The opinion of the court was delivered by: HAIGHT
This litigation arises under the Securities Exchange Act of 1934, 15 U.S.C. § 78a et seq., by the Williams Act and accompanying regulations.
On October 9th, 1985, the defendant and counterclaim-plaintiff, Avalon Corporation, publicly announced a tender offer for all outstanding shares of the common stock of plaintiff and counterclaim-defendant, Maynard Oil Company. The offering price was $6.00 a share.
The offer was specifically conditioned, among other things, upon the valid tender without withdrawal prior to the November 7th 1985 expiration date of 3.2 million shares, which number of shares together with the shares already owned by Avalon, would approximately equal 51 percent of Maynard Oil's total outstanding shares and the shares issuable upon exercise of outstanding stock options and upon conversion of the company's convertible debentures.
The expiration date of the offer is at midnight Eastern Standard Time, Thursday, November 7, 1985, unless extended. Withdrawal rights expire at midnight Eastern Standard Time on Thursday October 31, 1985.
The board of directors of Maynard regarded and regard Avalon's offer with disfavor. At 8:30 p.m. on October 15, Maynard issued a press release which was quoted on the broad tape on October 16, and referred to by leading newspapers of this city on October 17. The press release commences with an announcement by the Maynard board of directors that the board did not favor the Avalon offer, viewed it as inadequate and not in the best interests of the company or its stockholders. And after dealing with that subject, on page 2 of the press release, the following appears:
"Maynard Oil Company also announced that the board of directors has authorized the purchase of up to 1.3 million shares of the company's common stock in open market or privately negotiated transactions. The board of directors has authorized the expenditure of up to $8 million for the purchase program. Maynard Oil said that the purpose of the purchase is to defeat the tender offer by Avalon Corporation, and to afford some stockholders who wished to sell shares at this time, an opportunity to do so, while allowing other stockholders wishing to retain their investment in the company under present management, to do so.
"Smith Barney will act as the company's agent for the purchase of shares. Maynard Oil intends to finance the purchases, along with its working capital needs, with internally generated funds, borrowings from banks, affiliates or others, or refinancing of existing indebtedness. In further action, the company has filed a lawsuit against Avalon Corporation and its affiliates alleging violation of the Federal Securities Laws in connection with Avalon's tender offer and Avalon's affiliates' prior purchases of Maynard stock. The suit filed in Federal Court in New York seeks to have the Avalon tender offer restrained and other relief."
The suit referred to in the last paragraph of the press release was filed on October 16, and was assigned to me. On October 17, Avalon filed a counterclaim against Maynard. Avalon accompanied that counterclaim with a motion for a temporary restraining order brought on by order to show cause.
Maynard was directed to show cause why a temporary restraining order should not issue herein, enjoining counterclaim defendants pending a hearing and determination of Avalon's motion for a preliminary injunction from purchasing, agreeing to purchase, or acquiring any interest in any shares or equivalents thereof of defendant Maynard Oil Company.
Counsel for Avalon appeared before me ex parte at 8:30 a.m. on October 17. The circumstances of that appearance and the action then taken I described in detail at the conclusion of the hearing held yesterday afternoon. It is sufficient for the present to say that at the conclusion of the ex parte hearing, I signed a temporary restraining order which provides, in pertinent part:
"It is further ordered that counterclaim defendants and each of them and their directors, officers, employees, agents, subsidiaries and affiliates, and all other persons acting in concert with or on behalf of counterclaim defendants directly or indirectly, are restrained and enjoined from purchasing, agreeing to purchase, or otherwise acquiring any interest in any shares or equivalents thereof of Maynard Oil until such time as the parties may be heard on Avalon's application for a temporary restraining order as set forth in this order to show cause and restraining order."
The motion for continuance of the temporary restraining order was made returnable at 1 p.m. on October 17. Counsel for the parties appeared and argued the case at length. Avalon presses for continuance of the restraint during that 10 day period contemplated by Rule 65, Fed.R.Civ.P., during which time expedited discovery would pave the way for Avalon's contemplated motion for a preliminary injunction. Maynard asks that the restraint be lifted.
Avalon's counterclaim asserts three causes of action against Maynard. The first alleges violation of Rule 13e-4, 17 C.F.R. § 240.13(e)-4, promulgated by the Securities and Exchange Commission. That cause of action is based upon the premise that Maynard's recent activities in respect of this stock should be characterized as an issuer tender offer. Avalon's second cause of action alleges violation of Rule 13e-3, 17 C.F.R. § 240.13(e)-3. It is based on the premise ...