Biechele v. Cedar Point, Inc., No. 83-3389

CourtUnited States Courts of Appeals. United States Court of Appeals (6th Circuit)
Writing for the CourtLIVELY
Citation747 F.2d 209
PartiesFed. Sec. L. Rep. P 91,829 Mary A. BIECHELE, Executrix of the Estate of Dallas J. Biechele, Deceased; Linda A. Mitchell; Margaret Nickles; and Charles Nickles, Plaintiffs-Appellants, v. CEDAR POINT, INC.; S. Pearson and Son Limited; Whitehall Holdings Limited; Lazard Freres & Co.; Paul A. Dunn; Marvin Johnson; Emil A. Legrros, Jr.; Robert L. Munger, Jr.; James S. Reid, Jr.; George A. Roose; Richard S. Sheetz; Carl C. Tucker, Defendants-Appellees.
Docket NumberNo. 83-3389
Decision Date08 November 1984

Page 209

747 F.2d 209
Fed. Sec. L. Rep. P 91,829
Mary A. BIECHELE, Executrix of the Estate of Dallas J.
Biechele, Deceased; Linda A. Mitchell; Margaret
Nickles; and Charles Nickles,
Plaintiffs-Appellants,
v.
CEDAR POINT, INC.; S. Pearson and Son Limited; Whitehall
Holdings Limited; Lazard Freres & Co.; Paul A. Dunn;
Marvin Johnson; Emil A. Legrros, Jr.; Robert L. Munger,
Jr.; James S. Reid, Jr.; George A. Roose; Richard S.
Sheetz; Carl C. Tucker, Defendants-Appellees.
No. 83-3389.
United States Court of Appeals,
Sixth Circuit.
Argued July 17, 1984.
Decided Nov. 8, 1984.

Page 210

Dennis E. Murray, Kirk J. Delli Bovi (argued), Murray & Murray Co., Sandusky, Ohio, for plaintiffs-appellants.

John E. Beerbower (argued), Cravath, Swaine & Moore, New York City, Thomas P. Mulligan, Jones, Day, Reavis & Pogue, Cleveland, Ohio, Edwin E. McAmis/Jerome S. Hirsch (argued), New York City, for defendants-appellees.

Before LIVELY, Chief Judge; ENGEL, Circuit Judge; and CELEBREZZE, Senior Circuit Judge.

LIVELY, Chief Judge.

This is an appeal by plaintiffs, shareholders and former shareholders of Cedar Point, Inc., an Ohio corporation (Cedar Point) from judgment for the defendants in an action claiming violation of federal securities laws. The complaint also contains pendent claims based on Ohio law relating to the fiduciary duties of corporate directors. The defendants are Cedar Point, its directors, two English corporations, S. Pearson and Son Limited and Whitehall Holdings Limited (hereafter collectively Pearson) and Lazard Freres & Co., advisor to Cedar Point. Lazard Freres & Co. was dismissed prior to final judgment and the plaintiffs do not argue that this action of the district court was erroneous.

I.

A.

Cedar Point operates amusement parks in Sandusky, Ohio and Shakopee, Minnesota. At all times material to this litigation Cedar Point common stock was registered with the Securities and Exchange Commission (SEC) and traded on the over-the-counter market.

In 1977 MCA, Inc., an entertainment company, expressed interest in merging with Cedar Point. Cedar Point was not enthusiastic about a merger with MCA, and the two meetings that were held did not result in any agreement. In July 1978 MCA announced that it had acquired five per cent of Cedar Point's stock in open-market purchases. In November 1978 MCA acquired another substantial block of stock through a privately-negotiated purchase. After that purchase, MCA owned 9.58 per cent of the Cedar Point common shares.

On December 3, 1979 MCA announced that it would make a tender offer for an additional 11 per cent of the Cedar Point shares at $30.10 per share. The Cedar Point board of directors opposed this offer as inadequate, and retained Kidder, Peabody & Co. (Kidder Peabody) "to explore the financial alternatives available to Cedar Point shareholders." No shares had been tendered when the MCA offer expired on January 10, 1980, apparently because the shares had been trading above the MCA offering price.

As part of its investigation of the financial alternatives to MCA's offer, Kidder Peabody prepared a report dated December 17, 1979, which contained, among other information, cash flow projections through 1984. The report was intended to be given to the 40 or 50 companies Kidder Peabody had contacted as potential buyers of all the Cedar Point stock, but apparently only

Page 211

about a dozen of those potential buyers were actually furnished a copy. None of the contacts, including one with Pearson, proved successful.

Pearson nevertheless was interested in acquiring a stake in Cedar Point. Representatives from Cedar Point and Pearson met together in "get-acquainted" sessions in March and April 1980. Internal Pearson memoranda indicated that a purchase price of $36-$40 per share was seen as within an acceptable range. By June, Pearson was clearly attracted to the possibility of acquiring what it saw as "definitely under-priced" Cedar Point stock.

