The opinion of the court was delivered by: CONNER
Plaintiff Milton Fisher ("Fisher") brought this action against defendants The Plessey Company Limited ("Plessey") and Plessey Incorporated ("Plessey Inc.") alleging various violations of the federal securities laws in connection with a 1980 tender offer by Plessey for Plessey Inc. debentures. The case is now before the Court on a blunderbuss motion by defendants to dismiss the complaint pursuant to Rules 12(b)(6) and 9(b), F.R.Civ.P. or, in the alternative, for summary judgment, Rule 56, F.R.Civ.P. With one exception noted below, these motions are denied.
Fisher, an owner of $15,000 (face amount) of Plessey Inc. debentures, claims that Plessey's actions in connection with its tender offer for the Plessey Inc. debentures violated the antifraud provisions contained in Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b) ("the Act"), Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5, and Section 14(e) of the Act, 15 U.S.C. § 78n(e),
and that portions of the tender offer materials violated the reporting requirements of Section 13(e) of the Act, 15 U.S.C. § 78m(e). Plaintiff also contends that defendants are also liable for breaches of state law fiduciary duties.
The complaint sets forth the following factual allegations in support of these claims. On March 18, 1980, Plessey, an English public limited company,
commenced an "any or all" tender offer for the 4-1/2% convertible subordinated debentures, due June 1, 1993, of Plessey Inc., its wholly-owned United States subsidiary. The debentures were traded on the American Stock Exchange and were convertible at the holder's option into Plessey stock at the rate of 14.3711 American Depository Receipts ("ADR") per each $1,000 face amount debenture. These ADRs, which are publicly traded in the United States on the New York Stock Exchange, each represent ten Plessey dollar ordinary shares, which are in turn convertible into Plessey ordinary shares, traded on the London Stock Exchange, on a one-for-one basis. Thus, the price of the debentures is related to the price of Plessey's ordinary shares. Under the terms of the offer, Plessey agreed to pay a net cash price of $585 per $1,000 principal amount debenture.
The offer was initially set to expire on April 7, 1980, but was extended prior to that date through April 30, 1980.
Fisher alleges that immediately prior to the tender offer the conversion value of each $1,000 principal amount debenture was $417 based upon a market price of $29 per ADR. He further claims that the offer to purchase, the transaction statement and the issuer offering statement were false and misleading because defendants
(1) failed to furnish any financial statements and/or financial information concerning Plessey or any fair or adequate summary thereof as required by Section 13(e) of the 1934 Act and Rules 13e-3 and 13e-4 promulgated thereunder;
(2) failed to give any information concerning the improvement in Plessey's sales and earnings which defendants knew Plessey would achieve for the fourth quarter of the fiscal year 1979 as well as for the entire fiscal year 1979;
(3) failed to give any information concerning Plessey's improved market position by reason of the sale of two unprofitable subsidiaries and an expected increase in orders;
(4) falsely stated their belief that the offer was fair, without giving an analysis of the transaction's fairness as required by Rule 13e-3, when they actually expected the price of the ADRs and debentures to increase based both upon disclosure of Plessey's fourth quarter earnings for fiscal 1979 and upon Plessey's expected strong performance during the first two quarters of fiscal 1980; and
(5) falsely stated that, aside from the historical price information presented regarding the ADRs, there was no other information material to a decision whether to tender the debentures.
Plaintiff asserts that defendants timed the tender offer to take advantage of the existing low debenture prices immediately before the announcement of Plessey's strong fourth quarter earnings for 1979. Those earnings, which were publicly reported on June 26, 1980, showed an 81% increase over the fourth quarter of the previous fiscal year. When Plessey's strong performance continued in the first two quarters of fiscal 1980, the ADRs reached a high of 62-7/8, thus giving the debentures a conversion value of $903. Plaintiff claims that because of his reliance on the allegedly false and misleading tender offer materials, he was fraudulently induced to sell his debentures at the unfairly low tender price.
Summary judgment is appropriate only where the court is satisfied that the moving party has met its burden of establishing that there exists no genuine issue with respect to any material fact and that it is entitled to judgment as a matter of law.
Rule 56, F.R.Civ.P., Friedman v. Meyers, 482 F.2d 435, 438-39 (2d Cir. 1973). In making this determination, the Court cannot try issues of fact but can only determine whether there are issues of fact to be tried. SEC v. Research Automation Corp., 585 F.2d 31, 33 (2d Cir. 1978). Moreover, any ambiguities are to be resolved in favor of the nonmoving party. Id. The Court will consider affidavits, depositions, answers to interrogatories and admissions, but will not give any effect to mere conclusory allegations or denials, or to unsubstantiated assertions submitted by a party. The goal of this procedure is not to subjugate the rights of the plaintiff by requiring him to submit to trial by affidavit, but rather to weed out and dispose of unsupportable claims prior to trial as a means of protecting the defendant and the Court from unnecessary proceedings. See Feick v. Fleener, 653 F.2d 69, 77 (2d Cir. 1981).