Minzer and Schipper v. Keegan, Ruppel, et al., Docket No. 99-7199
| Decision Date | 01 August 1999 |
| Docket Number | Docket No. 99-7199 |
| Citation | 218 F.3d 144 |
| Parties | (2nd Cir. 2000) LEONARD MINZER and HARRY SCHIPPER, on behalf of themselves and all others similarly situated, Plaintiffs-Appellants, v. GERALD C. KEEGAN, PHILIP F. RUPPEL, GEORGE H. SORTER, GWENDOLYN CALVERT BAKER, WILLIAM F. DE NEERGAARD, JAMES G. PEEL, C. STEPHEN CONNOLLY, WILLIAM F. WARD, NICHOLAS A. MARSHALL, PETER C. HAEFFNER, JR., GREATER NEW YORK SAVINGS BANK, ASTORIA FINANCIAL CORP., ASTORIA FEDERAL SAVINGS AND LOAN ASSOCIATION, and ASTORIA FEDERAL SAVINGS & LOAN, Defendants-Appellees, MICHAEL HENCHY, DANIEL J. HARRIS, PHILIP CIMINO, PHILIP SPIES, and R. CARLSON, Defendants |
| Court | U.S. Court of Appeals — Second Circuit |
Appeal from an order of the United States District Court for the Eastern District of New York (Charles P. Sifton, Judge) dismissing a complaint alleging that a proxy statement seeking approval of a proposed merger was materially misleading. We affirm on the ground that the alleged omissions on the proxy statement would upon rectification not have made any reasonable investor less likely to approve the objected-to merger.
JOSEPH H. WEISS, Weiss & Yourman (Jules Brody, Stull, Stull & Brody, on the brief), New York, New York, for Plaintiffs-Appellants.
JOEL B. HARRIS, Thacher, Proffitt & Wood (Jonathan D. Forstot, Charles T. Caliendo, on the brief), New York, New York, for Defendant-Appellees Astoria Financial Corporation, Astoria Federal Savings and Loan Association, Gerald C. Keegan, and Greater New York Savings Bank.
MICHAEL H. BARR, Sonnenschein Nath & Rosenthal (Steven K. Barentzen, on the brief), New York, New York, for Defendant-Appellees Outside Directors of Greater New York Savings Bank.
Before: WINTER, Chief Judge, NEWMAN, Circuit Judge, and KEENAN, District Judge.*.
Leonard Minzer and Harry Schipper, on behalf of themselves and similarly situated shareholders, appeal from then-Chief Judge Sifton's dismissal of their complaint. It alleged that a proxy statement seeking shareholder approval of a proposed merger was materially misleading, in violation of Section 14(a) of the Exchange Act, see 15 U.S.C. § 78n(a), and Rule 14a-9, see 17 C.F.R. § 240.14a-9(a). Appellants also alleged a breach of state law fiduciary duties. We affirm the dismissal of the federal claim on the ground that the allegedly material omissions in the proxy statement would not have induced any reasonable investor to be less likely to approve the objected-to merger. There was, therefore, no causal link between the omissions and any harm resulting from approval of the merger. We dismiss appellants' state law claims without prejudice.
In reviewing a dismissal under Rule 12(b)(6), we take as true the allegations of the complaint, here the second amended corrected complaint and the proxy statement, which is incorporated by reference. See, e.g., Koppel v. 4987 Corp., 167 F.3d 125, 128 (2d Cir. 1999).
In early 1997, Gerald Keegan, the president of Greater New York Savings Bank ("Greater New York"), began exploratory merger talks with the top management of Astoria Financial Corporation and its subsidiary Astoria Federal Savings and Loan Association (collectively, "Astoria"). On February 26, 1997, Thomas O'Brien, the Vice Chairman of North Fork Bancorporation, Inc. ("North Fork"), phoned Keegan and informed him of North Fork's interest in a merger with Greater New York. The negotiations with Astoria continued, and, on March 16, Astoria's Chief Executive Officer informed Keegan that Astoria would, subject to due diligence -- essentially an inspection of Greater New York's books -- be willing to pay approximately $18 per share in cash and stock for Greater New York's stock. The next day, John A. Kanas, North Fork's Chief Executive Officer, called Keegan and informed him that North Fork had acquired a significant stake in Greater New York and that he desired a face-to-face meeting to discuss a merger. Keegan declined the invitation, stating that Greater New York was not planning to merge and that he was unwilling to talk to North Fork under any circumstances. However, that same day, Keegan discussed both the Astoria offer and the North Fork expression of interest with his board. The board authorized Keegan to proceed with the Astoria transaction.
Also on the same day, Kanas drafted a strongly worded letter expressing his disappointment at Keegan's refusal to arrange a meeting and offering a 2-for-1 stock-for-stock merger, subject to "customary due diligence." This offer would have allegedly valued Greater New York's stock at approximately $19 per share. Kanas never sent that letter but did send a milder letter four days later. Either the same day or the next, Christopher Quackenbush, a principal at Sandler O'Neill & Partners, L.P., Greater New York's investment bank, suggested to Kanas that Greater New York "was willing to reconsider." The two arranged a telephone conversation for March 19.
