Court Opinion

ID: 9001684
Source: CourtListenerOpinion
Date Created: 2022-11-27 13:08:05.217153+00
Date Added: 2024-06-11T17:11:11.133435
License: Public Domain

MESKILL, Circuit Judge,
dissenting:
I agree with the majority’s treatment of the statute of limitations issue. I also agree with the majority that the question of the target board’s reliance on the artificially altered market price is a reasonably determinable question of fact. Therefore, I agree that Litton, the plaintiff, bears the burden of proving that reliance. However, I part company with the majority in its application of summary judgment principles to this record.
Under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is appropriate when the record shows that “there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed. R.Civ.P. 56(c), Because the defendants will not bear the burden of proof at trial on the issue of the Itek Board’s reliance, they need not negate reliance at the summary judgment stage either; rather, they may establish the absence of a genuine issue as to reliance by the Itek Board by showing the absence of evidence of reliance in a well developed record. See Celotex Cory, v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986). The issue in dispute here, reliance on the market price, must be genuine; a mere scintilla of evidence will not suffice to defeat summary judgment. See Anderson v. Liberty Lobby, 477 U.S. 242, 247-52, 106 S.Ct. 2505, *7532509-512, 91 L.Ed.2d 202 (1986). I disagree with the majority’s conclusion that this record contains evidence from which a reasonable jury could conclude that the Itek Board relied in any meaningful way on the then-current market price.
None of the Itek Directors offered testimony sufficient to support a finding of reliance. The majority places heavy reliance on the fairness opinion given the Itek Board by the investment firm First Boston. There is evidence that the Itek Board relied on First Boston’s evaluation of the $48/share offer as “fair” in recommending that the stockholders accept that offer. There is also evidence that, in reaching its conclusion that $48/share was fair, First Boston relied in part on market price analysis, including an examination of the “premium over [market] price” of comparable acquisitions. The majority concludes that the Itek Board thus relied on a “market price plus premium” formula in assessing the offer.
The record evidence does not support this conclusion. There was evidence that First Boston regarded the premium over market price to be one of several relevant factors in assessing the fairness of a tender offer, but the record does not show that there was any particular size premium that rendered an offer “fair.” The comparable acquisition data compiled by First Boston indicated the relationship between market price and acquisition price for a number of acquisitions it deemed comparable to the Litton/Itek deal. Those acquisitions resulted in “premiums” that ranged from a 23.2% discount below market price to a 121.1% premium above market price. The average premium of those companies presented in the First Boston pricing report was approximately 64% above market price.
The majority asserts that the fact that the ultimate price recommended by the Itek Board to the shareholders was almost exactly 50% above the then-prevailing market price is circumstantial evidence that the Board utilized the “50% premium” method the majority earlier asserted as the prevalent “rule of thumb for calculating the minimum acceptable offer” in tender offer situations at that time. If there were any evidence in the record that there was in fact an accepted “50% premium” method of assessing a fair price for a stock in a takeover situation, the near perfect conformity of the ultimately accepted price to that method would be strong circumstantial evidence that the method had been utilized.
The record evidence, however, does not support a finding that such a method in fact was prevalent or was known by the members of the Itek Board. There is no evidence that the First Boston presentation focused on a 50% above market method of analysis. As noted above, the premiums First Boston reported for comparable acquisitions varied widely. Moreover, of the sixteen acquisitions for which this data was presented, only one was even within five percentage points of 50% (45.9%).
The majority relies only on materials outside the record to support its contention that there was a prevalent “50% premium” rule of thumb in existence at the time of this acquisition. Neither the Yale Law Journal article nor the Wall Street Journal article is part of this record and thus cannot be used to raise an inference of reliance by the Itek Board. Moreover, the support to which the majority directs us does not purport to present such a “rule of thumb” for a “minimum acceptable offer.” See Note, Insider Trading by Intermediaries: A Contract Remedy for Acquirers’ Increased Costs of Takeovers, 97 Yale L.J. 115, 129 & n. 67 (1987); Corporate Mergers Rose 8% Last Year to 2,533, The Most Since 1974, Wall Street Journal, Jan. 13, 1984, at 46. Rather, they simply note that the average acquisition price during the early 1980s was about 50% above the prior prevailing market price. Acquisition price may always be expressed in terms of prior prevailing market price. That is hardly evidence of how a particular acquisition price was determined.
In short, the fact that the price ultimately agreed to by the Itek Board was roughly 50% above the then-current market price does not imply that the Board used that market price in determining that the $48/ share price was acceptable.
*754This record is entirely devoid of evidence from which a reasonable jury could conclude that the Itek Board relied on the then-current market price in any way relevant to this dispute in making its recommendation to stockholders regarding the Litton offer. I, therefore, would affirm the entry of summary judgment in favor of defendants.