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January 8, 1976

Browning Debenture Holders' Committee, et al., Plaintiffs
DASA Corporation, et al., Defendants

Owen, District Judge.

The opinion of the court was delivered by: OWEN

OWEN, District Judge:

This case was tried before me without a jury over six days in June 1975. The complaint, filed in 1972, originally had five causes of action arising out of the DASA Corporation's *fn1" proposal to sell and the eventual sale of certain of its computer equipment to raise needed cash. The sale required the approval of its debenture holders, which included the two individual plaintiffs, Sims R. Browning and Roy E. Brewer, together with Bradley R. Brewer, *fn2" plaintiffs' counsel herein, who denominated themselves as plaintiff "Browning Debenture Holders Committee." As part of the proposal to the debenture holders, DASA proposed to reduce the conversion price of the debentures into common stock from $42.42 to $21.00.

 Five causes of action alleging various wrongs were asserted against various defendants including DASA Corporation; The Bank of New York, trustee under a Trust Indenture covering plaintiffs' debentures; Arthur Andersen & Co., the then auditor of the corporation; and various individual defendants, officers and directors of DASA. At the outset, only DASA, the Bank and Andersen were served. *fn3"

 Of the five causes of action, the first two alleged that the proxy materials and shareholders reports in connection with the DASA annual meeting in 1972, and the DASA financial statements for 1971, were misleading. The implication flowing from these allegations was that the scheduled 1972 DASA stockholders' meeting was illegal since the proxies to be used therein were fraudulently solicited. Judge Motley denied a preliminary injunction, permitted the meeting and allowed the sale of the equipment that was there duly voted. Judge Greisa thereafter dismissed the first two causes of action as moot. *fn4"

 This ruling left causes of action 3, 4 and 5.

 The 5th, purporting to be a derivative claim against Andersen, alleged that the auditors (1) omitted a material fact in the annual report of 1970; (2) that this omission was corrected in the 1971 report; and (3) that the 1971 report failed to state that the omission had been made in the prior (1970) report. Plaintiffs then claimed that Andersen, knowing that its opinions would be sent with the proxy materials to the shareholders in 1971 and 1972, breached its duty of care to the corporation by the said actions. On this basis, plaintiff demanded up to $3,000,000 in damages running to the corporation, without any allegation as to how these damages were occasioned by the claimed omissions. The 5th cause of action, on motion by Andersen, was dismissed by me in an opinion dated April 18, 1975 *fn5" for failure to allege damage or comply with Fed. R. Civ. P. 23.1.

 This ruling left only the 3rd and 4th causes of action.

 The 4th cause of action was solely against The Bank of New York, the trustee under the Trust Indenture covering the plaintiffs' debentures. Plaintiffs' claim was that the Bank, as trustee, had a duty to form a judgment as to the fairness and propriety of the reduction of the conversion price of the debentures proposed by management and communicate that opinion to the debenture holders prior to their vote.

 The demise of that cause of action (the 4th) came about as follows. In January 1975, a trial date had been set for May. In March and April plaintiffs belatedly commenced a whirlwind of activity with the obvious design of delaying the trial. *fn6" This included numerous notices to depose Bank employees, a motion for partial summary judgment against the Bank, and a motion to add DASA's lawyers as defendants, together with a request for a six months' adjournment on the ground that DASA had coercively subverted the Bank and made an alleged pay-off to it.

 From the moving papers, this latter motion seeking to add attorneys as defendants and raising charges of illegality, initially appeared to have some substance being apparently based on the contents of a "one page" letter of DASA's counsel to the Bank, a "copy" of which was annexed to plaintiff's moving papers. DASA's answering papers, however, disclosed that the alleged "letter" was but the last page of a three page letter, the first two pages revealing the context and therefore the propriety of the entire matter. That motion was summarily denied.

 At the same time, upon the argument of plaintiffs' motion for partial summary judgment against the Bank on the ground of the Bank's alleged duty to investigate the proposal and give its opinion to the debenture holders, plaintiffs' counsel orally acknowledged that there was no existing legal support for the relief requested. *fn7"

 I denied this motion as well, observing that both the motion and the complaint sought the identical relief against the Bank. Given the lack of legal support for the allegations against the Bank, and plaintiffs' misuse of the "one page" letter in the companion motion, I directed that the plaintiffs furnish an undertaking to the Bank in the amount of $25,000 for costs and attorneys' fees in the event I later determined that such payment was justified, the risk of which was becoming apparent. The plaintiffs, alleging financial inability, declined to furnish the said undertaking and I dismissed the 4th cause of action upon being authoritatively so informed. *fn8"

 All the foregoing left but one cause of action, the 3rd. This was solely against defendant DASA, involving the March 9, 1972 solicitation letter seeking the debenture holders' consent to the release for sale of the computer equipment and providing for a reduction from $42.42 to $21.00 of the conversion price of the debentures. Plaintiffs claimed that the March 9 letter contained some false statements as to material facts and omitted other alleged material facts. Those alleged material misstatements and omissions were set forth in 21 assorted paragraphs. In a conference with all counsel the day before the trial, plaintiffs' counsel withdrew the allegations of paragraph (h) (i)-(vii).

 Thereafter the trial commenced. One of the allegations pleaded in various ways and places in the 3rd cause of action was that the Board of Directors owed a duty to consider the debenture holders interests in setting the proposed new lower conversion price. Concluding that there was no such duty as long as all the facts were fairly set forth from which the debenture holders could reach an intelligent, well-informed conclusion as to whether or not to accept the proposal, *fn9" I dismissed paragraphs (a), (c), (d), (l), (m) and (n). Further, having concluded that the Bank of New York had no duty either to form an opinion as to the "fairness" of the proposal, or to communicate any such opinion to the debenture holders (see supra), it necessarily followed that DASA had no duty to advise the debenture holders that the Trustees had taken no position in that regard. I therefore dismissed paragraph (e). Also, during the trial, plaintiffs' counsel, upon questioning, withdrew the allegations of paragraphs (f) and (s), and, it appearing that (g) had been alleged by plaintiffs in error, that claim, too, was withdrawn.

 This left for resolution at the close of the trial the allegations of the following paragraphs: (b), (i), (j), (k), (n), (o), (p), (q), (r), (t) and (u).

 After six days of trial, I conclude that no substantial evidence was offered by plaintiffs in support of ...

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