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WILSON v. GREAT AMERICAN INDUSTRIES

August 14, 1991

ALEXANDER WILSON, INDIVIDUALLY AND AS REPRESENTATIVE OF ALL MINORITY SHAREHOLDERS OF CHENANGO INDUSTRIES, INC., OTHER THAN DEFENDANTS ON AND BEFORE OCTOBER 18, 1979, PLAINTIFF,
v.
GREAT AMERICAN INDUSTRIES, INC. AS A CORPORATE ENTITY AND AS A SOLE SHAREHOLDER OF CHENANGO INDUSTRIES, INC., MILTON KOFFMAN, BURTON I. KOFFMAN, RICHARD E. KOFFMAN, AS DIRECTORS OF GREAT AMERICAN INDUSTRIES, INC., CHENANGO INDUSTRIES, INC., JOSEPH M. STACK AS THE REPRESENTATIVE OF CHENANGO INDUSTRIES IN THE MERGER BETWEEN CHENANGO AND GREAT AMERICAN INDUSTRIES, AND GARY CROUNSE, DAVID KEITH DYER AND SHARON LEE DYER, AS CO-EXECUTORS OF THE ESTATE OF DAVID L. DYER, DECEASED, WILLIAM STARNER, AND ANTHONY MINCOLLA AS DIRECTORS OF CHENANGO INDUSTRIES, INC., DEFENDANTS.



The opinion of the court was delivered by: McCURN, Chief Judge.

MEMORANDUM-DECISION & ORDER

I. Background

This action arose out of the merger in 1979 of defendant Great American Industries, Inc. ("GAI") and defendant Chenango Industries, Inc. ("Chenango"). The plaintiff, Alexander Wilson, was a minority shareholder in Chenango. Wilson is the class representative for minority shareholders on the date of the merger. This court, in Wilson v. Great American Indus., Inc., 661 F. Supp. 1555 (N.D.N.Y. 1987) ("Wilson I"), granted judgment in favor of the defendants, finding that none of the plaintiffs' claims under the federal securities statutes had merit. The Second Circuit reversed that decision in Wilson v. Great American Indus., Inc., 855 F.2d 987 (2d Cir. 1988) ("Wilson II"), holding that the proxy statement issued by the defendants contained five material omissions and misrepresentations in violation of section 14(a) of the Securities and Exchange Act of 1934, 15 U.S.C. § 78n(a); and Rule 14a-9, 17 C.F.R. § 240.14a-9. The Second Circuit remanded for calculation of damages.

  A hearing on damages was conducted, and this court, in
Wilson v. Great American Indus., Inc., 746 F. Supp. 251
(N.D.N.Y. 1990) ("Wilson III"), awarded damages to the
plaintiff class in the amount of $776,000 together with
interest from the date of the merger, totalling $2,140,777.03.
The defendants then

brought a motion for reconsideration of that decision, and the
court, in Wilson v. Great American Indus., Inc., 763 F. Supp. 688
 (N.D.N.Y. 1991) ("Wilson IV"), amended the previous
judgment to correct a clerical error in the previous interest
calculation; to add certain shareholders to the plaintiff class
which plaintiffs maintained had been wrongly excluded; and to
offset the amount of damages to class members who had received
cash payments instead of GAI Series B preferred stock at the
time of the merger. Final judgment in the amount of
$808,892.27, together with interest from the date of the
merger, for a total of $2,211,837.94, was entered on July 2,
1991.

The defendants have now moved for reconsideration of that decision, and the decision in Wilson III. The defendants maintain that the Supreme Court's decision in Virginia Bankshares, Inc. v. Sandberg, ___ U.S. ___, 111 S.Ct. 2749, 115 L.Ed.2d 929 (1991), issued subsequently to Wilson IV, precludes damages to the minority shareholders. In Virginia Bankshares, the Supreme Court held that minority shareholders whose votes were not required by law or corporate bylaw to authorize a merger were not entitled to damages under section 14(a) of the Securities Exchange Act, even if their votes were solicited by a false or misleading proxy statement. Defendants' motion for reconsideration, and for the court to alter or amend its previous judgments, pursuant to Fed. R.Civ.P. 52(b), 56, and 59(e), was brought on by order to show cause. Presently before the court is the return of the order to show cause, which seeks an order permitting reconsideration and reargument. The ultimate relief defendants seek is summary judgment in their favor. Plaintiffs oppose the motion for reconsideration on three grounds: (1) defendants' filing of a notice of appeal prior to filing the motion for reconsideration divests this court of jurisdiction over the motion; (2) a ruling by this court on the application of Virginia Bankshares would exceed the mandate issued by the Second Circuit when it remanded for a calculation of damages; and (3) Virginia Bankshares is distinguishable from the instant case and would not preclude damages to the plaintiffs here.*fn1

II. Discussion

A.  NOTICE OF APPEAL

On July 11, 1991, the defendants filed a notice of appeal from the court's various judgments in this action, including those issued in accordance with the court's decisions in Wilson III and Wilson IV. The defendants filed a second notice of appeal on July 12, 1991, and plaintiffs filed a notice of cross-appeal. The defendants brought their motion for reconsideration by order to show cause on July 12.

The plaintiffs argue that once defendants' notice of appeal was filed, the court was divested of jurisdiction over those aspects of the case involved in the appeal. The plaintiffs rely on, among other cases, Griggs v. Provident Consumer Discount Co., 459 U.S. 56, 103 S.Ct. 400, 74 L.Ed.2d 225 (1982). While Griggs recites the general rule advanced by plaintiffs, it actually stands for the proposition that a motion to alter or amend a judgment pursuant to Rule 59(e) extinguishes a previously filed notice of appeal. Griggs quotes Fed. R.App.Proc. 4(a)(4), which states, in pertinent part:

    If a timely motion under the Federal Rules of
  Civil Procedure is filed in the district court by
  any party . . . under Rule 59 . . ., the time for
  appeal for all parties shall run from the entry
  of the order denying . . . such motion. A notice of
  appeal filed before the disposition of [such
  motion] shall have no effect. . . .

(emphasis added). The Supreme Court also cites Moore's Federal Practice on this point: "Professor Moore has aptly described the post-1979 effect of a Rule 59 motion on a previously filed notice of appeal: 'The appeal simply self-destructs.'" Griggs, 459 U.S. at 61, 103 S.Ct. at 403.

Here, defendants' motion was timely filed, albeit by an order to show cause. Consequently, the notice of appeal is of no effect, and the court has jurisdiction to consider the motion.

B.  SECOND CIRCUIT'S MANDATE

Plaintiffs next argue that, even if this court has jurisdiction to consider the motion, it would exceed the Second Circuit's mandate to calculate damages only, if it ruled on the ...


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