*1 May Harry and Anna VOEGE Walter Last Tunmore, as Trustees Harry Voege, W. Testament Will and Plaintiffs, al., Defendants. et

R. G. SMITH Civ. 1042.

No. 71 Court, States District

United

S. D. New York. July 1, Reargument

On Trynin, City,

Charles New York plaintiffs.

Simpson, Bartlett, Thacher New City, York In- defendant dustries, Inc. Fried, Harris, Frank, & Jacob- Shriver

son, City, New York for defendant Glen Corp. OPINION LASKER, Judge. District representative In this ac- stockholders’ Schenley Industries, tion on behalf of Inc. (“Schenley”) plaintiffs pre- move for a liminary injunction against adoption plan agreement reorgan- of a (“the Plan”) ization of which effect merge Corporation will be to Glen Alden (“Glen Alden”) Schenley. Schenley’s are owners of 14% stock and sue on behalf of a class minority public Schenley’s holders of common and its convertible in- to common. Glen the owner of remaining provides stock. The Plan that each out- standing share of common, ex- cept Alden, shares owned Glen cancelled, will be will be converted into principal in cash and amount of 7y2% a new Glen Alden subordinated sinking fund debenture due 1985. Plain- tiffs “pack- contend that the value of this *2 “package” they age” per would receive under share. Defendants is $26.60 per Plan. it at share.1 $29.00 August 8, By accompanying prospectus proxy statement The carry designed meeting (clearly the “in- to of stockholders out notice of annual agreement), Sehenley Alden tention” clause of the March announces that Glen voting purchase the necessary power to stock to cause Glen Alden offered has the Sehenley reorganization at a to consummated of holders be approximately produced in favor of it intends to vote formula per reorganization. share. Plaintiffs $53.10 class they represent declined to tender predicate on an is, they stock; refused the their alleged 10(b) of the violation of Section August Alden in offer made Glen (“the Exchange ofAct Securities that, by They claim, nevertheless, 1968. Act”). pendent claim under state A agreement, they virtue of the March 1968 sup- the facts mon law added. Since right” continuing as third have a “vested porting pendent claim occurred party of the March 1968 beneficiaries chronologically sup- than the facts earlier agreement to receive at $54 $53 porting claim, content the federal present time. relationship can be better understood by describing the state cause of action argument, plain As a subordinate first. estopped tiffs contend that Glen Alden contending price per that a lesser because, share is fair connection with I. offer, tender stockhold pendent party third bene- A. The enjoin the ers of Glen Alden ficiary claim: ground a waste offer on the that was assets, and Alden of Glen Alden’s Glen 20, By agreement 1968, March dated that the asserted 1,417,689 acquired shares of Alden Glen per fair common share was $53.33% Sehenley Lewis N. common stock from argument may and reasonable. This be Rosensteil, operating officer of chief summarily since, disposed of while Glen Sehenley, sellers. and six other related showing estopped Alden on a be per purchase price was The $53.33% situation is factual sub share. The was at arm’s transaction stantially identical to which existed length. agreement March such provided intention that was “the (other conclusory than a parties” that the holders Schen- complaint), it is ley oppor- common would be afforded such a can be made. tunity to sell their shares for a total con- comparable sideration to or more favor- 10(b)-10b-5 B. The Claim: purchase price paid able than the prospectus Glen group.2 Rosensteil Plaintiffs claim following para- 1968 contained the purchase agreement virtue of stock graph : 1968, they party of March became third completion Exchange “After of the beneficiaries of Glen Alden’s contractual Of- fer, obligation may (subject to future and are now entitled to conditions) per per make a share rather than the further tender of- $26.60 remaining fer to the share which is their of the holders of Sehen- valuation principal Pell, 1. amount of Affidavit of John H. debentures. Defend- G. sworn to preferred 24, 1971, page 2, March ants value the at $26.10 and Affidavit of p. (See affidavit, Stanley share. Shuman 5. S. Shuman sworn to June appear in- The Pell affidavit does not 1971, page 5, respectively. out Each package. preferred clude a valuation standing share of $1.40 stock Complaint, par. will be converted into cash and $4.50 issue), plaintiffs propose ley to com- controls Common Stock argue irrevocably Sehenley. will dam- In con- Alden and bine Glen aged any by the further tender consummation nection with accept require combination, them to cash which will consideration offer or and securities valued them the holders of Schen- $26.60 received when, stock ley for each share of common according who have ac- Common Stock *3 Exchange view, have cepted the Offer than, than, to receive for each share. or the same as more Exchange provided in the Offer.” For the reasons set forth below injunction preliminary is motion for prospectus that the falls is claimed It denied. awry requirements 10 of of the Section passage (b), since neither in this or else- II. prospectus what where “disclose