standing expansive view supported commentators have Offers, Tender Bromberg, The Securities Law See, g., (e). e. under § Hamilton, on Cash Reflections (1969); Some F. Y. L. N. (1969); Note, 269, 291-292 L.Y. Legislation, 15 N. Offer Tender F.. *54 66
III Ash, foreclosing Cort v. 422 U. as 66, view S. Petitioners not standing belong in this because tender offerors do case I con “especial Congress the intended benefit. am class” Cort, authority the is not vinced, controlling that however, In Borak, J. Co. the held Borak, supra. but I. Case v. Court corporation suit on behalf of the could be that a derivative 14 377 it brought S., 431, although see U. under at (a), primary seems clear beneficiaries that section that corporations. were individual stockholders rather than Thus, not majority’s “especial Borak itself does meet class” carefully distinguished test.18 But Cort Borak on grounds Borak, apply equally to this case. as in case, statutory inferring there is “at least a basis for that a civil Cort, lay someone,” cause action some sort in favor id., “pervasive 422 at at 79 there is S., 79; 11; legis U. see n. plain governing relationship lative scheme between tiff particular class and the defendant class in a regard,” id., private remedy necessary is 82; at effectuate id., congressional goal, 84; at and that will goal accordingly if plaintiff hindered is relegated inadequate state id., at 85. remedy, Thus, presented by kind situation Opportunity and Loss of Opportunity, to Control: The Lost 820, 43 Ford. L. Rev. (1975); Comment, 821 Remedies for Defrauded Tender Offerors Under Exchange Section 14 of the Securities Act of 1934, 1693, (1974); Note, Offers, Geo. L. J. 1695-1696 Cash Tender (1969); Comment, Harv. L. Rev. 398-399 Tender Offers: Requirements Standing Liberalization Under 14 (e), Section 7 U. San (1973). Fran. L. Rev. 561 though merely The Court reads Borak as it sustained class relief on Ante, 32-33, opinion behalf of all shareholders. and n. 21. The Borak itself, however, explicit holding right its that “a of action exists as to both derivative and S., direct at 431. Even under the causes.” U. interpretation Court’s protecting shareholders, of Borak as all I do not today’s holding only understand some pro shareholders are e., “ordinary” opposed large tected—i. shareholders to holders of blocks.
Borak and this Cort does require case, plaintiff belong to “especial class” as one four factors to relevant be considered; nowhere say does it that this factor is essential. inAnd discussing this the Court factor, suggested the existence *55 “pervasive a legislative scheme” as to an alternative an “articulated federal right in the plaintiff,” id., I at 82. con clude that Cort does not bar Chris-Craft’s action, and that Borak remains a precedent. viable As shown in Part II-A, supra, Borak compels a holding that Chris-Craft has standing.
The “especial class” besides argument, being based misreading of Cort Borak, is also based on the mistaken belief that congressional protect desire to shareholders is some way inconsistent with providing tender offerors with right to damages.
