Bubar v. Ampco Foods, Inc.

• Decision Date: 25 January 1985
• Docket Number: No. 82-3539,82-3539
• Citation: 752 F.2d 445
• Parties: 1985-1 Trade Cases 66,387 Ronald O. BUBAR, Donald J. Nowatzki, William M. Barth, Charles W. Houpt, John J. Netterberg, and James F. Palo, Plaintiffs-Appellants, v. AMPCO FOODS, INC., a California corporation; Alexander & Baldwin, Inc., a Hawaii corporation; and Rogers Foods, Inc., a Delaware corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 445

752 F.2d 445

1985-1 Trade Cases 66,387

Ronald O. BUBAR, Donald J. Nowatzki, William M. Barth Charles W. Houpt, John J. Netterberg, and James F Palo, Plaintiffs-Appellants, v. AMPCO FOODS, INC., a California corporation; Alexander &amp Baldwin, Inc., a Hawaii corporation; and Rogers Foods, Inc., a Delaware corporation Defendants-Appellees.

No. 82-3539.

United States Court of Appeals, Ninth Circuit.

Argued April 8, 1983.

Submitted Nov. 7, 1983.

Decided Jan. 25, 1985.

Thomas J. Greenan, Ferguson & Burdell, Seattle, Wash., for plaintiffs-appellants.

Ronald E. McKinstry, Bogle & Gates, Seattle, Wash., Noble K. Gregory, Pillsbury, Madison & Sutro, San Francisco, Cal., for defendants-appellees.

Appeal from the United States District Court for the District of Idaho.

Before HUG, POOLE, and NORRIS, Circuit Judges.

HUG, Circuit Judge:

This suit was brought for a breach of contract and also for treble damages for violations of sections 1 and 2 of the Sherman Act, 15 U.S.C. Secs. 1 and 2 (1982). The district court, 539 F.Supp. 535 (1982), granted summary judgment on the contract claim on the ground that there had been no contract formed, and on the antitrust claims on the ground that the plaintiffs lacked standing. The plaintiffs appeal only the portion of the summary judgment denying the antitrust claims. Thus, the sole issue before us is whether the plaintiffs have standing to sue for treble damages under section 4 of the Clayton Act, 15 U.S.C. Sec. 15 (1982).

FACTS

We conduct a de novo review of a summary judgment to determine if there is a genuine issue of material fact and, if not, whether the prevailing party is entitled to judgment as a matter of law. Chelson v. Oregonian Pub. Co., 715 F.2d 1368, 1370 (9th Cir.1983). In reviewing the evidence, we view it in the light most favorable to the losing party. Id. There had been considerable discovery prior to the motion for summary judgment, with depositions taken of all of the principal persons participating in the transactions. The testimony we refer to in relating the facts is taken from the depositions. Viewing the evidence in the light most favorable to the appellants, the record reveals the following: Plaintiffs Bubar, Nowatzki, Barth, Houpt, Netterberg, and Palo are former management employees of Rogers Foods, Inc., a corporation that processed potato, onion, and garlic products. Rogers Foods ("Rogers") was a wholly-owned subsidiary of Alexander & Baldwin, Inc. ("A & B"). Ampco Foods, Inc. ("Ampco") was a prime competitor of Rogers in the processed potato market in the Pacific Northwest.

In the summer of 1978, A & B decided to divest itself of certain holdings, including its subsidiary, Rogers. The plaintiffs, who were the top management of Rogers, ("the management group"), became interested in purchasing Rogers themselves, if financing could be obtained and if adequate terms of purchase could be obtained from A & B. In the early fall, they informed the A & B management of their desire to purchase and were informed that A & B would look favorably on the possibility of selling to the plaintiffs. The management group then began investigating possible sources of debt and equity capital.

In November of 1978, Ampco also became interested in purchasing Rogers, and met with A & B representatives to discuss a possible purchase. The course of negotiations between A & B and the two prospective purchasers may be summarized as follows: In mid-November, the management group made a proposal to acquire all the stock of Rogers for $10 million. A & B responded that the figure was too low, but that Rogers could be acquired for $15 million. On or about December 4, 1978, the management group proposed $12.5 million as the acquisition price for the stock. A & B responded that this was still too low.

On December 15, 1978, Ampco made a proposal to purchase the assets of only Roger's potato division for $10 million. This would leave A & B with the onion and garlic divisions. On December 28 or 29, after receiving this offer from Ampco, A & B telephoned the management group and proposed a sales price for Rogers of $13.5 million. At this time, all of the proposals were preliminary negotiations, with no firm offers having been made. A & B also had received expressions of interest from other prospective purchasers.

