Richard W. Bosse v. Crowell Collier and MacMillan

customs and the Coast Guard independent justifica each had officer investigatory stop a brief

tion they cooperated The fact

vessel. impairs justifica way in no

one another was us agency Neither stop.

tion for stalking horse. as a other

ing the

AFFIRMED. al., BOSSE et

Richard W.

Plaintiffs-Appellants

, AND COLLIER MACMILLAN

CROWELL al., Defendants-Appellees.

et

No. 75-1298. Appeals, States Court of

United

Ninth Circuit.

Dec.

Thomas J. Trimble (argued), of Jennings, Salmon, Phoenix, Ariz., Strouss & plaintiff s-appellants.

Terence F. Gilheany (argued), of Cad- walder, Taft, York, Wickersham & New Y.,N. for defendants-appellees. Before and GOODWIN, CHAMBERS Judges, CONTI,* Circuit District Judge. Conti, Judge, California, United States Samuel District Northern District of

* TheHonorable sitting by designation. operations. finance Coinart’s loan to CHAMBERS, Judge: Circuit approximately Bank lent Coinart a total interlocutory appeal certified This is $325,000, gave eight the Bank and Coinart 54(b) from the district Fed.R.Civ.P. amount, with promissory notes for that due dismissing seven order court’s from November 17 to December dates alleged in their com- relief claims for nine personally Plaintiffs [VNB notes]. allegations in true the Accepting as plaint. pledged to the guaranteed these loans and must, the relevant as we complaint, security majority of the Coinart Bank are as follows. of record facts Despite stock. these loans from officers, directors are former adequately Coinart was unable to finance of Coinart Cor- controlling shareholders its operations, and Macmillan then entered of musi- a manufacturer [Coinart], poration the scene. instruments, saxophones. C. G. mainly cal and re- a manufacturer Conn, [Conn], Ltd. 28,1971, On October Macmillan and Coin- instruments, acquired tailer of musical Bosse, (again by art president) entered and Collier Crowell defendant by agreement, a written whereunder Mac- into large diversified [Macmillan], Macmillan $300,000 agreed up millan to lend Coinart to various contractual Through conglomerate. Agreemеnt]. agreed Macmillan also [Loan below, Conn are outlined dealings, which $325,000 the purchase to from the Bank pri- became the Macmillan parent and its evidencing worth of VNB notes Coinart’s and creditors of customers mary suppliers, prior indebtedness to the and to take 1970, contract a written In late Coinart. by assignment corresponding security the was executed [Supply-Purchase Contract] stock).1 (the controlling shares of Coinart Conn, whereunder Coinart and by Coinart obligated pay Coinart to when due buy and Conn to agreed to sell certain notes, the schedule for which these VNB specific to pursuant saxophone instruments appended Agreement. to the Loan to Coinart was Payment by Conn orders. agreement upon was to take effect Macmil- shipment. of days within ten to bе made purchase lan’s of these notes. From Octo- required Conn to furnish also The contract ber, through January, 1972, Macmillan work-in- tooling and a current specified $270,000 and, pursuant lent Coinart to the and usable” inventory “good of progress Agreement, gave Loan Coinart Macmillan apparently to be used for parts, saxophone amount, with eight notes for that total due by Coin- of the instruments production 24, 26, January April from 1972 to dates contract, became Under this Conn art. 1972 [Coinart notes]. supplier. largest purchaser and Coinart’s oth-, with began negotiations When Coinart for- 19, 1971, Macmillan On November of possible acquisition entities for the er purchased the VNB notes and also mally Conn, latter, however, at the by the Coinart agreement, exacted from a letter Macmillan, behind allegedly fеll direction of plaintiffs agreed wherein if Coinart Supply-Pur- obligations under the its on any defaulted on of the VNB or Coinart Contract, financial detri- to Coinart’s chase notes, all of the notes would be accelerated ment. become and five owing upon and would due to Coin- Bosse, days’ written notice from Macmillan 1971, June, Richard plaintiff Agreement]. art Thereaft- Coinart, began negotiations of president [Acceleration pay- for a Valley er, National Bank time with Bank] extended [the Macmillan 28, end, Coinart) on the terms and conditions set same date of October on that 1. To prior security agreement agreements ad- forth in the between letter executed guaranteeing agreements personally and the Bank. These letter to Macmillan Coinart dressed Agreement obligаtions under referred to the Loan and indicated due” all of Coinart’s “when they were made in consideration for the Agreement pledging to Macmil- and the Loan $300,000 by up lan, purchase Macmil- to to be made loans as collateral for Macmillan’s Coinart, pursuant Agreement, lan to to the Loan loans to Coinart notes and its direct the VNB $325,000 by by purchase pledged plain- Macmillan previously and the of the collateral all majority (including of VNB notes. shares worth to the Bank tiffs 81,1972, January to divestiture for notes violations of the fed- ment of the VNB two eral and Arizona antitrust laws payment by the first Macmil- and the time 22 and 1972. On lan’s April impeding negotiations Coinart notes to Coinart’s however, gave 3, 1972, Macmillan February competitors certain of Macmillan’s for the was in competitors’ acquisition the lаtter default possible Coinart notice that and finan- on one of the and cial rescue of According plain- on VNB notes Coinart. to 2, 1972. The tiffs, notice February negotia- notes due responded Macmillan to the Acceleration pursuant by directing stated that tions its subsidiary Conn remaining 2 of the (15 1, Sherman Act 2), U.S.C. §§ York and Macmillan in sale was held New and specifically intended competi- to lessen bought plaintiffs’ stock for Coinart $100. tion through acquisition activities, in obtaining record of ownership After thus violation of 7 (15 section of the Clayton Act stock, May the Coinart Macmillan filed on U.S.C. Violation of § anti- Arizona’s voluntary dismissal of a notice of alleged.2 trust laws also On Macmil- under from the case Fed.R.Civ.P. motion, lan’s the district court dismissed 41(a), removing party Coinart as a thereby complaint this count of the for failure to action. state a claim subject lack of matter jurisdiction. discovery, plaintiffs After filed We find this disposition extensive cor- 18, complaint rect since July a second amended on lack standing to sue for 1973, separate claims alleging nine for re- antitrust violations. granted lief. The district court Macmillan’s This court repeatedly has used “tar the motion to dismiss for failure to a state get approach3 area” standing antitrust relief, claim on claims plaintiffs’ five of (15 section 4 of the Clayton Act granted summary judgment for Mac- 15), U.S.C. requiring § “identification of other claims for plaintiffs’ millan on two of affected the economy area of and then relief. The lower court directed entry of ascertainment inju of whether the claimed judgment 54(b) under Fed.R.Civ.P. as to its ry occurred within area.”4 In re Mul clаims; dismissal of these seven the propri- tidistrict Air Vehicle Pollution M.D.L. No. ety of these is now before us. dismissals 31, 122, (9th 481 Cir.), F.2d 129 cert. denied nom., claim sub Morgan Plaintiffs’ first for relief in v. Automobile Mfrs. Ass’n, Inc., 1045, their complaint sought damages 551, treble 94 38 S.Ct. agree Title 1. plaintiffs’ Ariz.Rev.Stat.Ann. Ch. art. 4. We with defendants that re- Valley liance on v. Harman National 339 (9th 1964) misplaced, Purdue, F.2d 564 is generally Lytle since the 3. See & Antitrust Tar- opinion plaintiff get indicates that the Clayton in 4 of was active Area Under Section Act: economy allegedly Standing area of the Light affected Determination of of the Al- wrongful event, Violation, any leged defendant’s acts. in our Antitrust 25 Am.U.L.Rev. 795 subsequent (1976). cases to Harman we have consist- ently “target utilized the area” test.