did justify prompt future conditions would preliminary injunction “an extra- A provided a lesser consideration than that granted ordinary remedy, will not be Exchange Offer, of in view the said probable except upon a of clear obligations Alden’s under the Ros- injury.” possible irreparable success and Agreement, and ensteil Stock Purchase original). (Emphasis Motors Checker party in view of the vested third bene- Chrysler Corp., Corp. 405 F.2d 323 ficiary of interest therein (2d 1969). Cir. 3 It is the other members of the class.” Co., Clairol, Inc. v. Gillette See also: argued further the instant Sym (2d 1968); F.2d 265 Cir. 389 which would result in the of conversion ington Wayne Corp. In v. Dresser common stock.for a (2d dustries, Inc., Cir. 383 F.2d 840 by of cash and debentures valued them at Gittlin, 1967); Corp. v. Studebaker per share, is “unfair to the minor- $26.60 ity, (2d Comp 1966); F.2d 692 Societe Cir. designed injure minority, toir Etablisse De L’Indus. Contonniere grossly and its effect is so unfair to the Department ments Boussac v. Alexander’s minority shocking as to be and fraudu- Stores, (2d Inc., 299 F.2d Cir. (Complaint, par. 25). lent.” 1962). Finally, conclusory language which often characterizes 10b-5 com- preliminary injunction “A will not is- plaints court, alleged it is sharply sue where there are contested “constitutes, by the Plan and the use Holobeam, issues of fact.” Newman v. majority stockholdings Glen Alden of its F.Supp. 1389, n. Sehenley and its control and domina- (S.D.N.Y.1970), cases cited there- Schenley’s of Board of Directors to in. same, effectuate the would constitute an By plaintiffs’ appli- all these tests the act, practice, and course of business which cation fails. have not estab- operates operate or would as a fraud and probability succeeding lished the on upon minority public deceit irreparability the merits or the of dam- Sehenley, including stockholders of age injunction, in the absence of an class, plaintiffs, as a in connection with sharply there are contested issues fact Sehenley forced sale of their shares in the case. proposed merger, under the in violation prohibitions Probability of the A. Section 10 of the Success: Exchange Securities Act of 1934 and (1) the outset a real Jurisdiction: At promulgated Rule 10b-5 the Securities issue exists as to whether the court has Exchange Commission thereunder.” subject matter. It Claiming allega questionable have no whether the (under law, complaint Delaware tions of which describe fraudu- Complaint, 14(b). par. issue presented an (b). deceptive within conduct We lent or 10(b) strikingly that before similar to meaning 10b-5 Section of Rule in Inc., language Appeals Rosen- of this Circuit Court Act. While Airlines, “shocking as Northwest words blatt v. uses such There, (2d parrots the (par. 25) or F.2d 1121 Cir. and fraudulent” language minority claiming (par. the statute against “constitutes, 27) the Plan majority Plain- proposed stock- an stockholder. its use Glen Alden holdings * * * same, proxy statement effectuate tiffs claimed relating In act, deficient. practice, was an would constitute affirming operates or denial the District Court’s course of business Appeals up- injunction, held operate the Court as a fraud and deceit would requirements were the Act minority public stock- alleges regardless complied the fairness Schenley,” it nowhere *4 holders of with— minority upon can be such conclusions of the transaction facts —when fully minority of informed any a been are facts Absent based. opinion disclose, stated: misrepresentation the facts. failure to Yet this is or omission. commission “[Ojnce the Northwest 10(b) (§ what the federal statute sufficiently to alerted SBC’s had been Judge Mansfield Act) is all As about. merger promoting the interest in active observed, denying applica- recently an charges had been that and under for a suits, it against stockholders’ it in the same statute and rule: determine, on them to for each of was basically future a disclosure view of the “Rule is the basis of his own 10b-5 merged company provision; plaintiff that his knowl- if claims and stock, edge his own regardless share- the cost of disclosure * * * along go approval to the directors whether he holder appraisal his for a breach or assert are to be held liable fiduciary duty ** (435 *, remedy rights.” his F.2d at than federal lies under state rather plaintiffs have at hand the In the case Nytronics, law.” Abramson v. relating to all the facts informed of been F.Supp. 519, (S.D.N.Y.1970). proxy have, transaction analysis plaintiffs’ with the com- in connection The true material issued “sufficiently plaint merger, alerted” has here is not that fraud been pro- perpetrated, interest or that a mis- Alden’s “active there merger” moting representation as the details as well or failure disclose—in- deed, very a number of lawsuit and the facts all seem to be on the of this rather, page pending actions. table—but as stated at similar plaintiffs’ memorandum: not, any not, reach do We need federal being as to whether “Rule' violated re- final 10b-5 determination However, the quiring jurisdiction here exists. the holders of ques- analysis right appraisal preceding raises sufficient

