Bell v. Cameron Meadows Land Co.
| Decision Date | 22 February 1982 |
| Docket Number | No. 80-5326,80-5326 |
| Parties | Fed. Sec. L. Rep. P 98,602 Mary N. BELL, Margaret A. Stokes, Arthur Payne and Stephen Hogue, Trustee, Plaintiffs-Appellants, v. CAMERON MEADOWS LAND COMPANY, a Wisconsin corporation; SF Minerals, Inc., a Nevada corporation; Santa Fe International Corporation, a California corporation; Jack E. Arnold, and Paul C. Perret, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Major Langer, Henry B. La Torraca, Perona & Langer, Long Beach, Cal., for plaintiffs-appellants.
Robert C. Vanderet, O'Melveny & Myers, Los Angeles, Cal., argued, for defendants-appellees; Martin Glenn, Los Angeles, Cal., on brief.
Appeal from United States District Court for the Central District of California.
Before SKOPIL, FARRIS and BOOCHEVER, Circuit Judges.
Plaintiffs allege the defendants violated sections 10(b) 1 and 14(e) 2 of the Securities Exchange Act of 1934, corresponding California state securities laws, and committed common law fraud, all in connection with a tender offer by which SF Minerals, Inc., a Nevada corporation, acquired Cameron Meadows Land Company, a Wisconsin corporation. The district court rejected plaintiffs' two untimely jury demands, and thereafter granted summary judgment for defendants on all claims. We reverse in part and affirm in part.
Plaintiffs are two sisters, Mary Bell and Margaret Stokes, their brother, Arthur Payne, 3 and the trustee of a trust for the benefit of Arthur Payne. 4
The only remaining defendant is Santa Fe International Corporation, a California corporation engaged in oil and gas exploration and development. SF Minerals, Inc. is a subsidiary of Santa Fe formed to accomplish the tender offer at issue.
At the time of the tender offer, Cameron Meadows Land Company possessed only one significant asset, a large tract of oil and gas producing property in Louisiana. There were 134 shareholders and 83,300 outstanding shares. The shares were not traded publicly. During the eleven years preceding the tender offer, shares had been sold ten times for prices between thirty and fifty-five dollars. 5 Plaintiffs collectively owned 1,920 shares.
Santa Fe's tender offer to Cameron Meadows shareholders was for all outstanding shares at $186 per share, contingent upon acceptance by holders of at least 80 percent of the outstanding shares. The written tender offer document (Tender Offer) announced in bold print on the second page, "The Board of Directors of Cameron Meadows Land Company has Approved and Recommended Acceptance of the Offer." On page seven, the Tender Offer referred to a land appraisal by Paul C. Perret (Perret Report) which suggested a value per share well below the tender offer price. The Tender Offer also advised, "It is the present intention of the Purchaser, if it acquires control of the Company, to cause the Company to be liquidated and dissolved." In a separate letter accompanying the Tender Offer, Cameron Meadows president and director Jack Arnold further advised Cameron Meadows shareholders,
The tender offer was accepted by 133 of the 134 shareholders holding 96 percent of all Cameron Meadows shares. Plaintiffs tendered all their shares, but only after the minimum of 80 percent of the outstanding shares had been tendered by other shareholders.
Plaintiffs allege in their third, fourth and fifth "causes of action" two categories of false and misleading statements: (1) misleading references in the Tender Offer to the Perret Report; and (2) failure to disclose certain dealings between Santa Fe and Cameron Meadows president Jack Arnold. 6
We must view the evidence and the inferences drawn therefrom in the light most favorable to plaintiffs. Gaines v. Haughton, 645 F.2d 761, 769 (9th Cir. 1981). We can affirm summary judgment only if there are no genuine issues of material fact and appellee Santa Fe is entitled to prevail as a matter of law. Dosier v. Miami Valley Broadcasting Corp., 656 F.2d 1295, 1300 (9th Cir. 1981); Fed.R.Civ.P. 56(c).
Summary judgment must be affirmed as to each claim for which an essential element of a valid section 10(b) cause of action is missing. The essential elements at issue here are material false or misleading statements, scienter, reliance and injury.
False or misleading statements are actionable only if material. Facts are considered material if there is a substantial likelihood that a reasonable shareholder would consider them important when making an investment decision. TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438, 449, 96 S.Ct. 2126, 2132, 48 L.Ed.2d 757 (1976); Little v. Valley Nat. Bank of Arizona, 650 F.2d 218, 222 (9th Cir. 1981); United States v. Margala, 662 F.2d 622, 626 (9th Cir. 1981). The district court found that plaintiffs' allegations of material misstatements lacked any factual basis. We disagree.
