45 12 Rondeau v. Mosinee Paper Corporation 8212 415

Decision Date17 June 1975
Docket NumberNo. 74,74
Citation422 U.S. 49,45 L.Ed.2d 12,95 S.Ct. 2069
Parties. 45 L.Ed.2d 12 Francis A. RONDEAU, Petitioner, v. MOSINEE PAPER CORPORATION. —415
CourtU.S. Supreme Court

Respondent corporation brought this action against petitioner to enjoin him from voting or pledging his stock in respondent and from acquiring additional shares, and to require him to divest himself of the stock that he already owned. Respondent claimed that the failure of petitioner who had acquired more than 5% of respondent's stock, to make timely disclosure as required by § 13(d) of the Securities Exchange Act of 1934, as added by the Williams Act, was a scheme to defraud respondent and its stockholders. Petitioner, who had filed the disclosure schedule about three months after the statutory filing time, contended that the Williams Act violation, which he readily conceded, resulted from his lack of familiarity with the securities laws, and that neither respondent nor its shareholders had been harmed. The District Court granted petitioner's motion for summary judgment, having found no material issues of fact regarding petitioner's lack of willfulness in failing to make a timely filing and no basis in the record for disputing petitioner's claim that he first considered the possibility of obtaining control of respondent sometime after he discovered his filing obligation. It concluded that respondent had suffered no congnizable harm from the late filing and that this was not an appropriate case in which to grant injunctive relief. The Court of Appeals reversed, concluding that respondent was harmed by having been delayed in its efforts to respond to petitioner's potential to obtain control of the company but that, in any event, respondent was not required to show irreparable harm as a prerequisite to obtaining permanent injunctive relief, since as the securities' issuer, respondent was in the best position to assure that § 13(d)' § filing requirements were being timely and fully complied with. Held: A showing of irreparable harm, in accordance with traditional principles of equity, is necessary before a private litigant can obtain injunctive relief based upon § 13(d) of the Securities Exchange Act. Pp. 57-65.

(a) The Court of Appeals erred in concluding that respondent suffered 'harm' because of petitioner's technical default, since petitioner has not attempted to obtain control of respondent, has now made proper disclosure, and has given no indication that he will not report any material changes in his disclosure schedule. Pp. 58-59.

(b) Persons who allegedly sold their stock to petitioner at unfairly depressed predisclosure prices have adequate remedies by an action for damages, and those who would not have invested, had they thought a takeover bid was imminent, are not threatened with injury. Pp. 59-60.

(c) The District Court was entirely correct in insisting that respondent satisfy the traditional prerequisites of extraordinary equitable relief by establishing irreparable harm, and its conclusions that petitioner acted in good faith and promptly filed a disclosure schedule when he became aware of his obligation to do so support the exercise of that court's sound judicial discretion to deny the application for an injunction, relief that is historically 'designed to deter, not to punish.' Hecht Co. v. Bowles, 321 U.S. 321, 329, 64 S.Ct. 587, 592, 88 L.Ed. 754. Pp. 60-62.

(d) Respondent is not relieved of the burden of establishing those prerequisites simply because it is asserting a so-called implied private right of action under § 13(d). Pp. 62-65.

7 Cir., 500 F.2d 1011, reversed and remanded.

David E. Beckwith, Milwaukee, Wis., for petitioner.

L. C. Hammond, Jr., Milwaukee, Wis., for respondent.

Mr. Chief Justice BURGER delivered the opinion of the Court.

We granted certiorari in this case to determine whether a showing of irreparable harm is necessary for a private litigant to obtain injunctive relief in a suit under § 13(d) of the Securities Exchange Act of 1934, 48 Stat. 894, as added by § 2 of the Williams Act, 82 Stat. 454, as amended, 84 Stat. 1497, 15 U.S.C. § 78m(d). 419 U.S. 1067, 95 S.Ct. 653, 42 L.Ed.2d 663 (1974). The Court of Appeals held that it was not. 500 F.2d 1011 (CA7 1974). We reverse.


Respondent Mosinee Paper Corp. is a Wisconsin company engaged in the manufacture and sale of paper, paper products, and plastics. Its principal place of business is located in Mosinee, Wis., and its only class of equity security is common stock which is registered under § 12 of the Securities Exchange Act of 1934, 15 U.S.C. § 78l. At all times relevant to this litigation there were slightly more than 800,000 shares of such stock outstanding.