607 Delaware, authoring judge v. because Blankenship see (1973); 336 L.Ed.2d Indiana, ap- 426 rather than law was found to 519 F.2d Corp., Hearst Cases, Asphalt Liquid ply. importantly, re Western More Schlick was 1975); In 1973), de cert. (9th Cir. suit, 199 F.2d in contrast to 487 shareholders’ derivative l. v. Co. et a nom., Oil Standard sub nied suit in their individual plaintiffs’ present 1419, 39 919, 94 S.Ct. al., 415 U.S. et Alaska authority to buttress capacities. noWith recently have also We L.Ed.2d successfully cannot position, plaintiffs of law for question standing is a noted standing here.6 establish antitrust properly that it determine court to claim for divestiture un where the Plaintiffs’ ruling pre-trial may be denied (15 compet Clayton 16 of the Act U.S.C. der section “component is not a plaintiff “component 26) or a also because of their lack of is barred infrastructure” itive Lenore & John significance.” standing. thorough After a review of this competitive F.2d Brewing Olympia v. in In legislative ‍​​‌‌‌‌‌​‌​​‌‌‌‌​‌​​​‌​​‌‌​​‌​‌‌‌​​​‌​​​‌​‌​‌‌‌​‌‍history, Co. we held section’s case, it is undis 1977).5 In our (9th Cir. Telephone Telegraph Corp. & v. ternational (and pre although Coinart puted Corp., & Electronics Telephone General instrument is) in the musical still sumably 1975) that divestiture is F.2d 913 business, individuals plaintiffs as production private actions. remedy not an available been in that never now and have are not Volkswagen v. Corp. also Calnetics See as sharehold their roles aside from business Inc., America, Cir.), Thus, ers, of Coinart. and directors officers U.S. S.Ct. indi solely in their sue here who plaintiffs, (1976).7 attempt Plaintiffs’ L.Ed.2d within that area are not capacities, vidual ground that it in distinguish ITT on the al by defendants’ economy affected seeking dives separate competitor volved a violations. antitrust leged titure, this case concerns an at whereas Castle, Plaintiffs, relying previ Schlick return to of stock tempted 94,909 (S.D.N.Y. ¶ Fed.Sec.L.Rep. them, unpersuasive. is ously CCH owned equi appealing concededly make 1974), Thеrefore, prop first claim was shareholders that former argument table erly dismissed. clearly is within corporation claim for relief chal Plaintiffs’ third be should not economy area of affected authorizing statutes lenged the Arizona very antitrust suing for the from barred unconstitutional, depriv sale as foreclosure by the means allegedly was that violation procedural proc of their due ing plaintiffs corpora acquired the the defendant however, vacated, right prior evidentiary hearing. to a ess was later tion. Schlick 9, 1974, pend- August recognized this case was supra, tive while also Lenore & 5. John court, replaced ing the corre- message district Supreme to recov in recent that Court’s 44-1408(B) Clayton sponding provision found in id. § 7 of the of section er for a violation 1976-77) injury, (Supp. (рart Uniform State An- Act, plaintiff prove of the “antitrust” must a Act), standing any is, to injury type titrust which confers antitrust laws of the injured “person in his or . . . business prevent flows from and that intended to were any guidance property.” In the absence of acts unlaw makes the defendant’s that which 498-99, scope citing as to the supra from the Arizona courts at John Lenore & Co. ful. Bowl-O-Matic, Inc., standing provisions, slightly we Corp. different v. Pueblo Brunswick standing lacking reasons as find for the same L.Ed.2d 701 U.S. Clayton granting standing section 4 of the Act. See id. (1977). to indi believe We 1976-77). (Supp. engaged 44-1412 affected § in the are not viduals who economy inimical would be indeed area of the Corp., supra the district In Brunswick note 7. underlying purposes laws. the antitrust to the private in a anti- court had ordered divestiture outrightly appeals suit and the court of similarly trust the view thаt are of 6. We rejected portion granted. of relief Since standing as antitrust laws under Arizona’s lack appealed Supreme 44-1405(B) issue to the the Court, however, was not Ariz.Rev.Stat.Ann. well. Former “[a]ny person standing did not address the the Court (1956) conferred Thus, agreement, ITT remains the law of by” any or issue. case damaged trust unlawful repealed this circuit. effec- statute was That combination. payment correctly dismissed this The district court the Coinart and state a claim under 42 count for failure to VNB notes at April, until least of the lack of suffi 1983 because U.S.C. § thrust of these oral understandings cient “state action.” Macmillan’s foreclo Macmillan, was that aware of del- Coinart’s sale of the Coinart stock was pledged sure situation, icate financial would help nurse it 9-503, 9-504, by UCC §§ authorized through its difficulties “rolling over” аdopted in Arizona. Ariz.Rev.Stat.Ann. dates, loan repayment say, by due that is to (1956), (Supp.1976-77). 44-3149 44-3150 §§ renewing the as they notes fell due legisla Arizona Plaintiffs claim 90-day periods, successive as the sup- Bank these provisions in Ari ture’s enactment posedly sum, had long- done before. Arizona law drastically zona altered arrangement term financing assertedly thus sufficient “state constituted action” contemplated by the parties, and Macmillan activate the amendment due fourteenth breached agreement this basic when it essentially This process protections. claim strictly enforced literal terms of the rejected has been addressed our by calling written documents af- Agreement a single, fully-inte constituted lan in that it to failed abide by certain grated written contract alleged agreements between with Macmil and Coin- lan, plaintiffs. Coinart and The district art. Essentially, plaintiffs alleged that court’s implicit finding pre to that effect there were understandings mutual oral be- cluded parol tween Macmillan and introduction evidence to al plaintiffs which, ter while or modify express not memorialized in the actual writ- terms of that ten documents of October 28 and contract. generally November See Brand Elledge, v. 19, 1971, 352, 101 obligated Ariz. (1966); Macmillan 419 P.2d 531 Jamison defer re- similarly Inc., Adams has (1974); 8. Sales, been Nowlin v. Professional Auto followed in a ma jority Bryant denied, of the other circuits. See v. (8th Cir.), Jef 496 cert. F.2d 16 419 U.S. Ass’n, Savings 1006, ferson Federal 328, & Loan 166 (1974); U.S. 95 S.Ct. 42 L.Ed.2d 283 178, (1974); Gary Pinnx, App.D.C. v. James v. 1974); 509 F.2d 511 495 F.2d 206 Darnell, Shirley 1974); v. v. Gibbs State National 505 F.2d 741 739 493 F.2d Titelman, denied, (3d Cir.), (2d Cir.), 1009, cert. 502 1107 F.2d 419 U.S. 1039, 526, 329, (1974). 95 42 42 S.Ct. L.Ed.2d 316 L.Ed.2d 284

