646 F.2d 271 (7th Cir. 1981), 80-1375, Panter v. Marshall Field & Co.

Docket Nº:80-1375, 80-1389.
Citation:646 F.2d 271
Party Name:, 1981-1 Trade Cases 63,971 Ruth PANTER et al., Plaintiffs-Appellants, v. MARSHALL FIELD & CO. et al., Defendants-Appellees. Richard WEISS et al., Plaintiffs-Appellants, v. MARSHALL FIELD & CO., Defendants-Appellees.
Case Date:April 02, 1981
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit

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646 F.2d 271 (7th Cir. 1981)

, 1981-1 Trade Cases 63,971

Ruth PANTER et al., Plaintiffs-Appellants,


MARSHALL FIELD & CO. et al., Defendants-Appellees.

Richard WEISS et al., Plaintiffs-Appellants,


MARSHALL FIELD & CO., Defendants-Appellees.

Nos. 80-1375, 80-1389.

United States Court of Appeals, Seventh Circuit

April 2, 1981

Argued Sept. 10, 1980.

Rehearing and Rehearing En Banc Denied July 6, 1981.

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Alan L. Unikel, Rosenberg, Savner & Unikel, Chicago, Ill. (Harry A. Young, Jr., Bilandic, Neistein, Richman, Hauslinger & Young, Ltd., Arthur T. Susman, Prins, Flamm & Susman, Ltd., Chicago, Ill., Donald L. Weinsberg, Kohn, Savett, Marion & Graf, P. C., Philadelphia, Pa., Robert S. Atkins, Freeman, Atkins & Coleman Ltd., Lawrence H. Eiger, Much, Shelist, Freed, Denenberg, Ament & Eiger, P. C., Chicago, Ill., on Brief) for plaintiffs-appellants in No. 80-1375;

Irwin Panter, Panter, Nelson & Bernfield, Chicago, Ill., for plaintiffs-appellants in No. 80-1389".

Lowell E. Sachnoff, Bryson P. Burnham, Mayer, Brown & Platt, Chicago, Ill., for defendants-appellees.

Before PELL and CUDAHY, Circuit Judges, and DUMBAULD, Senior District Judge. [*]

PELL, Circuit Judge.

The nineteen named plaintiffs in these consolidated cases appeal from a judgment of the district court which granted the defendants' motion for a directed verdict at the close of the plaintiffs' presentation of evidence to the jury. Panter v. Marshall Field & Co., 486 F.Supp. 1168 (N.D.Ill.1980). The plaintiffs, shareholders of Marshall Field & Company (Field's) sought to prove that the defendants, the company and its directors, had wrongfully deprived the plaintiffs of an opportunity to dispose of their shares at a substantial premium over market when the defendants successfully fended off a takeover attempt by Carter Hawley Hale (CHH), a national retail chain. The plaintiffs claimed relief under federal securities law and state corporation and tort law. The district court found the evidence insufficient to go to the jury of the federal law claims and, exercising its pendent jurisdiction, similarly found the evidence insufficient on the state law claims.


A thorough and accurate summary of the facts was presented in the opinion of the district court. However, because the posture of the case requires determination of whether the facts established by the plaintiffs provide a sufficient basis for a jury verdict, we review them in some detail here.

  1. The Parties.

    The named plaintiffs in the cases consolidated for trial were nineteen shareholders of Field's. On June 30, 1978, the plaintiffs were certified as class representatives of all persons who held Field's common stock at any time between December 12, 1977, and February 22, 1978. The plaintiff class was subdivided into four subclasses. Subclass I included all persons who held Field's stock on or before December 12, 1977, but disposed of it before February 22, 1978. Subclass II included all persons who acquired Field's stock after December 12, 1977, and disposed of it before February 22, 1978. Subclass III included all persons who acquired Field's stock after December 12, 1977, and did not dispose of it before February 22, 1978. Subclass IV included all persons who held Field's stock on or before December 12, 1977, and did not dispose of it before February 22, 1978.

    Field's is a Delaware corporation with its principal office in Chicago, Illinois. The company has been engaged in the operation of retail department stores since 1852, and on December 12, 1977, it was the eighth largest department store chain in the United States, with thirty-one stores. Fifteen of the stores were located in the Chicago area: they included the State Street and Water Tower Place Stores in Chicago, the Oakbrook Store in west suburban Chicago, and the Old Orchard and Hawthorn Center Stores in north suburban Chicago. Other divisions included the Frederick & Nelson division in the state of Washington; the Halle Division of Halle Brothers Company in Ohio and Pennsylvania; and the Crescent

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    Division of Halle with stores in Spokane, Washington.

