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October 4, 1982


The opinion of the court was delivered by: POLLACK


 MILTON POLLACK, District Judge.

 Plaintiff, Todd Shipyards Corporation ("Todd" hereafter) sues for a permanent injunction to block the defendants Madison Fund, Inc. (the "Fund") and Bernard L. Schwartz from making further purchases of Todd's common stock and for various relief on their present holdings, charging that defendants violated § 13(d) of the Securities Exchange Act of 1934, 15 U.S.C. § 78m(d)(1) [the Williams Act] by the allegedly deficient Schedule 13D filed on September 3, 1982 with the Securities and Exchange Commission ("SEC") and the New York Stock Exchange pursuant to the Act and the Rules and Regulations promulgated thereunder. Plaintiff also joined as defendants, the President, Gould, and the Vice-President, Breed, of the Fund and the defendant Furman, Selz, a corporate registered broker-dealer, and its Executive Vice-President, the defendant Mager. (The brokers are joined as alleged members of the purchasing group and as alleged beneficial owners of stock acquired by the group).

 Jurisdiction is posited on the federal questions involved. Section 27 of the 1934 Act, 15 U.S.C. § 78aa, and 28 U.S.C. §§ 1331 and 1337.

 The matter was brought before the Court by order to show cause for a preliminary injunction and following expedited discovery, the issues were tried at a Bench trial. In conformity with Rule 65(a)(2) Fed. R. Civ. P. and on consent of the parties, the Court advanced and consolidated the trial on the merits of this action with the hearing on the preliminary injunction.

 The proofs presented consisted of testimony of witnesses, depositions and exhibits. At the conclusion of the trial, decision was reserved. On due deliberation and weighing the evidence, circumstances and probabilities and assessing the credibility of the witnesses, the complaint must be dismissed for failure of the plaintiff to carry its burden of proof to establish its claims by a fair preponderance of the credible evidence. The background follows.

 The Parties

 Plaintiff Todd is a New York corporation whose stock is registered pursuant to Section 12 of the 1934 Act, 15 U.S.C. § 78 l, and which is listed and traded on the New York Stock Exchange. It has approximately 5,000,000 shares of common stock issued and outstanding. Todd's business consists of shipbuilding and repair and a substantial portion of its revenues is derived from government contracts. Todd's treasury contains approximately $100 million in what was described by a witness as "redundant cash".

 Defendant Madison Fund is an investor in the common stock of Todd. It is a closed-end, non-diversified management investment company registered under Section 8 of the Investment Company Act of 1940, 15 U.S.C. §§ 80a-8 ("the 1940 Act"). On April 21, 1982, the Madison Fund shareholders voted to authorize the Fund to "cease" being a registered investment company and management of Madison Fund has engaged in a search for acquisition opportunities which would qualify it for exemption from the requirements of the 1940 Act. Thus, it has stated that investments would be made in majority owned and controlled subsidiaries to the extent that the Fund might be in a position to submit the appropriate applications to the SEC for deregistration as an investment company should it so desire.

 Defendant Schwartz is the chairman of the board of directors of Loral Corporation ("Loral"), a corporation engaged primarily in the design and manufacture of defense electronic systems and electronic communications products. He owns and has the power to vote 134,200 shares of Todd's outstanding shares.

 The Relationship of Schwartz and Madison Fund with Respect to Todd

 In July 1982 Schwartz approached Madison Fund, with which he was previously acquainted, and invited it to consider making a substantial investment in Todd. Madison Fund after evaluating the possibility, agreed to go forward and said it would consider acquiring up to 25% of Todd's outstanding stock. Schwartz had indicated that he was willing to commit approximately $5-6 million of his funds to purchase Todd stock which would translate into approximately 5% of the outstanding stock at the then prevailing market price. To equalize their relationship they entered into an agreement on August 24, 1982 whereby each granted to the other a right of first refusal if either were to decide to sell its or his Todd's stock. Madison Fund also granted to Schwartz an option to purchase up to 15% of its shares of Todd under certain circumstances at a price based upon Madison Fund's cost. Schwartz, in turn, granted Furman, Selz, the brokerage firm which introduced the matter, an option to acquire a portion of the Todd shares which were covered by the option agreement between Schwartz and Madison Fund if and after such shares were acquired by Schwartz. Furman, Selz also is being compensated up to $550,000 by Madison Fund and Schwartz as a "financial advisory fee".

