The opinion of the court was delivered by: WARD
Plaintiff Corenco Corporation ("Corenco") instituted this action on July 25, 1973, in an attempt to block a cash tender offer for Corenco stock announced by defendant Schiavone & Sons, Inc. ("Schiavone") on July 17, 1973. Corenco seeks to enjoin Schiavone, its parent, Michael Schiavone and Sons, Incorporated ("Michael Schiavone"), and Joel Schiavone (together "the Schiavone defendants") and anyone acting on their behalf from soliciting the tender of any Corenco shares; acquiring any Corenco shares as a result of the tender offer; further soliciting proxies of Corenco common stock stockholders; voting any shares of Corenco common stock or proxies; and otherwise utilizing such stock as a means of gaining control of Corenco. Corenco alleges violations of §§ 13(d), 14(a), 14(d), and 14(e) of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78m(d) and 78n(a), (d), and (e) and Rules promulgated pursuant thereto. Corenco also alleges violations of § 7 of the Clayton Act, 15 U.S.C. § 18, and §§ 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2.
By order to show cause dated July 26, 1973, Corenco moved for a preliminary injunction and for expedited discovery.
The Schiavone defendants in their amended answer and counterclaims seek judgment, inter alia, dismissing the complaint; enjoining Corenco and its officers and directors (named as additional defendants in the counterclaim and called "Corenco's management" herein) from making false and misleading statements to Corenco's shareholders in an attempt to defeat the tender offer; and directing them as a group to file a Schedule 13D with the Securities and Exchange Commission (the "SEC"). By order to show cause dated August 2nd, the Schiavone defendants moved for a preliminary injunction on their claims.
On August 3rd, pursuant to agreement among the parties, the Court ordered an accelerated trial on the merits. The evidence introduced at the trial on August 3rd and 4th consisted of live testimony, as well as deposition testimony and documentary evidence. The parties have also extensively briefed the factual and legal issues involved.
Plaintiff Corenco is a publicly-held corporation organized and existing by virtue of the laws of Maine. Its principal place of business is Tewksbury, Massachusetts. Corenco has 378,567 shares of common stock issued and outstanding. Its stock is traded over-the-counter. Corenco's principal business is the rendering of fats resulting in the production of tallow. Seventy-five to 80 percent of this production is exported. Within the last few years the plaintiff has also entered the fertilizer business and more recently has begun the production of shortening and of industrial oils.
Defendant Schiavone, a subsidiary of Michael Schiavone, is a closely-held corporation organized and existing by virtue of the laws of Massachusetts and has its principal place of business in Boston, Massachusetts. Schiavone's shares are neither registered pursuant to § 12 of the Securities Exchange Act of 1934, 15 U.S.C. § 78 l, nor publicly traded. Schiavone's business is processing and merchandising scrap metals. Schiavone exported between 55 and 60 percent of its production in 1972 and between 80 and 85 percent in 1973.
Michael Schiavone is a Connecticut corporation with its principal place of business in that state. It is the parent corporation of defendant Schiavone & Sons, Inc. The parent is also a closely-held corporation engaged in the scrap metal business.
Joel Schiavone is vice president and a shareholder of Michael Schiavone and president, chief operating officer, and a director of Schiavone, the subsidiary.
Reed Rubin is engaged in the brokerage business. He arranged the introduction of Corenco management to Schiavone management in the hope that some form of merger or acquisition could be consummated between the two corporations. This, in turn, would result in his earning a finder's fee. Plaintiff also alleges that Rubin with Schiavone formed a "group" within the meaning of § 13(d) (1) of the Securities Exchange Act of 1934, 15 U.S.C. § 78m (d) (1).
Singer & Mackie, Inc. is the brokerage firm employing defendant Rubin and for whom, plaintiff alleges, he carried out the attempt to bring Corenco and Schiavone together.
Bear, Stearns & Co. is dealer-manager for the tender offer. D.F. King and Co., Inc. has been stipulated out of the case.
The defendants on the counterclaim are all officers and/or directors of Corenco.
The Facts Surrounding the Tender Offer and Counterclaim
On July 17, 1973, Schiavone announced a tender offer to purchase shares of Corenco common stock for cash at a price of $33 net per share. The bid price of Corenco stock was reported as $26 1/2 per share and the asked price as $28 per share on July 16, 1973. Immediately prior to the announcement, Schiavone filed with the SEC, pursuant to Section 14(d) of the Securities Exchange Act of 1934, a Statement on Schedule 13D and an Offer to Purchase dated July 17, 1973. An announcement of the tender offer appeared in The Wall Street Journal on July 18th and in other newspapers subsequently. The announcement stated, among other things, that the ...