Moore, Mulligan and Timbers, Cir. JJ. Mulligan, Cir. J. (concurring). Timbers, Cir. J. (concurring).
Plaintiff, Frank Kohner, brought an action under sections 12(2) and 17(a) of the Securities Act of 1933 and section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934 against Abraham Wechsler and Manufacturers Hanover Trust Company, wherein he sought to rescind a purchase agreement pursuant to which he agreed to purchase all of the outstanding shares of the Wecolite Company owned by Wechsler. Defendant, Manufacturers Hanover Trust Company, the escrow agent named in an escrow agreement which was a part of the transaction, is not a party to this appeal.
Shortly after the action was commenced, plaintiff sought a preliminary injunction to prevent Wechsler from leaving the country and for consolidation of the trial on the merits with the hearing on the injunction. The motion for consolidation was initially denied by Judge Frankel. After a four-day evidentiary hearing on the preliminary injunction, before Judge Cannella, the court, sua sponte, consolidated the hearing and the trial on the merits. From an order denying the preliminary injunction, dismissing the summons and complaint, and terminating the escrow agreement, plaintiff appeals.
The gravamen of plaintiff's complaint centers around the assertion of fraudulent representations allegedly made by the Seller, Wechsler, to Kohner to the effect that Wecolite, the Company purchased, operated in conformity with the law, whereas, in fact, it had violated provisions of the Robinson-Patman Act, had underpaid customs duties, and was engaged in sharp and unethical business practices (withholding commissions and royalties due).
The only issue before the trial court was whether the proof justified rescission. The court found that plaintiff's charges as to violations of the Robinson-Patman Act had not been sustained, that if there were unpaid customs duties, they would very probably amount to the de minimis sum of $4,000, and that there was no substance to the charge that Wecolite engaged in unethical business practices.
On appeal, as in the trial court, Kohner conjures up the specter of Wecolite being forced to defend a Federal Trade Commission action for violations of the Robinson-Patman Act as well as a multiplicity of private suits by Wecolite's customers based on these same violations. The trial court found no such violations. Even now there are still no threats of Robinson-Patman actions or suits by the government for unpaid customs duties. If plaintiff, as the new owner of Wecolite, believes that certain of the business practices of his acquired Company are in violation of the law, he is free to remedy these practices, albeit the trial court found no such violations of law. If he does not approve of the Company's business policies, he is equally free to change them. If unpaid customs duties require payment, the indemnity agreement which is part of the purchase agreement is protective. Noting that "The plaintiff, an experienced businessman and a sophisticated investor had many financial advisors to assist him in carefully analyzing defendant Wechsler's business before the sale was finalized,"*fn1 the trial court concluded that plaintiff's motion for a preliminary injunction should be denied and the summons and complaint dismissed. Wechsler cross-appeals the dismissal of his counter-claim for damages for interference with his employment and consulting contracts which were executed in connection with the sale of Wecolite. No proof was adduced at trial as to this claim and Judge Cannella properly dismissed it. We affirm.
Apparently, on its own motion, the trial court added: "The escrow agreement with defendant Manufacturers Hanover Trust Company is hereby terminated and the Court directs that the notes being held in escrow be turned over to defendant Wechsler, and that the legitimate fees incurred by the Bank in the amount of $1,350 be paid by the plaintiff."*fn2
The order appealed from must be modified because the escrow agreement and the indemnity agreement were vital parts of the purchase transaction. The purchase price was $650,000. Remaining unpaid is $274,000, consisting of a negotiable note for $124,000 due January 2, 1973, and two non-negotiable notes for $76,500 due January 2, 1973, and $73,500 due October 15, 1974.
Since the trial court did not grant rescission, the purchase agreement remains in full force and effect including the indemnity and escrow provisions. Hence the escrow agreement should not have been terminated. The notes held pursuant thereto should continue to be held in accordance with its terms. Any fees thereunder should be paid in accordance with the terms thereof.
Order as modified affirmed.
MULLIGAN, Cir. J. (concurring):
I concur in the opinion of Judge Moore.
Appellant Kohner has assumed here and below that once having established that Wecolite was selling the same commodity at different prices to two or more competing buyers, the burden of proof shifted to the appellee Wechsler under the Robinson-Patman Act (15 U.S.C. § 13 (1970)). Thus, under the much maligned decision in Moss,*fn3 appellant has urged that the appellee must bear the burden of proving no possible competitive injury. Moreover, under § 2(b), he has assumed that the appellee has the burden of establishing that Wecolite was meeting and not beating the price of a competitor. I do not think the appellee here had to sustain either burden of proof. The appellant is not the Federal Trade Commission or an injured secondary line competitor bringing a § 2(a) action. The appellant is neither a purchaser of Wecolite products or even a competitor. He is the disappointed buyer not of a commodity but of the business itself. Although the Act is admittedly murky, there is no language in it which gives him a cause of action. The burden of proof provision in § 2(b) is explicitly limited to hearings on complaints brought under the statute. Since this is not such an action the appellant is not entitled to the benefit of the statutory presumption. The appellant buyer of the business has urged that the appellee seller has violated the Act -- he therefore has the burden, in my view, of establishing that Wecolite not only discriminated to the possible detriment of its buyers but that it had no § 2(b) defense.*fn4
Even if this is not sound and the appellant is to be treated as the plaintiff under the statute, I agree with Judge Timbers that there is no showing of any Robinson-Patman violation. The expert opinion relied upon is bereft of any meaningful survey indicating competitive realities in relevant areas. Absent this we simply have a recitation of cases which can be found in any anti-trust primer culminating in the rather startling prediction that both Wecolite and Kohner face the strong likelihood of both civil and criminal liability in an action brought by the Anti-Trust Division. As Judge Moore has pointed out, no proceeding of any kind ever took place in the past and, as for ...