609 Higgins Savings v. Arizona Ariz.App. 3 See & Loan Life Ins. States v. Southern Ass’n, 55, 61, 476, (1966). parol evi- 90 Ariz. 365 P.2d 481 131, 412 P.2d to, subtracting adding prohibits (1961); Properties, Line Inc. v. Deer- dence rule Shore contradicting the terms of from,^varying Chemicals, Ltd., or Ariz.App. O-Paints & unаmbiguous written con- complete and 331, 334-35, 760, (1975). 538 P.2d 763-64 or contem- through prior evidence of tract properly The district court here found the negotiations. agreements or poraneous 28 and November 19 written docu- October Sligh, v. 89 Ariz. Development Co. Richards complete unambiguous, ments 329, (1961). Plain- 358 P.2d rejection parol therefore evidence to deposition state- argue that certain tiffs modify express writings terms of and a written Macmillan officials ments justified. required was The court was not by Mac- prepared schedule repayment loan writings those in determin- beyond to look consid- and submitted for personnel millan ing parties that intended them to con- to Macmillan’s board directors eration par- stitute the entire contract between the policy lenient “roll over” indicate that a Meisner, Co. ties.10 See Hofmann part rule. considered as of the dence have been should parties, es- between the thus written contract Moreover, deposition the statements Mac- parol caping under the evidence rule. exclusion rely upon are millan officials that data, however, appeared label under the This certainly ambiguous and do not indicate breach and, payment if schedule” ‍​​‌‌‌‌‌​‌​​‌‌‌‌​‌​​​‌​​‌‌​​‌​‌‌‌​​​‌​​​‌​‌​‌‌‌​‌‍even “Tentative of contract. part Macmillan, adopted be deemed cannot arguments inapplicabili- 10. Plaintiffs’ other parties. “agreement” the Sim- the between of unpersuasive. ty parol rule are of the evidence proposed repayment ply put, schedule was the 610 from the April leading deviate the transactions document to written

