Viacom Intern. Inc. v. Icahn
| Decision Date | 09 October 1991 |
| Docket Number | D,No. 1534,1534 |
| Citation | 946 F.2d 998 |
| Parties | , Fed. Sec. L. Rep. P 96,286, RICO Bus.Disp.Guide 7855 VIACOM INTERNATIONAL INC., Plaintiff-Appellant, v. Carl C. ICAHN; Icahn Holding; Icahn Capital Corp.; Heron Investors Plan Inc.; ACF Corporation, Inc.; Unicorn Associates Corporation; GNU Corp.; Excaliber Partners; Health Investors Limited Partnership; Longview Investors Limited Partnership; Harmonious Associates Limited Partnership; Stork Associates Limited Partnership, Defendants - Third - Party - Plaintiffs - Appellees, Ralph M. Baruch; Terrence A. Elkes; Kenneth F. Gorman; John W. Goddard; Leo Cherne; Joseph F. Condon; Theodore C. Jackson; Alan R. Johnson; Paul A. Norton; Harry M. Plotkin; Nance C. Reynolds; John F. White, Third-Party-Defendants-Appellees. ocket 91-7174. |
| Court | U.S. Court of Appeals — Second Circuit |
Michael E. Tigar, Austin, Tex. (Stephen Lowey, Neil J. Selinger, John Mage, Lowey Dannenberg Bemporad & Selinger, P.C., Goodkind, Labaton & Rudoff, Wolf Popper Ross Wolf & Jones, New York City of counsel), for plaintiff-appellant.
Dennis J. Block, New York City (Stephen A. Radin, Beth J. Jacobwitz, New York, New York, Weil, Gotshal & Manges, of counsel), for third-party-defendants-appellees.
Before KEARSE, MAHONEY, and SNEED, * Circuit Judges.
Plaintiff, Viacom International Inc. (Viacom), appeals from the district court's grant of summary judgment dismissing the plaintiff's case against defendants Carl Icahn (Icahn) and various corporations and entities controlled by Icahn. Viacom claims that Icahn committed extortion, in violation of the Hobbs Act, 18 U.S.C. § 1951 (1988), when Viacom was forced to repurchase Icahn's Viacom stock at a price that was significantly higher than current per share price on the open exchange. The district court concluded that the repurchase of the stock, commonly known as "greenmail," did not violate the Hobbs Act. We affirm.
As of May 1, 1986, Carl Icahn held slightly less than five percent of Viacom's stock. During this time, Icahn met with Joseph R. Perella, Viacom's investment banker at First Boston Corporation. Icahn indicated that he wanted Viacom to repurchase his shares. Perella communicated this information to Viacom.
On May 5, 1986, Icahn bought one million shares of Viacom stock from Ivan Boesky for $63 a share. Because Icahn now owned more than five percent of the company's stock, he had until May 15, 1986, to file form 13D with the Securities Exchange Commission (SEC), revealing his share ownership and detailing his intentions. Before the form had to be filed, Icahn further increased his holdings when he bought 1.5 million shares of Viacom stock for $70 a share from JMB Realty Corp. of Chicago.
On May 15, 1986, Icahn filed his form 13D with the SEC. In it, he stated that he owned almost seventeen percent of Viacom's stock. He said he was prepared to buy all of Viacom's stock for $75 per share. If no deal could be reached, Icahn indicated that he would continue to explore strategies for obtaining control of Viacom. He also suggested that he might dispose of his shares for "cash or otherwise."
During this time, Icahn also went public with his share holdings. There is evidence that the widespread perception of an imminent takeover adversely affected Viacom's business operations. Apparently, companies and individuals were reluctant to engage in certain contractual relations with Viacom because of the possibility that the company would soon be sold or broken up.
On May 21, 1986, Viacom repurchased all of Icahn's shares. Icahn received cash (equivalent to $62 per share), warrants to purchase 2.5 million shares of common stock, and ten million dollars worth of free advertising. 1 When the whole deal is added together, Icahn received approximately $79.50 for each share of Viacom stock. The actual share price on the open exchange on May 22 was $62. Icahn received a premium over that market price which totalled over sixty million dollars. As part of this deal, Icahn agreed not to purchase Viacom stock or seek control of the company for eleven years. Ten months later, Viacom was acquired by National Amusement, Inc., for $111 a share.
On May 28, 1986, Viacom filed this suit alleging that Icahn and his affiliates had violated the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1962. The amended complaint filed on October 11, 1988, alleges that Icahn committed the requisite predicate acts required under RICO by engaging in extortion in violation of the Hobbs Act, 18 U.S.C. § 1951, and by committing securities fraud in violation of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b) and rule 10b-5.
Specifically, Viacom alleges that Icahn's greenmail deal with Viacom constituted extortion. Viacom further alleges that Icahn has engaged in a pattern of extortion. Viacom points to other greenmail deals between On September 14, 1990, in a published decision, Judge Robert P. Patterson granted defendants' motion for summary judgment. The court held that Icahn "did not obtain property from plaintiff to which they had no lawful claim and therefore did not commit extortion." Viacom Int'l, Inc. v. Icahn, 747 F.Supp. 205, 213-14 (S.D.N.Y.1990). The court also dismissed plaintiff's securities claims because Viacom did not have standing to raise them. Id. at 210. Having dismissed the alleged predicate acts under RICO, the court dismissed the entire case. Id. at 214.
