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May 11, 1981

The CHASE MANHATTAN BANK, N.A., Manufacturers Hanover Trust Company and United States Trust Company of New York, Defendants. MANUFACTURERS HANOVER TRUST COMPANY, Third-Party Plaintiff, v. UV INDUSTRIES, INC., Third-Party Defendant. CONNECTICUT MUTUAL LIFE INSURANCE COMPANY, et al., Intervenors, v. SHARON STEEL CORPORATION, Plaintiff, and UV Industries, Inc., Third-Party Defendant. UNION PLANTERS NATIONAL BANK OF MEMPHIS, as Trustee, Plaintiff, v. UV INDUSTRIES, INC. and David Finkelstein, Arthur R. Gralla, Martin Horwitz, Edwin Jacobson, Theodore W. Kheel, and Paul Kolton, as Trustees of the UV Industries, Inc. Liquidating Trust, Defendants, and Sharon Steel Corporation, Defendant

The opinion of the court was delivered by: WERKER

Plaintiff, Sharon Steel Corporation ("Sharon"), commenced this action against defendants, The Chase Manhattan Bank, N.A. ("Chase"), Manufacturers Hanover Trust Company ("Manufacturers"), and United States Trust Company of New York ("U.S. Trust"). *fn1" Manufacturers impleaded UV Industries as a third-party defendant, and the holders of certain UV debentures (the "Intervenors") intervened, asserting claims against both Sharon and UV. Union Planters National Bank of Memphis ("Union Planters") subsequently commenced a separate action against UV, the Trustees of the UV Industries, Inc. Liquidating Trust, and Sharon Steel Corporation. The Union Planters suit has been consolidated with the main action for all purposes.

This action having been tried before a jury on April 21-24, April 27-30, and May 4-6, 1981, and plaintiff having completed the presentation of its evidence, Chase, Manufacturers, the Intervenors and Union Planters have moved for a directed verdict pursuant to Fed.R.Civ.P. 50(a), on the ground that plaintiff has failed to establish a prima facie case as to any of its eight causes of action and that all its claims can be decided as a matter of law. Without weighing the credibility of the witnesses or otherwise considering the weight of the evidence, I find that there is but one conclusion that can be reached with respect to each of plaintiff's claims. Accordingly, I grant the motion for a directed verdict as a matter of law and dismiss the complaint. In so ruling, I have viewed the evidence in plaintiff's favor to the extent possible and have given the plaintiff the benefit of all inferences which reasonably could be drawn from the evidence. See Lopez v. A/S D/S Svendborg, 581 F.2d 319, 321 (2d Cir. 1978). I now enter this opinion in support of this disposition. The relevant facts follow.

Between 1965 and 1977, UV borrowed certain sums of money pursuant to five separate indentures (the "Indentures"). Two indentures involved Chase as trustee, and the remaining three involved Manufacturers, Union Planters and U.S. Trust as trustees.

 The Manufacturers Indenture was issued pursuant to an indenture dated April 15, 1977. Under this indenture, UV borrowed approximately $ 75,000,000 by issuing 87/8% debentures due 1982-1998. Approximately $ 66,775,000 principal amount of these debentures is still outstanding.

 The U.S. Trust Indenture was issued pursuant to an indenture dated as of April 15, 1977. Under this indenture, UV borrowed approximately $ 25,000,000 by issuing 91/4% senior subordinated notes due 1987. Approximately $ 15,035,000 principal amount of these notes is still outstanding.

 The first Chase Indenture was issued pursuant to an indenture dated as of September 1, 1965. Under this indenture, UV borrowed approximately $ 23,000,000 by issuing 53/8% subordinated debentures due 1979-1995. Approximately $ 13,669,900 principal amount of these debentures is still outstanding.

 The second Chase Indenture was issued pursuant to an indenture dated as of December 1, 1968. Under this indenture, the City of Port Huron, Michigan borrowed approximately $ 22,000,000 by issuing Industrial Development Revenue Bonds which bear interest at the rate of 61/4% due 1993. Approximately $ 16,550,000 principal amount of these debentures is still outstanding.

 The Union Planters Indenture was issued pursuant to an indenture dated as of November 12, 1968. Under this indenture, The County of Itawamba, Mississippi borrowed approximately $ 13,000,000 by issuing Industrial Revenue Bonds due 1993. Approximately $ 10,270,000 principal amount of the bonds is still outstanding.