In April 1971 petitioner Francis A. Rondeau, a Mosinee businessman, began making large purchases of respondent's common stock in the over-the-counter market. Some of the purchases were in his own name; others were in the name of businesses and a foundation known to be controlled by him. By May 17, 1971, petitioner had acquired 40,413 shares of respondent's stock, which constituted more than 5% of those outstanding. He was therefore required to comply with the disclosure provisions of the Williams Act,1 by filing a Schedule 13D with respondent and the Securities and Exchange Commission within 10 days. That form would have disclosed, among other things, the number of shares bene- ficially owned by petitioner, the source of the funds used to purchase them, and petitioner's purpose in making the purchases.

Petitioner did not file a Schedule 13D but continued to purchase substantial blocks of respondent's stock. By July 30, 1971, he had acquired more than 60,000 shares. On that date the chairman of respondent's board of directors informed him by letter that his activity had 'given rise to numerous remors' and 'seems to have created some problems under the Federal Securities Laws . . ..' Upon receiving the letter petitioner immediately stopped placing orders for respondent's stock and consulted his attorney2. On August 25, 1971, he filed a Schedule 13D which, in addition to the other required disclosures, described the 'Purpose of Transaction' as follows:

'Francis A. Rondeau determined during early part of 1971 that the common stock of the Issuer (respondent) was undervalued in the over-the-counter market and represented a good investment vehicle for future income and appreciation. Francis A. Rondeau and his associates presently propose to seek to acquire additional common stock of the Issuer in order to obtain effective control of the Issuer, but such investments as originally determined were and are not necessarily made with this objective in mind. Consideration is currently being given to making a public cash tender offer to the shareholders of the Issuer at a price which will reflect current quoted prices for such stock with some premium added.'

Petitioner also stated that, in the event that he did obtain control of respondent, he would consider making changes in management 'in an effort to provide a Board of Directors which is more representative of all of the shareholders, particularly those outside of present management . . ..' One month later petitioner amended the form to reflect more accurately the allocation of shares between himself and his companies.

On August 27 respondent sent a letter to its shareholders informing them of the disclosures in petitioner's Schedule 13D.3 The letter stated that by his 'tardy filing' petitioner had 'withheld the information to which you (the shareholders) were entitled for more than two months, in violation of federal law.' In addition, while agreeing that 'recent market prices have not reflected the real value of your Mosinee stock,' respondent's management could 'see little in Mr. Rondeau's background that would qualify him to offer any meaning ful guidance to a Company in the highly technical and competitive paper industry.'

Six days later respondent initiated this suit in the United States District Court for the Western District of Wisconsin. Its complaint named petitioner, his companies, and two banks which had financed some of petitioner's purchases as defendants and alleged that they were engaged in a scheme to defraud respondent and its shareholders in violation of the securities laws. It alleged further that shareholders who had 'sold shares without the information which defendants were required to disclose lacked information material to their decision whether to sell or hold,' and that respondent 'was unable to communicate such information to its stockholders, and to take such actions as their interest required.' Respondent prayed for an injunction prohibiting petitioner and his codefendants from voting or pledging their stock and from acquiring additional shares, requiring them to divest themselves of stock which they already owned, and for damages. A motion for a preliminary injunction was filed with the complaint but later withdrawn.

After three months of pretrial proceedings petitioner moved for summary judgment. He readily conceded that he had violated the Williams Act, but contended that the violation was due to a lack of familiarity with the securities laws and that neither respondent nor its shareholders had been harmed. The District Court agreed. It found no material issues of fact to exist regarding petitioner's lack of willfulness in failing to timely file a Schedule 13D, concluding that he discovered his obligation to do so on July 30, 1971,4 and that there was no basis in the record for disputing his claim that he first considered the possibility of obtaining control of respondent some time after that date. The District Court therefore held that petitioner and his codefendants 'did not engage in intentional covert, and conspiratorial conduct in failing to timely file the 13D Schedule.'5

Similarly, although accepting respondent's contention that its management and shareholders suffered anxiety as a result of pet...

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