430 U.S. 1 (1977), 75-353, Piper v. Chris-Craft Industries, Inc.
|Docket Nº:||No. 75-353|
|Citation:||430 U.S. 1, 97 S.Ct. 926, 51 L.Ed.2d 124|
|Party Name:||Piper v. Chris-Craft Industries, Inc.|
|Case Date:||February 23, 1977|
|Court:||United States Supreme Court|
Argued October 6, 1976
CERTIORARI TO THE UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
Respondent Chris-Craft Industries was the unsuccessful tender offeror in a contest for the control of a corporation. During the course of the takeover contest, Chris-Craft brought suit for damages and injunctive relief against the management of the target corporation, its investment adviser, and Bangor Punta Corp., the successful competitor, alleging, inter alia, violations of § 14(e) and other provisions of the Securities Exchange Act of 1934, and Rule 10b-6 of the Securities and Exchange Commission. Section 14(e) makes unlawful
any fraudulent, deceptive, or manipulative acts or practices, in connection with any tender offer . . . or any solicitation of security holders in opposition to or in favor of any such offer. . . .
Rule 10b-6 prohibits issuers whose stock is in the process of distribution from market tampering by purchasing stock or stock rights until the distribution has been completed. After protracted litigation, the Court of Appeals ultimately held that Chris-Craft had standing to sue for damages under § 14(e) and Rule 10b-6, and that a claim for damages had been established. The court stated that it would not infer from the silence of the statute that Congress intended to deny a federal remedy as a "means of furthering the general
objective of § 14(e). . . ." On the merits the court found violations of § 14(e) by all the defendants and violations of Rule 10b-6 by the successful competitor. The court then remanded for a determination of the amount of damages, and instructed the District Court to enjoin the successful competitor for at least five years from voting the target company's shares acquired through violation of § 14(e) and Rule 10b-6.
1. A tender offeror, suing in its capacity as a takeover bidder, does not have standing to sue for damages under § 14(e); hence, the Court of Appeals erred in holding that Chris-Craft, as a defeated tender offeror, had an implied cause of action for damages under that provision. Pp. 24-42.
(a) The legislative history shows that the sole purpose of § 14(e) was the protection of investors who are confronted with a [97 S.Ct. 930] tender offer. Congress was intent on regulating takeover bidders, who had previously operated covertly, in order to protect shareholders of target companies; tender offerors, the class regulated by the statute, were not the intended beneficiaries of the legislation. Pp. 26-37.
(b) The creation of an implied cause of action for damages by judicial interpretation, such as is urged by Chris-Craft, is not necessary to effectuate Congress' objectives in enacting § 14(e). This conclusion is confirmed by the four factors identified in Cort v. Ash, 422 U.S. 66, as "relevant" in determining whether a private remedy is implicit in a statute not expressly providing one: (i) Chris-Craft, a member of the class whose activities Congress intended to regulate for the benefit of target shareholders, was not "`one of the class for whose especial benefit [§ 14(e)] was enacted . . .'"; (ii) although nothing in the legislative history manifests an intent to deny a damages remedy to tender offerors, there is no material showing an intention to create such a remedy, and the pervasive legislative history negates any claim that the statute was intended to provide tender offerors with additional weapons in contests for control; (iii) it is not consistent with the underlying legislative purpose to imply a damages remedy for the tender offeror in a statute especially designed to protect shareholders of target corporations, particularly where the damages award (here $36 million to Chris-Craft) favors the tender offeror, not the "injured" shareholders of the target; and (iv) the cause of action by a tender offeror is one appropriately "relegated to state law," to the extent that the offeror seeks damages for loss of an opportunity to control a corporation. Pp. 37-41.
2. In the context of this case, Chris-Craft has no standing to sue for damages on account of the asserted Rule 10b-6 violations by the
successful competitor, since Chris-Craft's complaint is not that the price paid for the target company's shares was influenced by the Rule 106 violations, but that the opportunity to gain control of the target company was lost by virtue of those violations. Thus, Chris-Craft's complaint does not implicate the concerns of Rule 10b, which is aimed at maintaining an orderly market for the distribution of securities free from manipulative influences. Pp. 42-46.
3. The Court of Appeals erred, under the circumstances presented here, in awarding Chris-Craft injunctive relief. The case was tried in the District Court exclusively as a suit for damages after Chris-Craft expressly waived any claim to injunctive relief. Under these circumstances, this Court's holding that Chris-Craft has no cause of action for damages under either § 14(e) or Rule 106 renders the injunction granted by the District Court inappropriate, premised as it was upon the impermissible award of damages. Pp. 47-48.
