Source: https://m.openjurist.org/948/f2d/59
Timestamp: 2020-02-24 18:10:50
Document Index: 373662869

Matched Legal Cases: ['§ 78', '§ 240', '§ 240', '§ 240', '§ 240', '§ 78', '§ 240']

948 F2d 59 Calvary Holdings Inc v. Chandler | OpenJurist
948 F. 2d 59 - Calvary Holdings Inc v. Chandler
948 F2d 59 Calvary Holdings Inc v. Chandler
948 F.2d 59
60 USLW 2310, Fed. Sec. L. Rep. P 96,292
CALVARY HOLDINGS, INC., et al., Plaintiffs, Appellants,
Burton CHANDLER, Defendant, Appellee.
No. 91-1445.
Our review of summary judgment is plenary. Amsden v. Moran, 904 F.2d 748, 752 (1st Cir.1990), cert. denied, --- U.S. ----, 111 S.Ct. 713, 112 L.Ed.2d 702 (1991); Griggs-Ryan v. Smith, 904 F.2d 112, 115 (1st Cir.1990); Garside v. Osco Drug, Inc., 895 F.2d 46, 48 (1st Cir.1990). We, like the district court, must view the record in the light most favorable to the non-moving party, indulging all reasonable inferences in that party's favor. Griggs-Ryan, 904 F.2d at 115; Amsden, 904 F.2d at 752. Under Federal Rule of Civil Procedure 56(c) the moving party is entitled to summary judgment if "there is no genuine issue as to any material fact and ... the moving party is entitled to judgment as a matter of law."
Calvary's argument is that all nominees, except those covered by a separate limited exception in the SEC regulations, must file a Schedule 13D even if their votes are controlled by third parties. Section 13(a)(1) of the Securities and Exchange Act states that:
15 U.S.C. § 78m(a)(1) (emphasis added).
17 C.F.R. § 240.13d-3(1)(a) (1991).
We are of the opinion, however, that neither Congress nor the SEC intended that nominees limited to purely ministerial tasks be required to file a Schedule 13D. In 1968 Congress amended the Securities and Exchange Act of 1934 to combat a perceived problem in the area of transfers of corporate control. Individuals were accumulating large blocks of stock in corporations in a short period of time and/or making cash tender offers without any public disclosure. H.R.Rep. No. 1711, 90th Cong., 2d Sess. (1968), reprinted in 1968 U.S.C.C.A.N. 2811, 2812-14 (hereinafter House Report); see also General Aircraft Corp. v. Lampert, 556 F.2d 90, 94 (1st Cir.1977). Other investors were unaware of these possible changes in corporate control. Such investors were therefore forced to invest blindly without the information necessary for rational decision-making. See Louis Loss & Joel Seligman, 4 Securities Regulation 2164 (1990).
The amendment, called the Williams Act, was intended to alleviate this problem by requiring those in the position to alter control of a company to disclose to the SEC and the corporation their ownership. House Report at 2814; see also Wellman v. Dickinson, 682 F.2d 355, 365 (2d Cir.1982) ("Section 13(d) was designed to alert investors in securities markets to potential changes in corporate control and to provide them with an opportunity to evaluate the effect of these potential changes."), cert. denied, 460 U.S. 1069, 103 S.Ct. 1522, 75 L.Ed.2d 946 (1983); GAF Corp. v. Milstein, 453 F.2d 709, 717 (2d Cir.1971), cert. denied, 406 U.S. 910, 92 S.Ct. 1610, 31 L.Ed.2d 821 (1972); Bath Indus., Inc. v. Blot, 427 F.2d 97, 102 (7th Cir.1970); Loss & Seligman, supra at 2165-66 ("The legislative history thus shows that Congress was intent upon regulating takeover bidders, theretofore operating covertly, in order to protect the shareholders of target companies.").
Section 13(d) requires "disclosure of information by persons who have acquired a substantial interest, or increased their interest in the equity securities of a company by a substantial amount, within a relatively short period of time." House Report at 2818. Thus the Williams Act is aimed at those who seek control of shares in order to effectuate changes in a corporation. Rule 13d-3(1)(a) defining "beneficial ownership" recognizes this. The regulation focuses on the "power to vote;" the ability to "direct a vote;" and the "power to dispose" of stock. 17 C.F.R. § 240.13d-3(1)(a). Implicitly the regulation concentrates on those individuals who have "the ability to control or influence the voting or disposition of the securities." Interpretive Release Applicable to Insider Reporting and Trading, Exchange Act Release No. 34-18114, 46 Fed.Reg. 48147-01 (October 1, 1981).