the City of parties. of the See The court intent thereto. district dismissed true this 11, Burke, Ariz.App. 504 19 subject v. inter jur- Scottsdale count alia because matter simply does not (1972).11 Our case applicable P.2d 552 lacking; isdiction was the statute of questions mold. While fit within plaintiffs’ of limitations barred claims un- disposition may summary render fact often 12(2) of 1933 der section the Securities Act inap- as fraud and mistake of such claims (15 777); plaintiffs’ U.S.C. claim for re- § Ashton, 4 Ariz.App. v. see State propriate, laches; was barred by plain- scission (1967), 599, 727 the uncontroverted 422 P.2d remaining tiffs’ assertions were not stated reveal the of these case absence facts in this particularity with sufficient under Fed.R. record shows that clearly elements. 9(b) and state a Civ.P. failed to claim under attorney their examined each plaintiffs and 12(b)(6). Fed.R.Civ.P. Several close ques- executed, the time it dis- at document claims, presented are tions these and we represent- length with Macmillan cussed at part reverse in the court’s disposi- district terms and conditions about atives those of tion them. were there differences between the respect plaintiffs’ allega With fully understood what was be- parties, and parties 12(2) under and 17 of ing signed. The dealt at arm’s tions sections the 1933 represented by (15 777, were length 77q), plaintiffs counsel Act U.S.C. lack §§ negotiations, throughout the and had full standing to sue under these sections for knowledge surrounding all facts damages or since either rescission even un These facts transaction. warranted dis- the most der liberal view cannot be conclusion as a of law trict court’s matter purchasers considered either or offerees оf mistake, inequitable conduct, fraud or Wolfson, securities. Simmons v. 428 F.2d prerequisites reformation, necessary 455, 1970), circumstances, Under these lacking. were 999, 459, U.S. S.Ct. L.Ed.2d 450 was properly reformation denied. Nuss- (1971); Corp. McLendon, Greater Iowa v. Court, Superior 504, baumer v. 107 Ariz. 1967); 788-91 see 507-08, (1971). P.2d 846-47 Chip Stores, Stamps Drug Blue v. Manor 723, 733-34, 736, sought Plaintiffs’ seventh claim for relief (1975).12 Thus, L.Ed.2d 539 damages alleged prongs and rescission for those viola- plaintiffs’ tions of the federal and seventh claim were properly state securities dis subject fraud laws in connection with foreclo- missed for lack of jurisdict matter plaintiffs’ sure sale of Coinart stock on ion.13 admissibility parol Supreme yet

11. The evidence for refor- issue which the Court has not may hinge purposes initial mation on an find- addressed. Id. at 734 n. 95 S.Ct. 1917. In ing Apolito event, any of one of elements. See qualify not do as either Johnson, Ariz.App. 414 P.2d purchasers or here. offerees evidence Even if such is admissible for this inquiry, however, preliminary district court court, ground district an 13. The alternative disposition its did not base of this sixth claim for dismissal of claims under section rule, parol on the evidence rather on but 12(2) sky of the 1933 Act and Arizona’s blue mistake, as a determination matter of law that (Ariz.Rev.Stat.Ann. tit. law ch. arts. 13 inequitable lacking. fraud or conduct was 14), & held that these claims were barred applicable statutes of limitation. 15 U.S.C. plaintiff 12(2) 12. The class under section 77m; 44-2004(B). § Ariz.Rev.Stat.Ann. expressly “person[s] isAct limited to Securities year waited for more than a from .”, purchasing security such . . thus re- discovery their securities fraud quiring purchase by plaintiff. an actual complaint amending before to add this contrast, may apparently 17 of that section Act totally Since claim. this was a new claim only encompass purchasers not actual but also (the based a transaction foreclosure sale of plaintiff offerees within the class. See Blue stock) the Coinart which had not even occurred Stores, Chip Drug Stamps supra v. Manor complaint filed, original at the time the This, & n. U.S. at 733-34 95 S.Ct. 1917. “relation back” doctrine Fed.R.Civ.P. course, implied assumes that an civil cause of 15(c) plaintiffs here. would not aid See Rural section, action can be maintained under that

