The opinion of the court was delivered by: TYLER
The General Time Corporation ("GTC") has petitioned this court for a preliminary injunction pursuant to Rule 65(a), Fed. R. Civ. P., and Section 14 of the Securities and Exchange Act, 15 U.S.C. § 78n (1964), enjoining the defendants,
their officers, directors and all others acting on their behalf, from soliciting or voting proxies or shares in connection with GTC's annual stockholders' meeting scheduled for April 22, 1968.
This motion was brought on by an order to show cause dated April 5. An evidentiary hearing was held on April 8 and affidavits were submitted at that time.
For reasons to be discussed hereinafter, I conclude that plaintiff has failed to establish that it is reasonably certain to prevail at a plenary trial. Furthermore, any injury that GTC would incur because of a denial of a preliminary injunction would probably be outweighed by the considerable harm that such an injunction would cause to defendants. See, e.g., Unicon Management Corp. v. Koppers Co., 366 F.2d 199 (2d Cir. 1966); Studebaker Corp. v. Gittlin, 360 F.2d 692 (2d Cir. 1966). Accordingly, plaintiff's motion is denied.
The Independent Stockholders' Committee of General Time Corporation ("the Committee") and one of its members and sole financial supporter, Talley Industries, Inc. ("Talley"), appear to be the most important defendants in this suit. The Committee's holdings of GTC stock, including that portion owned by Talley, amount to some 19% of the outstanding voting shares.
In its proxy solicitation material, the Committee has proposed ten nominees for positions on the GTC Board of Directors. The proxy contest growing out of this confrontation with the incumbent directors is the subject matter of this litigation.
The first hint of controversy was brought to the attention of the public on February 19, 1968 when Smith, Barney & Co., a Wall Street brokerage firm, announced a special bid for 200,000 shares of GTC. According to the Dow Jones Broad Tape, the initial reaction of GTC's management was to label the bid "grossly inadequate."
That same day, GTC learned from Smith, Barney & Co. that Talley was behind the special bid, and an afternoon meeting of GTC and Talley management was hastily arranged.
According to the testimony of Frank Stone, one of plaintiff's attorneys present at the meeting, Franz Talley, President of Talley Industries, represented to GTC management that he and his associates then owned "about a third of the outstanding shares of General Time" and he was interested in effecting a merger between the two companies.
At the advice of counsel, GTC issued a press release that day and sent an open letter to its stockholders the following day, divulging this information and again urging GTC stockholders to reject the special bid. Stone firmly denied that there was any agreement to keep the substance of the conversations at the meeting from becoming public.
Within the next week, Talley and its associates purchased an additional 7% of GTC stock. On February 27, Talley announced in a press release that it then owned about 12% of GTC's stock and that recent purchases of that stock by "others known to Talley" exceeded another 28%. The announcement continued by noting that "these latter shares if taken together with the Talley Industries' interest would total more than 40 per cent of the outstanding stock of General Time." The release also confirmed that Talley was contemplating a merger with GTC.
The February 29th edition of the Wall Street Journal carried an account of the release under the headline, "Talley and Associates Claim 40% Ownership of General Time Stock." The article quoted from the text of the release and stated inter alia that Talley "said it and its associates hold more than 40%" of GTC's stock. This story was repeated by Standard & Poor's in its March 8th report.
The record before this court, including various schedule 14(b) statements on file with the SEC and the proxy solicitation material sent out by the Committee, indicates that Talley and its associates on the Committee own 19.3% of GTC's stock. From this, plaintiff submits that either:
(1) The 14(b) statements and the proxy solicitations are false and misleading; or
(2) Some of Talley's associates have failed to file 14(b) statements; or
(3) Talley is guilty of misleading the public by pre-solicitation publicity that it ...