It true Congress was deeply concerned about the individual stockholder faced with a tender Congress offer. did not, view this shareholder’s interest as however, being distinct from the interests of others affected his decision. As noted in the discussion of Chris-Craft’s standing as a Congress also protect intended to those who shareholder, would remain shareholders after the successful tender offer, supra, 56-57, 5; supra, at n. see n. 15. 62-63, also Like participants these shareholders, the in the tender contest were having seen as integrity process. an interest Williams, purposes Senator stated: explaining bill, “I to have taken extreme with this legislation care in- legitimate protect to equally balance the scales corporation, management, and sharehold- terests of Every unduly takeover bids. impeding without cash ers regu- the balance tipping effort has been made to avoid or in favor latory management burden in favor of full and require of this bill is purpose offeror. The while at of stockholders for the benefit fair disclosure management providing time same offeror case.[19] opportunity fairly present their equal Experi ence . . . amply has demonstrated that the disclosure requirements Federal securities acts are an aid to legitimate business transactions, not a hindrance.” Cong. (1967) added). Rec. (emphasis 854-855 bill put equal footing respect will all with
“[This on] availability to the of significant facts about a tender .... offer All will be able to deal in the securities mar knowing pertinent kets that all of the facts are available.” Id., at 856. protection of only tender offerors is not consistent
Indeed, protection indispensable shareholders. It is also protecting shareholders. Individual shareholders often lack effectively. capacity litigate these cases Few indeed pursue could afford to course Chris-Craft has taken of hir- experience ing complex litigation counsel with of this kind *56 through preliminary to a litigate injunction, trial discovery, on another trial on three liability, appeals to damages, including petitions Second an en and three Circuit, banc, this Court. the most on Thus, realistic deterrent to fraud shareholders is a brought by the opposition suit the tender contest. disallowing such suits creates Moreover, an incentive to violate the Act in retaliation for violations by the other side. no judicial When effective remedy is avail- able, self-help is more attractive. Finally remedy a damages for the tender offeror necessary protection for the of one particular class of shareholders: target those shareholders of corporations who accept an exchange offer and thereby become shareholders of the tender In the 112,089 offeror. instant case, Piper shares were tendered to part Chris-Craft as of an ex- change offer July effective tendering 24. The shareholders took the risk that might lose a fair tender con- 19 language This is also found both the House Reports. and Senate 4; Report Report House Senate they
test. But did not assume the risk Punta would illegally deprive Chris-Craft of opportunity its gain control. These shareholders certainly are within especial 14 class was intended protect. Only by making Chris- Craft whole can expectations of these shareholders be vindicated.20
Petitioners’ answer to all this is that an award of dam ages to Chris-Craft would harm the former Piper shareholders who exchanged their stock for Bangor Punta stock. This answer is unsatisfactory for three I reasons. am First, unpersuaded that the federal courts are incapable of structur ing the remedy avoid problem. See K. Porter H. Co. v. Nicholson Co., File 2dF. 421, (CA1 1973). Second, many cases problem will not either arise, because the size of the judgment will be small in relation to the defendants’ or because most or assets, all of the tender ing shareholders will have sold their stock the time of the judgment. Third, the argument provides no basis dis tinguishing private between plaintiffs. Any monetary recov ery against Bangor by any Punta plaintiff potentially de creases the value of Bangor Punta’s stock.21 injury Because the “ordinarily to these shareholders flows from the damage corporation, done the damage rather than from the inflicted directly upon Borak, stockholder,” S., 377 U. it at would be only slight a extension of bring Borak to allow these shareholders to a id., derivative action behalf of Chris-Craft. I Cf. 432-433. would bring also allow Chris-Craft to the action. argument Petitioners’ person would thus bar suit who *57 Punta, recovery large Bangor had tendered a number of shares to since a injure Piper on his behalf could other former shareholders. It would also remaining public bar of Piper suing, one shareholders in from either in Piper, illegal his behalf or on behalf own Punta’s acquisition Likewise, by of control. it bar share would suit stock, exchanged holder in the reasonable who his stock for Chris-Craft legally protected expectation would have a fair Chris-Craft acquire Piper. argument simply opportunity to control of Petitioners’ cuts too far. my in sum, judgment disposition of the standing by the Court Appeals
issue for the Circuit Second was con- sistent with prior this decisions as well as the unani- Court’s may mous view other Circuits. The fact that error have in litigation been committed the consideration of the liability other damages might issues—or be committed in analysis of the permitted not be to color the cases—should pol- basic standing threshold On that issue—unless the issue. in- icy liberally protect construing legislation securities to in this area of motivated this Court’s decisions vestors, which repudiated—a the law for fair evaluation decades, to requires the statute affirmance. questions other the Court does not address the
Since I by petitions, neither shall presented certiorari I. my from the register additional dissent must, however, deciding volunteering to decide—and Court’s action parties. The incorrectly—a question not raised by the District injunction entered Court’s reversal Appeals Court to the direction of the Court pursuant is, totally unprecedented. I as far as can determine, I which leads the frankly reasoning do not understand “premised” upon injunction Court conclude that damages Ante, in- injunction award. 47. The was an dependent remedy premised on the violations of law found recovery Setting pro- lower courts. aside the permitting injunction vides an additional reason surely logically support not effect; that action does remain remedy whatsoever the conclusion that there be no should arguendo, prop- were assumes, for violations which the Court erly proved.
