Court Opinion

ID: 9466117
Source: CourtListenerOpinion
Date Created: 2023-08-05 01:06:04.186291+00
Date Added: 2024-06-11T17:39:33.132359
License: Public Domain

SKELTON, Senior Judge,
concurring in part and dissenting in part:
I agree with the holding of the majority that American Fidelity (AMFI) did not violate § 14(a) of the Securities Exchange Act of 1934, 15 U.S.C. § 78n(a) (1970), and Rule 14a-9 of the SEC, 17 C.F.R. § 240.14a-9 (1976) in the mailing of proxy and supplemental proxy statements, because, as held by the district judge, there were no significant misstatements or omissions in the proxy materials.
I also agree with the decision of the majority that AMFI succeeded in establishing the absence of any genuine issue of material fact as to the subjective motivation of its directors and officials in adopting the repurchase program and as to the effect of the program on the company’s capital and surplus. The majority correctly approved the action of the district court in finding that the undisputed facts show that the company had adequately disclosed the existence, size and effect of the program, and that Rule 10b-5 does not require corporate directors and officers to disclose their subjective motivation in adopting a stock repurchase program.
*618I also agree that Counts III and IV involving state claims were properly dismissed.
However, I cannot agree with the majority’s decision to reverse the case for a hearing on Alabama Farm’s allegations that the repurchase plan was a device to manipulate the market in AM FI’s shares and thereby inflate the market price of the shares in order to preserve the defendant’s control over the AMFI, and that as a part of this scheme the defendants failed to disclose the inflationary effect AMFI’s repurchases would have on the market price of its outstanding shares, all in violation of § 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5. In my opinion, there is no genuine issue as to any material fact regarding these allegations of Alabama Farm and, therefore, a new trial is not warranted. The majority correctly states:
“The Supreme Court has cautioned that ‘ “[m]anipulation” ’ is '“virtually a term of art when used in connection with securities markets.” ’ Santa Fe Industries, supra, 430 U.S. at 476, 97 S.Ct. at 1302, 51 L.Ed.2d at 493, quoting Ernst & Ernst v. Hochfelder, 1976, 425 U.S. 185, 199, 96 S.Ct. 1375, 1384, 47 L.Ed.2d 668, 680. ‘The term refers generally to practices, such as wash sales, matched orders, or rigged prices, that are intended to mislead investors by artificially affecting market activity.’ (Emphasis supplied). Santa Fe Industries, supra, 430 U.S. at 476, 97 S.Ct. at 1302, 51 L.Ed.2d at 493-494. ‘Manipulation’ has referred, in general, to devices used to induce investment in a company’s stock, not to devices implemented to discourage such investment.”
Notwithstanding the above decisions of the Supreme Court, the majority takes the opposite view and holds that “manipulation by a corporation refers to devices used by it to discourage investment by others in its stock, and that such conduct by AMFI in the instant case acted as a deceit or worked as a fraud on AMFI or on those who have invested in its stock. I do not agree.
There was no deceit nor fraud practiced by AMFI in connection with its repurchase plan. There is no allegation by Alabama Farm of any fact that shows any purpose, plan or intent on the part of AMFI to inflate the market price of its stock by its repurchase plan. Furthermore, the execution of the plan by AMFI did not inflate the market price of its stock. The facts show that the stock was originally issued for $25 a share. Later, and prior to the time of the repurchase plan, it reached $45 a share. Thereafter, it fell to $10 a share. AMFI repurchased its stock for an average of $8.41 a share. Where is the inflated price?
Also, it should be pointed out that Alabama Farm purchased 300,000 shares of AMFI stock (approximately 20% of the then outstanding shares) for the total sum of $2,530,000.00. No one forced it to buy this stock. We can assume that it made these purchases voluntarily and at prices that were satisfactory to it. Where was the deceit or the fraud? In my opinion, they were totally lacking. There was no violation of § 10(b) or Rule 10b-5 by AMFI.
The majority holds that there is a question of fact as to whether AMFI practiced deception in its initial press release that its purchases would be carried out in a manner that would not unduly affect the market. As a matter of fact, this is exactly what AMFI did. It purchased the stock in small lots over a long period of time. No one was deceived or misled. The price of the stock was not inflated by reason of its purchases.
I agree with the decision of Judge Tjoflat when he, acting as a district judge, granted summary judgment for the defendants on this phase of the case on the ground that Rule 10b-5 was not violated because there was no “deception” of or “injury” to the plaintiffs in connection with the repurchase program. I would add that there is no genuine issue of any material fact on this part of the case.
I would affirm the judgment of the district court on both Count I and Count II.1

. In my opinion, this case is much ado about nothing and borders on being frivolous. It is obvious that Alabama Farm evolved a plan to take control of AMFI one way or another. At *619first it sought to do this by buying 300,000 shares of AMFI’s stock. When this plan failed to produce the desired results, it embarked on a course of conduct involving legal harassment, coercion and intimidation to gain control of AMFI. All of this is shown by Alabama Farm’s pleading and conduct whereby it filed two suits in Federal courts in two different states and a third suit in a state court and in connection with such suits, which were consolidated into the present case, it attempted to take 38 depositions and filed 15 motions in connection therewith. These motions were obviously without merit, as the district court never acted on them. As a part of its case, Alabama Farm is making demand on AMFI for $3,423,078 in damages without alleging any fact that would entitle it to even $1 in damages. However, the making of the claim in such a large amount is itself an harassment and an intimidation. It appears to me that AMFI has done no wrong and that Alábama Farm is the bad actor in this scenario. A reversal of this case would enable Alabama Farm to subject AMFI to more harassment and intimidation. I do not think we should allow our courts to be used for such purposes.