Opinion ID: 3011883
Heading Depth: 3
Heading Rank: 4

Heading: The NY Daily News Article

Text: On June 6, 1996, Rick Cotton of NBC published an article which stated: In 1995, a seismic event occurred: Rockefeller Center went bankrupt. NBC, in considering ways to provide for its long-term studio and office needs, had discussions with various investors to find a solution that would benefit Rockefeller Center, NBC and New York City. After examining many alternatives, NBC began to consider the possibility of purchasing our current space at Rockefeller Center. . . . This purchase would give the potential new owners of the Center $440 million in new, up-front capital . . . . Second Amended Complaint, at P 89; App. at 00843. The NY Daily News Article lacks the requisite particularity in the same way as the WSJ Article. Cotton’s article establishes that at some point after the bankruptcy of the partnerships, NBC considered a number of alternatives for providing for its corporate needs. Only [a]fter examining many alternatives, NBC began to consider the possibility of purchasing the space that it had been leasing. Again, exactly when NBC began considering a purchase is unclear. Cotton’s article is just as consistent with the notion that GE/NBC began considering a purchase after the acquisition of RCPI by the Investor Group. And, the Daily News Article says nothing about the Investor Group or its intentions. 5. The February 20, 1996 Draft Letter & The April 23, 1996 Sale Agreement According to the Shareholders, the agreement evidencing the sale of a portion of Rockefeller Center to GE/NBC itself supports their claims. They assert that the April 23, 1996 sale agreement provided for: a payment by GE/NBC of $440,000,000 (‘the Purchase Price’), to be paid to the successor owner in the manner contemplated by the reorganization plan. Second Amended Complaint, at P 87 (emphasis in original). Furthermore, the Shareholders contend that the sale agreement referred to a draft letter of February 20, 1996 in which NBC assumed control over 30 heating, ventilation, air conditioning, elevator, and window washing systems of the space it occupied. The Shareholders argue that since the Partnerships had filed a Second Amended Joint Plan of Reorganization on February 8, 1996 -- the same plan referred to in the sale agreement above -- the Investor Group must have contemplated the sale at that time. Also, because the sale agreement incorporated by reference the February 20, 1996 letter agreement, the sale must have been in consideration at that time as well. The District Court held that the term contemplated in the sale agreement does not refer to the subject of negotiations between the Investor Group and GE/NBC when the Second Amended Reorganization Plan was filed, but rather to the manner of payment of sale proceeds as set forth in that plan. We agree, and find no plausible interpretation fitting the Shareholders’ description. The phrase a payment . . . to be paid to the successor owner in the manner contemplated by the reorganization plan is a clear statement of how the parties to the sale intend to structure the payment, that is, as set forth in or contemplated by the reorganization plan. This is nothing more than an assurance given by the parties to the sale that the $440 million payment would be in accordance with the requirements of the prior reorganization plan. That assurance does not support the Shareholders’ view that the sale itself was somehow in contemplation in February 1996, when the Second Amended Reorganization Plan was filed. The absence of any independent indication of a potential sale to GE/NBC in the reorganization plan supports the District Court’s interpretation. With regard to the incorporation by reference of the February 20, 1996 letter agreement, we agree that it also fails to substantiate the Shareholders’ claims. First, the sequence of events does not logically flow to the conclusion that the Shareholders advocate. The fact that GE/NBC negotiated for some autonomy over physical plant systems in February 1996 does not mean that sale negotiations were underway at that point. In fact, it seems to point to the contrary conclusion, namely that as lessee they desired more control. A subsequent sale simply indicates that the negotiations progressed along a continuum, starting with 31 alternative lease options and advancing to arrangements contemplating more control in the hands of GE/NBC. Thus, the incorporation of the February 20, 1996 letter agreement in the April 23, 1996 sale agreement fails to show that the Investor Group had engaged in sale negotiations with GE/NBC before the date of the proxy vote, March 25, 1996. 6. Statements of Counsel at the Bankruptcy Hearing The Shareholders point out that at a May 6, 1996 hearing relating to the bankruptcy proceedings of the Partnerships, counsel for the Partnerships stated that there had been discussions for several weeks, pertaining to the proposed transaction between the REIT designee and NBC. Second Amended Complaint, at P 90. Furthermore, counsel for RGI stated that some time ago there had been some consideration of doing a transaction with G.E. . . . Id. at P 91. The Shareholders also contend that the bankruptcy court itself expressed surprise at the sudden announcement of the sale to GE/NBC and queried whether the disclosure statement in some way might have been inadequate or inappropriate. Id. atP 92. From these statements, the Shareholders conclude that the Investor Group must have been negotiating the terms of the sale with GE/NBC before the proxy vote. Furthermore, the Shareholders believe that the revelations made at the bankruptcy hearing support their claim that the Investor Group had, in fact, formed an intent to consummate the sale. Neither of those two conclusions are justified by these statements. First, the statements regarding the timing of negotiations relating to the sale to GE/NBC are unspecific. Several weeks before May 6, 1996 and some time ago lack the sort of precision necessary to meet the requirements of Rule 9(b) and the Reform Act. The statements shed no definitive light on the issue of exactly when negotiations began or when the Investor Group formed the intent to consummate