Smith, Hays and Feinberg, Circuit Judges.
This is another of the growing number of cases based upon section 10(b) of the Securities Exchange Act of 1934 ("the Act"), and Rule 10b-5 promulgated thereunder by the Securities and Exchange Commission. We deal primarily with the first amended complaint of appellant Leo Vine against appellee Beneficial Finance Company, Inc., which alleges violations of both the Act and state law. The District Court for the Southern District of New York dismissed the complaint. Its basic holding was narrow; the federal action failed because Vine was not a "seller" of securities. For reasons elaborated below, we hold that Vine is entitled to invoke the Act, and reverse the order of dismissal.
The amended complaint alleges: Vine, a resident of New York, has owned during all relevant times 100 shares of Class A common stock of Crown Finance Company, Inc., a Delaware corporation with its principal office in Delaware, as is Beneficial. Beneficial and Crown both are in the business of operating small loan offices. The stock of the former, with over a billion dollars in assets, is listed on the New York Stock Exchange; Crown, a much smaller company, has limited over-the-counter trading in its stock. Crown has two classes of common stock, A and B, with equal voting rights except that A designates onethird of the directors and B, two-thirds. In liquidation, a B share equals only onetenth of an A share, and A has a claim on eighty per cent of sums set aside for payment of cash dividends at any time, while the B stockholders have twenty per cent. There were 624,870 A shares outstanding at the relevant times, and 46,500 B shares outstanding. The officers and directors of Crown were its principal Class B stockholders. Vine's claim is that Beneficial, acting in concert with these officers and directors and using means and instrumentalities of interstate commerce and the mails, defrauded Crown and its Class A stockholders by appropriating for Class B stockholders $900,000 which otherwise would have gone to Class A stockholders, and by merging Crown into Beneficial for at least $800,000 less than the fair market value of Crown.
The complaint describes the mechanics of the fraudulent scheme as follows: While negotiating for the acquisition of Crown in the spring and summer of 1963, Beneficial desired to merge Crown into Beneficial at a cost equal to Crown's book net worth, which in June was about $1,680,000, exclusive of good will. Knowing Beneficial's wishes in the matter, Crown's officers and directors*fn1 conspired with Beneficial to divert to themselves more than a fair share of the price to be paid for Crown. Although these individuals were minority stockholders, they controlled the board of directors. If Beneficial had acted as it should have (according to Vine) and offered in a merger to give all Crown stockholders cash for their stock, or to buy Crown's assets for cash, A stockholders would have voted share for share alike with B stockholders. A's voting superiority would have prevented a merger or sale of assets giving grossly disproportionate proceeds to the B class, since either plan would require two-thirds approval of all stockholders. Even if the total price had remained the same, the Class A stockholders would then have received about $1,670,000, and Class B, only $12,500, the book value of the stock at the time. But using their fiduciary positions, the Class B stockholders "shape[d] the transaction in such a way" that they were paid about $700,000 for their shares, plus some $200,000 in benefits under employment and consulting agreements. Class A stockholders were paid only $800,000 for their stock, $870,000 less than they should have received. Moreover, but for the fraudulent scheme, Beneficial would have had to pay more than mere book net worth. Beneficial's motive in the conspiracy was to keep the cost of the acquisition down by overpaying the B's and underpaying the A's; Beneficial received at least $300,000 in tangible assets and $500,000 worth of going business value without paying for them.
In sum, in the words of the district judge, "the alleged fraudulent scheme involved three steps: (1) a purchase by Beneficial of the Class B stock from the directors of Crown; (2) a public offer or tender by Beneficial to the holders of the Class A stock to acquire 95% of the total outstanding shares of Crown; and (3) a short form merger of Crown into a wholly-owned New York subsidiary of Beneficial which would result in the acquisition of the remaining shares of Class A stock." Thus, the complaint alleges that in early August 1963, Beneficial agreed with the principal B stockholders to buy their 43,000 shares at $15.00 a share, and later that month made a public offer to A stockholders to purchase A shares for $1.25 a share. This was increased to $2.50 in an offer sent out to remaining A holders in January 1965. Some A holders accepted, not knowing the facts. By the fall of 1965, having acquired ninety-five per cent of the A stock, Beneficial was engaged in completing the merger of Crown into it on a basis which paid minority stockholders $3.29 in cash per share; since this was a short form merger, the assent of the remaining A stockholders, like appellant Vine, was not necessary. The complaint further alleges that this overall scheme and the various acts and omissions pursuant thereto constituted fraud on the Class A stockholders and were violations of the Act and Rule 10b-5, and New York and Delaware law. The amended complaint seeks $1,700,000 in damages for Crown, plus what Crown's assets were worth in addition to what was paid for them, and punitive damages, all to be paid pro rata to A stockholders who did not participate in the claimed wrongdoing.