    The ten directors of Marshall Field & Company during the period from December 12, 1977 to February 22, 1978 are also named as defendants. Seven of the directors were not affiliated with Field's management; the remaining three were officers of Field's.

    CHH is a California corporation engaged in the operation of retail department, specialty, and book stores. It was not a party here, although its efforts to acquire Field's gave rise to this litigation. CHH's Neiman-Marcus division operates retail stores in Texas and the southeastern United States. As of December 12, 1977, it had one store in Northbrook Court in north suburban Chicago. CHH also had acquired land on North Michigan Avenue, one block south of Field's Water Tower Place Store, and had expressed its intent to put a Neiman-Marcus Store there, although those plans were in abeyance during the relevant time period. CHH had also been attempting for some time to enter the Oakbrook Shopping Center in west suburban Chicago where Field's already had a store. Other divisions of CHH had department or specialty stores in the western United States. Its Walden Book division operated 433 book stores across the United States. In December 1977 Walden was the third or fourth largest bookseller in the Chicago market.

  2. The Pre-1977 Events.

    On several occasions in the late 1960's and continuing to the mid-1970's, Field's management was approached by would-be merger or takeover suitors. In 1969 Field's sought the help of Joseph H. Flom, an attorney with expertise in such matters, in determining how best to respond to the overtures of interested parties. Flom advised the board that the interest of the shareholders was the paramount concern, and that management should listen to such proposals, evaluate whether the proposal was serious, and whether the proposal raised questions of antitrust violations. He also advised Field's directors and management to invest the company's reserves and use its borrowing power to acquire other stores, if such acquisitions were in accord with the sound business judgment of the board, and in the best interest of the company and its shareholders. He counseled that such acquisitions were a legal way of coping with unfriendly takeover attempts.

    Flom's advice was followed during this period in conjunction with a series of tentative approaches to Field's by or on behalf of potential acquirors. Thus, when in 1969 a third party interested in acting as a "catalyst" for a Field's-Associated Dry Goods merger approached the board, it considered the matter and rejected further exploration. While this offer was under consideration, Field's acquired Halle Brothers, a retailer with stores in communities in which Associated already had stores.

    In 1975, investment bankers representing Federated Department Stores, then the nation's largest department store chain, approached Field's about a possible merger. Again, the Field's board considered the matter, but in light of advice of counsel that it would raise antitrust problems and damage the chances of a proposed Field's acquisition of the Wanamaker Company, the board determined not to pursue the contact.

    Two approaches were initiated in 1976. In August, Dayton-Hudson, a large national department store, expressed interest in a possible merger. Field's management drew up a thorough list of options covering the advantages and disadvantages of such a merger. After reviewing that statement, Field's board decided that in light of their plans for future development and financial projections for 1977, a merger would not be advisable.

    In September of 1976 Field's management received an inquiry from a third party asking whether Field's was interested in having Gamble-Skogmo, another national retailer, acquire a twenty percent block of Field's stock to "prevent a takeover by another party." Again the proposal was evaluated by Field's directors and turned down.

  3. The CHH Approach.

    In 1977 the Field's board decided to hire Angelo Arena, then head of CHH's Neiman-Marcus division, to commence employment

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    with the company in 1977, work with its current president, Joseph Burnham, for two or three years, and then assume the presidency of Field's on Burnham's retirement. However, when Burnham died unexpectedly in October of 1977, the Field's board determined, in an emergency meeting held three days after Burnham's death, to elect Arena to the presidency immediately and ask him to come to Chicago earlier than originally planned. In the three day interval CHH made informal contacts with intermediaries and expressed an interest in merging with Field's. The board was informed of those contacts at the October 13 meeting and resolved at that time not to consider the merger.

    CHH continued to press its attentions however, and on November 16, Arena asked Field's antitrust counsel, the Chicago law firm of Kirkland & Ellis, to investigate the antitrust aspects of such a merger. Field's board met the next day, and authorized Arena and George Rinder, another director and Field's executive, to meet with representatives of CHH. That meeting took place the next day. The CHH team expressed their reasons why a merger would be good for both companies, and noted that a foreign firm was likely to make a $60.00 tender offer for Field's at any time. Field's representatives conveyed the board's position that internal expansion would be best for Field's, and expressed concern about antitrust problems of such a merger. CHH responded that their counsel had opined that there was no antitrust...

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