mon, who have no 262(k) prob- on the east under Delaware Gener- tion in itself to ability doubt § prevailing this Corporation Law, upon al to receive following court; and, proposed discussion as the stock, indicates, questions also presently are other serious which is share, per worth less than inherent case. $54 consideration in cash and debentures (2) if assume Even we Fairness: presently which have a realizable invoked, properly federal of $27.50.” prob- not demonstrate the do ability they succeed on will But not seem to does they en- theory Their state a cause merits. of action under Section 10 decree, of one of as a third an antitrust share to beneficiary titled party validity, Schenley’s profitable subsidiaries. most is of agree- since the Rosensteil-Glen analyze microscop- There is need merely it stated March 1968 ment of ically ex- valuation affidavits parties that those was the intention side, perts stated but be on each Schenley common would the holders ex- presentation of defendants’ opportunity to sell their afforded an be thorough considerably pert is more comparable favorable or more shares plaintiffs’. It persuasive than that of paid $53.33y3 price Rosensteil than the reasons for the sufficient to observe added-),. opportunity (emphasis Such not dem- above, outlined have plaintiffs in was tendered they probably succeed will onstrated that they rejected it. unfair. the offer is very advised all offer of Damage: ability Irrepar B. (including holders of argument will any Plaintiffs’ further offer were plaintiffs) if than, is con- if the Plan at a “more made it assump- provided” the false summated is on the same as that based than, ($53.10). (Emphasis tion that have no occasion They added.) no au- under Delaware law. offer thority contention, to sustain then, issue, to a de- is reduced appears direct variance with be at whether, independent of *5 termination of past history, language 262(k) of of 8 Del.C. Section are terms of the Plan the Law, Corporation the Delaware General plaintiffs their class. fair to the provides are issue, plain- this narrow the Even as to when, as available to stockholders established, degree tiffs have not necessary “ *- * * under the terms of a granting of a to sustain the * * * holders or consolidation such probability preliminary injunction, the accept required for such stock they Plaintiffs them- will succeed. anything except or and cash stock stock agree selves the offered corpora- lieu of fractional shares of the in Defend- them is worth at least $26.60-. surviving, resulting tion ants it at Even if we ac- $29.00. the or consolidation.” Here valuation, cept plaintiffs’ there is no accept” “required stockholders are unfairness, since of clear the merged corporation— debentures of the beginning record indicates that from the is, something other than stock of organization the re- 1971 to the announcement of cash. 24, average February the plaintiffs ap- But even did if not have closing price 28%, of Glen Alden was praisal rights, they nevertheless would range the has from 25 to 31%. not be consum- during stock not over all of did trade mation of the since it is obvious 1969, 1970, or in the latter months of litigate that their the issue re- traded as low as in 1970 and 20% of- mains has been prices paid in 1969.4 The to Rosensteil they fered—much made—that can- Schenley and offered to holders of recovering fully protected by not be are, mon in if not irrele- they damages from defendants whatever vant, clearly controlling not as to fair- entitled to. ness, obviously premium since were prices paid and, any event, for in control Sharpness C. Factual Issues: going presented without the into details not should record, the there have been substantial granted issues of where fact are changes in the business of Schen- affairs “sharply contested,” (Newman v. Holo- ley days, including sale, 1390, beam, supra, F.Supp. since those the at n. p. Stanley Shuman,

