The opinion of the court was delivered by: SAND
LEONARD B. SAND, U.S.D.J.
Plaintiffs herein are Condec Corporation, a corporation incorporated under the laws of New York State whose shares are traded on the American Stock Exchange, and two of its wholly owned subsidiaries. Plaintiffs allege that defendant William Farley and other named defendants under his control violated New York's Security Takeover Disclosure Act, N.Y. Bus. Corp. §§ 1600-1614 (McKinney 1982 Supp.), by failing to file a registration statement pursuant to sections 1602 and 1603 of the Act after acquiring control of over 5% of Condec's publicly traded common stock.
Plaintiffs accordingly seek a temporary restraining order and preliminary injunction requiring the immediate filing of a registration statement and enjoining further purchases of Condec stock until the statement is filed. Plaintiffs further ask this Court to order defendants to divest themselves of "all stock purchased in violation of the statute." Plaintiffs' Memorandum at 20.
The procedural history of this application is somewhat unusual and is important to an understanding of the nature of this proceeding. When the parties first appeared before us in the federal court action, 83 CIV. 6932(LBS), it was on an Order to Show Cause why there should not be expedited discovery preliminary to plaintiffs' application for a preliminary injunction based on alleged violations of federal securities laws. The parties were in agreement that such discovery was appropriate. A hearing was scheduled for October 17th, 1983, to deal with the application for injunctive relief. Subsequently, plaintiffs initiated this action in state court, alleging solely violations of the New York Business Corporation Law and an application was made for a temporary restraining order. Defendants removed that case to this Court; a motion for remand has been denied and the two cases have been consolidated for all purposes.
For purposes of this proceeding, based only on the alleged violation of New York Business Corporation law, plaintiffs assert that they rely solely upon the facts disclosed in the 13D statement filed by the defendants. We proceed on the basis of the assumption that the 13D statement is true and accurate, and indeed, any contrary contentions based on matters outside the four corners of the 13D should property await the October 17th hearing.
This application then is a renewal of the application for a temporary restraining order which was pending in the state court at the time of the removal. The issue which confronts the Court is whether, assuming the truthfulness of the 13D statement filed, the requirements for temporary injunctive relief on the state law claim have been satisfied, so that the plaintiffs should be granted this relief prior to consideration by the Court on October 17th of the application for a preliminary injunction predicated on the federal law violation.
We assume for the purposes of this application that plaintiffs have standing under the New York statute to assert a private right of action.
We further assume that plaintiffs have demonstrated that they will suffer "irreparable injury" if we do not grant the requested relief.
Passing these threshold considerations, we find, however, that plaintiffs have not established either (1) a likelihood of success on the merits or (2) sufficiently serious questions going to the merits to make a fair ground for litigation and a balance of hardships tipping decidedly in their favor. See Jackson Dairy, Inc. v. H.P. Hood & Sons, Inc., 596 F.2d 70, 72 (2d Cir. 1979).
Thus, we decline to grant the extraordinary relief that plaintiffs seek.
The relevant facts for the purposes of this application are largely undisputed. As revealed by Schedule 13D statements filed with the Securities and Exchange Commission by defendant William Farley and submitted as exhibits by plaintiffs, defendants currently do control over 5% (in fact 8.7%) of Condec common stock. Defendants have not filed a registration statement with the New York Attorney General. We are asked to decide two issues: (1) whether defendants have violated the New York Takeover Disclosure Act and (2) whether the New York Takeover Disclosure Act has been preempted by federal securities law or violates the Commerce Clause of the United States Constitution. Because we find that defendants have not shown a violation of the New York statute, we do not reach the latter issue.
Our decision rests entirely on statutory construction. No relevant case law has been cited to us, nor are we aware of Any. Section 1602 of the New York Security Takeover Disclosure Act provides:
No offeror shall make a takeover bid unless as soon as practicable on the date of commencement of the takeover bid he files with the attorney general at his New York city office and the target company a registration statement containing the information required by section sixteen hundred three of this article.
If defendants' stock purchases constitute a "takeover bid," they are clearly in violation of New York law, because no ...