Berman v. Thomson

• Citation: 284 F. Supp. 521
• Decision Date: 14 May 1968
• Docket Number: No. 65 C 2051.,65 C 2051.
• Parties: Jeri J. BERMAN, Plaintiff, v. Albert W. THOMSON, A. D. Martin, M. J. Coen, Ralph A. L. Bogan, Jr., Edward D. Boshell, Francis C. Woolard, J. Earle May, Herbert F. Korholz, American Gypsum Company, a New Mexico Corporation and the Susquehanna Corporation, a Delaware Corporation, Defendants, Massachusetts Mutual Life Insurance Company, a Massachusetts corporation, State Mutual Life Assurance Company of America, a Massachusetts corporation, and the First National Bank of Boston, a national banking association, Additional party defendants as of March 15, 1966.
• Court: U.S. District Court — Northern District of Illinois

284 F. Supp. 521

Jeri J. BERMAN, Plaintiff, v. Albert W. THOMSON, A. D. Martin, M. J. Coen, Ralph A. L. Bogan, Jr., Edward D. Boshell, Francis C. Woolard, J. Earle May, Herbert F. Korholz, American Gypsum Company, a New Mexico Corporation and the Susquehanna Corporation, a Delaware Corporation, Defendants Massachusetts Mutual Life Insurance Company, a Massachusetts corporation, State Mutual Life Assurance Company of America, a Massachusetts corporation, and the First National Bank of Boston, a national banking association, Additional party defendants as of March 15, 1966.

No. 65 C 2051.

United States District Court N. D. Illinois, E. D.

May 14, 1968.

Arnold I. Shure, L. Louis Karton, Chicago, Ill., for plaintiff-appellant.

Sumner H. Babcock, Boston, Mass., John T. Chadwell, James E. Hastings, Chadwell, Keck, Kayser, Ruggles & McLaren, Chicago, Ill., for First Nat. Bank of Boston.

Joseph A. Sommer, Santa Fe, N. M., for American Gypsum.

Robert Mansell, Chicago, Ill., for Ralph Bogan.

Tom Van Dyke, Kansas City, Mo., for Thomson and Coen, A. D. Martin.

Schiff, Hardin, Waite, Dorschel & Britton, Chicago, Ill., for Ralph A. L. Bogan, Ed. D. Boshell, Francis C. Woolard.

Melvan M. Jacobs, Robert O. Mansell & Joseph O. Kostner, Chicago, Ill., for American Gypsum Co., Herbert F. Korholz and The Susquehanna Corp., and J. E. May.

Robert J. Gareis, David Macdonald, Russell Baker, Chicago, Ill., for Thomson, Martin & Coen.

Owen Rall, William E. Rattner and Peterson, Lowry, Rall, Barber & Ross, Chicago, Ill., for Massachusetts Mutual Life Ins. Co. and State Mutual Life Assurance Co.

MEMORANDUM OPINION

MAROVITZ, District Judge.

Motion of Defendant First National Bank of Boston to Dismiss.

This is a derivative action, brought on behalf of the Susquehanna Corporation, against certain of its directors and others, to recover for the issuance of a proxy statement alleged to be in violation of Section 14(a) of the Securities Exchange Act of 1934 (15 U.S.C. Sec. 78n), and Rule 14a-9 thereunder.

In essence, the plaintiff, a shareholder of Susquehanna, asks this Court to set aside an Agreement of Merger under which American Gypsum Company (Gypsum) would be merged into Susquehanna, and to enjoin any action hereafter to be taken pursuant to it, and to set aside any action taken under it during the pendency of these proceedings. The gist of plaintiff's aggrievement is contained in Paragraph 26 of the complaint, where she avers:

"If the proposed merger is consummated, the shareholders of SUSQUEHANNA will cease to be shareholders of an almost debt free company with excellent potential, and will become the victims of this merger which will transform their company into a debt burdened company with massive debt charges and maturities as demonstrated by the proxy statement. The gross book value of GYPSUM is offset very largely by such debt burdens, which will now be shifted to SUSQUEHANNA, endangering the investment of every shareholder."

More specifically, as of June 30, 1965, Gypsum had assets of $22,200,000. In addition, it had long term debt totaling $12,517,000, of which $6,000,000 consisted of long-term unsecured notes held by insurance companies, and $6,450,000 consisted of a collateral note from the First National Bank of Boston (Boston Bank) which was secured by 430,000 shares of Susquehanna stock owned by Gypsum.

The specific violations of Section 14 urged by plaintiff need not be considered here, since they are not relevant to the issue at bar, a motion to dismiss by defendant Boston Bank.

Plaintiff alleges, in the Third Amendment and Supplement to the Complaint, that the above mentioned collateral note had a maturity date of July 15, 1966, but that there was an oral understanding between Gypsum and the Bank that if Gypsum were merged into Susquehanna, the maturity date would be extended to December 31, 1966. It is plaintiff's position that since the pledged Susquehanna shares are "grossly insufficient" to pay the note, assets of Susquehanna other than those attributable to Gypsum will be used to pay all or a substantial part of said note, unless this Court enters a restraining order. Accordingly, the bank is added as a defendant for the purpose of requiring it to account and repay to Susquehanna any of the latter's assets received in payment of, or as collateral for, any of Gypsum's obligations.

The Bank moves to dismiss on the grounds that: (1) it is not subject to the jurisdiction of this Court under Sec. 27 of the Exchange Act, 15 U.S.C. Sec. 78aa; (2) although served with process in Massachusetts, it is not subject to process from this Court, and; (3) as a National Banking Association, it may be sued only in Massachusetts, where its home office is located, under the special venue provision of 12 U.S.C. Sec. 94.

We believe that we are without jurisdiction as to the Boston Bank and consequently they must be dismissed as party defendant...