 The municipalities that were parties to the second Chase Indenture and the Union Planters Indenture issued the bonds for the purpose of acquiring and constructing premises which were to be and were leased to Mueller Brass Company ("Mueller"), a wholly-owned subsidiary of UV. Mueller's rent payments to each of the municipalities were to be used to pay the principal and interest on the bonds. UV executed Lease Guaranty Agreements (the "Lease Guaranties"), in connection with these leases, guaranteeing unconditionally the payment of all amounts due under the leases.

 Each indenture provides in essence that in the event that UV merges or consolidates with another corporation or sells "all or substantially all" of its assets to another corporation, the successor corporation is entitled to succeed to UV's rights and obligations under the indenture. In addition, the Lease Guaranties provide that in the event of a sale of "all or substantially all" of UV's property to another corporation, the purchaser must assume in writing all of UV's obligations thereunder.

 On December 19, 1978, UV publicly announced that it planned to sell one of its wholly-owned subsidiaries, Federal Pacific Electric Company ("Federal") and on January 19, 1979, UV publicly announced that it planned to liquidate. On February 20, 1979, UV distributed a proxy statement to all UV stockholders recommending approval of the sale of Federal to a subsidiary of Reliance Electric Company ("Reliance") for $ 345,000,000. The proxy statement also set forth and recommended a Plan of Liquidation and Dissolution (the "Liquidation Plan"), pursuant to which the assets of UV were to be sold over a 12-month period, with the proceeds or unsold assets to be distributed to shareholders after payment of or provision for UV's obligations. The Liquidation Plan required "that at all times there be retained an amount of cash and other assets which the Board deems necessary to pay, or provide for the payment of, all of the liabilities, claims and other obligations ..." of UV. The proxy statement also stated that if both the sale of Federal and the Liquidation Plan were approved, there would be an initial liquidating distribution of $ 18 per share to the holders of UV common stock. On February 21, 1979, UV announced that it had scheduled a special meeting for March 26, 1979 at which time its shareholders' would vote on the plan to sell Federal as well as the Liquidation Plan.

 At the special meeting on March 26, UV's shareholders approved the sale of Federal and the adoption of the Liquidation Plan. Thereupon, UV entered into a plan of voluntary liquidation and dissolution. The following day, UV, a Maine corporation, filed its Statement of Intent to Dissolve with the State of Maine.

 On March 29, 1979, UV sold Federal to a subsidiary of Reliance Electric Company for $ 345,000,000 in cash. On April 9, 1979, UV announced that it would make the previously planned liquidating distribution of $ 18 per share to its common stockholders on April 30, 1979.

 Although the Trustees had been aware of UV's plan to sell Federal and make the liquidating distribution since at least February 20, 1979, they made no attempt to block the planned distribution until April 26, 1979, the eve of the last business day before the distribution was to occur. On April 26, representatives of Chase, Manufacturers and U.S. Trust met with UV representatives. At least one of the banks threatened to commence litigation to enjoin the distribution unless UV immediately paid the bondholders whom the banks as indenture trustees represented.

 The outcome of the meeting was embodied in a document entitled "Agreement for Treatment of Certain Obligations of UV Industries, Inc." (the "April Document"), dated April 27, 1979, which provided that UV would deposit with certain banks an aggregate amount of $ 155,000,000 in cash or cash equivalents to cover all its public indebtedness. The April Document also provided that within 90 days, UV would present to the indenture trustees a proposal for the payment of its Indebtedness and for satisfaction and discharge of UV's obligations under the Indentures. The April Document further stated that UV and the trustees entered into the April Document for good and valuable consideration, and in executing the April Document, the signatory Indenture Trustees agreed not to seek a court injunction against the $ 18 per share liquidating distribution. UV thereafter deposited the $ 155,000,000 in the special fund and proceeded to distribute a total of about $ 274,000,000 to its stockholders on April 30, 1979.

 On July 23, 1979, UV announced that it had entered into an agreement for the sale of most of its oil and gas properties to Tenneco Oil Company ("Tenneco") for 135,000,000 cash. This sale was consummated on October 2, 1979.

 On November 26, 1979, Sharon and UV entered into an agreement entitled "Agreement for Purchase of Assets" ("Purchase Agreement") and "Instrument of Assumption of Liabilities" ("Assumption Instrument"). Under these agreements Sharon agreed to buy UV's assets and assume UV's liabilities.

