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March 23, 1982

Carl C. ICAHN et al., Defendants

The opinion of the court was delivered by: LEVAL

On Motion for Preliminary Injunction

Marshall Field & Co. moves for a preliminary injunction enjoining the defendants from further purchases of Field stock, requiring rescission of previous acquisitions and, alternatively, enjoining the defendants from voting certain shares acquired by defendants under an assertedly misleading Schedule 13-D.

 The defendants form a group led by Carl Icahn that has purchased a substantial percentage of the Field common stock pursuant to a program of acquisition of Field shares.

 On February 16, 1982, Field sought a temporary restraining order against further purchases by the defendants. I found the existence of a substantial question on the merits whether the 13-D statement then filed by the Icahn group adequately disclosed the defendants' proposals or plans, in the event the group acquired control, to engage in extraordinary transactions respecting the company's real estate assets. Because of the high likelihood that the Field shareholders and the market place generally were being misled as to information the acquiring group was required by law to disclose, I found that the balance of hardships decidedly favored the injunction of further purchases.

 Field claims that, during the effective period of the assertedly deficient 13-D filing, the Icahn group acquired 942,000 shares or nearly 9% of the stock. The defendants contend that this number should be reduced by 380,000 shares which were purchased on the day of, but prior to, the filing.

 Three days after the grant of the temporary restraining order the Icahn group amended the Schedule 13-D and sought revocation of the restraining order. I found that the new statement was adequate, in light of the evidence then available, to advise the public of extraordinary proposals being considered by the Icahn group. Accordingly, I lifted the order. The Icahn group has since increased its holdings to approximately 30% of the outstanding stock.

 Marshall Field has made, in the meantime, additional applications for restraining orders which I have found to be without merit and have denied. Field has also been active seeking competing tenders from a "white knight". On March 17, 1982, BATUS, Inc., with the support of the Field management, announced a tender offer for Field shares. The price of BATUS' offer was increased the next day.

 Field's first contention is that further purchases by the defendants should be enjoined on the ground that their 13-D filings misrepresent the intentions of the Icahn group. The argument is made with particular reference to the intention to acquire control and the intention thereafter to cause Field to make extraordinary transactions.

 Recognizing that the matter remains in a preliminary stage in which findings are subject to change with further discovery of additional evidence, I conclude that Field has failed to make out these contentions in a manner calling for relief. The evidence suggests not that Icahn is operating under a firm plan to acquire control but rather that the defendant group is feeling its way with a mind open either to selling out if offered a sufficiently attractive profit or to pushing on for control if that seems preferable. In my view, based on the available evidence, to require a more definite statement of intention to acquire control may be to require a false overstatement, equally capable of misleading the marketplace.

 As to plans or proposals for extraordinary transactions in the event control is obtained, I conclude that the amended filing is not inadequate or misleading when measured against the sketchy evidence available.

 Field's alternative contention is that I should enjoin the voting of the shares acquired by defendants under the earlier 13-D filing. An argument in favor is that one who used false filings to assist him in an attempt to gain control should not be rewarded by being allowed to exercise the benefits of the fraudulently obtained stocks. Field argues that this ruling would encourage fraudulent filings with occasional correction from time to time as court decrees require.

 The argument does not depend on irreparable harm which would flow from the voting of the shares or be avoided by an injunction. The argument depends rather on the policy of preserving the integrity of the requirements of the securities laws and preventing violators from profiting by the violation.

 This argument has considerable force. However, strong arguments also point to the contrary in these circumstances. First, there has been no conclusive finding that the early 13-D was false. The finding was of the tentative kind which can justify temporary relief depending on the balance of equities. It is not clear that Field will be able to prove falsity by a preponderance of the evidence when all discovery is complete and the issue is ripe for definitive trial on the merits. Second, in the event it should eventually be shown that the earlier filing was false, those deceived by it, who arguably sold out more cheaply than they would have on proper information, would obtain no benefit from the relief Field now seeks. The victims of such a false filing can be protected by an action for money damages. The benefits of the injunction would go to persons other than those damaged by the false filing.

 Third, the application is premature. No shareholder vote is currently scheduled before November, eight months hence. Even assuming that injunction of the voting will eventually be justified, no irreparable harm results from failure to grant such relief at a preliminary stage based on an inconclusive record.

