516 F.2d 172 (2nd Cir. 1975), 672, Chris-Craft Industries, Inc. v. Piper Aircraft Corp.
|Docket Nº:||672, 1055, Dockets 74-2542, 75-7003.|
|Citation:||516 F.2d 172|
|Party Name:||CHRIS-CRAFT INDUSTRIES, INC., Plaintiff-Appellant-Cross-Appellee, v. PIPER AIRCRAFT CORPORATION et al., Defendant-Appellees-Cross-Appellants.|
|Case Date:||April 11, 1975|
|Court:||United States Courts of Appeals, Court of Appeals for the Second Circuit|
Argued Feb. 24, 1975.
Rehearing En Banc Denied June 9, 1975.
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Arthur L. Liman, New York City (Stuart Rabinowitz, Jack C. Auspitz, Anthony M. Radice, Richard A. Miller, and Paul, Weiss, Rifkind, Wharton & Garrison, New York City, on the brief), for Chris-Craft Industries, Inc.
James V. Ryan, New York City (C. Kenneth Shank, Jr., Allan J. Graf, and Webster Sheffield Fleischmann Hitchcock & Brookfield, New York City, on the brief), for Bangor Punta Corp., Nicolas M. Salgo and David W. Wallace.
John F. Arning, New York City (Charles W. Sullivan, Richard Urowsky, and Sullivan & Cromwell, New York City, on the brief), for The First Boston Corp.
Zachary Shimer, New York City (Chadbourne, Parke, Whiteside & Wolff, New York City, on the brief), for Howard Piper, Thomas F. Piper and William T. Piper, Jr.
Lawrence E. Nerheim, General Counsel, David Ferber, Solicitor, and Charles E. H. Luedde, Attorney Fellow, SEC, Washington, D. C., for Securities and Exchange Commission, amicus curiae.
Before MANSFIELD, OAKES and TIMBERS, Circuit Judges.
TIMBERS, Circuit Judge:
On these cross-appeals from a judgment entered November 25, 1974 after a four day hearing in the Southern District of New York, Milton Pollack, District Judge, 384 F.Supp. 507, pursuant to the remand ordered in our prior decision, Chris-Craft Industries, Inc. v. Piper Aircraft Corp., 480 F.2d 341 (2 Cir.), cert. denied, 414 U.S. 910 (1973), for determination of appropriate relief to be awarded to Chris-Craft Industries, Inc. (CCI), the defeated contestant for control of the target corporation, Piper Aircraft Corporation (Piper), resulting from defendants' violations of the federal securities laws, the essential questions are:
(1) Whether the district court erred in the method by which it determined a compensatory damage award to CCI in amount of $1,673,988.
(2) Whether the district court erred in holding that CCI is entitled to pre-judgment interest and in refusing to award to CCI attorneys' fees and interest expense on the debt incurred by CCI to finance its acquisition of Piper stock.
(3) Whether the district court abused its discretion in fashioning equitable relief to implement our mandate.
For the reasons below, we affirm the district court's holding that CCI is entitled to pre-judgment interest, its refusal to award attorneys' fees and interest expense to CCI, and its fashioning of equitable relief; but we reverse and vacate its determination of compensatory damages due to CCI and remand with instructions to enter a modified judgment in the amount of $25,793,365, plus pre-judgment interest thereon.
I. PRIOR PROCEEDINGS
This is the third round in this Court during the tumultuous six years of litigation stemming from the battle for control of Piper. The battle was chiefly between CCI, the unsuccessful contestant, and Bangor Punta Corporation (BPC), the successful contestant. Others (the named defendants-appellees) whose conduct through violations of the federal securities laws contributed to the success of BPC's takeover attempt were held jointly and severally liable with BPC for damages to CCI. On this round in this Court, the issues involve the appropriateness of the relief granted by the district court pursuant to the remand ordered in our last prior decision.
We assume familiarity with our prior decisions and those of the district court involving this contest for control of Piper. 1 We shall summarize here only those facts and prior proceedings necessary to an understanding of our rulings on the essential questions stated above.
CCI began purchasing Piper shares on December 30, 1968. 2 By January 22, 1969, it had acquired more than 200,000 shares or approximately 13% of the 1,644,790 3 outstanding Piper shares.
On January 23, CCI announced a cash tender offer, beginning immediately and ending on February 3, to purchase up to 300,000 Piper shares at $65 per share. The closing price of Piper stock on the New York Stock Exchange (NYSE) on January 22 was $52.50. By February 3, CCI had purchased 304,606 Piper shares through tenders pursuant to its offer and an additional 38,800 shares through cash market purchases. These acquisitions brought its total holdings to 547,106 shares or approximately one-third of the outstanding Piper stock.