 The Fund and Schwartz, each for their own account, and in advance of concluding an agreement between them, began purchasing Todd common stock on the New York Stock Exchange. The on-going negotiations between them actually produced mutual assent on all essential terms and written contracts between them and with the stock brokers, came into being on August 24, 1982. They then called on the president of Todd, to explain their purposes and investment plan. They explained that they were interested stockholders who did not regard their investment as hostile and would not constitute a threat to management. They stated their high regard for Todd's management and the effective job it had done and that they had no plans of acquiring a specific percentage of Todd stock, but that their investment might reach 30 percent.

 Schwartz and the Fund's president, Gould, also discussed in particular with Todd's president their ideas for Todd's possibly utilizing its excess liquid assets ("redundant cash") to a greater benefit. They stated that as important stockholders they would find a method for expressing their views to the board in a friendly posture and thus by their knowledge, skill and background, make a contribution to the welfare of Todd.

 The reaction of Todd's president was to tense up, prepare to resist intrusion by his callers into Todd's affairs, and shortly to retain counsel with instructions to threaten Madison Fund with suit should it exceed the 5% level of stock ownership in Todd and proceed to file a Schedule 13D. Madison Fund was so told by counsel for Todd -- his words being: "when they file the 13D, rockets will go off". *fn1"

 Todd's directors, management and employees own 7% of the outstanding shares of Todd, and an additional 11-12% of the shares are in the hands of shareholders closely related to management.

 The Schedule 13D

 On August 25, 1982, for the first time, the investments in Todd common stock by Madison Fund and Schwartz reached 5% of Todd's issued and outstanding shares. Within 10 days thereafter, a Schedule 13D was drafted and the management of Todd was offered but declined an opportunity to review the Schedule 13D as suggested by Madison Fund to Todd. Thereupon, on September 3, 1982, Madison Fund and Schwartz jointly filed with the SEC and the New York Stock Exchange and delivered to Todd a Schedule 13D pursuant to Section 13(d) of the Exchange Act, reflecting the facts that they had acquired shares of the common stock of Todd to establish an equity position in Todd; that they were acting in concert; that their aggregate holdings in Todd as of September 2, 1982 amounted to 8.87% of Todd's issued and outstanding common stock; that subject to their investment judgment as set forth in the filing, they intended to acquire in the aggregate up to 30% of the outstanding shares of Todd's common stock; and that they had no plans to merge, reorganize or liquidate Todd, to sell or transfer a material amount of its assets, or to change materially Todd's capitalization or dividend policy, or its business or corporate structure. The filing also states that either or both of Schwartz and Madison Fund may at any time increase or decrease their respective investments depending on certain factors.

 Madison Fund and Schwartz expressly stated in the Schedule 13D that the purpose of their purchases is to make significant investments in Todd and to seek to influence the deployment of excess liquid assets and future cash flows not directly required by or employed in Todd's current business. They further stated therein that although they have no specific plans, recommendations or proposals regarding the future conduct of Todd's business, they intend to discuss with its management the ways in which Todd's liquid assets and future cash flows not directly required by or employed in Todd's current business may be deployed, with the object of enhancing the value of the shareholders' investment in Todd, including among the alternative possibilities such transactions as selective acquisitions or repurchases of all or a portion of the outstanding shares.

 Madison Fund and Schwartz expressly denied, in their Schedule 13D, any plans to seek majority representation on Todd's Board of Directors. They stated, however, that they might seek to appoint one or more nominees to serve as Directors of Todd and that they intend to support current management of Todd in the operation of the business.

 As of September 17, 1982 Madison Fund and Schwartz had bought a total of 654,600 shares, representing approximately 13.20% of Todd's common stock and on September 20, 1982, they filed an amendment to the Schedule 13D to reflect the increase since the earlier filing.

 The Statutory Obligation Involved

 Section 13(d) of the 1934 Act requires anyone who, directly or indirectly, becomes the beneficial owner of more than 5% of any registered equity security, within ten days, to file with the SEC and the issuer and the stock exchange where the security is traded a Schedule 13D containing all of the information required by the SEC's rules and regulations.

 Schedule 13D specifies the categories of information which must be disclosed pursuant to Section 13(d). Foremost ...

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