Belden Corp. v. InterNorth, Inc.

• Decision Date: 10 November 1980
• Docket Number: No. 80-2596,80-2596
• Citation: 90 Ill.App.3d 547,413 N.E.2d 98,45 Ill.Dec. 765
• Parties: , 45 Ill.Dec. 765 BELDEN CORPORATION, Plaintiff-Appellee, v. INTERNORTH, INC., and I N Holdings, Inc., Defendants-Appellants. Virginia WERMINE et al., Defendants-Cross-Claimants-Appellees, v. INTERNORTH, INC., and I N Holdings, Inc., Defendants-Appellants.
• Court: United States Appellate Court of Illinois

Page 98

413 N.E.2d 98

90 Ill.App.3d 547, 45 Ill.Dec. 765

BELDEN CORPORATION, Plaintiff-Appellee, v. INTERNORTH, INC., and I N Holdings, Inc., Defendants-Appellants.

Virginia WERMINE et al., Defendants-Cross-Claimants-Appellees, v. INTERNORTH, INC., and I N Holdings, Inc., Defendants-Appellants.

No. 80-2596.

Appellate Court of Illinois, First District, Second Division.

Nov. 10, 1980.

James W. Kissel, Sidley & Austin, Chicago, John L. Warden, Sullivan & Cromwell, New York City, for defendants-appellants.

Reuben & Proctor, Chicago, for plaintiff-appellee; Don H. Reuben, Chicago, of counsel.

Arvey, Hodes, Costello & Burman, Chicago, for defendants-cross-claimants-appellees; Nathan M. Cohen, Chicago, of counsel.

STAMOS, Justice:

Belden, Inc., filed an action in the Chancery Division of the circuit court to enjoin InterNorth and its wholly-owned subsidiary, I N Holdings, Inc. (herein collectively referred to as InterNorth), from proceeding with a tender offer for Crouse-Hinds, Inc. (Crouse). Belden and Crouse had, prior to the tender offer, entered into a contract paving the way for a merger of Belden and Crouse. Belden's action was predicated on the torts of interference with contractual relations and interference with prospective advantage. A number of Belden shareholders were permitted to intervene as representatives of the class of Belden shareholders; the intervenors allege that InterNorth's tender offer interfered with their prospective advantage. The trial court granted the preliminary injunction requested by Belden and the intervenors, and InterNorth has taken this interlocutory appeal.

InterNorth is an Omaha-based corporation (chartered in Delaware) that, over the past several months, had been evaluating the possible acquisition of Crouse, a New York corporation based in Syracuse. Unknown to InterNorth, Crouse, for a similar length of time, had been engaged in merger discussions with Belden, a corporation based in Geneva, Illinois (chartered in Delaware). The management of InterNorth had planned to propose, at the September 9, 1980, meeting of the board of directors, that InterNorth undertake a tender offer for a majority of Crouse shares. A few hours before the meeting, InterNorth's management learned that Crouse and Belden had executed, on September 8, 1980, an agreement to merge.

The Belden-Crouse agreement recited that Belden would merge with Coppertime, Inc. (a wholly-owned Crouse subsidiary), and that Coppertime would be the surviving corporation. The agreement set forth specific duties of the management of both parties. Crouse's and Belden's management promised to present the proposed merger to their respective shareholders within a specified period of time and to recommend approval. Other clauses required, in effect, that the corporations not alter their business and financial postures prior to consummation of the merger.

InterNorth's extensive acquisition plans had been focused on Crouse, and the evidence reflected that InterNorth was financially and logistically unprepared to consider a takeover of both Crouse and Belden. InterNorth elected to go forward with its tender offer for Crouse. On the morning of September 12, 1980, InterNorth's president phoned Crouse's chief executive officer to advise him that a tender offer would be advertised in that morning's edition of the Wall Street Journal. Later that day, InterNorth delivered a letter to Crouse's corporate offices, outlining in a very general sense its plans for Crouse should the tender offer succeed. The tender offer advertisement, as it appeared in the Wall Street Journal, contained one boldface paragraph that did not appear in a draft of the offer prepared prior to the announcement of the Belden-Crouse agreement. That paragraph provided:

"The Offer is not conditioned upon any minimum number of Shares being tendered. The Offer is conditioned upon the previously announced merger of the Company (Crouse) and Belden Corporation ("Belden") being rejected by the shareholders of either the company or Belden or the termination of the merger agreement by the parties thereto."

