The opinion of the court was delivered by: HERLANDS
Defendant Mount Clemens Industries, Inc., by an order to show cause, has brought on this motion asking:
(a) for summary judgment; or, in the alternative,
(b) to strike certain allegations of the complaint; or, in the alternative,
(c) to require plaintiff to serve an amended complaint, stating therein as separate causes of action each of the two claims for relief presently set forth in the complaint as one cause of action, and to require plaintiff to furnish security for costs as to one cause of action; and
(d) to require plaintiff to produce all indicia of the shares of stock of Mount Clemens Industries, Inc. (hereinafter referred to as Mount Clemens) held by plaintiff in order that defendants may ascertain the identity of the holder of record and the date of plaintiff's acquisition of said shares.
This is an action brought by a stockholder of Mount Clemens, both derivatively and representatively, in behalf of himself and other stockholders similarly situated.
Plaintiff bases his claims on alleged violations of sections 14(a) and 10(b) of the Securities Exchange Act of 1934 (hereinafter referred to as the 1934 Act), 48 Stat. 891, 895 (1934), 15 U.S.C. §§ 78j, 78n (1958).
Federal jurisdiction is accordingly based on 28 U.S.C. § 1331 and section 27 of the 1934 Act, 48 Stat. 902 (1934), 15 U.S.C. § 78aa (1958).
Defendants in this action previously moved, under Rule 12(b)(1) of the Federal Rules of Civil Procedure, for dismissal of the complaint for lack of jurisdiction over the subject matter, arguing that no private right of action could be based on either section 14(a) or section 10(b) of the 1934 Act. This motion was denied by Judge Metzner in a memorandum opinion filed March 1, 1965, 241 F.Supp. 345. None of the issues now before this court was involved in the motion passed upon by Judge Metzner.
The relevant facts, as alleged in the complaint and undisputed on this motion, are as follows:
1. Through a chain of control, defendants George Horvath, Ernest Horvath, and their sister, Mrs. Klari Erdoss (hereinafter referred to as the Horvaths), at or about the time of the alleged violations of the 1934 Act, controlled The Buckeye Corporation (hereinafter referred to as Buckeye), a Delaware corporation.
2. Buckeye, in turn, controlled Mount Clemens.
3. In the exercise of their ultimate control of Mount Clemens, the Horvaths installed themselves and the other individual defendants herein as directors of Mount Clemens.
4. From about January, 1963 until the time of the alleged violations of the 1934 Act, Buckeye owned approximately 80 percent of the outstanding capital stock of the Miami National Bank (hereinafter referred to as the Bank).
5. Defendants entered into a scheme whereby Buckeye would sell the shares of the Bank owned by it to Mount Clemens on terms beneficial to Buckeye and adverse to Mount Clemens.
6. In the furtherance of this scheme, defendants Horvaths, with the approval and assistance of the other defendants, caused a Delaware corporation to be formed on or about September 3, 1964.
7. In order to effectuate the acquisition by Mount Clemens of the Bank stock owned by Buckeye, the defendants solicited approval of the proposed acquisition by mailing to all shareholders of Mount Clemens, on October 8, 1964, a notice of a special ...