419 F.2d 1112 (7th Cir. 1970), 17393, Schy v. Susquehanna Corp.

Docket Nº:17393.
Citation:419 F.2d 1112
Party Name:Maurice H. SCHY, Appellant, v. The SUSQUEHANNA CORPORATION, a Delaware corporation, Samuel M. Ferguson, M. M.Hardin, H. F. Korholz, J. Earle May, Hugh C. Michels, Aksel Nielsen, D. W.Reeves, R. C. Schenk and N. F. Tisdale, Jr., Appellees.
Case Date:January 05, 1970
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit
 
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Page 1112

419 F.2d 1112 (7th Cir. 1970)

Maurice H. SCHY, Appellant,

v.

The SUSQUEHANNA CORPORATION, a Delaware corporation, Samuel M. Ferguson, M. M.Hardin, H. F. Korholz, J. Earle May, Hugh C. Michels, Aksel Nielsen, D. W.Reeves, R. C. Schenk and N. F. Tisdale, Jr., Appellees.

No. 17393.

United States Court of Appeals, Seventh Circuit.

January 5, 1970

Rehearing Denied Jan. 27, 1970.

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[Copyrighted Material Omitted]

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Ira S. Kolb, Adolf Loeb, Chicago, Ill., for appellant; Schwartz, Cooper & Kolb, Chicago, Ill., of counsel.

M. M. Jacobs, Robert Mansell, Chicago, Ill., Charles S. Rhyne, Washington, D.C., for appellees.

Before KNOCH and CUMMINGS, Circuit Judges, and GORDON, District Judge.

MYRON L. GORDON, District Judge. 1

This action was brought for equitable relief from an alleged violation of § 14(a) of the Securities and Exchange Act, 15 U.S.C. § 78n, and the applicable regulation. The district court dismissed the complaint with prejudice and denied leave for the plaintiff to file an amended complaint.

The plaintiff is one of 9,145 stockholders of the Susquehanna Corporation. In his complaint, he has alleged that Susquehanna issued a false and misleading proxy statement on March 29, 1967. The purpose of that statement was to obtain stockholder approval of a proposed new issue of Susquehanna preferred stock. The plaintiff claimed that Susquehanna failed in the proxy statement of March 29 to inform stockholders of a planned merger with Atlantic Research Corporation and of the intended use of the new preferred stock to carry out such merger.

Although a majority of the shares outstanding were voted to approve the new stock issue, no preferred shares were issued pursuant to the proxy statement of March 29. On August 2, 1967, the board of directors of Susquehanna approved a merger with Atlantic Research Corporation; on October 18, 1967, the plaintiff filed his complaint.

On October 26, 1967, Susquehanna and Atlantic issued a joint proxy statement. Like Susquehanna's proxy statement of March 29, this joint proxy statement also sought authorization for a new issue of preferred stock. The proxy statement also outlined the stock's contemplated use in effectuating the merger of the two companies, and it fully described the terms of the proposed new issue of the stock and of the merger. It further described, in ample detail, the plaintiff's pending law suit. At the oral argument of this appeal, the plaintiff's counsel acknowledged that the joint proxy statement was accurate and complete. On November 27, 1967, the stockholders approved

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the plan described in the joint proxy statement dated October 26 by a vote of 80.8% To 0.42%.

The plaintiff filed a motion for summary judgment which he thereafter withdrew but later renewed. The defendants also filed a motion in which they applied for an order that the plaintiff could not maintain his action as a class action and also to dismiss on the ground that the plaintiff had failed to seek redress from the stockholders before instituting his action.

Following a hearing on the defendant's motion, the district judge rendered an oral opinion granting such motion on the grounds stated in the motion and on the additional ground, raised at the oral argument, that the plaintiff, as a matter of law, was unable to show any damage resulting from the alleged fraudulent proxy statement. Later, a judgment was entered dismissing the action on the merits.

The plaintiff owns 100 shares of Susquehanna stock. He is an attorney and has aided in preparation of this suit. He has an arrangement with...

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