Three days later, Belden filed the instant action for inducement of breach of contract and tortious interference with prospective advantage. On September 23, Belden and Crouse amended their agreement to allow an immediate exchange of shares. Under this provision, Belden's shareholders could exchange (according to a specified ratio, and not exceeding 47% of outstanding shares) their shares for Crouse treasury shares. Since the Belden shareholders who participated in the exchange became Crouse shareholders (the same result the anticipated merger would have), and since Crouse would acquire control of Belden proportionate to the number of shares exchanged, this agreement permitted a partial "merger" of Belden and Crouse without the need for approval of Crouse's shareholders.

InterNorth's takeover bid spawned litigation in several forums. InterNorth petitioned the New York Supreme Court to order Crouse to provide InterNorth with a shareholder list. That petition was denied, and an appeal is pending in the Appellate Division of that court. Meanwhile, Crouse filed an action in the United States District Court for the Northern District of New York, seeking to halt the tender offer because of alleged violations of federal securities law. That claim is still pending, but on a counterclaim filed in that court by InterNorth, the district court granted InterNorth's motion to enjoin the share exchange between Belden and Crouse. Crouse has appealed that decision to the Court of Appeals for the Second Circuit.

InterNorth claims in the instant appeal that the trial court's grant of the preliminary injunction was improvident, as the plaintiff's and intervenors' claims failed to satisfy the prerequisites for a preliminary injunction. Additionally, InterNorth argues that the injunction fails to preserve the status quo pending trial, as it permits Belden and Crouse to proceed with the share exchange, thereby "stacking the deck" in favor of shareholder approval of the merger. If the injunction is found improvident, InterNorth's second contention need not be addressed. In evaluating the trial court's action, however, this court may neither sift the evidence anew nor consider the merits of the case. (Alexander v. Standard Oil Co. (1977), 53 Ill.App.3d 690, 698, 11 Ill.Dec. 402, 368 N.E.2d 1010.) The issuance of a preliminary injunction is a matter within the discretion of the trial court, and the decision below will not be reversed without a showing of abuse of discretion or error of law. (K. F. K. Corp. v. American Continental Homes, Inc. (1975), 31 Ill.App.3d 1017, 1020, 335 N.E.2d 156.) One such error of law would be the issuance of a preliminary injunction where the plaintiff has not satisfied his burden of persuasion as to the four elements required. These elements are: (1) the plaintiff must have no adequate remedy at law, and show an irreparable injury if the injunction is denied; (2) the threatened injury to the plaintiff must be immediate, grave, and certain, and the inconvenience suffered by the defendant as a result of the injunction must be relatively minor; (3) the plaintiff must show a reasonable likelihood of prevailing on the merits; and (4) the injunction, if granted, must not cause injury to the general public. McCormick v. Empire Accounts Serv., Inc. (1977), 49 Ill.App.3d 415, 7 Ill.Dec. 259, 364 N.E.2d 420.

In evaluating the propriety of the preliminary injunction, this court must also consider, in relation to the foregoing requirements, the nature and elements of the torts alleged. The torts of interference with contractual relations and interference with prospective advantage are closely allied. Both recognize that a person's business relationships constitute a property interest and as such are entitled to protection from unjustified tampering by another. (See City of Rock Falls v. Chicago Title & Trust Co. (1973), 13 Ill.App.3d 359, 362, 300 N.E.2d 331.) Both causes of action imply a balancing of societal values: an individual has a general duty not to interfere in the business affairs of another, but he may be privileged to interfere, depending on his purpose and methods, when the interference takes a socially sanctioned form, such as lawful competition. (See also Herman v. Prudence Mut. Cas. Co. (1969), 41 Ill.2d 468, 473, 244 N.E.2d 809.) The difference between the two torts is that the tort of interference with contractual relations affords a greater degree of protection to the parties to a business relationship. The sacrosanct contractual relation takes precedence over the conflicting rights of any presumptive interferor, including his right to compete and his own prospective advantage. Prosser, Torts § 129, at 945 (4th ed.1971).

The elements of the tort of interference with contractual relations are set out in Zamouski v. Gerrard (1971), 1 Ill.App.3d 890, 275 N.E.2d 429. These include: (1) the existence of a valid and enforceable contract between the plaintiff and another; (2) the defendant's awareness of this contractual...