Court Opinion

ID: 9453065
Source: CourtListenerOpinion
Date Created: 2023-08-04 18:01:15.98285+00
Date Added: 2024-06-11T17:33:29.508039
License: Public Domain

MOORE, Circuit Judge
(dissenting in part):
A glance at the amended complaint reveals that plaintiffs, namely, a corporation and two partnerships, are owners of common stock of S. H. Kress and Company (the shares of which were traded on the New York Stock Exchange). Their shares were acquired between November 15, 1963 and August 17, 1964. This is not a class action. Plaintiffs do not purport to represent or to champion other stockholders than themselves.
The relief sought, however, asks that (a) the defendants, Genesco and its Board Chairman, Jarman, pay to plaintiffs “and the other minority stockholders of S. H. Kress and Company the fair value of their pro rata share of the uses of the business, assets and credit of S. H. Kress and Company wrongfully made by defendants.” (Kress, the assets of which plaintiffs would distribute pro rata to other stockholders whether they desired to be recipients or not, is not even a party to the action); (b) defendants distribute to plaintiff and the minority stockholders their pro rata share of the assets of Kress — in other words liquidate Kress at their behest regardless of the wishes or welfare of the other stockholders; and (c) while awaiting such dismemberment that defendants be enjoined from (i) purchasing Kress stock, (ii) issuing any public report or statement except along the lines conceived by plaintiffs, (iii) using an alleged sum of $72,-000,000 for the acquisition of an “other firm or corporation”, and (iv) deriving any benefit from the assets of Kress; and (d) fees to plaintiffs’ attorneys.
In short, plaintiffs, as owners of 16,-608 shares of Kress out of 2,322,738 outstanding (April 18, 1966), ask the court by affirmative injunction, in effect, to usurp managerial powers and override the votes of 2,306,130 shares.
The extremes to which plaintiffs go in allegations and argument are the best refutations to their asserted positions. Were there any fraud practiced on stockholders who had tendered their stock, the Securities and Exchange Commission in its amicus brief has a succinct answer: “Here plaintiffs were not injured by any fraud allegedly practiced on the Kress stockholders who accepted the tender offer ; plaintiffs were not even Kress stockholders at the time of that alleged fraud” (P. 7).
I agree with the law as stated in Cochran v. Channing Corp., 211 F.Supp. 239 (S.D.N.Y., 1962) that manipulation of security prices whether by purposeful depression of dividends or by unlawful market maneuvers is actionable but plaintiffs do not allege that they sold their shares or suffered any loss as a result of such practices, even assuming they occurred. As the Commission (in its brief) stated “in respect to these activities [market depression] plaintiffs are neither buyers nor sellers of securities,” and since “the only transactions in securities which plaintiffs refer to in this connection are the defendants’ possible purchases of Kress shares from other Kress shareholders at depressed prices,” plaintiffs in this suit by injunction or otherwise have no right or standing to dictate to other stockholders what they should do with their stock. If such stockholders choose to sell and thereby should sustain damages, they still retain the right to sue, if they believe that they have been defrauded, or to stay out of the law courts if their peace of mind is best maintained by such abstention. The Commission recognizes that “such purchases have no *549sufficient causal connection with any injury which plaintiffs claim to have suffered” (Br. p. 8).
In stating that plaintiffs have a claim for injunctive relief, the majority are forced to turn this action, in effect, into a class or derivative action, which it is not, to “cure harm suffered by continuing stockholders.” Were this so, Kress would appear to be an indispensable party. If plaintiffs have been made the victims of “[djeceitful manipulation of the market price,” they should pursue their claim for damages, if any. But it is scarcely appropriate for the judiciary by mandatory injunctive decree to decide at the behest of three stockholders what the corporate dividend policy of Kress should be or that a stockholder other than themselves should be deprived of his supposedly constitutional right to sell his stock to Genesco if his judgment so dictates. Courts should stand ready to redress wrongs suffered by plaintiffs who allege and prove that they have been damaged thereby but not, by the device of an exercise of injunctive powers to go beyond this role.
I would affirm the judgment in its entirety.