739 F.2d 11 (1st Cir. 1984), 84-1099, Wayne Inv., Inc. v. Gulf Oil Corp.

Docket Nº:84-1099.
Citation:739 F.2d 11
Party Name:WAYNE INVESTMENT, INC., Plaintiff, Appellant, v. GULF OIL CORPORATION, et al., Defendants, Appellees.
Case Date:July 18, 1984
Court:United States Courts of Appeals, Court of Appeals for the First Circuit

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739 F.2d 11 (1st Cir. 1984)

WAYNE INVESTMENT, INC., Plaintiff, Appellant,


GULF OIL CORPORATION, et al., Defendants, Appellees.

No. 84-1099.

United States Court of Appeals, First Circuit

July 18, 1984

Argued May 11, 1984.

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Susan F. Brand, Boston, Mass., with whom Alfred J. O'Donovan, III, Boston, Mass., was on brief, for appellant.

John W. Castles 3d, New York City, with whom William P. Casella, Banks Brown, Ellen M. Saideman, New York City, John E. Bailey, Kenneth C. Keener, Houston, Tex., Eleanor D. Acheson, Ropes & Gray, Boston, Mass., and Lord, Day & Lord, New York City, were on brief, for appellees.

Before COFFIN and BOWNES, Circuit Judges, and PETTINE, [*] Senior District Judge.

COFFIN, Circuit Judge.

Appellant Wayne Investment brought an action against Gulf Oil Corporation (Gulf) alleging that Gulf had violated Sec. 17(a) of the Securities Act of 1933, 1 Secs. 10(b) and 14(e) of the Securities Exchange Act of 1934, Mass.Gen.Laws Ann. ch. 93A, and the common law of fraud by making false and misleading statements in connection with a tender offer. The district court dismissed the complaint on the ground that appellant had not met the requirement of Fed.R.Civ.P. 9(b), which provides, "In all averments of fraud ..., the circumstances constituting the fraud ... shall be stated with particularity." Appellant argues that its complaint and an affidavit it filed in opposition to Gulf's motion to dismiss did set out the fraud claim with sufficient particularity. In addition, appellant argues that its claim under Mass.Gen.Laws Ann. ch. 93A was not subject to the requirements of Fed.R.Civ.P. 9(b), and that it should have been allowed to amend its complaint to allege diversity jurisdiction for this claim. We find that the district court ruled correctly on both of these issues, and we affirm.

On June 17, 1982, Gulf and Cities Service Company (Cities Service) entered into a merger agreement under which Gulf agreed to make an offer of $63.00 per share for approximately 54 percent of the Cities Service common stock. If the offer was successful, Gulf planned to merge Cities Service with a wholly-owned subsidiary of Gulf. Gulf's Offer to Purchase (the Offer) expressly warned, "There can be no assurance that a challenge to the Offer on antitrust grounds will not be made, or if such a challenge is made, what the result will be." The Offer stated that each party would "use its best efforts to cause the Merger to occur." The Offer also provided, however, that Gulf reserved the right to terminate the offer if certain conditions (including an adverse action by a governmental authority) arose, "regardless of the circumstances giving rise to such condition (including any action or inaction by ... Gulf)."

Gulf began to purchase shares of Cities Service on June 22, 1982. During June and July appellant sold a number of put and call options with a September expiration date. On July 29, 1982, the Federal Trade Commission (FTC) obtained a temporary restraining order enjoining the transaction on antitrust grounds. Gulf issued a press release on July 30, 1982, announcing that it intended "to contest the FTC action vigorously,

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but at the same time [to] seek to discuss whether there is a reasonable basis for prompt settlement of the action."...

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