the sale. As the District Court noted, several weeks before May 6, 1996, the date of the bankruptcy hearing, could be interpreted to include only the six-week period after the Shareholders’ vote -- that is, the six weeks between March 25, 1996 and May 6, 1996. Therefore, there is nothing in either of the statements that even remotely suggests that 32 negotiations relating to the sale definitively commenced during a time when the Investor Group would have been obligated to disclose such negotiations. As to the statement of counsel for RGI, the Shareholders attempt to manufacture an inference of fraud by noting that co-defendant David Rockefeller was also a principal of RGI. But as the District Court appropriately noted, RGI is not a defendant in this case, and the precise issue before the bankruptcy court involved the disclosure obligations of the Partnerships vis-a-vis their creditors in the Chapter 11 proceedings, not the duties of the Investor Group with regard to the proxy solicitation. Merely because David Rockefeller was a principal of RGI does not transfer the disclosure obligations of RGI to the Investor Group. The statements simply do not address who was negotiating, when the negotiations took place, and what exactly was on the table in February 1996. The conclusion that the Shareholders reach is supported only by speculations and inferences that are not justified under the set of facts alleged. This last point also puts the statement of the bankruptcy court into perspective. The Shareholders invoke the phrases inadequate or inappropriate and disclosure statement, implying that the disclosures in the Investor Group’s proxy statement must also have been insufficient. It bears repeating that the court’s statement was made in the context of the Partnerships’ bankruptcy proceedings. Furthermore, the obligations alluded to by the court pertain to the disclosure obligations of the Partnerships, not the Investor Group, in the bankruptcy proceedings. Again, those obligations are wholly distinct from the Investor Group’s disclosure obligations in the context of its proxy solicitation. In short, the Shareholders have taken these statements out of their proper context. More importantly, the Shareholders’ allegations fail to substantiate any actual ongoing negotiations between GE/NBC and the Investor Group before the proxy vote, an intent on the part of the Investor Group to consummate the sale, or any fraudulent misrepresentation or omission concerning the same. 7. The Letter to the New York State Department of Law Shortly after the bankruptcy hearing described above, RCPI wrote to the New York State Department of Law on 33 May 22, 1996, primarily for the purpose of requesting that a no-action letter received in 1988 would remain valid as to the upcoming transfer of title to GE/NBC pursuant to the sale. The Shareholders highlight one line in the May 22 letter: [The Partnerships have] filed for protection under the federal bankruptcy code and the proposed plan of reorganization contemplates that the Partnerships shall transfer fee title to certain units (including its reversionary rights) to NBC, and transfer fee title to all remaining units then owned by [the Partnerships] to RCPI. App. at 00990. Because the Partnerships filed their Second Amended Reorganization Plan on February 8, 1996, and because the May 22 letter states that that plan contemplates the transfer to NBC, the Shareholders conclude that sale negotiations must have been underway at least as early as February 8, 1996. Again, the Shareholders have taken this statement out of context, resulting in a tortuous misinterpretation. Most importantly, the Shareholders’ interpretation contradicts their discussion of the bankruptcy proceedings above, in which the Shareholders concede that the first time that the issue of the GE/NBC sale arose in the bankruptcy court was at the May 6, 1996 hearing. Therefore, it would have been impossible for the February 8, 1996 plan of reorganization to address the GE/NBC sale because, as far as the bankruptcy court was concerned, there was no such sale until May 6, 1996. And, as the proceedings before the bankruptcy court evidenced, the Partnerships’ plan of reorganization was not a static set of simple steps. The plan was fluid, subject to uncertainties and disputes, and flexible enough to accommodate a sale of a portion of Rockefeller Center consummated after the Shareholders’ vote. Thus, the statement that the plan of reorganization contemplates the sale to GE/NBC is completely consistent with the overall intent of the May 22, 1996 letter: to convince the Department of Law that the recently consummated sale to GE/NBC did not contravene the plan of reorganization and, consequently, that the Department of Law should extend its no-action position. In fact, the only plausible chronology of events is delineated by the Shareholders’ own allegations: (1) a plan 34 of reorganization was, in fact, filed with the bankruptcy court in February 1996; (2) at some point after the proxy vote, the Investor Group and GE/NBC agreed to the sale of a portion of Rockefeller Center; (3) this disclosure was made to the bankruptcy court on May 6, 1996, at which time the bankruptcy court satisfied itself that the sale to GE/NBC was consistent with Partnerships’ Second Amended Disclosure Statement and Plan of Reorganization; and (4) on May 22, 1996, RCPI requested that the New York State Department of Law approve the sale by seeking to extend the effect of the 1988 no-action letter to the GE/NBC deal. The fact that the Shareholders misinterpret statements made throughout the course of these events does not change the fact that their allegations do not substantiate their core claim of fraud -- that the Investor Group had engaged in negotiations relating to the GE/NBC sale prior to the proxy vote and that the Investor Group had formed an intent to consummate that sale during those pre-vote negotiations. Having reviewed all of the critical factual events alleged by the Shareholders, we agree with the District Court that the Shareholders have failed to support their claims of fraud with the factual particularity required by Rule 9(b) and the Reform Act, 15 U.S.C. S 78u-4(b)(1).