The opinion of the court was delivered by: MANSFIELD
MANSFIELD, District Judge.
This case comes to us upon remand from the Court of Appeals, which on December 10, 1969, reversed in part and affirmed in part a judgment entered by this court (Ryan, J.) on June 5, 1968, denying plaintiff's motion for preliminary injunctive relief and dismissing the complaint upon the merits. See Crane Co. v. Westinghouse Air Brake Co., 419 F.2d 787. Defendants now move for an order defining and limiting the issues to be determined on remand and striking plaintiff's claim for money damages as set forth in answers to defendants' interrogatories dated May 21, 1970. Our ruling as to the issues raised by plaintiff's contemplated claim for money damages is set forth below.
In June 1967, Crane Co. ("Crane"), having decided that it would be advantageous to acquire the Westinghouse Air Brake Co. ("Air Brake"), began to purchase Air Brake stock on the open market through a nominee. Late in August 1967, after having purchased 133,000 Air Brake shares, Crane approached the management of Air Brake with a proposal that Air Brake be merged into Crane. The proposal was later rejected by Air Brake, but Crane continued with its program of purchasing Air Brake stock.
By January 1968, Crane had purchased more than 10% of Air Brake's stock, and by May 1968 its holdings amounted to 32%. Air Brake's management continued to resist these unwanted advances by Crane. First, an amendment to Air Brake's by-laws was adopted on December 7, 1967, which operated to increase the percentage stock ownership required to elect one Air Brake director from 9% to 25%. In addition, Air Brake entered into negotiations with American Standard, Inc. ("Standard") in hopes of achieving a friendly merger of Air Brake into Standard. Since Standard and Crane were major competitors in the plumbing and heating equipment industry, such a merger might require Crane to sell its Air Brake stock to avoid antitrust liability.
The negotiations between Air Brake and Standard were successful. On March 4, 1968, Air Brake and Standard agreed, subject to stockholder approval to be sought on May 16, to merge Air Brake into Standard. Crane, opposing the merger, persisted with its program of open market purchases of Air Brake stock and, during the week of April 8, 1968, announced a tender offer which was to expire on April 19, 1968, although it was subsequently extended three times. Air Brake stockholders were offered a package of Crane subordinated debentures valued at roughly $50 for each share of Air Brake stock. On the final day of the tender offer, April 19, Standard purchased 170,000 shares of Air Brake on the open market at an average price of $49.08. It also sold, at an average price of approximately $44, some 140,000 Air Brake shares in private sales not on the open market. Despite Crane's large ownership of Air Brake stock and numerous lawsuits brought by Crane in state and federal courts in New York and Pennsylvania, on May 16, 1968, the merger was approved by the shareholders of Air Brake, 2,903,869 shares being voted for the merger and 1,180,298 against it.
In the meantime on April 17, 1968, Crane commenced an action against Air Brake and its directors charging solicitation of proxies through false and misleading statements in violation of §§ 14 and 10 of the Securities Exchange Act of 1934 (15 U.S.C. §§ 78n and 78j) and Rules 14a-9 and 10b-5 thereunder, and seeking solely injunctive relief. On May 6, 1968, Crane commenced a second action in which it charged that Standard and Blyth & Co., Inc., which was also named as a defendant, manipulated and rigged the price of Air Brake stock through certain transactions for the purpose of promoting the Standard-Air Brake merger and deterring tenders under Crane's exchange offer, and with unlawful solicitation of proxies, in violation of §§ 10 and 14 of the Exchange Act, Rules 10b-5, 10b-6 and Regulation 14A thereunder, and of state law and requesting relief which was exclusively equitable in nature, as follows:
"(i) Preliminarily and permanently enjoining defendants from, directly or indirectly, voting or causing to be voted any Air Brake stock at said shareholders' meeting.
"(ii) Preliminarily and permanently enjoining defendants from, directly or indirectly, soliciting any votes of Air Brake stockholders relating to the aforesaid meeting.
