Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

CHOCK FULL O'NUTS CORP. v. FINKELSTEIN

October 6, 1982

CHOCK FULL O'NUTS CORPORATION, Plaintiff,
v.
JERRY FINKELSTEIN, JAMES A. FINKELSTEIN, STEVEN BAUMAN, BURTON M. ABRAMS, ABC INDUSTRIES, INC., NORMAN ELOWITZ, SEYMOUR COHN, GLADIEUX CORPORATION, LAWRENCE E. BRINN, ROBERT L. WECHSLER and H.J.T. CO., INC., Defendants



The opinion of the court was delivered by: BRIEANT

MEMORANDUM AND ORDER

 Brieant, J.

 Plaintiff in this action, filed on September 9, 1982, founded on § 13(d) of the Securities Exchange Act of 1934 (hereinafter "the Act") brings this action in its capacity as issuer of its own publicly traded common stock, against defendants, a group acting together (hereinafter "the Insurgents"), who have recently acquired approximately 16% of plaintiff's common stock in open market purchases. Plaintiff seeks injunctive relief only.

 Plaintiff operates a well-known chain of fast-food restaurants in the City of New York and elsewhere, under the trade name "Chock Full O'Nuts." It is referred to herein, and in the documents submitted to the Court as "Chock Full." Defendants apparently perceived that plaintiff was also "Chock Full Of Money," undervalued assets, or unrealized potential.

 Defendants duly filed a Schedule 13D Statement and six Amendments with the issuer and with the Securities and Exchange Commission ("SEC"). That portion of the statements as amended known as "Item 4 -- Purpose of Transaction" is set forth in that noncommittal lingua franca which has become customary in documents making disclosure under the federal securities laws, written with reference to forms used successfully in prior cases, intended to comply with the law and yet retain as much decision making latitude as is possible. Such verbiage often obscures as much as it discloses. The six Amendments which are now on record must be treated for purposes of this lawsuit along with the original filing, as a single disclosure statement.

 Certain defendants have moved by notice of motion stated as being brought pursuant to Rule 12(b)(6), F.R.Civ.P., to dismiss the amended complaint docketed September 16, 1982, for failure to state a claim upon which relief can be granted. An affidavit containing documents and exhibits was submitted therewith and considered by the Court in connection with the motion, which therefore must be treated as having been made for summary judgment pursuant to Rule 56, F.R.Civ.P. The motion was heard and fully submitted on September 22, 1982, together with a companion motion by plaintiff seeking expedited discovery. Because of the Court's disposition of the substantive motion noted below, the application for expedited discovery is moot.

 When only equitable relief is sought, the Court's decree speaks as to the date on which it is uttered, and with reference to the facts then existing. Chapman v. Sheridan-Wyoming Coal Co., Inc., 338 U.S. 621, 630, 94 L. Ed. 393, 70 S. Ct. 392 (1950). We are therefore concerned here only with the adequacy of the disclosure in the 13D Statements, as they have been amended to date and now stand. Included now is a copy of the amended complaint in this action (Ex. 2 to Amendment to Schedule 13D Statement filed on September 13, 1982 and annexed as Ex. 7 to the Affidavit of Jeffrey Glekel, sworn to September 16, 1982). However, the amended Statement does not concede the truth of the allegations.

 The gist of the amended complaint is found in the following allegations:

 
"18. At a time presently unknown to plaintiff, but believed to be no later than November, 1981, the defendants embarked upon a plan, scheme and conspiracy to purchase large amounts of plaintiff's common stock for the purpose of later extorting from plaintiff a price for those shares that is far in excess of their fair market value by threatening to conduct or by conducting a proxy contest. [Emphasis added].
 
21. The Schedule 13D Statements filed by the defendants are false and misleading, contain untrue statements of material facts, and omit to state material facts necessary to make the statements contained therein not misleading in that they indicate [sic] that defendants were considering an attempt to gain control of plaintiff or to exert influence over plaintiff's management when in fact defendants' true purpose in acquiring plaintiff's shares was to later extort from plaintiff a price for those shares that is far in excess of their fair market value by threatening to conduct or by conducting a proxy contest." [Emphasis added].

 The amended complaint goes on to allege that during "discussions" following acquisition, defendants offered to sell their shares to plaintiff at a "price that is far in excess of their fair market value." (A. Complaint, para. 22).

 The amended complaint alleges that the Schedule 13D Statements are false and misleading in that they fail "to adequately describe" the extent to which and the terms on which their purchases were financed by borrowings. This latter contention was not pressed at the hearing. The Court finds no serious defect in the nature and extent of the disclosure on this subject, which is to the effect that this deal, like so many of its kind, is floating substantially on borrowed money obtained from banks and brokerage firms. Certainly this should come as no surprise to the reasonable investor who would have occasion to study the 13D Statements for the purpose of determining his or her own course of conduct.

 Plaintiff alleges substantial and irreparable injury to itself, its shareholders and others who may rely on the truthfulness of the disclosed intentions of the defendants to wage a proxy solicitation contest for corporate control. The theory is that other purchasers in the market will seize upon this information to purchase Chock Full stock of their own, in the hope of profiting from the predictable success of defendants intended corporate coup or possible improved results of new management. Alleging no adequate remedy at law, plaintiff demands the following equitable relief from the Court:

 
1. Preliminarily and permanently enjoining the defendants and all those acting for or in concert with them from: (a) acquiring or attempting to acquire any additional shares of plaintiff's stock; (b) voting in person or by proxy any shares of plaintiff's stock; (c) filing or disseminating any proxy materials until such time as defendants' Schedule 13D Statements have been corrected; and (d) taking any further steps in furtherance of their unlawful plan and scheme.
 
2. Preliminarily and permanently ordering defendants to file corrected Schedule 13D Statements.
 
3. Preliminarily and permanently ordering defendants to divest themselves of all of plaintiff's shares owned by them.
 
4. Granting plaintiff such other and further relief as the Court may deem just and proper, including the costs and disbursements of this action.

 Disclosure here is required by § 13(d) of the Act, 15 U.S.C. § 78m(d)(1)(A)-(E) (Supp. I 1977), reading ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.