762 F.Supp. 675 (W.D.Va. 1991), Civ. A. 90-0043, C-T of Virginia, Inc. v. Euroshoe Associates Ltd. Partnership

Docket Nº:Civ. A. 90-0043
Citation:762 F.Supp. 675
Party Name:C-T of Virginia, Inc. v. Euroshoe Associates Ltd. Partnership
Case Date:April 22, 1991
Court:United States District Courts, 4th Circuit, Western District of Virginia
 
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Page 675

762 F.Supp. 675 (W.D.Va. 1991)

C-T OF VIRGINIA, INC., f/k/a Craddock-Terry Shoe Corporation, Plaintiff,

v.

EUROSHOE ASSOCIATES LIMITED PARTNERSHIP, et al., Defendants.

Civ. A. No. 90-0043-L.

United States District Court, W.D. Virginia, Lynchburg Division.

April 22, 1991

Edward B. Lowry, Michie, Hamlett, Lowry, Rasmussen & Tweel, P.C., Charlottesville, Va., and Harold Bonacquist, Paul Traub, Fredrick J. Levy, Traub, Bonacquist, Yellen & Fox, New York City, for C-T of Virginia, Inc.

David D. Embrey, Cunningham & Embrey, Lynchburg, Va., for Edgar T. and Georgia K. Harris, Mary M. Hunt, Edgar L. and Vera B. Dehner Living Trust, Vera B. Dehner, Jonathan D. Dehner Co., Wood W. Lay.

Carter R. Allen, Allen & Carwile, Waynesboro, Va., for Ruth B. Cohn and Dorothy L. Mondell.

C. Burton Gerhardt, pro se.

W. Martin Johnson, pro se.

James J. Sakolosky, Davidson, Sakolosky & Richards, P.C., Lynchburg, Va., for Schewel Furniture Co.

Carter R. Allen, Allen & Carwile, Waynesboro, Va., and Ned L. Fisher, Hall,

Page 676

Holmberg, Roach, Johnston & Fisher, Waukegan, Ill. for Ruth B. Cohn and Dorothy L. Mondell.

Richard E.B. Foster, Magee, Foster, Goldstein & Sayers, Roanoke, Va., for Harold and Karl D. Walls.

Alexander W. Bell, Lynchburg, Va., and Thomas E. Palmer, Squire, Sanders & Dempsey, Columbus, Ohio, for Euroshoe Associates Ltd. Partnership, and N.V. Euro Shoe Unie.

Benjamin C. Ackerly, Virginia W. Powell, Tyler P. Brown, Hunton & Williams, Richmond, Va., for Michael J. Gade, Lewis B. Goode, Jr., Edward F. Haley, III, W. Edwin Masencup, Jr., G. Bruce Miller, Roland K. Peters, Elias Richards, III, Kenneth S. White, and Alan L. Wurtzel.

Mitchell A. Karlan, Stephen A. Kaplan, James P. Ricciardi, Stuart D. Karle, Gibson, Dunn & Cruthcer, New York City, and W. Stephen Scott, Paxson, Smith, Gilliam & Scott, Charlottesville, Va., and Edward Lee Isler, Terence P. Ross, Gibson, Dunn & Crutcher, Washington, D.C., pro hac vice, for Hecco Ventures, Cinerama, Inc. James J. Cotter Ltd., and Michael R. Foreman.

John G. Douglass, Wright, Robinson, McCammon, Osthimer & Tatum, Richmond, Va., for Louise, Margot, Mary G., and Samuel B. Aronson, The Fisher Trust and Kenneth L. and Sherilynn A. Fisher.

MEMORANDUM OPINION

KISER, District Judge.

This matter is before me on motions for summary judgment and motions to dismiss filed by several different groups of defendants. The plaintiff in this action is a large corporation now in bankruptcy. The defendants are former shareholders of the plaintiff who sold their shares to the company as part of a leveraged buyout that converted Craddock-Terry into a closely held corporation. Plaintiff contends that the transaction through which Craddock-Terry purchased its own shares was a voluntary transfer that unjustly enriched the defendants.

Facts

The facts underlying this case are essentially undisputed. In April 1985, C-T hired Prudential-Bache Securities, Inc., as financial advisor to study strategic financial alternatives available to C-T. One of Prudential's recommendations was that C-T pursue a leveraged buyout. The Board decided that a management buyout would most likely realize maximum value for shareholders because it (i) would provide the highest expected value to shareholders and had a high probability of success, (ii) would maintain the viability of the enterprise, and (iii) would protect the interests of employees and other constituents. The Board authorized management to explore a buyout at a price of $15 per share.

On June 12, 1985, after an announcement of a proposed LBO by management, C-T received an unsolicited proposal from Southwestern General Corporation proposing a merger under which holders of C-T would receive $17.50 per share. Southwestern withdrew its offer on August 26, 1985, following an announcement by President Reagan that he would not limit the importation of shoes into the United States.

On November 11, 1985, HH Holdings, Inc., a Delaware holding company, made an unsolicited offer for a cash merger in which each share of C-T common stock would be exchanged for $19.00 cash. On November 25, 1985, HH Holdings increased its offer to $20.00 cash per share of C-T common stock (the "merger consideration"). C-T's Board of Directors found the terms acceptable, and the parties agreed to a...

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