 Under the Purchase Agreement, all of the assets owned by UV on November 26, 1979 were purchased by Sharon. Under the Assumption Instrument, Sharon assumed all of UV's liabilities, with exceptions not relevant here, including UV's liabilities under the Indentures. Before November 26, 1979, UV or its subsidiary Mueller Brass timely made all payments of semi-annual interest, all sinking fund payments and all rent payments required by the Indentures, leases or Lease Guaranties.

 In accordance with the successor obligor sections of the Indentures providing for the execution and delivery to the defendant trustees of Supplemental Indentures upon the sale of all or substantially all of UV's assets to another corporation, Sharon delivered on December 6, 1979 to each of the trustees a First Supplemental Indenture executed by Sharon and UV, along with other documents required by the Indentures. The defendants have refused to execute the supplemental indentures, but Sharon nevertheless has continued to make all payments of principal and interest required under the Indentures. On December 31, 1979, Sharon delivered an Assumption of Lease Guaranty to Chase and Union Planters but they also have refused to sign them.

 By letters dated December 24, 1979 Chase, U.S. Trust and Manufacturers delivered to Sharon and UV virtually identical notices stating that UV's sale of assets to Sharon constituted a default under the Indentures. None of the notices referred to any event other than the sale of UV's assets to Sharon as a basis for default. On the same day, Chase and U.S. Trust commenced virtually identical actions against Sharon and UV in New York Supreme Court. Manufacturers subsequently filed a similar suit against both Sharon and UV in New York Supreme Court on March 21, 1980. Union Planters issued a notice of default on July 24, 1980, and commenced suit in this court on September 19, 1980.

 The amended complaint sets forth eight *fn2" causes of action. In essence, five claims are presented. The first and second are that the April Document is of no force and effect because UV was coerced into entering into the agreement and because there was a failure of consideration flowing to UV. Sharon's third claim is that when it purchased all UV's assets and assumed all UV's liabilities, the April Document expired and became inapplicable because it was never intended to apply and cannot, as a matter of law apply to a successor corporation as defined in the Indentures. Sharon's fourth claim is that Manufacturers and Chase have engaged in an unlawful conspiracy in restraint of interstate trade in violation of § 1 of the Sherman Act, 15 U.S.C. § 1. Sharon also has asserted these claims against the Intervenors and Union Planters, arguing that Manufacturers was the Intervenor's agent and that Manufacturers, Chase and U.S. Trust acted as agents for Union Planters. Finally, Sharon claims that Chase and Manufacturers with respect to the 53/8% and 87/8% debentures respectively have improperly, wrongfully and unreasonably (a) refused to execute supplemental indentures, (b) issued notices of default, and (c) seek immediate payment of the debentures. Sharon contends that as a consequence of these wrongful acts, it has been deprived of an agreement to which it is lawfully entitled. Sharon asserts against the Intervenors the same claim asserted against Manufacturers on the basis of the alleged agency relationship between Manufacturers and the Intervenors. In addition, Sharon contends that Chase and Union Planters have wrongfully and unreasonably (a) issued notices of default under their respective lease guaranties and (b) seek immediate repayment of the bonds issued pursuant to the City of Port Huron and County of Itawamba Indentures.

 The Coercion Claim

 Sharon contends that UV was coerced into executing the April Document and that therefore, the document is null, void, and unenforceable against Sharon and UV. The heart of plaintiff's position with respect to this claim is that the defendants, although they had known about the planned liquidating distribution scheduled for April 30, 1979 for over two months, waited until the eve of the distribution, and then improperly threatened to impede the distribution unless UV agreed to make certain undertakings with respect to its public debt. According to Sharon, Chase, U.S. Trust, and Manufacturers jointly pursued this conduct despite the statement in UV's Liquidation Plan that it would retain sufficient cash to pay or make provision for its debts, as required by Maine law at all times during the term of the Plan.

The modern doctrine of economic duress ... (e)ven in its furthest extension ... has not been applied to a threat of process or suit, not otherwise oppressive, limited to the subject matter of the agreement, attacked for duress .... Nor should the rule be extended to threats to employ process or exercise rights, not otherwise disproportionate or clearly oppressive, available to the promisee with respect to the subject matter proper. It would make little sense to inhibit the promisee from claiming or enforcing his just due. The vice arises only when he employs extortive measures, or when lacking good faith, he makes improper demands. This occurs ...

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