611 law ance v. Casualty Co., based their securities Bankers Life & also 6, 10(b) 12-13, of the 1934 on section U.S. part in L.Ed.2d claim (15 78j(b)) Exchange (1971); Act U.S.C. § cf. Rochelle v. Marine Securities Midland (17 240.- thereunder CFR (9th rule 10b-5 Grace 535 F.2d Trust Cir. court dismissed this 10b-5). 1976). Thus, The district plaintiffs’ claim was at least subject lack of of the clаim for portion within the compass 10(b) of section such allege the jurisdiction, failure to subject jurisdiction matter that matter thereunder particularity under with sufficient fraud was sufficiently alleged. 9(b), and failure to state a

Fed.R.Civ.P. argues plaintiffs’ Macmillan that 12(b)(6). Dismissal of this claim under rule in assertions this count were so vague and claim was erroneous. portion of the seventh conclusory that were properly dis Walling in As this court stated 9(b) missed under Fed.R.Civ.P. for lack of Beverly Enterprises, 476 F.2d v. however, particularity. 9(b), Rule only re 1973), if there is a “sale” of securi quires the identification of the circumstanc “in allegedly if fraud is used connec ty and constituting es fraud so that the defendant sale, there is re possible tion with” that prepare can adequate answer from the 10(b), regardless of dress under section allegations. Walling Bеverly Enterpris v. is available under state remedy whether a es, supra. conclusory allega While mere pláintiffs’ pledged of disposition law. The suffice, tions of fraud will not statements Macmillan fore through the Coinart shares time, place and nature of the purposes of was a “sale” for closure sale fraudulent activities will. Id. Plaintiffs’ rule, and accompanying its this section and claim, though seventh not model of clari “sellers” and thus thereby became plaintiffs ty, sufficiently specific to withstand requirement purchaser/seller satisfied 9(b) grounds. on rule attack Chip Stamps, supra. See by Blue imposed Bank, the question We next reach First National McClure v. allegations in this 1974), plaintiffs’ 420 whether count claim for which relief 43 L.Ed.2d 402 failed to state a could U.S. S.Ct. 12(b)(6). granted rule As Lampe, v. be under stated National Bank (1975); Lincoln above, essentially claim is 1270,1278 (N.D.Ill.1976); Dopp plaintiffs’ F.Supp. underlying to disclose F.Supp. failed Macmillan v. Franklin National intentions when it “manipula motivations and assumed (S.D.N.Y.1974).14 The 907-09 over alleged in this a creditor status re device” deceptive or tive pledged their Coinart stock as collat ceived establishing was Macmillan’s seventh claim plaintiffs’ allegations Accepting eral. relationship plain with a debtor-creditor ambiguities all arrangement, true and pledge resolving via a loan tiffs favor, purpose intent or underlying Walling, supra portion at this plaintiffs’ barely seventh claim was We cannot suf of Coinart. gaining control stage that defend Macmillan’s preliminary ficient to survive motions to at state their true alleged failure disclose dismiss. We believe Macmillan’s al ants’ legally leged purpose gaining undisclosed cannot control or motivations intentions Coinart, than of jurisdictional merely financing rather within’ fraud constitute toward 10(b). helping gain can we conclude Coinart with a view it Nor scope of section stability, gave possible connec financial rise to a alleged fraud was not “in 10(b) claim for relief section and rule the foreclosure sale of the Coin- tion with” Dopp In contrast to the facts of 10b-5.15 Superintendent of Insur- art stock. See 10(b) Hepp, of section and rule 10b-5 reason of 366 F.2d 355 Fire Protection Co. v. pledged foreclosure sale of their Coinart stock. 15. The district court dismissed re- argument, conceded that oral ‍​​‌‌‌‌‌​‌​​‌‌‌‌​‌​​​‌​​‌‌​​‌​‌‌‌​​​‌​​​‌​‌​‌‌‌​‌‍defendants 14. At rescission, quest presumably purposes standing as “sellers” had 10(b), part on section on the based at least supra at 910 and greatеr necessary than that to continue National Franklin Plaintiffs Levenson, 539 F.2d (4th operations. Coinart’s further al- Molever claim) leged (in the ninth that Conn breach- denied, 429 U.S. 97 S.Ct. Cir.), Supply-Purchase by the Contract not (1976), do ed plaintiffs L.Ed.2d fulfilling obligation thereunder send to obtain able Macmillan that allege tooling inventory parts and See adequate price. a nominal for of Coinart control Co., These last two claims were dis- Jersey Trust Coinart. North Cooper v. generally by the district court for failure to missed While (S.D.N.Y.1964). F.Supp. plaintiffs claim in that were not the state a the merits of view on express no we under parties “real in interest” Fed.R.Civ.P. of the dis claim, portion that we reverse ruling by the district court 17(a).17 This court’s order.16 trict was correct. for ninth claims eighth and Plaintiffs’ damages for At the time this action was com sought relief were related and be- Coinart was a named Af plaintiff. Contract menced Supply-Purchase breach of the Macmillan foreclosed on plaintiffs’ Plain- ter tween Coinart and defendant Conn. shares, however, Coinart pledged Coinart basically alleged despite tiffs that Coinart’s Conn, voluntarily plaintiff pursu withdrew as a compliance agreement, with that 41(a)(1). Plaintiffs’ knowledge the and on the instructions ant to Fed.R.Civ.P. with eighth only and ninth claims were asserted Macmillan, delayed and discontinued saxophone plaintiffs’ in second payment on invoices for in- the first time by complaint year struments manufactured Coinart and over one amended after Coin- event, shipped agreement. any to Conn had withdrawn. art by corporation claimed that this behavior two claims are those of the entering Cоnn necessitated Coinart’s into and not of the plaintiffs. individual Plaintiffs first contend Macmillan, that were third Agreement