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May 27, 1981

CREDIT & FINANCE CORP. LTD., Crescent Diversified Ltd., Mike Felkay, Glenhaven Ltd., Abraham Israeloff, Phyllis Israeloff, Clara E. Kellner, George A. Kellner, Carl B. Menges, Nat Miller Associates, Elizabeth B. Mott, Pimlico Associates, Polytechnic Organisation Ltd., Fred R. Nederlander, Elmer G. St. John, M. D., Margaret W. St. John, Sogo Sosha Limited, Samuel M. Stayman and Alfred Rand, as Agents for Star Investors, Wendy Jesser Stowe, Robert Winthrop, Jerry Roland and Donaldson, Lufkin & Jenrette, Inc., Plaintiffs,
WARNER & SWASEY COMPANY and Ranco Incorporated, Defendants

The opinion of the court was delivered by: KNAPP


In its opinion reversing our original judgment (486 F. Supp. 101) dismissing the amended complaint as against defendant Ranco Incorporated ("Ranco"), the Court of Appeals, speaking through Friendly, C. J. (638 F.2d 563), directed the taking of limited expedited discovery, at the conclusion of which "it may well be that ... Ranco will be in a position to move successfully for summary judgment." Id. at 567. Such discovery having been completed, Ranco's motion for summary judgment is now before us, and is denied. *fn1"

 It will be remembered *fn2" that in the July 16 press release, Ranco explained the decision of its board of directors to reject the Warner & Swasey ("W&S") offer by stating, among other things:


"(T)he Board questioned the compatibility of the two companies and the credibility of Warner & Swasey's management in view of the agreement that has been in effect with Ranco since September 1978 and assurances received from Warner & Swasey's management during that time." (Emphasis supplied.)

 With respect to this statement, Judge Friendly observed (638 F.2d at 566-67):


"A reader of this release could reasonably interpret it as suggesting that Ranco was indeed expecting a hostile tender offer... Actually the sentence (quoted above) is Janus-faced, with the "credibility' reference suggesting a hostile tender offer and the "assurances' phrase the contrary. Perhaps the peculiar language of the release was mere inadvertence."

 The evidence before us raises a genuine issue of fact as to whether the language in question was indeed "mere inadvertence", or whether it was deliberately designed to give the impression that a hostile tender offer was anticipated. A jury could permissibly conclude that Ranco desired to give such an impression in order to support the price of its stock, and thus encourage Vorwerk to purchase W&S's Ranco stock at a price acceptable to W&S. *fn3"

 We need consider no other question. The motion for summary judgment must be, and is, denied.

 A conference is set for Tuesday, June 30, 1981 at 9:30 a.m. in Courtroom 619, at which time counsel for all parties shall be prepared after full discussion among themselves to suggest a schedule for completing all pre-trial proceedings.



 On Motion to Reargue

 Defendant Ranco seeks to reargue its motion for summary judgment denied by our Memorandum and Order of May 27, 1981 (at 135). The application for reargument is based primarily on the premise that we did not read the deposition testimony of various Ranco witnesses. The plain fact, however, is that nothing these witnesses may have said could warrant the granting of summary judgment.

 When this case was first before us, Ranco persuaded us that: it had received, and ultimately decided not to recommend to its stockholders, an offer from Warner & Swasey; it had not believed this offer to portend a hostile tender offer on Warner & Swasey's part; it had accurately reflected these facts and belief in its July 12 and July 16 press releases; and that no one could rationally have concluded that either release foreshadowed a hostile tender offer.

 Ranco espoused the same position before the Court of Appeals. Thus, with respect to the July 12 release, it observed (at page 13 of its brief):


"Both the July 12 letter (from Warner & Swasey) and Ranco's responsive press release plainly indicated that no hostile tender offer was anticipated by either party..."

 With respect to the July 16 release it argued (at page 29):


"There was nothing to suggest that Ranco at any relevant time anticipated a hostile tender offer by Warner & Swasey in the event that the proposal made in the July 12 letter were to be rejected."

 After remand from the Court of Appeals and completion of the directed limited discovery, Ranco shifted its position with respect to the July 16 release. In seeking to obviate the issue formulated by Judge Friendly as to whether or not the phraseology of that release had resulted from "inadvertence", Ranco took the position that the release had been deliberately phrased to allow for the possibility of a hostile tender offer.

 On our initial consideration of Ranco's motion for summary judgment, we did not grasp the full significance of this new position, but treated the matter as though the issues remained those formulated by Judge Friendly in response to Ranco's original arguments. Actually, the change in position in and of itself precludes the granting of summary judgment. Once it is conceded or asserted that the July 16 release was deliberately phrased to take into account the possibility of a hostile tender offer, it inescapably becomes a question of fact whether the "Janus-faced" vehicle employed for such deliberate purpose constituted adequate compliance with Rule 10b-5, or whether it was "reckless"1a to have failed to set forth all facts known to Ranco which caused it to alter the forecast expressed on July 12, to the end that the investing public (including these plaintiffs) might have made an informed decision as to the likelihood of a hostile tender offer.

 The motion for reargument is accordingly denied.


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