Court Opinion

ID: 9460183
Source: CourtListenerOpinion
Date Created: 2023-08-04 21:44:05.937749+00
Date Added: 2024-06-11T17:36:31.111746
License: Public Domain

WIDENER, Circuit Judge
(concurring) :
I concur in the issuance of the temporary injunction because I believe the existence of the agreements between Da-tronics and the various companies whose stock found its way to the market through Datronics, on account of the agreements, with no apparent business purpose which has been expressed to us, other than the creation of a public market for the stock, points to the fact that Datronics may have been a willing cats-paw in a device or scheme to avoid the statute. For this reason, I believe there is a probable right and a probable danger, and that the right may be defeated unless the injunction is issued. The considerable weight which should be given to the need of protection to the plaintiff is satisfied by the need of protection by the public from possible injury resulting from the violation of the statute. Sinclair Refining Company v. Midland Oil Company, 55 F.2d 42 (4th Cir. 1932).
With so much of the opinion as holds that Datronics may be an underwriter within the meaning of the statute, 15 U.S.C. § 77b(11), I agree. The word “distribution” as used in the statute has not been defined to require value. XXIX Md.Law Rev., 320, 332.
I note that the opinion of the court may not be broadly enough read to cast doubt upon the legitimate business acquisition of one company by another, or the legitimate business merger of two companies, although a market for securities spun off as a consequence of the transfer may be thereby created; for, as the opinion of the court recites, the market created by Datronics’ spin-offs was spurious, doubtless meaning illegitimate, however actual it might have been, and Datronics caused the consummation of the transactions complained of without any business purpose of its own.
In my opinion, the root of this case is the pre-existing agreement between Da-tronics and the various companies whose stocks it spun off with no apparent purpose other than the incidental benefits of creation of a public market for the stock. If the transactions were with a view to creating a public market for the stock which the various companies could not otherwise do absent compliance with *256the statute, then I think Datronies may be held to be an underwriter. The value requirement of a sale, 15 U.S.C. § 77b(3), for the issuer (15 U.S.C. § 77b (4)) did receive value, I think, may be satisfied by the exchange of stock of the various companies with Datronies or by the exchange of stock of the various companies for services of Datronies. See also 58 Va.L.Rev. 1451.
OPINION ON MOTIONS TO RECONSIDER
PER CURIAM:
On review of the petition of Datronies Engineers, Inc., appellee herein, for reconsideration of the opinion filed on July 27, 1973 in this case, the Court denies a rehearing except as to that part of the opinion which remands the cause to the District Court for the entry of the preliminary injunction sought in the complaint of the Securities and Exchange Commission.
In regard to the injunction the Court notes the stressed reassurance, in the petition and the accompanying affidavit, of the owners of a majority of Datronies Engineers, Inc.’s stock that no more spinoffs would be undertaken, that the majority stockholders will not vote their stock in the future for any spin-off transactions or to elect as a director any person who would so vote, that the principals involved in the challenged spinoffs are no longer associated with Da-tronics, and that a merger of Datronies with another firm is in contemplation. In these circumstances the Court apprehends that its direction to the District Court to issue an injunction might have a punitive effect, which was not intended, and disturb the proposed merger.
Therefore, the Court rescinds so much of its initial opinion as requires the trial court to award a preliminary injunction, and in lieu thereof the cause is remanded for a determination by the District Court, consistently with the remainder of the opinion, of whether an injunction should or should not be issued restraining Datronies in respect to such transactions as the opinion of the Court declares to be impermissible. Nothing herein shall be construed as prohibiting or directing the issuance of an injunction, and the District Court is authorized to consider, if it sees fit, the bona fides of the merger asserted to be in prospect.
In view of the foregoing decision upon the petition of Datronies Engineers, the Court is satisfied that nothing would be gained by extending the time for the appellees, Sylman I. Euzent and John T. Gauthier to file requests for a rehearing, and their requests are denied.
No judge in regular active service or a member of the panel that rendered the instant decision on appeal having requested a vote on the appellees’ suggestion for a rehearing in banc, such a rehearing is denied. Although ordinarily a rehearing will not be granted in the absence of a request by the court for an answer to the petition for rehearing, instantly we deemed an answer unnecessary. See FRAP 40(a).