the Loan in the amount of the party overdue invoices beneficiaries under the Supply-Pur- plaintiffs ground by parties, were barred laches. summated and did not leave delay plaintiffs’ misapprehension by was a 15-month between There uncorrected a alleged security discovery terms, fraud and the poten- to the contract’s tially greater Macmillan had a filing complaint. requirements Two 10(b) burden under section to not espoused laches have been this court: lack respect plaintiffs’ mask its intentions with diligence by party against whom the pledging of their Coinaet stock and Macmillan’s asserted; prejudice party defense is to the and subsequent foreclosure thereon. Wе are aware asserting the defense. Central Council v. Chu authority holding of no Arizona that a contract- Ass’n, (9th Native 502 F.2d cach Cir. ing party explain subjective must his or her Harris, Upham 1974); Hecht v. & 430 F.2d entering validly motivation for into a executed 1970). clearly Plaintiffs here contract, explanation may but such an be man- diligent pressing been more could have 10(b) contracting dated party section when the Additionally, while defendants’ asser claim. party’s takes the other stock as collateral prejudice certainly tions of are not overwhelm loan, to secure the with the undisclosed inten- ing, invested shows that Macmillan record gaining tion of control of that stock. Even money during and time into Coinart the 15- though underlying negotiations and actual period, and this in our view substanti month consummation of the contraсt here were not finding ates the district court’s of laches. See infected fraud such that reformation under Rosen, Baumel v. 574-75 lie, state law would “fraud” for rule 10b-5 1969), cert. purposes expansive concept may is a more Therefore, plaintiffs’ 24 L.Ed.2d 681 encompass an intentional nondisclosure as that properly claim for rescission was dismissed. minimum, question here. At a is a it summary disposed that should judg- not have been of on the 16. While we have affirmed pleadings. ment for Macmillan on sixth claim (for reformation), part which rested in for relief fraud, allegations of we do not feel our contrast, par- 17. In themselves were ipso disposes on that count facto course taken Agreement to the Loan and Acceleration ties plaintiffs’ claim of securities fraud under Agreement parties and thus were the “real Although 10(b). did not Macmillan section respect interest” with to their fifth and sixth suppress any fraudulently misrepresent or for relief. claims agreements conditions of the con- terms or Ass’n, Men’s 405 F.2d 659 par- are real therefore chase Contract is without eighth This contention ninth claims are not interest. Plaintiffs’ ties in law, general “as a Arizona Under merit. guarantee claims for breach of their to a con- privies parties only the rule pledge agreements, but for breach of the v. West- Treadway enforce it.” may tract which, on as non- Supply-Purchase Contract Co., Ariz. Ginning 40 & Cotton Oil ern non-beneficiaries, cannot parties person (1932). third P.2d “[A] cases, merger on Finally, relying sue. he is not to which a contract recover on can contend that since the sharehold the reveals that if the contract only party corporation were disappearing ers of the the intended that contract to the parties bring to their non-derivatively able claims the third directly benefit would contract disappearing corporation, plaintiffs for the he is a member.” of which or a class party bring likewise should be able to their claims Ins. v. Reliance Corp. Sales Johns-Manville corporation the in this case. for See Miller 1969). “[I]t Steinbach, (S.D.N.Y. F.Supp. parties the in- appear that definitely must 1967); Brewing Co., v. Pearl Smallwood party as the the third recognize to tend F.2d 579 This contention and, privy as to interest party in primary point misses the of those cases. In the party third to in for the promise, order situation, merger disappearing corpora Ariz. Murphey, 81 Irwin v. recover.” still tion’s shareholders retained some inter reading simple A P.2d est, though surviving indicates even it was in the Contract Supply-Purchase to that con- parties not disappearing are since corporation, that cor to be direct not intended tract and are longer existed, poration no such sharehold inter- parties in primary of or beneficiaries bring only ers were the ones who could contract, are not and therefore est in protect disap their interests in the action contract. of that beneficiaries third-party Here, corporation. plaintiffs have pearing Coinart, lost their interest in but only not are arguments other Plaintiffs’ argu Plaintiffs’ still exists and either it or its Coinart similarly unpersuasive. dismissal was rule 41 that Coinart’s suing derivatively ment shareholders un present actually defendant it was since improper, may reсovery 23.1 seek der Fed.R.Civ.P. controlling acquisition Macmillan’s under the any harm suffered Coinart the dis brought about shares that conclusion, Contract. Supply-Purchase in the law. missal, no basis has eighth and ninth claims were 18(b) (join that Fed.R.Civ.P. contend also 17(a). under properly dismissed rule join these remedies) them to permits der of above, In accordance with the the district of their case. aspects the other claims with entirety court’s order affirmed in its ex- is however, contemplate not 18(b), does Rule portion cept dismissing plaintiffs’ belong contingent claim bringing of a damages 10(b) claim for under section plain the sense that non-party ing to Exchange the 1934 Act and rule Securities argu alternative desire. Plaintiffs’ tiffs 10b-5 thereunder. ties and inter they have “direct ment that Contract— Supply-Purchase in the ests” guarantors pledg as namely, their status CONTI, Judge, dissenting: District Macmillan— loans from