 Field argues that refusing to grant the relief now effectively rewards the defendants for false filings since potential white knights will be deterred by the size of defendants' voting block. Since the argument was advanced, however, a white knight bidder has emerged. Furthermore, uncertainty and speculation would in any event cloud the future, for a competing tenderer relying on such a preliminary grant of relief would have to bear the risk that the relief provisionally granted would ultimately be rescinded. Likewise, the sophisticated marketplace will be aware that the relief of sterilization of the shares, although now premature, may well be granted at a subsequent time, either upon final trial, or in the event a vote or other circumstance arises which calls for such relief. I can see no reason to enjoin voting on a provisional and inconclusive record when no vote is scheduled for eight months-an eternity in the marketplace of tender offers and battles for control. The application, although now denied, may be renewed either upon final trial or if the imminent holding of an election or other circumstance raises the threat of immediate irreparable harm.

 In pressing for sterilization, Field contends that the mere possibility that the Icahn group will be able to vote the shares in the future poses an immediate threat to the success of the BATUS tender offer and the welfare of Field shareholders. First, Field argues that, if a majority of the company's outstanding shares are not tendered to BATUS, BATUS will be dissuaded from waiving its minimum condition of acceptance if it expects a proxy fight from the Icahn group armed with the voting rights to the contested shares. Second, the shareholders' current decision whether to sell now at the market price or tender their shares depends on their estimate of the ultimate success of the tender offer. That estimate in turn depends in part on the likelihood of a waiver by BATUS in the event the minimum tender condition is not met.

 This argument is not persuasive. The first prong depends on the possibility that BATUS' tender will yield close to, but slightly less than, 50% of the stock. If that situation does in fact occur, there will be a further timely occasion to consider whether failure to grant relief will result in irreparable harm. As to the second prong of the argument, the preliminary relief sought here would not bring certainty to the shareholders. As noted above, the temporary injunction would not preclude the possibility that the Icahn group would eventually be allowed to vote the shares. Moreover, because lay shareholders may misconstrue preliminary relief as a final determination on the merits, a preliminary injunction might well exacerbate the problem rather than solve it.

 Marshall Field also contends that the failure of Alexander Goren and Dan-Elath to file Schedule 13-D's justifies the entry of a preliminary injunction. Dan-Elath is the controlling shareholder of Picara Valley N. V., a filing member of the Icahn group. Goren is the controlling shareholder of Dan-Elath. Even if this failure to file is a violation of section 13(d)(1), it is not misleading. The roles of both Goren and Dan-Elath are set forth in the current filings. The public is not being deprived of any material information. Such a violation will not support a preliminary injunction. Treadway Companies, Inc. v. Care Corp., 490 F. Supp. 660, 665 (S.D.N.Y.), aff'd in part, 638 F.2d 357, 380 (2d Cir. 1980); Wellman v. Dickinson, 475 F. Supp. 783, 833 (S.D.N.Y.1979).

 Marshall Field's allegation that Goren is in violation of Israeli tax laws is hotly disputed by the defendants.

 Finally, Field contends that the defendants have violated the anti-racketeering statutes, 18 U.S.C. §§ 1961-1968 (1976), and that these violations justify preliminary relief. The RICO Act forbids, among other things, acquisition of an interest in a company through a "pattern of racketeering activity." 18 U.S.C. § 1962(a)-(b) (1976). A "pattern of racketeering activity" requires at least two acts of "racketeering activity" within the past ten years. 18 U.S.C. § 1961(5) (1976). "Racketeering activity" is defined at length in 18 U.S.C. § 1961(1)(A)-(D). One racketeering activity under § 1961(1)(D) is "an offense involving ... fraud in the sale of securities ... punishable under any law of the United States."

 Field contends Icahn is liable under this branch of the RICO prohibitions. For proof of fraud in the sale of securities, it relies primarily on a series of civil settlements and stipulations entered into by various defendants with the SEC in earlier SEC proceedings unrelated to this litigation. These settlements admit no violations and are not themselves admissible as evidence of securities violations. Marshall Field also relies on evidence adduced in these earlier proceedings. I find that this evidence does not suffice to show a likelihood of success on the merits with respect to proving any "offense(s) involving ... fraud in the sale of securities ... punishable under any law of the United States." See 18 U.S.C. § 1961(1)(D) (1976). Nor do I find a balance of equities tipping in the plaintiff's favor on this claim. Nor has Field demonstrated irreparable harm flowing from the Icahn group's acquisition of Field shares.

 Marshall Field's motion for a preliminary injunction is therefore denied.


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