679 F.2d 1299 (9th Cir. 1982), 80-4372, Feldman v. Simkins Industries, Inc.

Docket Nº:80-4372.
Citation:679 F.2d 1299
Party Name:Joseph D. FELDMAN, on behalf of himself and all others similarly situated, Plaintiff-Appellant, v. SIMKINS INDUSTRIES, INC., Defendant-Appellee.
Case Date:June 22, 1982
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit

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679 F.2d 1299 (9th Cir. 1982)

Joseph D. FELDMAN, on behalf of himself and all others

similarly situated, Plaintiff-Appellant,


SIMKINS INDUSTRIES, INC., Defendant-Appellee.

No. 80-4372.

United States Court of Appeals, Ninth Circuit

June 22, 1982

Argued and Submitted Jan. 11, 1982.

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[Copyrighted Material Omitted]

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David B. Gold, David B. Gold, Law Corp., San Francisco, Cal., for plaintiff-appellant.

Paul Rosen, Spector, Cohen, Hunt & Rosen, Philadelphia, Pa., argued, for defendant-appellee; Michael R. Jencks, San Francisco, Cal., on brief.

Appeal from the United States District Court for the Northern District of California.

Before SNEED and TANG, Circuit Judges, and STEPHENS, [*] District Judge.

TANG, Circuit Judge.

This is an appeal from the dismissal by summary judgment and directed verdict against Plaintiffs' claims that Defendant violated federal and state securities laws. We affirm.


Between 1974 and 1977 Simkins Industries, Inc. (Simkins) acquired Fibreboard Corporation (Fibreboard) stock representing 14% of Fibreboard's outstanding shares. It paid an average price of approximately $15.25 per share. By late 1977, however, Simkins had become dissatisfied with its investment in Fibreboard. Fibreboard appeared to Simkins to be poorly managed; its stock was trading at low market prices; and the company often failed to pay dividends. Moreover, the relationship between Leon Simkins, the president of Simkins Industries, and Fibreboard management had become one of open hostility. Simkins had been denied a seat on the Fibreboard board of directors, and his suits against the company's management had been widely-publicized.

During late 1977 and early 1978, rumors began circulating in the financial community that Fibreboard was a merger candidate.

On January 26, 1978, without Leon Simkins' knowledge or participation, Fibreboard and Louisiana-Pacific Corporation (L-P) prepared and disseminated a press release announcing L-P's merger offer to acquire all of Fibreboard's common stock at $15 per share. The release indicated that the offer was conditioned on, among other things, approval of Fibreboard's three largest shareholders, including Simkins. The substance of that announcement went out on the Dow Jones tape at 8:35 a. m. EST. On that day, 72,700 shares of Fibreboard common stock were traded on the NYSE at prices ranging from $14.625 to $13.875 and closing at $14.625 per share. During the next several days, reporters interviewed Leon Simkins and officials of the other two largest shareholders and reported in the

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press that these individuals did not consider the $15 offer to be acceptable. The articles' authors also included their own commentary about the possibility that the merger would eventually be consummated at a price higher than $15.

On January 27, 1978, 298,100 shares of Fibreboard common stock were traded on the NYSE at prices ranging from $16.75 to $14.375, closing at $16.125 per share. Articles appeared in the Wall Street Journal and the San Francisco Chronicle that day, commenting on the shareholder approval requirements for the merger, the companies' financial situations, and the continuing merger discussions with other companies. A San Francisco Examiner article quoted Leon Simkins as characterizing the L-P bid as "not sufficient." The article reported that Simkins "wouldn't accept the $15 tender for his 14 percent interest in Fibreboard," and that "(h)e declined to set a target figure that would be acceptable."

On that day, Simkins began to sell shares of Fibreboard when the price per share had risen to near $17. The sales were made in ten or twenty thousand share lots with stop orders at set minimum prices. At the end of trading that day, Simkins had sold 67,200 shares at an average price of $16.376 per share.

On January 30, 1978, following the weekend, 207,700 shares of Fibreboard common stock were traded on the NYSE at prices ranging from $16.375 to $15.75, closing at $16 per share. Simkins sold 115,000 shares of Fibreboard through its broker, Bear, Stearns, & Co., in transactions similar to those of the preceding trading day. The purchase price averaged $16.034 per share. On the following day, January 31, 463,700 shares of Fibreboard common stock were traded on the NYSE; prices ranged from $15.875 to $14.625, closing at $15 per share. Simkins sold a total of 295,000 shares through Bear, Stearns. The sales for that day averaged slightly over $15 per share.

Plaintiff Feldman purchased 500 shares of Fibreboard at $14.875 per share on January 31, 1978, after his broker had advised him of the pending L-P merger offer. At 6 p. m. that day, L-P issued a press release announcing the formal withdrawal of its offer to purchase Fibreboard stock at $15 per share. A Dow Jones tape release and articles in the Wall Street Journal and San Francisco Examiner publicized the withdrawal and quoted an L-P spokesman as stating that the offer was withdrawn when the three largest shareholders rejected the $15 price. (L-P's offer specified that the offer would expire if the approval of the shareholders was not obtained by January 31, 1978). On February 1, 1978, Simkins disclosed to the SEC, NYSE, and Fibreboard (as required by § 13(d)(2) of the Exchange Act), the sale of its 477,200 shares of Fibreboard common stock.

On February 2, plaintiff Feldman sold his 500 shares of Fibreboard common stock for an average price of $14.175. On that day also, Fibreboard issued a news release stating that discussions with a number of companies concerning possible acquisitions would continue. On March 10, 1978, L-P and Fibreboard announced agreement in principle on a merger at $17 per share; on March 23, the parties signed an agreement approving the merger at that price.

Feldman brought this action against Simkins Industries, Inc. and a brokerage house, Bear, Stearns & Co. ("Bear, Stearns") for violations of § 17(a) of the Securities Act (15 U.S.C. § 77q(a)), § 10(b) of the Exchange Act (15 U.S.C. 78j) its implementing Rule 10b-5 (17 C.F.R. § 240.10b-5), §§ 5, 12...

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