ors on Coinart’s respectfully portion I dissent to eighth them to maintain enable majority’s opinion which reverses the claims, supported by is not and ninth dismissing plaintiff’s court’s order district claims indi involved Those cases cases. claim for relief based on section seventh of duties owed alleging breaches viduals 10(b) Exchange the 1934 Act Securities here, not, to a individuals, and them as 10(b)-5 (15 78j(b)) and Rule there- U.S.C. § Empire Life non-party corporation. See (17 240.10b-5). CFR In all other Corp., 468 F.2d 330 v. Valdak Ins. Co. respects, majority. I concur with the v. Professional 1972); Buschmann relief, to the seventh claim for ed by As counsel throughout negotia- allegations held that of an majority tions, undis- knowledge had full of all facts (Macmil- party secured of a purpose closed surrounding the p. transaction.” lan) control of a debtor’s gain company (Emphasis supplied) having (Coinart) by pledge the debtor its so, being This it is clear that Coinart knew shares of stock to the controlling secured that if it did good not make obliga- security for a loan while the party as debtor tions, Macmillan, turn, would exercise its difficulty, rather was in financial than the rights, foreclose on the security and take party merely financing the debtor secured over control of Coinart. The purpose of the helping gain with a view toward the debtor security was obvious. stability, financial states a claim for relief Even if there was an omission part on the 10(b)-5. allegations Rule Such can- Macmillan, it was not It is material. did, not and do not state a claim. If necessary “that the facts withheld be mate- transaction every sophis- business between rial in the sense that a reasonable investor persons involving ticated business stock as might have considered important them security, give could rise to a securities fraud making of this decision.” Id. 406 U.S. claim when default required debtor 153-54, at Here, S.Ct. at 1472. we are foreclosure security. of the Under the ma- dealing not gullible, with defenseless busi- jority’s holding, a debtor need only make people ness protect unable to themselves allegations purpose of an undisclosed and a from the machinations of a vastly superior party secured would be forced to trial since opposite party. Under these circumstances, summary judgment be unlikely would recognized circuit has the duties allegations. method for resolution of such 10(b)-5 under Rule are not as demanding as presented below, As the reсord establishes they might be in other Hughes situations. purpose fully that Macmillan’s known Dempsey-Tegeler Co., Inc., & and, not, Coinart even if it was such an It does not make purpose undisclosed is not a material omis- sense to hold Macmillan potentially liable giving 10(b)-5 sion rise to a Rule violation. for not disclosing purpose a which was obvi- 10(b)-5, To state a claim under Rule a ous. knowingly agreed post its plaintiff plead prove must as an essen- controlling shares of stock as security ‍​​‌‌‌‌‌​‌​​‌‌‌‌​‌​​​‌​​‌‌​​‌​‌‌‌​​​‌​​​‌​‌​‌‌‌​‌‍for a tial element that defendant made either an loan. Coinart knew that Macmillan might untrue statement of a material fact or very well foreclose on the security if Coin- omitted to state a material fact. 17 CFR art failed to meet obligations. So what 240.10b-5(b); Affiliated Ute Citizens v. if Macmillan’s true purpose was to take States, United Coinart; over destiny Coinart’s was in its 31 L.Ed.2d 741 In the instant own hands and was determined its own case, omission, alleged we are faced with an knowledgeable business decisions. is, that Macmillan’s failure to alleged dis- Furthermore, close purpose its true of take over when the the cases cited the ma pledge security of stock was taken as jority support this Dopp dissent. v. Frank However, the loan. the record in this case lin National 374 F.Supp. (S.D.N. establishes that there was Y.1974), not an omission held alleged that an conspiracy to at all. To use the majority’s own words: voting shift power by selling pledged stock in violation of an clearly agreement

“The record shows that oral concealing while attorney identity and their examined each pro docu- executed, spective purchаser ment at the time it was from party dis- to the al cussed length leged agreement, at oral with did not state a Macmillan claim repre- for relief 10(b)-5. sentatives those terms and conditions under Rule Id. at 909- Levenson, about which there were differences be- 10. Molever v. 539 F.2d 996 parties, 1976), tween the fully although understood Cir. directly not point, is what being signed. parties relevant since it deals pledge with a length represent- dealt at arm’s and were stock in There, return for a loan. jury verdict reversed Fourth Circuit alleged failure as the plaintiff,

favor to a did not amount in that case

disclose 10(b) Id. at 1000. Coo- of Rule violation —5. F.Supp. Jersey Trust v. North

per lan- by its broad (S.D.N.Y.1964), majority’s support appears to

guage however, That inapposite. it is

position; wrongful conversion

case dealt pledge in a

stock, to disclose not a failure situation.

stock in all court affirm the district

I would

respects. TRANSPORTA- PACIFIC

SOUTHERN COMPANY, Truck- Pacific Motor

TION Royster,

ing Company, F. Peti- and Silas

tioners, COMMERCE COMMIS-

INTERSTATE States of

SION and the United

America, Respondents.

