Burnup & Sims, Inc. v. Posner

• Decision Date: 29 July 1988
• Docket Number: No. 82-2067-Civ.,82-2067-Civ.
• Citation: 688 F. Supp. 1532
• Parties: BURNUP & SIMS, INC., a Delaware corporation, Plaintiff, v. Victor POSNER, Security Management Corp., NVF Company, Sharon Steel Company, Summit Systems, Inc., DWG Corporation, Southeastern Public Service Company, and Wright & Lopez, Inc., Defendants.
• Court: U.S. District Court — Southern District of Florida

688 F. Supp. 1532

BURNUP & SIMS, INC., a Delaware corporation, Plaintiff, v. Victor POSNER, Security Management Corp., NVF Company, Sharon Steel Company, Summit Systems, Inc., DWG Corporation, Southeastern Public Service Company, and Wright & Lopez, Inc., Defendants.

No. 82-2067-Civ.

United States District Court, S.D. Florida.

July 29, 1988.

Rodney O. Thorson and James Loots, Skadden, Arps, Slate, Meagher & Flom, Washington, D.C., Sergio Alvarez-Mena, Morgan, Lewis & Bockius, Miami, Fla., for plaintiff.

Lee A. Rau, Reed, Smith, Shaw & McClay, McLean, Va., Ira M. Elegant, Buchbinder & Elegant, P.A., Miami, Fla., for defendants.

MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS' MOTION FOR PARTIAL SUMMARY JUDGMENT AND MOTION TO DISMISS

HASTINGS, District Judge.

THIS CAUSE is before the Court on Defendants' motion for partial summary judgment and motion to dismiss Count I. After careful consideration of the motions, memoranda in support and in opposition and being fully advised, this Court GRANTS the motions for reasons stated below.

FACTS

Taking the facts as pled in the light most favorable to Plaintiffs, the events which precipitated this litigation are as follows. Defendant Victor Posner (hereinafter referred to as "Posner") and Securities Management Corporation (hereinafter referred to as "SMC") are substantial stockholders in and may be deemed to control Defendants NVF Corporation (hereinafter referred to as "NVF"), Sharon Steel Corporation (hereinafter referred to as "Sharon") and their representative subsidiaries, including Summit Systems Company (hereinafter referred to as "Summit") and Southeastern Public Service Company (hereinafter referred to as "Southeastern").¹ Plaintiff Burnup & Sims, Inc. (hereinafter referred to as "Burnup") and Defendant Wright & Lopez, Inc. (hereinafter referred to as "Wright"), the latter of which is a wholly-owned subsidiary of Southeastern are competitors in the telephone and cable television (CATV) service industry. The Posner companies have launched a takeover attempt against Burnup. Plaintiff contends that the control or acquisition of Burnup by the Posner companies would violate various sections of the federal antitrust laws.

On or about October, 1975, the Posner companies began buying Burnup stock on the open market. By January 1976, Sharon had bought more than five (5%) percent of Burnup and a Schedule 13D was filed. By November 1978, Sharon had accumulated 14.9% of Burnup. By December 1979, the Posner companies had acquired a total of 28.8% of Burnup. When the Posner companies attained 32.3% of Burnup, it filed an amendment to its 13D Schedule which disclosed that Defendants intended to seek changes in Burnup's management and the Board of Directors. When the Posner companies reached an accumulated holding in Burnup of 33.6%, this litigation commenced. Subsequent to the filing of the Complaint, the Posner companies amended their 13D filing in which the Defendants announced their unequivocal intention to obtain control of Burnup.

Count III of the Complaint, to which the Defendants motion for summary judgment is directed alleges that Defendants have violated Section 8 of the Clayton Act, 15 U.S.C. Section 19. That provision precludes the creation of interlocking directorships which would tend to eliminate competition in the subject industry or violate the anti-trust laws. Defendants claim the Plaintiff, as the target company, cannot raise such a claim since the express aim of Defendants is to seek total control of Burnup. Defendants also move to dismiss Count I of the Complaint which alleges a violation of Section 7 of the Clayton Act. That provision prohibits corporate actions that would substantially lessen competition in a given industry. Defendants contend that Burnup, as a target of a corporate takeover, has no standing to bring such a claim. This Court agrees with both of Defendants' legal arguments.

DISCUSSION OF LAW

A. MOTION FOR SUMMARY JUDGMENT

Summary judgment must be granted "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 2552-3, 91 L.Ed.2d 265 (1986).

Because Defendants now seek control of Burnup by merger, no claim under Section 8 can be had. Las Vegas Sun, Inc. v. Summa Corp., 610 F.2d 614 (9th Cir.1979), cert. denied, 447 U.S. 906, 100 S.Ct. 2988, 64 L.Ed.2d 855 (1980). See e.g., Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 104 S.Ct. 2731, 81 L.Ed.2d 628 (1984) (parent and subsidiary cannot "conspire" to violate anti-trust laws because they are in effect, a single entity). Plaintiffs cannot maintain this action in light of Defendants' avowed purpose to merge the target into the Posner companies. The target would no longer be an independent competitor, but rather an integral part of the Posner companies. Hence the "evil" of interlocking directors between separate and distinct companies, to which Section 8 is directed cannot be applied.

B. MOTION TO DISMISS

Recent case law and legal theory suggests that Plaintiff has no standing to bring any anti-trust claim whatsoever. Standing is a tool used by Federal courts to determine its powers under the law to decide a case. A...