SQUARE D CO. v. SCHNEIDER S.A.

The opinion of the court was delivered by: Sand, District Judge.

OPINION

On March 26, 1991, this Court heard oral argument on defendants' Order to Show Cause why Counts I, II, III and IV of plaintiff's Amended and Supplemental Complaint ("Complaint") should not be dismissed. At that time the Court issued an oral Opinion denying defendants' motion and reserved the right to issue a subsequent written Opinion. The following constitutes that written Opinion.

In the motion presently before the Court, defendants move to dismiss the first four Counts of the Complaint pursuant to F.R. Civ.P. 12(b)(6) for failure to state a claim upon which relief can be granted. Counts I and II allege violations of § 7 of the Clayton Act, 15 U.S.C.S. § 18 (1990). Count III alleges violations of § 8 of the Clayton Act, 15 U.S.C.S. § 19 (1990). Count IV alleges that defendants have conspired to restrain trade in violation of § 1 of the Sherman Act, 15 U.S.C.S. § 1 (1990). Plaintiff seeks preliminary and permanent injunctive relief.

I. BACKGROUND

Plaintiff, Square D Company ("Square D"), is a Delaware corporation with its principal place of business in Palatine, Illinois. Square D is principally engaged in the business of producing electrical distribution and electrical control products for commercial and industrial use.

The defendants in this action are a number of corporations and individuals all allegedly affiliated with Schneider, S.A. (hereinafter "Schneider"). The complaint alleges that defendant Schneider, acting through a group of commonly controlled companies known as Groupe Schneider, is engaged in an illegal plan to acquire Square D.

The complaint states that on February 21, 1991, Schneider announced its intention to engage in a proxy fight for control of Square D's Board of Directors, the purpose of which is to install Directors who will effectuate consummation of a merger between Square D and Schneider. Complaint ¶ 62. The complaint also states that Schneider launched a hostile all-share tender offer for Square D on March 4, 1991. Complaint ¶ 65.

With regard to the proxy fight, the complaint alleges that Schneider has proposed a slate of eleven candidates for Square D's Board. All eleven are allegedly "either employees, officers, directors, or consultants of Schneider or one or more of its subsidiaries." Complaint ¶ 122. The complaint further alleges that one of the Schneider nominees, defendant Mahmoud Tiar, sits on the Board of a Schneider subsidiary that competes with Square D in the United States. Complaint ¶ 124. It also asserts that five other nominees are officers or directors of two Schneider affiliated companies — Spie Batignolles and Jeaumont-Schneider — which in turn own a controlling interest in a third company (Jeumont Schneider Automation) which competes with Square D. Complaint ¶ 125.

II. ANALYSIS

In deciding a motion to dismiss, this Court is required to accept the plaintiff's allegations as true and construe those allegations in the light most favorable to plaintiff. See Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974). The complaint will be dismissed only if the plaintiff can prove no set of facts that would entitle him to relief. See Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957); Goldman v. Belden, 754 F.2d 1059, 1065 (2d Cir. 1985).

Section 7 of the Clayton Act, as amended, provides in pertinent part that "No [natural or legal] person engaged in commerce . . . shall acquire, directly or indirectly, the whole or any part of the stock or . . . assets of another person . . . where in any line of commerce . . . in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly." 15 U.S.C.S. § 18. Counts I and II of the Amended Complaint allege that if Schneider succeeds in acquiring Square D, the effect will be to lessen actual or potential competition among certain products in the United States.

Defendants' attack on the first two Counts of the Amended Complaint centers on the contention that plaintiff is not entitled to seek injunctive relief under § 7 of the Clayton Act because it lacks standing. Defendants claim that Square D has not and cannot allege "antitrust injury." See Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104, 113, 107 S.Ct. 484, 491, 93 L.Ed.2d 427 (1986).

Defendants recognize that in Consolidated Gold Fields PLC v. Minorco, S.A., 871 F.2d 252, 257-61 (2d Cir.), cert. dismissed, 492 U.S. 939, 110 S.Ct. 29, 106 L.Ed.2d 639 (1989), the Second Circuit held that a target of a hostile takeover had standing under § 7 of the Clayton Act because the target's allegation that it would "lose its ability to compete independently" was antitrust injury within the meaning of Cargill. Defendants further acknowledge that Square D has alleged that ...