No. 75-2175. Appeals,

United States Court

Ninth Circuit.

Dec. 1, 1978. Feb.

Rehearing Denied (argued),

John MacDonald Smith San Francisco, Cal., petitioners.

Raymond Ripple (argued), M. San Fran- cisco, Cal., respondents. notes Agreement, all breach Supply-Purchase be- Contract owing due and if the Coinart, would also become tween Conn thereby jeopardiz- 5-day within the not cured defaults were ing position, Coinart’s financial ex- February Mac- grace period. On erting undue pressure financial on Coinart millan of all of the payment through demanded strict enforcement of Loan notes. On March VNB and Coinart Agreement Agreement. and Acceleration plaintiffs written no- gave Macmillan These actions Macmillan were allegedly Coinart stock would pledged tice that their taken for purpose ensuring ability be at a foreclosure sale sold Macmillan gain control of Coinart. Plaintiffs thus Plaintiffs, April in New York on to, claimed Macmillan con- attempted Coinart, this action including commenced spired to, and monopolize did the woodwind filing 4- original March industry instrument unreasonably re- count lаter was amended complaint, which strained trade in violation of sections 1 April twice. On foreclosure

Notes

notes court in Adams v. Southern California First only ter a few short deferrals. The district 1973), National 492 F.2d 324 granted court summary judgment for de- S.Ct. count, fendants on finding the written adopt L.Ed.2d 282 We the Adams Macmillan, contract between Coinart and analysis reject argument.8 here to plaintiffs complete and unambiguous and The fact that Arizona’s enactment of these refusing therefore to allow introduction of provisions changed greatly Arizona law parol evidence to alter or amend that con- merely this area than codifying rather tract. Plaintiffs’ sixth claim for basi- relief right law preexisting common does not es cally rested allegations on the same as the tablish “state for purposes actiоn” fifth, but sought instead reformation of the fourteenth without amendment further in parties’ written contract to governmental conform the dicia involvement. See oral understandings Melara as set Kennedy, v. F.2d forth 805-06 above. 1976); Kenly granted The district Properties, Miracle court judg- summary F.Supp. (D.Ariz.1976) (3- ment for well, defendants on this count as judge court); Leland, cf. Culbertson v. finding mistake, no fraud or deception in . F.2d 426 argu Plaintiffs’ the contract or its underlying negotiations ment clearly cannot survive the multi refusing therefore to order reforma- pronged analysis suggested Melara, supra Disposition tion. these two related at and thus dismissal of this count was claims in this manner was appropriate. proper. Agreement The October 28 Loan Plaintiffs’ fifth claim for relief sought and November Acceleration damages for breach of сontract by Macmil-

notes to the VNB and Coinart respect 263, 265, (1972), 497 P.2d Ariz.App. of the overall contract actually part citing Development Sligh, Richards Co. v. and that at a minimum parties, between supra. Summary judgment for defendants the October 28 question of whether appropri- on the fifth claim therefore was were in- written documents November 19 Equip- ate. See Radobenko v. Automated “complete” con- to constitute tended 543-44 Corp., ment disposa- properly fact not was one of tract 1975). cannot summary judgment.9 We ble Plaintiffs’ claim for reformation parties adopt argument. this “When accept can no in their sixth claim fare better. appearance gives every form a written parol note that the evidence They correctly final, they are re- complete and being to actions for totally applicable rule is not in that form incorporate quired to reformation, evidence is parol usually since so, fail to do If agreement. entire the content of the necessary to establish to the same relating unincorporated terms agreement. McNeil v. Atta parties’ true & Per- are void.” Calamari subject matter 103, 110, P.2d way, 87 Ariz. illo, (1970); see at Contracts § important Plaintiffs overlook one (3d 638-39 ed. on Contracts §§ Williston law, point, however. Under Arizona an ac law, ques- the initial Arizona Under reformation, nothing which is more tion for whether the written documents tion of equitable remedy, only will lie if than comprise fully-inte- were intended n mistake, inequitable fraud or conduct in agreement parties grated, complete underlying negotiations, causing one of law fоr the court. fected the can be treated as n emphasize budget merely used in its that Macmillan a written a document 9. Plaintiffs decision-making operations process ‍​​‌‌‌‌‌​‌​​‌‌‌‌​‌​​​‌​​‌‌​​‌​‌‌‌​​​‌​​​‌​‌​‌‌‌​‌‍regarding projection of internal cash flow Coinart’s relationship with The sched- financial Coinart. prepared which was Macmillan accountants clearly approved ule was at odds with written docu- and later and ratified Macmillan’s projection ments of 28 and November of directors. This included October board required pay repayment re- “when due” or “in schedule which indicated payment with their terms” the VNB and Coi- on the loans was not antici- accordance of interest March, 1972, bearing maturity ranging payment pated nart notes dates from and the first until June, April expected principal and thus until November 1971 to not parol projection properly argue schedule excluded under evi-

Case Details

Case Name: Richard W. Bosse v. Crowell Collier and MacMillan

Court Name: Court of Appeals for the Ninth Circuit

Date Published: Dec 6, 1977

Citation: 565 F.2d 602

Docket Number: 75-1298

Court Abbreviation: 9th Cir.