Appeal from an order of the District Court for the Southern District of New York (Michael B. Mukasey, Judge) granting a preliminary injunction under section 16 of the Clayton Act against a takeover alleged to violate section 7 of the Act, 15 U.S.C. §§ 18, 26 (1982). Order granting preliminary injunction affirmed, rulings denying antitrust standing to takeover target and rejecting subject matter jurisdiction over securities law claims reversed, and case remanded for proceedings consistent with this opinion. Judge Altimari concurs in part and dissents in part in a separate opinion.
Before: FEINBERG, JON O. NEWMAN, and ALTIMARI, Circuit Judges.
JON O. NEWMAN, Circuit Judge:
The primary issue on this appeal is whether the target of a takeover and entities controlled by a target can demonstrate a threat of "antitrust injury" sufficient to confer standing to seek injunctive relief under section 16 of the Clayton Act against a takeover alleged to violate section 7 of the Act, 15 U.S.C. §§ 18, 26 (1982). Also at issue is the extent to which an American court may apply the antifraud provisions of American securities laws to a tender offer involving two foreign corporations and occurring on foreign soil, where only a small percentage of the target's shareholders are American residents. These issues arise on an appeal from an order of the District Court for the Southern District of New York (Michael B. Mukasey, Judge) granting a preliminary injunction that prevents appellant Minorco, S.A., along with co-defendants Anglo American Corporation of South Africa, Ltd. ("Anglo") and De Beers Consolidated Mines, Ltd. ("De Beers"), from proceeding with a tender offer to acquire all of the shares of Consolidated Gold Fields PLC ("Gold Fields").*fn1 Judge Mukasey issued the injunction after finding that two of the plaintiffs --Newmont Mining Corporation ("Newmont"), in which the target Gold Fields has a 49.3% stake, and Newmont's subsidiary, Newmont Gold Company ("Newmont Gold") --had proved a likelihood of success on their claim that the proposed acquisition of Gold Fields would violate section 7.*fn2 The District Court dismissed for lack of subject matter jurisdiction plaintiffs' claim that the tender offer also violated sections 10(b) and 14(e) of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j(b), 78n(e) (1982), and S.E.C. Rule 10b-5, 17 C.F.R. § 240.10b-5 (1988), promulgated thereunder. Plaintiffs cross-appeal from the District Court's denial of antitrust standing to Gold Fields and its wholly owned American subsidiary, Gold Fields Mining Corporation ("GFMC") and the dismissal of the securities claims.
We conclude that all the plaintiffs in this case --the target as well as the target-controlled entities --have demonstrated a threat of "antitrust injury" sufficient to warrant the issuance of a preliminary injunction. We therefore affirm the District Court's grant of injunctive relief under section 16 but reverse that Court's denial of standing to Gold Fields and GFMC. Regarding the fraud claims, we conclude that the tender offer had sufficient effects within the United States to warrant application of American securities laws and that the District Court should have asserted subject matter jurisdiction over those claims. Accordingly, we remand the fraud claims to the District Court for further proceedings and a determination as to what remedy, if any, consistent with principles of international comity, should be granted.
Gold Fields is a British corporation with significant holdings in the United States. It is engaged primarily in the exploration, mining, and sale of natural resources, especially gold. Half of Gold Fields' $2.4 billion in assets are located in the United States. Gold Fields wholly owns GFMC, a Delaware corporation headquartered in New York with gold mining operations in California and Nevada. The crown jewel of Gold Fields' assets is its 49.3% stake in Newmont, a Delaware corporation headquartered in New York. Newmont, in turn, owns 90% of Newmont Gold, the largest gold producer in the United States. In addition to these American interests, Gold Fields has significant holdings in Australian gold mining operations, as well as a 38% ownership interest in Gold Fields of South Africa Limited, the second largest gold producer in South Africa. Gold Fields and its associated companies account for 12% of the western world's gold production, making it the second largest gold producer in the non-communist world.
Minorco is a Luxembourg corporation, whose principal assets are shareholdings in companies engaged in natural resource production and exploration, including a 29.9% interest in Gold Fields. Minorco is controlled to a large extent by co-defendants Anglo, a South African corporation, which owns 39.1% of Minorco, and De Beers, also a South African corporation, which owns 21% of Minorco. The Oppenheimer family of South Africa owns 7% of Minorco. Anglo has extensive gold mining operations in South Africa, as does the Oppenheimer family, which allegedly controls Anglo, De Beers, and Minorco. In addition to ownership interests in the three defendant companies, the Oppenheimer family has a number of its members and close associates on the boards of the companies. Considered together, the Minorco group is the largest producer of gold in the non-communist world, accounting for 20.3% of all gold production in the western world.
In October 1988, Minorco commenced its offer for the 70% of Gold Fields' stock it does not already own. Of the 213,450,000 Gold Fields shares outstanding, approximately 5,300,000 (2.5%) are held by United States residents. Of these shares, approximately 50,000 shares are held directly by residents, 3.1 million shares are held indirectly through nominee accounts in the United Kingdom, and about 2.15 million shares are owned through the ownership of American Depository Receipts (ADR's), documents that indicate ownership by an American of a specific number of shares in a foreign corporation held of record by a United States depository bank. The ADR depositories also have nominees in the United Kingdom.
In its offering documents, Minorco stated that the offer "is not being made directly or indirectly in, or by use of the mails or by any means or instrumentality of interstate or foreign commerce or of any facilities of a national securities exchange of, the United States of America, its possessions or territories or any area subject to its jurisdiction or any political sub-division thereof." Minorco sent the offering documents to the United Kingdom nominees for United States resident shareholders. Minorco did not mail offering documents to the United States resident shareholders who own Gold Fields shares directly, but the documents stated that Minorco would accept tenders from United States residents as long as the acceptance form was sent to Minorco from outside the United States.
A. The Need for a Hearing
Before turning to the principal issues before us, we must first consider appellant's claim that Judge Mukasey should have held an evidentiary hearing before granting the preliminary injunction, rather than ruling on the basis of the discovery record before him. This Court has held that "[o]n a motion for a preliminary injunction, where 'essential facts are in dispute, there must be a hearing . . . and appropriate findings of fact must be made.'" Fengler v. Numismatic Americana, Inc., 832 F.2d 745, 747 (2d Cir. 1987) (quoting Visual Sciences, Inc. v. Integrated Communications, Inc., 660 F.2d 56, 58 (2d Cir. 1981)). However, Fengler does not stand for the proposition that a hearing must be held in all preliminary injunction cases. As Judge Feinberg has noted, "[T]here is no hard and fast rule in this circuit that oral testimony must be taken on a motion for a preliminary injunction or that the court can in no circumstances dispose of the motion on the papers before it." Redac Project 6426, Inc. v. Allstate Insurance Co., 402 F.2d ...