The plaintiffs, Symington Wayne Corporation (Symington), a Maryland corporation whose stock is traded on the New York Stock Exchange, and two of its stockholders, appeal from the denial by Judge Bonsai in the Southern District of New York of a preliminary injunction against a tender offer by Dresser Industries, Inc. (Dresser), a Delaware corporation whose stock is also traded on the New York Stock Exchange, for 400,000 shares of Symington stock at $40 per share net. Judge Moore denied the application of the appellants for a stay pending appeal but granted a preference and we heard the appeal on July 25, 1967. As we agree with Judge Bonsai that plaintiffs have established neither that they are reasonably certain to prevail at trial nor that the injury they would incur by the denial of a preliminary injunction is irreparable and outweighs the harm which a preliminary injunction would cause Dresser and others, we affirm his denial of a preliminary injunction. See, e. g., Unicon Management Corp. v. Koppers Co.,
Dresser purchased some 178,000 shares of Symington stock, about 9% of the 2,000,000 shares outstanding, in April 1967, and sought to negotiate an acquisition of Symington in May and June 1967. Symington’s board of directors rejected Dresser’s proposal, and on June 28, 1967 announced agreement in principle on a combination with Universal American Corporation. Dresser’s tender offer for *842 400,000 shares of Symington stock was first advertised on July 10, 1967, with a one-week deadline, and was extended for another week on July 17, 1967. The result of this offer was to raise the price of the stock substantially above the prior level. This suit was brought on July 11, 1967 by Symington and two of its stockholders, of whom one is an officer and director of Symington and the other tendered ten shares of Symington stock to Dresser.
Plaintiffs’ first count charges that Dresser’s tender offer was accompanied by four material misrepresentations and omissions proscribed by the Securities and Exchange Commission’s Rule 10b-5, 17 C.F.R. § 240.10b-5. Two of plaintiffs’ claims under Rule 10b-5 are based upon the omission from the advertisement of the offer, which included a letter of transmittal which could be clipped and used to tender shares, of two terms which were set forth in the invitation for tenders, which was obtainable from the tender agent and apparently from other brokers. The invitation, but not the advertisement, stated that Dresser might withdraw the offer “if any legal action or proceeding shall have been instituted or threatened in any court or government agency against Dresser or Symington Wayne with regard to this Invitation,” and that the tender price should be reduced by the amount of any dividend with a record date prior to transfer of the tendered stock to Dresser. The third Rule 10b-5 claim is based upon a provision of the offer that if Dresser should acquire Symington before August 1, 1968 tendering stockholders will be offered the securities or other property to which they would have been entitled if still stockholders, a provision characterized by Dresser’s news release of July 7, 1967 as assuring tendering stockholders “the equivalent” of what they would have received had they not tendered. Plaintiffs assert that this characterization is misleading because tendering stockholders will recognize taxable gain while any acquisition of Symington would probably involve a nontaxable exchange. Plaintiffs’ final Rule 10b-5 claim is that while the offer stated that Dresser had offered Symington’s board of directors one convertible preferred share of Dresser paying an annual dividend of $2 for each share of Symington, it did not state that the shares were to be callable at $42.50 per share after five years.
Plaintiffs’ second count alleges that the provision of the tender offer entitling tendering stockholders to the property they would have received as stockholders if Dresser acquires Symington before August 1, 1968 is a “warrant or right to subscribe” to a security or an “investment contract” which must be registered before a public offering under the Securities Act of 1933, 48 Stat. 905 (1934), 15 U.S.C. § 77b(l); 48 Stat. 77 (1933), as amended, 15 U.S.C. § 77e. Plaintiffs contend that since Symington’s certificate of incorporation requires an affirmative vote of two-thirds of the shares outstanding for approval of a merger, the harm they would suffer by consummation of the tender would be irreparable.
Although Dresser has not argued mootness, we note that this appeal was not mooted by the expiration of the tender offer. E. g., Porter v. Lee,
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We agree with Judge Bonsai that plaintiffs have not shown that they are likely to establish at trial that any of the four misrepresentations and omissions they allege are material and were or would be relied upon to an extent sufficient to justify an injunction. Compare List v. Fashion Park, Inc.,
We also agree with Judge Bonsai that plaintiffs have not shown that they will be irreparably injured by the denial of a preliminary injunction. They allege that Dresser will have acquired the power practically to block a merger of Symington with any other corporation by a fully successful tender; but if Dresser were found after trial on the merits to have violated Rule 10b-5, plaintiffs or other persons interested could apply to the court for relief against the voting of the shares. Compare Vine v. Beneficial Fin. Co., Inc.,
Affirmed.
Notes
. “Insofar as is pertinent here, the test of ‘reliance’ is whether ‘the misrepresentation is a- substantial factor in determining the course of conduct which results in [the recipient’s] loss.’ Restatement, Torts § 546 (1938) ; accord, Prosser, Torts 550 (2 ed. 1955) ; I Harper & James, Torts 583-84 (1956). The reason for this requirement, as explained by the authorities cited, is to certify that the conduct of the defendant actually caused the plaintiff’s injury.”