Piper management (essentially the Piper family) in the meantime had decided to resist CCI's takeover bid. On January 27, Piper sent a letter to its shareholders urging them to reject CCI's offer and advising them that the board of directors "has carefully studied this offer and is convinced that it is inadequate and not in the best interests of Piper's shareholders." A similar letter was mailed by Piper to its shareholders on January 28.
One early defensive tactic by Piper involved an agreement entered into on January 28 for the sale of 300,000 authorized but unissued Piper shares to Grumman Aircraft Engineering Corporation (Grumman) at $65 per share. On January 29, a press release was issued and a letter was sent to Piper shareholders announcing the agreement. These communications, however, failed to reveal a "put" arrangement between Piper and Grumman whereby the latter was given an option to put the shares back to the
former after six months. This agreement was terminated on March 19 after the NYSE refused to list the new stock.
Meanwhile, CCI had decided to try to obtain the additional shares it needed for control through an exchange offer of CCI securities for Piper stock. On February 27, CCI filed an S-1 with the Securities and Exchange Commission (SEC) to acquire between 80,000 and 300,000 shares of Piper. A May 7 press release announced this offer which became effective May 15. CCI's release placed no value on its exchange offer, but the First Boston Corporation (First Boston) valued it at $70 to $74 per Piper share.
During the intervening period and after its maneuvers with two other corporations had failed, Piper revived negotiations with BPC which had begun in January. On May 8, a formal agreement was entered into between BPC and the Piper family whereby the latter agreed to exchange all of its Piper holdings (501,090 shares or approximately 31% of the outstanding Piper shares) for a package of BPC securities. BPC also agreed to use its best efforts to acquire more than 50% of the outstanding Piper shares through an exchange offer which placed a value of at least $80 on each Piper share. In addition, if BPC were successful, the Piper family was to receive cash or securities, or both, to bring the value of the package of BPC securities it was to receive up to $80 or more as contrasted with the $70 to $72 value placed on it by First Boston. A press release was issued jointly by Piper and BPC that same day announcing the proposed BPC exchange offer and the $80 value it placed on each Piper share.
After issuance of the May 8 press release but prior to BPC's filing of an S-1 on May 29, BPC made cash purchases of 120,200 shares of Piper. Both before and after the BPC exchange offer became effective on July 18, the Piper family, in an effort to insure the success of BPC's offer, wrote three letters to Piper shareholders on June 4, June 20 and July 25 disparaging CCI's offer and recommending that of BPC. The BPC offer which expired on July 29 resulted in the acquisition by BPC of 111,628 shares. First Boston acted as dealer-manager for the BPC exchange offer.
In response to the May 8 press release by Piper and BPC, CCI sweetened its exchange offer, which became effective May 15, with $10 cash through a post-effective amendment on May 16. After six extensions, this offer was withdrawn on July 24, by which time CCI had failed to obtain the minimum 80,000 shares specified in the offer. On July 22, CCI filed a registration statement for another exchange offer, effective July 24, adding substantially more value to its earlier package. Pursuant to this offer which expired on August 4, CCI acquired 112,089 shares.
After the expiration of both exchange offers, CCI and BPC had acquired 41% and 45%, respectively, of the outstanding Piper shares. CCI made additional purchases of 29,200 shares in August and then withdrew from the battle. BPC continued to purchase Piper shares until September 5, by which time it had acquired a majority shareholder position in Piper (839,306 shares or approximately 51%). As of that date, CCI had acquired 697,495 shares or approximately 42% of the outstanding Piper shares.
The instant litigation was begun on May 22, 1969, in the midst of the battle for control, when CCI commenced this action in the Southern District of New York. The complaint alleged violations of the 1933 Act and the 1934 Act. It sought damages and equitable relief. 4
On July 22, CCI moved for a preliminary injunction to prevent BPC from gaining and exercising control of Piper.
The preliminary injunction was denied by Judge Tenney on August 19, 1969. 303 F.Supp. 191. We affirmed in an en banc decision on April 28, 1970. Chris-Craft I, note 1 supra.
Pursuant to our remand to the district court for further proceedings, Judge Pollack, after a bench trial, on December 10, 1971 dismissed CCI's complaint, holding that many of the alleged violations of the securities laws had not been proven, that those which had been proven had not caused injury...
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