964 F.2d 149 (2nd Cir. 1992), 1292, Glazer v. Formica Corp.

Docket Nº:1292, Docket 91-9298.
Citation:964 F.2d 149
Party Name:Malcolm I. GLAZER, Farmington Mobile Home Park, Inc., Fabri Development Corp., Valley-Ho Mobile Home Park, Inc., Lakeview Mobile Home Park, Inc., Avram Glazer, Bryan Glazer, Darcie Glazer, Edward Glazer, Joel Glazer, Kevin Glazer, Plaintiffs-Appellants, v. FORMICA CORPORATION, Vincent P. Langone, Defendants-Appellees.
Case Date:May 18, 1992
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit

Page 149

964 F.2d 149 (2nd Cir. 1992)

Malcolm I. GLAZER, Farmington Mobile Home Park, Inc., Fabri

Development Corp., Valley-Ho Mobile Home Park, Inc.,

Lakeview Mobile Home Park, Inc., Avram Glazer, Bryan Glazer,

Darcie Glazer, Edward Glazer, Joel Glazer, Kevin Glazer,



FORMICA CORPORATION, Vincent P. Langone, Defendants-Appellees.

No. 1292, Docket 91-9298.

United States Court of Appeals, Second Circuit

May 18, 1992

        Argued April 1, 1992.

Page 150

        William G. Bauer, Rochester, N.Y. (Gordon E. Forth, Woods, Oviatt, Gilman, Sturman & Clarke, Rochester, N.Y., on the brief), for plaintiffs-appellants.

        Laurence A. Silverman, New York City (Robert A. Alessi, Silda Palerm, Cahill Gordon & Reindel, New York City, on the brief), for defendants-appellees.

        Before KEARSE and MAHONEY, Circuit Judges, and RESTANI, Circuit Judge [*].

        KEARSE, Circuit Judge:

        Plaintiffs Malcolm I. Glazer, et al., appeal from a final judgment of the United States District Court for the Western District of New York, Michael A. Telesca, Chief Judge, dismissing their claims against defendants Formica Corporation ("Formica" or the "company"), et al., under § 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b) (1988), and Rule

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10b-5, promulgated thereunder, 17 C.F.R. § 240.10b-5 (1991), in connection with a management-led leveraged buyout ("LBO") of Formica in May 1989. The district court granted summary judgment dismissing the amended complaint ("complaint") on the grounds that there was insufficient evidence that statements made by defendants were untrue or misleading or that any failure to disclose was material. On appeal, plaintiffs principally challenge the court's ruling that certain of Formica's press releases were not untrue or misleading and contend that there were genuine issues of fact as to the materiality of the company's nondisclosures. For the reasons below, we reject plaintiffs' contentions and affirm the judgment of the district court.


        Formica is a corporation that produces high-pressure decorative laminates and other surfacing products. At all pertinent times, defendant Vincent P. Langone was its president and chief executive officer. The plaintiffs (collectively "Glazers") are self-employed private investor Malcolm I. Glazer ("Malcolm"), six of his children, and four companies wholly owned by him. The present lawsuit arises out of overtures made by Glazers in 1988 for the purchase of Formica. Many of the events are not in dispute.

  1. Glazers' Unsuccessful Proposal To Acquire Formica

            On August 4, 1988, Glazers filed a Schedule 13D with the Securities and Exchange Commission to report their acquisition of 9.9% of Formica stock. The Schedule 13D stated that Glazers "may seek to acquire a controlling interest in [Formica's] Shares or obtain representation on [Formica's] Board of Directors." It also stated that Malcolm's wholly-owned First Allied Investors Corporation ("First Allied") would be the investment vehicle for Glazers' future Formica dealings. With the filing of Glazers' Schedule 13D, Malcolm issued a press release. On the following day, the price of Formica stock rose 2.375 points to close at $15.375.

            On August 19, Formica's board met and discussed, inter alia, Glazers' Schedule 13D. After receiving a presentation from the company's investment bankers, the directors concluded that Glazers were not a serious potential suitor because they lacked the financial wherewithal to consummate an acquisition of Formica.

            On September 29, after unsuccessful telephone attempts to arrange a meeting, Malcolm sent Langone a letter setting out an offer by First Allied to acquire Formica for $20 per share in a friendly transaction that would include unspecified "customary" provisions. The offer was conditioned on, inter alia, First Allied's obtaining the necessary financing. The letter did not describe what financing, if any, had already been secured.

            On September 30, Formica issued two press releases (the "September Releases"). The first stated that the company had rejected Glazers' proposal:

    Formica Rejects

    Leveraged Acquisition Proposal

            ... Formica Corporation ... announced that First Allied Investors Corporation has informed Formica that it is prepared to make an offer to acquire Formica at $20 per share, not all of which would be cash. The proposal is subject to various conditions including due diligence and First Allied's ability to obtain financing for the transaction. First Allied stated that its proposal assumes a friendly transaction endorsed by the Board of Directors of Formica.

            Mr. Vincent P. Langone, President and Chief Executive Officer of Formica, stated that it is the position of Formica that it is in the best interests of the Company and its stockholders for Formica to continue as an independent public company and that First Allied has been so advised.

            In August, 1988 a group including Mr. Malcolm I. Glazer, the President of First Allied, filed a Schedule 13-D stating that the group beneficially owned approximately 9.9% of the outstanding common stock of Formica.

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            The second September 30 release stated that though Formica believed it best to remain independent, it would consider any legitimate acquisition proposal:

            ...Formica Corp[.] will consider any legitimate proposal to acquire the company, a company official said.

            "Any legitimate offer will have to be evaluated by our board of directors," said Charles A. Brooks, the company's chief financial officer. He said Formica believes the best thing for the company and its stockholders is to remain independent.

            On September 30, Reuters described Formica's releases and financial industry reactions as follows:

            Earlier today, Formica said it received and rejected a 20 dlrs per share offer to be acquired by [First Allied Investors Corp], saying it prefers to remain independent.

            Later, traders said they expected another offer for Formica, even though the stock was trading below the offer price. "We're saying there's going to be a little bit higher offer," one trader said.

            Traders said Formica's takeout value could be as high as 23 dlrs per share.

            On October 1, "The Daily Telegraph," in an article entitled "Formica for sale," reported that Formica "put itself up for sale yesterday when, while rejecting a ... ($20 per share) bid from First Allied, an investment group, it said it would evaluate any legitimate offers." The article reported that arbitrageurs anticipated an eventual purchase price of about $23 per share.

            On October 4, First Allied issued its own press release, quoting Malcolm as "not[ing] that Formica's refusal to participate in discussions regarding the [First Allied] proposal is totally contradictory to Formica's recent announcement that it will consider any legitimate proposal to acquire the company." On October 11, Malcolm called Langone to discuss the possibility of acquiring Formica, but he and his investment group soon abandoned their efforts and sold their stake in Formica.

            In the wake of the September Releases, the closing price of Formica stock, which had been $13.25 on September 29, promptly rose some four points, to $17.125 on September 30 and $17.375 on the next trading day, October 3. Between September 30 and November 4, the closing prices of Formica stock fluctuated between $17.375 and $15.625 per share.

            On November 4, Glazers arranged to sell all of their Formica holdings to Great American Realty, Inc. ("GAR") for $15.875 per share. In addition, GAR agreed to pay Glazers a premium if, before May 10, 1989, it either sold these holdings at a profit or purchased additional Formica stock at a higher price and gained a 15% or larger share...

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