Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Lelandais v. Mds-Atron Inc.

decided: May 5, 1976.

PIERRE J. LELANDAIS & CO., INC., PIERRE J. LELANDAIS, RESEARCH & SCIENCE INVESTORS, INC., INTERCONTINENTAL TECHNOLOGY & NATURAL RESOURCES, S.A., CORONET FUND AND CREATIVE CAPITAL FUND, PLAINTIFFS-APPELLEES AND CROSS-APPELLANT,
v.
MDS-ATRON, INC. AND MOHAWK DATA SCIENCES CORPORATION, DEFENDANTS-APPELLANTS AND CROSS-APPELLEES, AND JOSEPH S. STOUTENBURGH AND RICHARD L. KARPEN, DEFENDANTS



Cross-appeals from judgment entered after a bench trial in the Southern District of New York, Charles L. Brieant, Jr., District Judge, awarding a total of $164,431.40 damages to certain of the plaintiffs for alleged violations by defendants of the federal securities laws, the award of damages having been based on a theory of estoppel rather than proof of actual damages. Affirmed in part; reversed in part and remanded with directions to dismiss the remaining action.

Friendly, Mansfield and Timbers, Circuit Judges.

Author: Timbers

TIMBERS, Circuit Judge:

On this appeal from a judgment in amount of $164,431.40 entered January 8, 1975, after a three day bench trial in the Southern District of New York, Charles L. Brieant, Jr., District Judge, 387 F. Supp. 1310 (S.D.N.Y. 1974), in a private damage action for alleged violations of Sections 10(b) and 14(a) of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j(b) and 78n(a) (1970), and Rules 10b-5 and 14a-9 promulgated thereunder, 17 C.F.R. §§ 240.10b-5 and 240.14a-9 (1975), in connection with a corporate merger, the question which we find to be dispositive is whether the district court erred in awarding damages to plaintiffs upon an estoppel theory, there being no proof of actual damages. For the reasons below, we hold that the district court did err. Accordingly, while we affirm the district court's dismissal of two claims, we reverse and remand with directions to dismiss the remaining action.

I.

We shall summarize those facts which we believe necessary to an understanding of our ruling on the dispositive question before us. We assume familiarity with the more detailed statement of facts by the district court. 387 F. Supp. at 1313-28.

The six named plaintiffs were stockholders of Atron Corporation (Atron). On April 30, 1971, Atron was merged into defendant MDS-Atron, Inc. (MDS), which was a subsidiary of defendant Mohawk Data Sciences Corporation (Mohawk).*fn1 Pursuant to the merger Atron's former stockholders received one share of Mohawk common stock for every four shares of Atron. Five of the six plaintiffs were among the overwhelming majority of Atron stockholders who voted in favor of the merger. The vote of plaintiff Intercontinental Technology & Natural Resources, S.A. (ITNR) was not cast for or against the merger.*fn2

Plaintiffs acquired their restricted Atron stock directly from Atron in private placements during 1968 and 1969. Atron stock was traded in a thin over-the-counter market. Atron was a small, young company. It was engaged in the manufacture and sale of peripheral computer equipment to computer manufacturers such as Mohawk. Ninety per cent of Atron's sales were to Mohawk at the time of the merger.

Prior to the instant merger, Atron had taken some preliminary steps with an eye to some form of merger. Nothing had come of these efforts. In January 1971, however, Atron was informed by Mohawk that the latter intended to exercise its contractual right to terminate its agreement with Atron and to begin producing itself the component which had been Atron's most important product. Two days following Atron's annual meeting of shareholders which had been attended by Mohawk, Mohawk proposed a merger which was agreed to upon the first and only discussion by Atron.

The January 29 merger agreement, announced the day it was proposed, provided for an exchange of stock at the 4:1 ratio stated above. This reflected the prevailing market price of the stock of the two companies.

The merger agreement was disclosed immediately to the public in a press release. The agreement was approved by Mohawk's Board of Directors on March 2. It was dated as of March 12. A proxy statement was mailed on April 16 to the Atron stockholders.

Focusing on the Atron stockholders, since their approval is all that we are concerned with here, each of the six named plaintiffs received and read the proxy statement. Five of the six plaintiffs voted in favor of the merger. The merger was approved by the Atron stockholders on April 30 by a 99.7 per cent majority: 924,756 in favor, 3,600 against.

Under the law of Minnesota where Atron was incorporated an affirmative vote of two-thirds of Atron's stockholders was necessary for approval of the merger. More than the statutory majority approved. Also under Minnesota law, as explained in the proxy statement, any dissenting stockholder who voted against the merger and followed the prescribed procedure was entitled to an appraisal of the "fair cash value" of his Atron stock and then was entitled to receive cash in that amount instead of Mohawk stock in exchange for his Atron stock.*fn3 No Atron stockholder sought to exercise his appraisal rights.

The instant action was commenced on May 25, 1972, more than a year after the merger. The theory of the ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.