"(iii) Preliminarily and permanently enjoining Standard from consummating any merger with Air Brake on the basis of votes obtained as a result of said violations.
"(iv) Preliminarily and permanently enjoining Standard from consummating any merger with Air Brake unless and until full disclosure of all relevant facts is given to the Air Brake stockholders and such stockholders are given an adequate opportunity to act on such information.
"(v) Preliminarily and permanently enjoining defendants from, directly or indirectly, purchasing votes of Air Brake stockholders.
"(vi) Preliminarily and permanently enjoining defendants from, directly or indirectly, enforcing or seeking to enforce any existing understanding with respect to the voting of Air Brake stock.
"(vii) Preliminarily and permanently enjoining defendants from engaging in any manipulative practises or any acts in violation of the Act."
Neither complaint sought any damages.
Both actions were consolidated and on six days during the period from May 21 to June 3, 1968, Judge Ryan held hearings, described by the court as a "trial on the merits," see Rule 65(a)(2), upon Crane's application for injunctive relief. Most of the proof related to the charges that Standard's proxy material contained false and misleading statements (e.g., statements as to Standard's income and capital assets) and that Standard's purchases and sales of thousands of Air Brake shares constituted unlawful vote-buying and should have been disclosed in the proxy solicitation material. By an opinion dictated into the record on June 3, 1968, Judge Ryan denied injunctive relief and dismissed the complaint on the merits. Although most of his opinion dealt with the charges of illegal purchases of votes or proxies and misstatements in proxy solicitation material, he did conclude that defendants had acted in good faith and that no violation of federal securities law, or of state statutory or common law, had occurred. On appeal, his decision was reversed in part by the Court of Appeals, which found that Standard's sales and purchases of Air Brake stock on April 19 had constituted market manipulation in violation of § 9(a)(2) of the 1934 Securities Exchange Act, 15 U.S.C. § 78i(a)(2), and nondisclosure of material facts in violation of § 10(b) of that Act, 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. 240.10b-5, promulgated thereunder. The balance of Judge Ryan's opinion, dealing with alleged buying of votes and misleading statements in the proxy statement, was affirmed. The Court of Appeals remanded for a determination of the appropriate remedies by the District Court. Judge Ryan recused himself from further participation in the case, and it has been assigned to us for all purposes pursuant to General Rule 2 of this court.
Plaintiff's multifarious claims for money damages, elaborated for the first time in an eight-page answer to defendants' interrogatory dated May 21, 1970, can be summarized as follows: (1) the difference in value between Crane's 32% block of Air Brake stock, including the value of control, and the Standard shares which were received in exchange therefor after the merger of Air Brake into Standard, (2) similar damages with respect to Air Brake stock which Crane was prevented from acquiring as a result of Standard's alleged manipulation and deceit, (3) the value to Crane of control of Air Brake, (4) the loss which Crane allegedly suffered from the forced sale of its Air Brake stock, for antitrust reasons, subsequent to the merger, and (5) punitive damages. Viewing the answer to the interrogatory as a preview of a motion to amend the complaint, Rule 15(a), F.R. Civ. P., which Crane may file in the future, we are called upon by Standard to determine whether, under the terms of the remand, Crane may without a jury trial recover damages for Standard's alleged manipulation under § 9(a)(2) and non-disclosure under § 10(b).
Standard argues that regardless what disposition has been made by the court, sitting without a jury, of the claim for injunctive relief, it is entitled under the Seventh Amendment
and Rule 38(a), F.R. Civ. P.,
to a jury trial of any damage claim, including a jury trial of all liability issues presented by the pleadings upon such a claim, and that it cannot be deprived of this constitutional right by a piecemeal non-jury determination of equitable claims. Dairy Queen v. Wood, 369 U.S. 469, 82 S. Ct. 894, 8 L. Ed. 2d 44 (1962); Beacon Theatres, Inc. v. Westover, 359 U.S. 500, 79 S. Ct. 948, 3 ...