My portions relevant of the record do reading persuade binding me made a election any right since it equitable relief,22 particularly waive only material in the record which I been able to locate and have *58 must be kept in mind that parties all had assumed that a damages remedy was available.23 If there has any been rele- vant it waiver, petitioners is did who not challenge which relevant colloquy to this issue is the following pretrial from a September conference on 1970: “MR. nothing has your LIMAN: us, That to do with Honor. I am
speaking of I Chris-Craft. think argument they that the was made that shouldn’t pay have to this part woman in seeking because we were enjoin them here record does complete not contain the transcript [the and it is to], unclear what this refers light way but in which they managed company year have injunctive this for a seeking I’m not any relief here. It good get wouldn’t do me Piper. here to back I am seeking damages. that I anything As to don’t think I have to do with pay case that this now. You can woman as far as I am concerned. “MR. I position, RYAN: Do understand that to be Mr. an irrevocable Liman? seeking LIMAN: can
“MR. You understand that I am here.” App. (CA2), No. 1105A. p. 72-1064 pages later, following
Two exchange place: took thought you 112,000 “THE COURT: I them to rescind wanted shares, 112,000 share transaction. money your now,
“MR. LIMAN: I want Honor. you say “THE papers up COURT: I know But the now. this point, Appeals having Bangor and in the Court of Punta talked about 112,000 give back the shares tender or rescind. LIMAN: these shares that were involved here. The shares
“MR. Not they got offer, yes, your Piper exchange And at that time Honor. injunction keep getting. was worth we lost that them from But exercising they position, control over have consolidated their has, you just think, powers I with all the Court don’t put give position me in the injunctive could relief that would effective why money August That’s is the that I in in of 1969. should have been only Id., thing at 1106A-1107A. that is left. . ..” Appeals Court of position counsel in the taken Chris-Craft’s follows: as position to put in a very we can “It is difficult to conceive how they particularly since again Bangor Punta for control ever compete seller, them the to sell If we were directed swing owned the blocks. *59 reaching out to decide this injunction this Court.24 a liberal view of unargued the Court takes question, I unacceptable. consider “plain error” doctrine which my the issues explaining views about Accordingly, without I its dissent from respectfully not decided the Court,25 judgment. they buying buy any price their
they them since were could afford to stock. own attempting to out practical difficulties in work there were such
“So minority position that a years in out equitable a frozen decree after two now, 'You have done they paid for the shares relief in were told which appropriate. them,’ seemed to be the most everything else to money damages are “However, any told that if for reason we are equitable relief of some sort then need appropriate in this case we was, do, which opportunity to had lost the us to what we will restore (CA2), p. 9. Arg. No. 72-1064 namely, Piper.” Tr. of Oral control of repeated: argument, counsel later Somewhat Bangor equitable fashioned. relief that could be “I think that there is That would enjoined voting shares. Punta could be from the controlled they, controlling position putting have the effect of course, object very Id., at 16. much to that.” pre opposition In its memorandum in motion for a Chris-Craft’s injunction, statement, liminary Bangor pp. Punta made this 24-25: moving prove allegations in its assuming Chris-Craft can “Even Bangor opportunity of Punta has had the papers at a full trial after fully trial, money judgment com will properly preparing itself for any allegedly because pensate damages it suffered Chris-Craft for go Bangor Punta.” 107,574 elected to shares Public holders argument Indeed, expressly stated at oral counsel for Punta standing injunctive relief under to seek a tender offeror’s Arg. unchallenged. Tr. of Oral causation, simply note that Chris-Craft’s On I would the issue of proof dependent on damages were not recovery which includes elements petitioners’ acquired but for viola actual control would have it Ap I affirm the Court And I also note that would not tions. should peals’ award. calculation total