The opinion of the court was delivered by: LASKER
On September 27, 1977, Humana advised Medicorp by letter that it intended to make an offer to acquire up to 75% of the outstanding shares of Medicorp on the basis of an exchange of cash and securities. The offer constituted a clear premium over the then market price of Medicorp stock. Very shortly after receipt of Humana's letter the Medicorp Board of Directors resolved that the offer was not advantageous to its stockholders and informed them to this effect. There has followed a spate of litigation including this action alleging that Medicorp has made material misrepresentations concerning the offer in violation of § 14(e) of the 1934 Securities and Exchange Act (the "Williams Act") and in which Medicorp has counterclaimed alleging violations of the same statute by Humana.
On September 30, 1977, Humana filed with the Securities & Exchange Commission a registration statement relating to the preferred stock it intended to issue as part of its tender offer. That registration statement became effective December 22, 1977. Immediately thereafter Humana formally issued its offer to Medicorp stockholders which will expire January 10, 1978, unless extended.
On December 21, 1977, Trans World Airways (TWA) and its wholly owned subsidiary, Hilton International Co. (Hilton), announced a competing partial tender offer which also will expire January 10, 1978, unless extended. The proposal consists of an offer to purchase 64% of the outstanding shares of Medicorp stock for $20. per share. TWA's announcement of the competing offer adds, however, that if the competing offer is successful, it is the intention of TWA and Hilton to acquire the remaining shares of Medicorp in exchange for equity securities of TWA or Hilton or an affiliate plus cash which is said to have an anticipated "value" of $20. per share.
On December 27, 1977, Humana moved by Order to Show Cause to file a second amended and supplemental complaint to its action against Medicorp to add TWA and Hilton as defendants; to state new causes of action relating to the TWA-Hilton competitive offer; and to request injunctive relief against TWA and Hilton. Because of the urgency of the situation, extensive treatment of the question has not been possible. This decision is being delivered on the record and will be amplified hereafter if it appears necessary.
Medicorp opposes the motion on the grounds that Humana does not have standing to sue for violations of the Williams Act by a competing offeror. Its principal reliance is placed on Piper v. Chris-Craft Industries, 430 U.S. 1, 51 L. Ed. 2d 124, 97 S. Ct. 926 (1977), and it also refers to the decision of Judge Ward in Crane Co. v. American Standard Inc., 439 F. Supp. 945, [Current] Fed. Sec. L. Rep. (CCH) P 96,160 (1977). Piper shattered the nearly universal holdings of lower courts that competing tender offerors had standing to sue each other for damages under the Williams Act. (15 U.S.C. §§ 78n(d) and (e)). In Piper, Chris Craft, a losing tender offeror in a consummated tender offer battle, sued both its competing tender offeror and target management for damages, claiming violations of the Williams Act in connection with the tender offer battle. Holding that the primary, if not exclusive, purpose of the Williams Act was to protect shareholders of the target company, the Supreme Court held that a tender offeror did not have standing to sue for damages under the Act. In determining that to imply a private right of suit by a tender offeror for damages under the Williams Act would not be "consistent with the underlying purposes of the legislative scheme," the Court commented:
"as a disclosure mechanism aimed especially at protecting shareholders of target corporations, the Williams Act cannot consistently be interpreted as conferring a monetary remedy upon regulated parties, particularly where the award would not redound to the direct benefit of the protected class." 430 U.S. 1 at 39, 97 S. Ct. 926, 51 L. Ed. 2d 124.
The question at hand is whether, in the light of Piper, an offeror (Humana) has standing to sue a competing offeror (TWA and Hilton) for injunctive
relief. I conclude that it does. Analysis of Piper requires determining not only what it decided but what it did not decide.
At footnote 33, Chief Justice Burger wrote:
"We intimate no view upon whether as a general proposition a suit in equity for injunctive relief, as distinguished from an action for damages, would lie in favor of a tender offeror under either § 14(e) or Rule 10b-6." 430 U.S. 1, 48 n.33, 97 S. Ct. 926, 51 L. Ed. 2d 124 (1977)
Of course, the footnote merely leaves the question open, and one must look for guidance elsewhere as to whether a ruling that an offeror has standing to sue a competing offeror for injunctive relief would be consistent with Piper.
A large body of material in Piper itself points toward allowance of standing when the remedy sought is injunctive relief. First, Chief Justice Burger exercised scrupulous care to use the word "damages" whenever he described the "narrow" issue before the court. Second, the opinion of the Court cites with approval Judge Friendly's observation in Electronic Specialty Co. Inc. v. International Controls Corp., 409 F.2d 937, 947 (2d Cir. 1969), that "in corporate control contests the stage of preliminary injunctive relief, rather than post-contest lawsuits, 'is the time when relief can best be given'", 430 U.S. 1, 42, 97 S. Ct. 926, 51 L. Ed. 2d 124 (1977) (emphasis added). At footnote 26, the opinion states in its own language that ". . . injunctive relief at an earlier stage of the context is apt to be the most efficacious form of remedy." Id. at 40 n. 26. These comments apply to the case at hand. The proposal is in its primary stages. If Humana's allegations that TWA and Hilton have violated the Williams Act are ever to be effectively explored, they must be explored now, since Medicorp's shareholders must have information upon which to act before the expiration of both offers on January 10th.
At least one passage in Piper appears affirmatively to suggest that construing the Williams Act to allow a tender offeror the implied right to sue for injunctive relief would be appropriate even though an implied right to sue for damages does not exist. At page 41, the court states:
"In short, we conclude that shareholder protection, if enhanced at all by damages awards such as Chris-Craft contends for, can more directly be achieved with other, less drastic means more closely tailored to the precise congressional goal underlying the ...