4. Affidavit of S. value, Magazine 1971, fairness Here issues of Forbes of March sub- relating by plaintiffs (to tender offer mitted on this facts motion regarded keenly 1968 are contest- indeed the effect that he as certainly money-making hardly ed. this consideration is machine), While rise to controlling, relevant, dignity necessary not when evidence expressed comparison past added to those above concludes delicate changed the matter. values circumstances. injunc- for motion presently if Even the contentions tion is denied. by plaintiffs accepted, disposi- were It is so ordered. matter would not be altered. my opinion earlier stressed In I Reargument On Motion for juris- even if were assumed reargument The motion denied. misrepresentation dictional stated, adequately assert the court had probability the facts mov- overlooked included had not demonstrated ing affidavit and the letter on the merits nor es- success had attorney 1971, establishing damage. irreparability tablished strength- substantially Sanders-Riklis Glen These views are decision, valued stock ened down June handed (the my day opinion) share. facts These were after and were indeed discussed in overlooked Vice Chancellor Marvel in David J. following paragraph original Co., Indus- Greene et al. opinion: tries, Inc,, Civil Action No. Chancery Dela- Court State argument, plain- “As a subordinate deny- County, ware in and New Castle tiffs contend that es- ing, ease, companion en- a motion to contending topped from that a lesser merger. join Schenley-Glen Alden price per because, share is fair in con- there, Finding I *6 nection tender 1968 rights have found to be the ease offer, of Glen Alden appraisal, remark- the Vice Chancellor enjoin the offer on the ed: ground it that was a waste Glen “ * * * assets, plaintiffs Alden’s and Glen Alden asserted have not shown will be common share $53.33% was fair in that if an not issue does argument may and reasonable. clearly This their relief lies in disposed summarily since, proceeding. while Glen estopped equity stand court should “While showing present situa- factual ready corporate prevent fraud and substantially tion is identical to that by overreaching fiduciaries which existed in 1968, no such stockholders, v. Bennett (other conclusory has been made than a Corporation], Breuil [Petroleum complaint), and it is Del.Ch. 99 A.2d [236] such a im token this same Court should can be made.” orderly pede the consummation of an reargument statutes, On the merger motion for the Delaware having contend that factu- an efficient and fair method substantially judi al situation is furnished, permits identical which cially protected existed which But from withdrawal stockholder, I do merger disgruntled not find supports the record such an assertion. American Ce remarks MacFarlane v. North Riklis, Corporation, Meshulam Chairman of the Board ment Del.Ch. Alden, excerpted page A. 396.” between the observed that It is to be day filing of this motion return reargue Schenley-Glen Alden sig- While consummated. aas

nificant not bar fact pressing prayer

matter of law from impossible relief, for the

for is now enjoin

court even were justified, is not. reargument

The motion is denied. Smith, Anderson, George Ragsdale, R. It is so ordered. Raleigh, Ragsdale, Dorsett, N. Blount & plaintiff. C., for Stacy, Jr., McLean, McLean, Dickson C., Lumberton, Henry McLean, N. Chambliss, Chambliss, Joseph B. C., Clinton, N. Paderick & Warrick defendant Nat. Bank of North Southern Carolina. Shockey, Comp- Legal Dept.

John E. C., Currency, Washington, troller of D. FIRST CITIZENS AND BANK TRUST Atty., Whitty, R. U. S. John Asst. COMPANY, Plaintiff, Raleigh, C., Camp. N. for defendant . SOUTHERN NATIONAL BANK OF MEMORANDUM OF DECISION CAROLINA, NORTH and William B. Camp, Comptroller Currency DUPREE, Judge. District States, the United Defendants. action, By this Bank First-Citizens Civ. No. 968. (First-Citizens) Company and Trust declaring judgment seeks a a certificate Court,

United States District B. issued the defendant William Carolina, E. D. North Fayetteville Comptroller Currency Camp, Division. (the Comptroller), the United States ev- idencing approval his and authorization operation for the establishment defendant, Bank Southern National *7 National), (Southern of North Carolina of a branch bank in the Town Clin- ton, illegal Carolina, North and void and injunction against National Southern enjoining operation of the branch pursuant bank Southern National the certificate. The case is before plaintiff court on cross-motions of the judgment summary and defendants under Rule 56 of the Federal Rules of Civil Procedure. alleges

In its First-Citizens Comptroller’s approval branch was void for failure Comptroller findings express make “solvency “need and convenience” and required by provi- the branch”