In July 1980 Pearson bought 4,000 shares of Cedar Point stock on the open market. Pearson also conducted negotiations with MCA, which had retained the Cedar Point shares it acquired in 1978. On August 21, 1980 Pearson purchased MCA's block of 313,615 shares at a price of $34.95 per share. As part of the purchase agreement Pearson agreed to pay MCA additional compensation if it should sell the shares it had purchased from MCA, or should tender for additional shares at an offering price higher than that it had paid for MCA's shares, within one year of the purchase from MCA (the Add-on agreement). The additional compensation was to be calculated according to a formula agreed to be MCA and Pearson.

Pearson filed a Schedule 13D with the SEC, which described the Add-on agreement, and to which was appended a copy of the purchase agreement. Pearson's purchase of the shares held by MCA was reported in news stories in which the Add-on agreement was mentioned, in the New York Times, Wall Street Journal, and Sandusky Register. After the MCA purchase Pearson owned about 9.7 per cent of the Cedar Point stock.

Pearson and Cedar Point continued to negotiate. On February 26, 1981 they executed an agreement whereby Pearson expressed its intention to make a tender offer for up to 15.3 per cent of the Cedar Point common shares. As part of the agreement Pearson agreed that for a period of five years it would not acquire in excess of 30 per cent of Cedar Point stock, absent circumstances involving a potential change in control of Cedar Point (the Standstill agreement).

On February 26, 1981 Pearson announced its tender offer for 15.3 per cent of the total Cedar Point shares. The Standstill agreement was attached to the Schedule 14D-1 which Pearson filed with the SEC. Cedar Point filed its Schedule 14D-9 with the SEC, and it also described the Standstill agreement. The plaintiffs assert that copies of the Standstill agreement were not provided to Cedar Point shareholders, but Pearson's offer to purchase and the Schedule 14D-9 were disseminated to them.

B.

Mary Biechele and three other named plaintiffs filed a class action complaint on March 27, 1981 on behalf of themselves and other Cedar Point shareholders. This was four days before the Pearson tender offer expired. The plaintiffs alleged violations of sections 10(b) 1 and 14(e) 2 of the

Page 212

Securities Exchange Act of 1934, and of Rule 10b-5 3 of the SEC, and also breach of fiduciary duty under state law.

A motion for a temporary order restraining Pearson from purchasing any additional tendered shares was granted on April 1, 1981. Plaintiffs' motion for a preliminary injunction against the consummation of Pearson's tender offer was denied on April 13, 1981, however, because the district court found that plaintiffs had failed to satisfy both the "irreparable harm" and "likelihood of success on the merits" requirements for issuance of such an order. See Mason County Medical Ass'n v. Knebel, 563 F.2d 256, 261 (6th Cir.1977).

In May 1981 the defendants moved for dismissal or, alternatively, summary judgment. The plaintiffs filed affidavits and, after this court's decision in Mobil Corp. v. Marathon Oil Co., 669 F.2d 366 (6th Cir.1981), a third supplemental memorandum in opposition to defendant's motions. In November 1982 the district court granted defendants' motions in part and denied them in part. The federal claims remaining were based on the plaintiffs' assertions that the Standstill and Add-on agreements were manipulative devices under Mobil, and that the defendants had failed to disclose these agreements in violation of sections 10(b) and 14(e) and Rule 10b-5.

C.

The defendants moved for reargument and reconsideration, contending that they had not had an opportunity to address the grounds upon which the court had relied, i.e., Mobil, and the motion was granted. The district court then reversed its earlier rulings and held that neither of the agreements at issue constituted a manipulative device, and granted summary judgment for the defendants; the state law claims were dismissed.

The district court found that no genuine issue of material fact existed as to the plaintiffs' claim that they relied on Pearson's nondisclosure of the Add-on agreement with MCA in making their decisions with respect to Pearson's tender offer. The record clearly showed, according to the district court, that the plaintiffs had knowledge of the facts concerning the agreement before they filed suit, which occurred prior to expiration of the tender offer and prior to the plaintiffs' making their decisions in response to Pearson's tender. This conclusion was supported by references to the provisions of the Add-on agreement in the complaint. Further, in depositions, the plaintiffs Charles Nickles and Linda Mitchell had testified that they did not rely on information disseminated with the tender offer in making their decisions, and counsel for the plaintiffs stated that the other named plaintiffs had not relied on such information. On the basis of this statement, depositions of the other plaintiffs previously noticed by the defendants were cancelled. Given these facts, the district court held that subsequent affidavits of the plaintiffs claiming reliance on the allegedly omitted details of the Add-on agreement, filed in opposition to motions for summary judgment, did not create a genuine issue of material fact.

The district court also held the defendants had no duty under sections 10(b), 14(e) or Rule 10b-5 to make disclosures beyond those shown in the record with respect to the Add-on and Standstill agreements. In dismissing the pendent state law claims the

Page 213

district court held that federal securities laws do not provide relief for mere breach of fiduciary duties of Cedar Point directors. Having concluded that the defendants were entitled to judgment on the claims of federal securities law violations, the district court exercised its discretion and dismissed the pendent claims.