The management group was informed that representatives of A & B would be meeting with other prospective purchasers during the week of January 8, 1979. The management group agreed to meet with A & B on January 9, 1979.

During this period of negotiations, the management group had held discussions with several venture capital organizations, seeking their participation as equity investors, and also had held discussions with several banks concerning a line of credit for operating expenses. No firm commitments had been made.

On January 8, 1979, the prime movers of the management group, Bubar, the President, and Nowatzki, the Vice President for Finance, met with representatives of three venture capital organizations, First Capital Corporation of Chicago, Security Pacific Capital Corporation, and Seidler, Arnett and Spillane, with whom they previously had discussed this project. The purpose of the meeting was to develop the proposals to be discussed with A & B and to determine how the $13.5 million purchase price could be funded.

In previous discussions, A & B had indicated that it would accept certain of Rogers's assets as part payment. There was a receivable for flood damage worth $3.5 million and a sale and lease-back transaction with Lamb Weston, that would result in $6.2 million in cash. Thus, $9.7 million of the $13.5 million price could be paid by transferring these assets of Rogers to A & B. This left a balance of $3.8 million that the purchasers would have to provide. In his deposition, Bubar testified that it was contemplated that the money would be provided as follows: The members of the management group would invest $50,000 each, for a total of $300,000. First Capital and Security Pacific were to invest $2.7 million. The balance of $800,000, it was thought, could be obtained from a bank loan. In preliminary discussions with the equity investors, it was agreed that an $8 million line of credit with a bank would be required. Discussions had been held with several banks who had expressed interest, but no commitments had been made. At the January 8, 1979 meeting, it was proposed that perhaps $800,000 of this line of credit could be used to fund the balance of the purchase. Seidler, Arnett and Spillane's participation was to involve service rather than financial investment.

The lead equity investor was to be First Capital, which was represented by Edward Smith. At his deposition, Smith testified that it was contemplated that First Capital would invest $1.7 million and Security Pacific, $1.3 million. This would result in $3 million from the venture capital groups, an increase of $300,000 over the $2.7 million that Bubar had mentioned. However, Smith also testified that there was doubt about Security Pacific's participation because of the difficulty he had in working with Stevens, the representative of Security Pacific.

Smith also testified at his deposition that the manner in which the acquisition would be made would be to form a new corporation that would acquire either the assets or the stock of Rogers. The percentage of stock ownership each investor was to have and the voting control of the new corporation had not been determined, and the depositions revealed widely different expectations. The management group was to invest about one-tenth of the equity capital. It was not determined what percentage of the stock they would receive. Discussions with Smith, however, had indicated that they would initially receive at least ten percent, but might receive an additional ten to fifteen percent, either initially or to be earned by the management group over a period of time as additional compensation. Smith stated that because both First Capital and Security Pacific were Small Business Investment Companies and governed by certain banking regulations, it would be necessary to put the voting control in the hands of Seidler, Arnett and Spillane, either through the mechanism of a voting trust or through the issuance of voting and non-voting stock. Seidler, Arnett and Spillane were requesting two percent of the stock and $100,000 to perform this service.

The management group was resistant to this idea, and to Seidler, Arnett and Spillane's participation, and had not as yet agreed to it.

On January 9, 1979, Bubar and Nowatzki from the management group and Smith from First Capital met with Evans of A & B to discuss the possible purchase. No representative from Security Pacific or Seidler, Arnett and Spillane was present. Bubar said his group would pay $13.5 million for Rogers, but asked for an additional 120 days to complete financial arrangements because the major portion of the equity capital was being provided by venture capital organizations. These organizations were required by their internal guidelines to send representatives to examine Rogers's books and substantiate the figures and present the investment proposal to their investment committees. When Evans replied that the time was too long, Smith stated that they would be able to make a decision in six weeks. Evans declined to give the group an exclusive status as the only party with whom A & B would negotiate during this period. At the end of the meeting, Evans informed the group that he would speak by phone with the president of A & B and get back to them later. No written agreements or letters of intent were signed and no oral commitments to buy or to sell were made.

Later that day, Evans met with representatives of Ampco. On that afternoon and during the course of the next two days, A & B agreed to sell the assets of the potato division to Ampco for $11,350,000. Evans so informed the management...