Court Opinion

ID: 8880563
Source: CourtListenerOpinion
Date Created: 2022-11-26 20:24:44.368367+00
Date Added: 2024-06-11T17:06:37.516302
License: Public Domain

FEINBERG, Circuit Judge
(concurring and dissenting):
I concur in Parts I and II of the court’s opinion. I dissent from much of Part III, because I cannot join in the disregard of the district court findings of misleading conduct by defendant, particularly those concerning the interview on August 13, 1968, of defendant’s president, Vesco.
This case was heard in the trial court by two district court judges. In September, Judge McLean heard evidence on plaintiffs’ motion for a preliminary injunction on three separate days; two months later, the action was tried before Judge Lasker for twelve days. After listening to Vesco and other witnesses, both judges concluded that Vesco’s statement of August 13 to the Wall Street Journal was an attempt to mislead the public. In order to appreciate fully the error in overturning the findings of the district court, it is necessary to set them out at some length.
This is what Judge McLean found:
But his [Vesco’s] conduct on August 13 is much harder to explain. On that day he recommended to the board that the tender offer go forward. The ultimate trier of the fact in this case could easily find that Vesco intended on August 13 to proceed with the tender offer, in view of the fact that three days later, in disregard of Smith, Barney’s advice, he executed the necessary documents to that end. Yet, on the same day, August 13, he informed the Wall Street Journal, in effect, that ICC’s intent was to the contrary. He said in substance that:
“Our preference is to sell our stock in Electronic Specialty * * but there is no urgency to do this. We will continue to watch the progress of the proposed merger with Carpenter and may, at some point, seek to resume talks with Electronic Specialty.”
Even if Vesco did not, as he claims, furnish the erroneous figure of close to 100,000 shares as the amount of ICC’s holdings, still the rest of his statement is misleading enough. Moreover, Vesco knew that the Wall Street Journal had made this same mistake before, on July 31. He did not take this opportunity to correct it. It is hard to see what purpose he could have had in mind in making this statement if it were not to mislead.
*953In the court’s opinion there is substance to plaintiffs’ contention on this branch of the case and a reasonable probability that plaintiffs will ultimately succeed at the trial in establishing a violation of the statute. [Footnote omitted.]
Judge Lasker considered the matter at much greater length and reached a similar, but more definite, conclusion. He found:
On August 13th, Yesco was again interviewed by the Wall Street Journal’s writer for “Heard on the Street.” The interview was published on August 15th and included the following statement:
“Asked about International Controls’ position on Electronic Specialty, which turned down a merger bid from International and agreed instead to a merger with Carpenter' Steel, Mr. Yesco said: ‘Our preference is to sell our stock in Electronic Specialty (close to 9% of Electronic’s two million shares) but there is no urgency to do this. We will continue to watch the progress of the proposed merger with Carpenter and may, at some point, seek to resume talks with Electronic Specialty.’ ”
The very night of the interview (August 13) ICC’s Board of Directors met and, according to its minutes, Vesco recommended to the Board that a tender offer should be reconsidered and that ICC stood an excellent chance of successfully tendering for 25% of ELS’ stock. The Board did not turn a deaf ear but advised Vesco to wait a week and to consult with Smith, Barney in the interim.
On August 16th, after extensive discussions with ICC, Smith, Barney declined to act as dealer-manager for the ELS tender offer and Mr. Dugan testified that their reason was “general doubts in our minds as to the possible implications of the reading of The Wall1 Street Journal which appeared on August 15th * * Disregarding these views and Smith, Barney’s repeated advice against a hostile tender offer, Vesco proceeded to arrange that day for another brokerage firm, of which he was a limited partner, to act as dealer-manager of the tender offer.
Also on August 16th, ICC filed with the Securities and Exchange Commission, Schedule 13-D required of tender offerers by Section 14(d) (1) of the Act.
On August 17th, Vesco swung ICC’s Board of Directors over. * * *
On August 19th, the tender offer was published in New York, Los Angeles and San Francisco.
The judge further found:
(1) ICC misled both ELS and the public as to its actual intention to make a tender offer. With a rare and momentary lapse only, it is clear that from mid-July on it was ICC’s unswerving intention, carried out by its chief executive officer and dominating personality, Vesco, to acquire control of ELS by one means or another, and by a hostile tender offer if nothing else would work. Even on the occasion of the one momentary lapse, when Vesco placed a day order for sale of 10,-000 shares of ICC’s ELS stock, the order was not pursued thereafter because he was advised that any sale might prejudice a later tender offer. Clearly, therefore, the intention to tender was the controlling element. Further, it must be remembered that ICC was under a compelling necessity to invest its funds, and the record is barren of evidence as to any other vehicle for such investment. In spite of this unswerving intention, ICC, through Vesco, made misleading statements on several key occasions, in private discussions with ELS and in public releases, claiming that it had no intention of proceeding to a tender offer, when it in fact did.
(2) ICC made misleading statements as to its intention to sell or not to sell its ELS holdings.
It is clear, therefore, that Judge Lasker found that Vesco intended on August *95413 to go through with the tender offer but deliberately gave the interviewer a contrary impression. (The obvious reason, of course, would be to keep the price down so that the tender offer would be more attractive when made.) No matter how phrased, these are findings of fact which are supported by the record and should not be overturned; if they stand, Vesco’s conduct was clearly improper. But the effect of Part III of the majority opinion is not only to minimize the whole episode — contrary to the thrust of the new legislation — but to preempt the trial court’s function in this significant area. The importance of not doing that is emphasized by Part II of the opinion, where my brothers wisely point out to the district judges that in administering section 14(d) and (e), “the opportunity for doing equity” may be greater while the tender offer is still in process. In other words, the district court judges are told to use their resourcefulness in the “prompt and judicious handling of applications for temporary injunctions” in this difficult area. If, at the same time, this court will subject the findings and conclusions of the trial judges to unrealistic scrutiny, then the advice is self-defeating.