Icahn and companies like B.F. Goodrich, Owens Illinois, and American Can Company. Viacom also alleges that Icahn violated the securities laws when he purchased stock in Saxon Industries (Saxon) and Hammermill Paper Company (Hammermill) and resold the stock back to the companies
This court has jurisdiction under 28 U.S.C. § 1291 (1988). The court reviews a district court's grant of summary judgment de novo. See Bryant v. Maffucci, 923 F.2d 979, 982 (2d Cir.1991). The reviewing court applies the same standard of review as that applied by the district court. See Burtnieks v. City of New York, 716 F.2d 982, 985 (2d Cir.1983). Under rule 56(c), summary judgment should be granted if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. See Bryant, 923 F.2d at 982. We view the record and the evidence in the light most favorable to the nonmoving party. See id.
Without addressing whether Icahn may have violated the Hobbs Act or the securities laws, we affirm the district court's holding dismissing this case because we conclude that Viacom was not damaged by the transaction. While the district court's holding was based on other grounds, both parties argued the damages question in the court below and discussed it in the briefs filed with this court. We can clearly affirm on this ground. See Colautti v. Franklin, 439 U.S. 379, 397 n. 16, 99 S.Ct. 675, 686 n. 16, 58 L.Ed.2d 596 (1979) (); see also AVC Nederland B.V. v. Atrium Investment Partnership, 740 F.2d 148, 152 (2d Cir.1984) (same). By affirming the judgment of the district court on this ground, we are selecting what to us is the most direct route to that end.
Viacom effectively paid Icahn $79.50 for each of his three and a half million shares. At the time of the deal, the stock was trading for $62 a share on the open exchange. To determine whether Viacom was injured, we must decide whether the $79.50 Viacom paid to Icahn exceeded the fair value of the stock.
Viacom points to the open market value and argues that $62 represented the fair value of the stock. Relying on the efficient capital market hypothesis, Viacom bases its damages on the seventeen dollar premium it was forced to pay for each share of stock. The efficient capital market theory holds that "because of the large number of skilled profit-motivated investors continuously analyzing all publicly available information concerning liquid publicly traded securities, the prices of those securities in the market fairly reflects the value of the securities." Joint Appendix at A495-96. Market price is considered "the most reliable indicator of the value of [Viacom's] shares" under this theory. Id. at A496.
We do not believe that market price is the only factor to be considered when determining the value of stock in a situation such as that before us. The efficient capital market theory clearly is not the sole means of determining value. See Paramount Communications Inc. v. Time Inc., [1989 Transfer Binder] Fed.Sec.L.Rep. (CCH) p 94,514, at 93,277, 1989 WL 79880 (Del.Ch.Ct. July 14, 1989) (). Determination of a stock's fair value is dependent on several factors. Market price is one of those factors but it is not the determining one. See Multitex Corp. of Am. v. Dickinson, 683 F.2d 1325, 1330 n. 4 (11th Cir.1982) (). The court must also consider a host of other factors including net asset value and investment value. See id. at 1328-29; see also Hunter v. Mitek Indus., 721 F.Supp. 1102, 1106 (E.D.Mo.1989) ().
To continue reading
Request your trial
-
Center Cadillac v. Bank Leumi Trust Co.
...denied, 454 U.S. 820, 102 S.Ct. 102, 70 L.Ed.2d 91 (1981); Viacom Int'l, Inc. v. Icahn, 747 F.Supp. 205 (S.D.N.Y.1990), aff'd, 946 F.2d 998 (2d Cir. 1991). Where the victim of the alleged extortion relinquishes property to the defendant out of fear of economic loss but receives in exchange ......
-
Brokerage Concepts, Inc. v. U.S. Healthcare, Inc.
...Court for the Southern District of New York in Viacom Int'l v. Icahn, 747 F.Supp. 205 (S.D.N.Y.1990), aff'd on other grounds, 946 F.2d 998 (2d Cir.1991), a case involving the allegation of extortion through the wrongful use of the fear of economic loss. In Viacom, the defendants were accuse......
-
In re Cromer, Bankruptcy No. 189-93264-260
...56(c). See also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 2509, 91 L.Ed.2d 202 (1986); Viacom Int'l, Inc. v. Icahn, 946 F.2d 998, 1000 (2d Cir.1991), cert. denied, ___ U.S. ___, 112 S.Ct. 1244, 117 L.Ed.2d 477 (1992); Aldrich v. Randolph Cent. School Dist., 963 F.2......
-
Care One Mgmt. LLC v. United Healthcare Workers E.
...sought).135 155 F.3d at 640.136 Id.137 Id.138 Id.139 Id. (citing 747 F. Supp. 205 (S.D.N.Y. 1990), aff'd on other grounds , 946 F.2d 998 (2d Cir. 1991) ).140 Id. (citing Viacom , 747 F. Supp. at 213 ).141 180 F.3d 55 (2d Cir. 1999).142 Id. at 71.143 In Enmons , violence during a lawful stri......