II.

The...

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  • Dolly v. Old Republic Ins. Co., No. 5:00CV1685.
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    • U.S. District Court — Northern District of Ohio
    • May 8, 2002
    .... . . earlier deposition testimony." Reid v. Sears Roebuck & Co., 790 F.2d 453, 460 (6th Cir.1986) (citing Biechele v. Cedar Point, Inc., 747 F.2d 209, 215 (6th On a motion for summary judgment, the Court will consider "[o]nly disputes over facts that might affect the outcome of the suit un......
  • McGrath v. City of Albuquerque, No. CIV 14-0504 JB/SCY
    • United States
    • United States District Courts. 10th Circuit. District of New Mexico
    • July 31, 2015
    ...v. Nimmo, 796 F.2d at 1237 (citing Foster v. Arcata Assocs., Inc., 772 F.2d 1453, 1462 (9th Cir. 1985); Biechele v. Cedar Point, Inc., 747 F.2d 209, 215 (6th Cir. 1984); Van T. Junkins & Assocs., Inc. v. U.S. Indus., Inc., 736 F.2d 656, 657-58 (11th Cir. 1984); Camfield Tires, Inc. v. Miche......
  • United States v. Rivera, No. CIV 14-0579 JB/CG
    • United States
    • United States District Courts. 10th Circuit. District of New Mexico
    • June 30, 2015
    ...v. Nimmo, 796 F.2d at 1237 (citing Foster v. Arcata Assocs., Inc., 772 F.2d 1453, 1462 (9th Cir. 1985); Biechele v. Cedar Point, Inc., 747 F.2d 209, 215 (6th Cir. 1984); Van T. Junkins & Assocs., Inc. v. U.S. Indus., Inc., 736 F.2d 656, 657-58 (11th Cir. 1984); Camfield Tires, Inc. v. Miche......
  • Stevenson v. City of Albuquerque, No. CIV 17-855 JB\LF
    • United States
    • United States District Courts. 10th Circuit. District of New Mexico
    • April 18, 2020
    ...v. Nimmo, 796 F.2d at 1237 (citing Foster v. Arcata Assocs., Inc., 772 F.2d 1453, 1462 (9th Cir. 1985); Biechele v. Cedar Point, Inc., 747 F.2d 209, 215 (6th Cir. 1984); Van T. Junkins & Assocs., Inc. v. U.S. Indus., Inc., 736 F.2d 656, 657-58 (11th Cir. 1984); Camfield Tires, Inc. v. Miche......
  • Request a trial to view additional results
116 cases
  • Dolly v. Old Republic Ins. Co., No. 5:00CV1685.
    • United States
    • U.S. District Court — Northern District of Ohio
    • May 8, 2002
    .... . . earlier deposition testimony." Reid v. Sears Roebuck & Co., 790 F.2d 453, 460 (6th Cir.1986) (citing Biechele v. Cedar Point, Inc., 747 F.2d 209, 215 (6th On a motion for summary judgment, the Court will consider "[o]nly disputes over facts that might affect the outcome of the suit un......
  • McGrath v. City of Albuquerque, No. CIV 14-0504 JB/SCY
    • United States
    • United States District Courts. 10th Circuit. District of New Mexico
    • July 31, 2015
    ...v. Nimmo, 796 F.2d at 1237 (citing Foster v. Arcata Assocs., Inc., 772 F.2d 1453, 1462 (9th Cir. 1985); Biechele v. Cedar Point, Inc., 747 F.2d 209, 215 (6th Cir. 1984); Van T. Junkins & Assocs., Inc. v. U.S. Indus., Inc., 736 F.2d 656, 657-58 (11th Cir. 1984); Camfield Tires, Inc. v. Miche......
  • United States v. Rivera, No. CIV 14-0579 JB/CG
    • United States
    • United States District Courts. 10th Circuit. District of New Mexico
    • June 30, 2015
    ...v. Nimmo, 796 F.2d at 1237 (citing Foster v. Arcata Assocs., Inc., 772 F.2d 1453, 1462 (9th Cir. 1985); Biechele v. Cedar Point, Inc., 747 F.2d 209, 215 (6th Cir. 1984); Van T. Junkins & Assocs., Inc. v. U.S. Indus., Inc., 736 F.2d 656, 657-58 (11th Cir. 1984); Camfield Tires, Inc. v. Miche......
  • Stevenson v. City of Albuquerque, No. CIV 17-855 JB\LF
    • United States
    • United States District Courts. 10th Circuit. District of New Mexico
    • April 18, 2020
    ...v. Nimmo, 796 F.2d at 1237 (citing Foster v. Arcata Assocs., Inc., 772 F.2d 1453, 1462 (9th Cir. 1985); Biechele v. Cedar Point, Inc., 747 F.2d 209, 215 (6th Cir. 1984); Van T. Junkins & Assocs., Inc. v. U.S. Indus., Inc., 736 F.2d 656, 657-58 (11th Cir. 1984); Camfield Tires, Inc. v. Miche......
  • Request a trial to view additional results

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