516 F.2d 172, reversed.
BURGER, C.J., delivered the opinion of the Court, in which STEWART, WHITE, MARSHALL, POWELL, and REHNQUIST, JJ., joined. BLACKMUN, J., filed an opinion concurring in the judgment, post, p. 48. STEVENS, J., filed a dissenting opinion, in which BRENNAN, J., joined, post, p. 53.
BURGER, J., lead opinion
MR. CHIEF JUSTICE BURGER delivered the opinion of the Court.
We granted certiorari in these cases, 425 U.S. 910 (1976), to consider, among other issues, whether an unsuccessful tender offeror in a contest for control of a corporation has an implied cause of action for damages under § 14(e) of the Securities Exchange Act of 1934, as added by § 3 of the Williams Act of 1968, 82 Stat. 457, 15 U.S.C. § 78n(e), or under Securities and Exchange Commission (SEC) Rule 10b-6, 17 CFR § 240.10b-6 (1976), based on alleged antifraud violations by the successful competitor, its investment adviser, and individuals constituting the management of the target corporation.
The factual background of this complex contest for control, including the protracted litigation culminating in the cases now before us, is essential to a full understanding of the contending parties' claims.
The three petitions present questions of first impression, arising out of a "sophisticated and hard-fought contest" for control of Piper Aircraft Corp., a Pennsylvania-based manufacturer of light aircraft. Piper's management consisted principally of members of the Piper family, who owned 31% of Piper's outstanding stock. Chris-Craft Industries, Inc., a diversified manufacturer of recreational products, attempted to secure voting control of Piper through cash and exchange tender offers for Piper common stock. Chris-Craft's takeover attempt failed, and Bangor Punta Corp. (Bangor or Bangor Punta), with the support of the Piper family, obtained control of Piper in September, 1969. Chris-Craft brought suit under § 14(e) of the Securities Exchange Act of 1934 and Rule 10b-6 alleging that Bangor Punta achieved control of the target corporation as a result of violations of the federal securities laws by the Piper family, Bangor Punta, and Bangor Punta's
underwriter, First Boston Corp., who together had successfully repelled Chris-Craft's takeover attempt.
The struggle for control of Piper began in December, 1968. At that time, Chris-Craft began making cash purchases of Piper common stock. By January 22, 1969, Chris-Craft had acquired 203,700 shares, or approximately 13% of Piper's 1,644,790 outstanding shares. On the next day, following unsuccessful preliminary overtures to Piper by Chris-Craft's president, Herbert Siegel, Chris-Craft publicly announced a cash tender offer for up to 300,000 Piper shares1 at $65 per share, which was approximately $12 above the then-current market price. Responding promptly to Chris-Craft's bid, Piper's management met on the same day with the company's investment banker, First Boston, and other advisers. On January 24, the Piper family decided to oppose Chris-Craft's tender offer. As part of its resistance to Chris-Craft's takeover campaign, Piper management sent several letters to the company's stockholders during January 25-27, arguing against acceptance of Chris-Craft's offer. On January 27, a letter to shareholders from W. T. Piper, Jr., president of the company, stated that the Piper Board "has carefully studied this offer and is convinced that it is inadequate, and not in the best interests of Piper's shareholders."
In addition to communicating with shareholders, Piper entered into an agreement with Grumman Aircraft Corp. on January 29 whereby Grumman agreed to purchase 300,000 authorized but unissued Piper shares at $65 per share. The agreement increased the amount of stock necessary for Chris-Craft to secure control, and thus rendered Piper less vulnerable to Chris-Craft's attack. A Piper press release and letter to shareholders announced the Grumman transaction, but failed to state either that Grumman had a "put" or option to sell the shares back to Piper at cost, plus interest, or that
Piper was required to maintain the proceeds of the transaction in a separate fund free from liens.
Despite Piper's opposition, Chris-Craft succeeded in acquiring 304,606 shares by the time its cash tender offer expired on February 3. To obtain the additional 17% of Piper stock needed for control, Chris-Craft decided to make an exchange offer of Chris-Craft securities for Piper stock. Although Chris-Craft filed a registration statement and preliminary prospectus with the SEC in late February, 1969, the exchange offer did not go...
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