Calvary argues that because the SEC has explicitly excluded brokers who hold stocks in street name under rule 13d-3(d)(2), the SEC requires that all other nominees file a Schedule 13D.4 This regulation, however, exempts brokers who have the power to vote without direction from the individual for whom they hold the stock. The regulation does not discuss those nominees that have no ability to vote without direction as in this case. It does not follow that because the SEC exempted a class of people that would be clearly otherwise covered by the regulations, namely stock brokers who may vote without direction, that the SEC intended to require other nominees who may not vote without direction to file a Schedule 13D.
Finally, the courts in defining section 13(d) of the Securities and Exchange Act look to who has the actual ability to vote. For example, in Bath Industries, Inc., the Seventh Circuit found that it was clear that " 'one who has the right to determine how the stock is voted has a beneficial interest for the purposes of this Act.' " 427 F.2d at 112 (quoting Bath Industries v. Blot, 305 F.Supp. 526 (E.D.Wis.1969)); see also GAF Corp., 453 F.2d at 716. The court opined that legal title is irrelevant for the purpose of the statute if someone else can guarantee a block of votes. Bath Industries, 427 F.2d at 112.
Calvary argues alternatively that Chandler must file a Schedule 13D because he is a member of a group as defined by rule 13d-5(b)(1).5 It is a settled appellate rule in this circuit that issues not raised in the district court may not be raised for the first time on appeal. Boston Celtics Ltd. Partnership v. Shaw, 908 F.2d 1041, 1045 (1st Cir.1990); Bettencourt v. Board of Registration in Medicine, 904 F.2d 772, 780 (1st Cir.1990). Calvary did not argue in its motion opposing summary judgment that Chandler was a part of a group and thereby required to file a Schedule 13D. It only argued that under rule 13d-3 Chandler alone as a record owner of five percent of the outstanding stock had to file a Schedule 13D. Though in a general sense Calvary addressed the issue of whether Chandler had to file a Schedule 13D as a "beneficial owner" it did not argue specifically in its brief opposing summary judgment that Chandler was a member of a group as defined by rule 13d-5. Having not been raised in the court below we will not examine the issue here.6
"The grant or denial of a Rule 56(f) continuance always rests in the trial court's sound discretion." Sheinkopf v. Stone, 927 F.2d 1259, 1263 (1st Cir.1991) (citation omitted). In this case we see no abuse of discretion in denying the continuance. Rule 56(f) provides that a continuance is proper if the party opposing summary judgment needs more time in order to obtain facts essential to justify its opposition. See Franco-De Jerez v. Burgos, 876 F.2d 1038, 1043 (1st Cir.1989); Snook v. Trust Co. of Georgia Bank, N.A., 859 F.2d 865, 870-71 (11th Cir.1988); Parrish v. Board of Comm'rs, 533 F.2d 942, 947-48 (5th Cir.1976). A party must allege, however, that those facts to be obtained through discovery are relevant to a genuine material issue in the litigation. Sheinkopf, 927 F.2d at 1263; Paterson-Leitch Co. v. Massachusetts Mun. Wholesale Elec. Co., 840 F.2d 985, 988 (1st Cir.1988).
17 C.F.R. § 240.13d-3(d)(2) states that:
17 C.F.R. § 240.13d-5(b)(1) states in pertinent part: "When two or more persons agree to act together for the purpose of acquiring, holding, voting or disposing of equity securities of an issuer, the group formed thereby shall be deemed to have acquired beneficial ownership...."
Regardless, we are of the opinion that Calvary's argument that Chandler is a member of a group and therefore required to file a Schedule 13D has little merit. According to 15 U.S.C. § 78m(d)(3) and 17 C.F.R. § 240.13d-5 a group consisting of two or more individuals who agree to act together for the purpose of acquiring, holding or disposing of stock must file a Schedule 13D. According to the legislative history, this section was intended to prevent individuals from evading the dictates of section 13d by dividing control over a block of stock so that no one person had control over five percent individually but as a group had agreed to act in concert. House Report at 2818; see also GAF Co., 453 F.2d at 716; Bath Industries, 427 F.2d at 109