Between March 19 and March 27, 1997, Quackenbush had a series of telephone calls with Kanas and O'Brien. Kanas asked to make a presentation to Greater New York's board, but no such opportunity was offered. O'Brien pressed for the opportunity to conduct due diligence and told Quackenbush that "in the absence of due diligence, North Fork did not know if everything was as it had modeled it or presumed it to be and that diligence was very important and was necessary before making any kind of final offer." North Fork was never given the opportunity to conduct due diligence and had to rely solely on publicly available information in determining Greater New York's financial condition. Astoria, however, was given an opportunity to conduct due diligence and acquire nonpublic financial information about Greater New York.
Greater New York convened a special meeting of its board on March 27, 1997. Kanas went to Greater New York's offices but was denied entry to the meeting. Nevertheless, Quackenbush informed Kanas by telephone that the board was interested in as many details as were available about North Fork's bid. Kanas offered a stock-for-stock merger in which North Fork would acquire Greater New York, exchanging .486 North Fork shares per Greater New York share (approximating the value of the offer to be $19.00 per share). Quackenbush asked if that was North Fork's best offer; Kanas replied, "that was our best bid until such time as we would be allowed to go in and . . . [conduct] due diligence." He informed Quackenbush that he had a team of bank officers prepared to work over the weekend to conduct due diligence, and that North Fork was "unwilling to raise [its] price or consider raising [its] price until such time as [it] had a chance to [conduct due diligence]." In refusing to increase North Fork's bid, Kanas told Quackenbush that "North Fork's bid included a substantial one-time charge to cover credit related issues," but that North Fork had "already factored that [charge] in so [its] price wo[uld]n't go down." After Quackenbush pressed him as to whether the price would go up, Kanas replied, "it won't go down." Kanas was also asked whether Keegan would have a major role to play in any such merged enterprise, to which Kanas responded in the negative.
Quackenbush described his conversations with Kanas to Greater New York's board, which in turn requested Astoria to increase its bid. Astoria raised its stock and cash bid to $18.94. This price included a substantial premium over Greater New York's trading price. Two days later, on March 29, 1997, Greater New York's board unanimously approved a merger with Astoria. As a part of the merger agreement, Greater New York's board agreed to termination fees capped at $5 million (with a maximum aggregate profit capped at $10 million) in the event that the merger did not go through and a lock-up option allowing Astoria to purchase 19.9% of Greater New York's outstanding common shares under certain conditions. Also, Greater New York agreed not to entertain any other inquiries about a merger. Finally, it is alleged that Keegan was employed by Astoria as part of the merger agreement, and Greater New York's board members were given three-year contracts providing them a stipend and stock options in return for serving on the Astoria Advisory Board.
On March 31, 1997, Greater New York and Astoria publicly announced the merger. Within seventy-two hours of that announcement, appellants filed a New York state court action against Greater New York's board for alleged breaches of fiduciary duty. The parties subsequently consented to dismiss that state court action without prejudice.
On June 24, 1997, Astoria and Greater New York distributed proxy statements seeking their respective shareholders' approval of the transaction. The portions of Greater New York's proxy statement relevant to the present appeal are as follows:
On March 17, 1997, Mr. Keegan received a call from the chief executive officer of another banking organization (the "Other Organization") expressing an interest in acquiring [Greater New York].
Mr. Keegan reported the contact with the chief executive officer of the Other Organization to the [Greater] Board at a special meeting on March 17, 1997. . . .
Subsequently, the chief executive officer of the Other Organization initiated a series of telephone calls with Mr. Keegan and [Greater New York's] investment bankers, Sandler O'Neill, regarding its interest in [Greater New York] and seeking the opportunity to make a proposal regarding a possible business combination with [Greater New York]. As part of these discussions and at the request of [Greater New York], the Other Organization submitted a letter intended to address its views on how an acquisition by it would impact the communities and customers served by [Greater New York] and its employees.
. . . . At [a special] meeting, the [Greater New York] Board considered, among...
To continue reading
Request your trial
-
In re Refco, Inc. Securities Litigation
...transaction, ... such an omission, material or not, could not have caused the injury for which damages are sought." Minter v. Keegan, 218 F.3d 144 (2d Cir.2000). Applying this materiality analysis to a case where plaintiffs' only options were to trade their preferred stock for common stock,......
-
United States ex rel. Prather v. Brookdale Senior Living Cmtys., Inc.
...Rule 8.Furthermore, every Circuit to address this question agrees that Rule 9(b) governs materiality allegations. See Minzer v. Keegan , 218 F.3d 144, 151 (2d Cir. 2000) ; Grabcheski v. Am. Int'l Grp., Inc. , 687 Fed.Appx. 84, 87 (2d Cir. 2017) ("Materiality must be pleaded with particulari......
-
Freedman v. Value Health, Inc.
...information about the New Jersey Contract would have influenced the Diagnostek shareholders to vote against the merger. Minzer v. Keegan, 218 F.3d 144, 149 (2d Cir.2000). The plaintiffs cannot prove such loss causation because knowing that Diagnostek was overvalued in the merger price would......
-
Cipolla v. County of Rensselaer
...in this case, the Court declines to exercise supplemental jurisdiction over the state law claims. See 28 U.S.C. § 1367; Minzer v. Keegan, 218 F.3d 144 (2d Cir.2000). III. For the foregoing reasons, Defendants' motion for summary judgment is granted and the Complaint is dismissed in its enti......