MLZ, INC. v. Fourco Glass Co., CIV-2-78-89.

• Decision Date: 21 July 1978
• Docket Number: No. CIV-2-78-89.,CIV-2-78-89.
• Citation: 470 F. Supp. 273
• Parties: MLZ, INC., et al., Plaintiffs and Defendants-By-Counterclaim, v. FOURCO GLASS COMPANY et al., Defendants and Plaintiffs-By-Counterclaim. FOURCO GLASS COMPANY et al., Third-Party Plaintiffs, v. Leo ZUCKERBERG et al., Third-Party Defendants.
• Court: U.S. District Court — Eastern District of Tennessee

470 F. Supp. 273

MLZ, INC., et al., Plaintiffs and Defendants-By-Counterclaim, v. FOURCO GLASS COMPANY et al., Defendants and Plaintiffs-By-Counterclaim.

FOURCO GLASS COMPANY et al., Third-Party Plaintiffs, v. Leo ZUCKERBERG et al., Third-Party Defendants.

No. CIV-2-78-89.

United States District Court, E. D. Tennessee, Northeastern Division.

July 21, 1978.

E. Cooke Rand and Michael R. Sonberg, New York City, and N. R. Coleman, Jr., Milligan, Coleman, Fletcher, Gaby & Kilday, Greeneville, Tenn., for plaintiffs and defendants-by-counterclaim.

Edwin O. Norris, Hunter, Smith, Davis, Norris, Treadway & Hadden, William T. Gamble, Wilson Worley, Gamble & Ward, Kingsport, Tenn., and Judith S. Kaye, Olwine, Connelly, Chase, O'Donnell & Weyher, New York City, for defendants and plaintiffs-by-counterclaim.

MEMORANDUM OPINION AND ORDER

NEESE, District Judge.

This is one of several actions pending in this Court, emanating from the respective efforts of the plaintiff MLZ, Inc. (MLZ) and the defendant Fourco Glass Company (Fourco) to acquire a controlling interest in the defendant ASG Industries, Inc. (ASG) through the purchase of shares of its common stock. The Court's jurisdiction was invoked under the Securities Exchange Act of 1934, § 27, 15 U.S.C. § 78aa, and the federal question statute, 28 U.S.C. § 1331. The plaintiff sought also to have this Court accept pendent jurisdiction over certain claims arising under state law.

The plaintiff applied for a temporary restraining order. Rule 65(b), Federal Rules of Civil Procedure. That rule, by its terms, relates only to restraints sought "* * * without written or oral notice to the adverse party or his attorney. * * *" Here, the adverse party had notice and, in fact, was present at and participated in the hearing thereupon on July 17, 1978; accordingly, the Court treated the application as one for a preliminary injunction. Wisch v. Sanford School, Inc., D.C.Del. (1976), 420 F.Supp. 1310, 1311, citing 11 Wright & Miller Federal Practice and Procedure § 2951.

MLZ and Fourco, each, made an offer to purchase ASG common stock from its shareholders. Subsequently, these offers were supplemented on several occasions in manners to increase the proposed purchase price, each side trying to effectively "out-bid" the other. The management of ASG endorsed unanimously Fourco's offer and also sought, through legal proceedings in this Court and elsewhere and by other means, to defeat the MLZ offer.

This action was commenced in the Southern District of New York on June 1, 1978. It is the primary contention of MLZ that the Fourco offer does not contain the information required by the rules of the Securities and Exchange Commission, particularly 17 C.F.R. § 240.14d-100 (Rule 14d-100), and that accordingly such offer is in violation of the so-called Williams Act, 15 U.S.C. § 78n(e).^*

Several motions were filed in the Southern District of New York. After conducting a hearing on June 7 and 8, 1978, Honorable Charles L. Brieant, judge, rendered a bench opinion, finding that "* * * time is of the essence * * *" herein. He also noted the necessity that the competing tender offers herein be "* * * proceeded with rapidly and that any disputes which arise be adjudicated promptly so that if there is a deficiency or a mistake or an incomplete statement in any offering material, that can be corrected and the persons to whom the offers are being made can be correctly informed and given the opportunity, if necessary, to withdraw their tendered stock if the change in the materials motivates them to do so. * * *" After indicating that he felt the Southern District of New York was not the most convenient venue for this action, Judge Brieant stated his view that:

* * * * * *

* * * It is appropriate that the taking down of the tendered stock be prevented until such time as the litigants can apply for that type of preliminary relief in either Delaware or Tennessee or in both places, in the federal courts in those jurisdictions, and I am prepared to issue a ten day restraining order unless earlier otherwise directed, by one or both of the courts which had the prior dealings with this subject matter, that both the competing tendering groups will be restrained from purchasing, transferring or making payment for or otherwise alienating any shares or any interest therein which has been or may now hereafter be tendered to either of such competing groups.

* * * * * *

That stay will last for ten days unless the courts in which the earlier litigation was initiated, one or both of them, otherwise earlier directs, and that will give you time to go down either to Delaware or to Tennessee or both places and make that request.

* * * * * *

This action was transferred to this Court on June 12, 1978. 28 U.S.C. § 1404(a). However, despite Judge Brieant's strong suggestion that the parties proceed to seek any desired preliminary relief in this Court forthwith, and, despite the obvious necessity of doing so in view of the rapidly approaching expiration date of the competing tender offers, neither side sought any relief in this Court in a timely fashion. The final tender offers, each, was scheduled to expire at 6:00 o'clock, p. m., Friday, June 19, 1978 (although this period was extended for one more day). Fourco was offering $5.00 per share; MLZ offered $5.50. By the close of business on June 19, MLZ had lost the tender-offer battle in an overwhelming fashion, despite its higher offering price. Accordingly, on the following day its offer was terminated.

The granting of preliminary injunctive relief pending final decision on the merits is a matter committed to the sound discretion of the trial court. Com-Share, Inc. v. Computer Complex, Inc., C.A. 6th (1972), 458 F.2d 1341, 13421. Such relief is equitable in nature, and the Court's exercise of its discretion is to be guided by the general historical principles of equity. Meredith v. Winter Haven (1943), 320 U.S. 228, 235, 64 S.Ct. 7, 11, 88 L.Ed. 9, 13 (headnote 4); see also Hecht Company v. Bowles (1944), 321 U.S. 321, 64 S.Ct. 587, 88 L.Ed. 754.

It is a well established principle that equity aids only the vigilant, and such relief is confined to those who exercise reasonable diligence in seeking the same, and it will be denied to those who sleep upon their rights. 27 Am.Jur.(2d) 658, Equity § 130; 42 Am. Jur.(2d) 805, Injunctions § 61. "* * * Courts of equity frequently decline to interfere on behalf of a complainant whose attitude is unconscientious in respect of the matter concerning which it seeks relief. * * *" National Fire Ins. Co. v. Thompson (1930), 281 U.S. 331, 338, 50 S.Ct. 288, 291, 74 L.Ed. 881, 886 (headnote 2).

The plaintiffs do not offer an acceptable explanation of the reason(s) they waited to seek preventive injunctive relief from this Court until after they had already lost in the marketplace. Had they sought such preliminary relief prior to the time the respective offers had terminated, this Court could easily have issued an order to maintain the status quo until the legality of Fourco's offering papers could be adjudicated. Time was absolutely of the essence herein; yet, the plaintiffs apparently elected to take their chances in the marketplace with their higher tender offer. In its latest brief, MLZ states that:

* * * * * *

* * * MLZ determined that, with a higher offer, it had an opportunity to succeed in the marketplace despite the illegality of the Fourco Offer and that it would not attempt to obtain injunctive relief in the one week remaining before closing. Obviously, had the MLZ Offer succeeded, the need for judicial relief would have been obviated. Footnote reference omitted.

* * * * * *

Thus, it is clear that MLZ took deliberately the calculated risk that it would prevail in the marketplace. It lost and now seeks to invoke the equitable powers of this Court to "undo" what it easily could have prevented, were it not for its considered choice to the contrary.

Under the circumstances that were presented, it was of absolute necessity...