Plaintiffs allege that the reference to the Perret Report in the Tender Offer was misleading in that it (1) incorrectly stated that the Perret Report had estimated the fair market value for the lands and future income for oil and gas producing royalties to be $6,380,970.00, (2) incorrectly stated that Santa Fe had no reason to believe the Perret Report was materially inaccurate, and (3) failed to disclose the true purpose of the report. 8
The full report by itself creates a genuine issue of material fact whether the reference in the Tender Offer was materially misleading. A reasonable investor might have viewed the appraisal differently had he known that the report in its cover pages expressly stated, "This report is not intended to establish a value for (Cameron Meadows) nor does it establish a basis for the sale or purchase of the corporate stock." Further, plaintiffs offered evidence indicating that Arnold had expressly directed Perret to prepare a conservative document, 9 and that a separate evaluation prepared for Santa Fe indicated total future net revenues from oil and gas production of $61,814,286.00. Considered in the light most favorable to plaintiffs, this evidence raises a genuine issue of material fact whether the reference to the Perret Report in the Tender Offer was materially misleading.
Plaintiffs allege Santa Fe failed to disclose (1) that prior to or during the tender offer Arnold had been promised a retainer by Santa Fe for his efforts in promoting the tender offer, and (2) that Santa Fe had drafted letters sent out over Arnold's signature encouraging acceptance of the offer.
The district court found that the evidence was uncontroverted that Santa Fe did not agree or promise to retain Arnold in exchange for his support of the tender offer. This finding was based on Arnold's deposition 10 and the affidavit of one of Santa Fe's officers. Plaintiffs presented sufficient contrary evidence to create a genuine issue.
Plaintiffs offered evidence that (1) Arnold was given a retainer at double his old salary; (2) the agreement went into effect immediately after the tender offer was closed; (3) the offer was not a surprise to Arnold, who in fact set the salary; (4) a memo by a Santa Fe officer characterized the retainer as a "continuation;" (5) Arnold's level of cooperation during the tender offer was extraordinary; (6) a consultant to Santa Fe involved in the negotiations reported to Santa Fe that Arnold would expect a two to three year retainer; (7) the consultant included such expectation in his summary of finders' fees sent to Santa Fe; (8) Santa Fe therefore had reason to believe Arnold did have such an expectation.
With respect to the failure to disclose that Santa Fe had drafted Arnold's letters promoting the tender offer, the district court found that (1) the letters were not false or misleading; (2) the decision as to the use and final wording of each letter was Arnold's; and (3) plaintiffs had presented no evidence to support a claim that the admitted fact of cooperative letter writing was material. We disagree. The letters were misleading for the very reason that they did not disclose that they were almost verbatim copies of drafts proposed by Santa Fe. As evidence of the materiality of this fact, plaintiffs offered Mary Bell's testimony to the effect that she would have acted differently had she known of the cooperative relationship between Arnold and Santa Fe. Other tendering shareholders testified to the same effect. That Arnold could exercise judgment as to the final wording of each letter does not render the fact of cooperative letter writing immaterial.
Any significant relationship between Arnold and Santa Fe was material to an evaluation of his and the other directors' positive recommendations, which presumably were material to an evaluation of the tender offer itself.
Santa Fe's argument that the plaintiffs have presented no credible evidence of scienter is similarly without merit.
Recklessness is sufficient to support section 10(b) liability. Keirnan v. Homeland Inc., 611 F.2d 785, 787 (9th Cir. 1980); Nelson v. Serwold, 576 F.2d 1332, 1337 (9th Cir.), cert. denied, 439 U.S. 970, 99 S.Ct. 464, 58 L.Ed.2d 431 (1978). Santa Fe acted recklessly if it "had reasonable grounds to believe material facts existed that were misstated or omitted, but nonetheless failed to obtain and disclose such facts although they could have done so without extraordinary effort." Keirnan, 611 F.2d at 788. "Cases where intent is a primary issue...
To continue reading
Request your trial
-
Chao v. Westside Drywall Inc, Civ. No. 08-6302-AC.
...Orr, 285 F.3d at 773. The court must view the evidence in the light most favorable to the non-moving party. Bell v. Cameron Meadows Land Co., 669 F.2d 1278, 1284 (9th Cir.1982). All reasonable doubt as to the existence of a genuine issue of fact should be resolved against the moving Hector ......
-
In re Intelligroup Securities Litigation
...v. Crow, 574 F.2d 256 (5th Cir.1978) (Affiliated Ute creates a presumption of reliance on alleged material omissions); Bell v. Cameron, 669 F.2d 1278 (9th Cir.1982); Vervaecke v. Chiles, Heider & Co., 578 F.2d 713, 717 (8th Cir. 1978); Blackie, 524 F.2d 891. In addition, although Affiliated......
-
Jernigan v. Alderwoods Group, Inc., Civil No. 05-1420-PK.
...of fact to be tried. Id. The court must view the evidence in the light most favorable to the non-moving party. Bell v. Cameron Meadows Land Co., 669 F.2d 1278, 1284 (9th Cir.1982). All reasonable doubt as to the existence of a genuine issue of fact should be resolved against the moving part......
- Davis Wine Co. v. Vina Y Bodega Estampa, S.A.