Beneficial moved in the district court to dismiss the amended complaint. Judge Bonsal found the federal claim insufficient on the ground that plaintiff was not a seller under the Act. As for the state law claim in which jurisdiction was based on diversity, the judge held that it could not stand on its own because the amount in controversy vis-a-vis appellant was less than $10,000. Moreover, the defect in jurisdictional amount could not be remedied by totalling the claims of all A stockholders because the class was a "spurious" one, and the derivative action failed because Crown no longer existed. Hence, the motion was granted and dismissal ordered on February 23, 1966. 252 F. Supp. 212 (S.D.N.Y.1966).
On March 3, the parties stipulated that a motion to reargue by plaintiff "shall be deemed to be timely made" if plaintiff delivered his motion papers and memorandum to appellee's attorneys by March 10 and made the motion returnable on March 22. Thereafter, on March 10, plaintiff noticed a motion for leave to reargue the dismissal of his amended complaint, and combined with it a motion for leave to file a second amended complaint.*fn2 On April 6, Judge Bonsal denied both motions in a memorandum opinion. CCH Fed.Sec.L.Rep. para. 91,663. Appellant's notice of appeal from the order was filed a week later.*fn3
Neither side expresses any doubt as to our jurisdiction and what has been brought up for review, although Beneficial's brief does correctly state that an order denying reargument is not appealable, In the Matter of Brendan Reilly Associates, Inc., 372 F.2d 235 (2d Cir. Jan. 30, 1967), and assumes that it is the judgment dismissing the first amended complaint that is being appealed from; both sides argue issues raised by the two amended complaints. Nevertheless, it is well settled that we must satisfy ourselves that we have jurisdiction even if a party does not raise the issue (at least where a substantial question of jurisdiction is apparent), e.g., Levin v. Ruby Trading Corp., 333 F.2d 592, 594 (2d Cir. 1964), and that timeliness is jurisdictional, Guido v. Ball, 367 F.2d 882 (2d Cir. 1966) (per curiam). Here, the notice of appeal was not filed "30 days from the entry of the judgment" of dismissal of the first amended complaint, see Fed.R.Civ.P. 73(a), and, as indicated above, the denial of reargument is not appealable. However, the Supreme Court has construed words in its own Rule 11(2) similar to the quoted words to mean that time to appeal runs from the denial of a petition for rehearing by the court from whose judgment the appeal is taken, at least when the petition for rehearing was timely. United States v. Healy, 376 U.S. 75, 77-80, 84 S. Ct. 553, 11 L. Ed. 2d 527 (1964). Moreover, Rule 73(a) itself provides that the thirty-day period for appeal starts anew after denial of a timely motion for a new trial, and by analogy a motion for reargument of a motion to dismiss should also again start the running of time for appeal. See 7 Moore, Federal Practice para. 73.09 at 3183-85 (2d ed. 1966); cf. Terrasi v. South Atl. Lines, Inc., 226 F.2d 823 (2d Cir. 1955), cert. denied, 350 U.S. 988, 76 S. Ct. 475, 100 L. Ed. 855 (1956). Therefore, Vine's notice of appeal was timely if his motion for reargument stopped the thirty days from running from February 23, the date of dismissal of his first amended complaint. Rule 9(m) of the General Rules for the Southern District required a motion for reargument to be made within ten days after the order dismissing the first amended complaint. Vine's motion was not made in that period because the parties had stipulated within the ten-day period that such a motion would be timely if made by March 10 (less than a week after the ten days expired). It is true that the stipulation was not signed by a judge,*fn4 but Judge Bonsal did receive and keep the motion sub judice some two weeks before deciding it on the merits, so that retroactive approval of the stipulation may be implied. As a result, the motion to reargue dismissal of the first amended complaint was not decided until after thirty days had run from the original order of February 23. Under these circumstances, we think that Vine could reasonably withhold his notice of appeal until the motion to reargue was decided. See Wolfsohn v. Hankin, 376 U.S. 203, 84 S. Ct. 699, 11 L. Ed. 2d 636 (1964), reversing 116 U.S.App.D.C. 127, 321 F.2d 393 (D.C.Cir.1963); Thompson v. Immigration & Naturalization Serv., 375 U.S. 384, 84 S. Ct. 397, 11 L. Ed. 2d 404 (1964). As to what was brought here for review, considering the manner in which the parties have so far proceeded, we are confident that both the February 23 and April 6 orders of Judge Bonsal are within our appellate purview. See Foman v. Davis, 371 U.S. 178, 83 S. Ct. 227, 9 L. Ed. 2d 222 (1962).
Turning to the merits, we consider first the amended complaint's federal claim under the Act and Rule; the factual allegations in the complaint must, of course, be taken as true, since judgment was granted on a motion to dismiss. The district court's narrow holding was that since Vine neither accepted the offer to purchase his stock nor surrendered his stock pursuant to the statutory short form merger, he was not a seller, ...