Chris-Craft Industries, Inc. v. Piper Aircraft Corp., No. 805-808
| Court | United States Courts of Appeals. United States Court of Appeals (2nd Circuit) |
| Writing for the Court | HAYS, OAKES and TIMBERS, Circuit |
| Citation | 480 F.2d 341 |
| Parties | CHRIS-CRAFT INDUSTRIES, INC., Plaintiff-Appellant, v. PIPER AIRCRAFT CORPORATION, Howard Piper, Thomas F. Piper, William T. Piper, Jr., Bangor Punta Corporation, Nicolas M. Salgo, David M. Wallace, The First Boston Corporation, Paul L. Miller and Nicholas H. Bayard, Defendants-Appellees. BANGOR PUNTA CORPORATION, Plaintiff-Appellant, v. CHRIS-CRAFT INDUSTRIES, INC., Defendant-Appellee. SECURITIES AND EXCHANGE COMMISSION, Plaintiff-Appellant-Appellee, v. BANGOR PUNTA CORPORATION, Defendant-Appellee-Appellant. |
| Docket Number | 72-1120,72-1140.,Dockets 72-1053,72-1064,No. 805-808 |
| Decision Date | 16 March 1973 |
480 F.2d 341 (1973)
CHRIS-CRAFT INDUSTRIES, INC., Plaintiff-Appellant,
v.
PIPER AIRCRAFT CORPORATION, Howard Piper, Thomas F. Piper, William T. Piper, Jr., Bangor Punta Corporation, Nicolas M. Salgo, David M. Wallace, The First Boston Corporation, Paul L. Miller and Nicholas H. Bayard, Defendants-Appellees.
BANGOR PUNTA CORPORATION, Plaintiff-Appellant,
v.
CHRIS-CRAFT INDUSTRIES, INC., Defendant-Appellee.
SECURITIES AND EXCHANGE COMMISSION, Plaintiff-Appellant-Appellee,
v.
BANGOR PUNTA CORPORATION, Defendant-Appellee-Appellant.
Nos. 805-808, Dockets 72-1053, 72-1064, 72-1120, 72-1140.
United States Court of Appeals, Second Circuit.
Argued August 14, 1972.
Decided March 16, 1973.
Zachary Shimer, New York City (Paul G. Pennoyer, Jr., Irene C. Warshauer, and Chadbourne, Parke, Whiteside & Wolff, New York City, on the brief), for Piper Aircraft Corp., Howard Piper, Thomas F. Piper, and William T. Piper, Jr. (defendants-appellees in No. 72-1064).
James V. Ryan, New York City (William L. D. Barrett, C. Kenneth Shank, Jr., and Webster, Sheffield, Fleischmann, Hitchcock & Brookfield, New York City, on the brief), for Bangor Punta Corp. (defendant-appellee in No. 72-1064; plaintiff-appellant in No. 72-1120; defendant-appellee-appellant in Nos. 72-1053 and 72-1140) and for Nicolas M. Salgo and David W. Wallace (defendant-appellees in No. 72-1064).
John F. Arning, New York City (Roger L. Waldman, Charles W. Sullivan, and Sullivan & Cromwell, New York City, on the brief), for The First Boston Corp., Paul L. Miller, and Nicholas H. Bayard (defendants-appellees in No. 72-1064).
Robert E. Kushner, Asst. Gen. Counsel, SEC, Washington, D. C. (G. Bradford Cook, Gen. Counsel, David Ferber, Solicitor, and James J. Sexton, Atty., SEC, Washington, D. C., on the brief), for SEC (amicus curiae in No. 72-1064; plaintiff-appellant-appellee in Nos. 72-1053 and 72-1140).
INDEX
Page
PRELIMINARY STATEMENT ______________________________________ 349
I. EVENTS LEADING TO INSTANT LITIGATION ___________________ 349
II. CHRIS-CRAFT INDUSTRIES, INC. v. PIPER AIRCRAFT
CORPORATION, ET AL. (No. 72-1064) ______________________ 355
(A) FUNCTION OF PRIVATE ACTION FOR DAMAGES
IN ENFORCEMENT OF FEDERAL SECURITIES
LAWS _______________________________________________ 356
(B) VIOLATIONS OF ANTIFRAUD PROVISIONS OF
SECTION 14(e) OF 1934 ACT __________________________ 357
(1) Standing of CCI to Sue for Damages _____________ 358
(2) Defendants' Violations of Section 14(e) ________ 362
(a) Controlling Principles In Determining
Section 14(e) Violations ___________________ 362
(b) Piper Family _______________________________ 364
(c) BPC And Its Officers _______________________ 366
(d) First Boston And Its Officers ______________ 369
(3) Causation ______________________________________ 373
(C) VIOLATIONS OF RULE 10b-6 UNDER 1934 ACT ____________ 377
(D) RELIEF TO BE GRANTED FOR VIOLATIONS OF
SECTION 14(e) AND RULE 10b-6 _______________________ 379
(1) Damages ________________________________________ 379
(2) Equitable Relief _______________________________ 380
III. BANGOR PUNTA CORPORATION v. CHRIS-CRAFT INDUSTRIES
INC. (No. 72-1120) ____________________________________ 380
(A) CLAIM OF MANIPULATION OF PRICES OF CCI
STOCK ___________________________________________ 381
(B) CLAIM OF ILLEGAL WAREHOUSING _______________________ 383
IV. SEC v. BANGOR PUNTA CORPORATION (Nos. 72-1053
and 72-1140) ___________________________________________ 383
(A) INJUNCTIVE RELIEF __________________________________ 384
(1) Erroneous Standard _____________________________ 385
(2) Requirement of Intent __________________________ 385
(3) Injunction to Protect Public Interest __________ 386
(4) BPC's Past Violations __________________________ 387
(5) BPC as a Conglomerate __________________________ 388
(6) Abuse of Discretion ____________________________ 389
(7) Mischievous Precedent __________________________ 390
(B) RESCISSION ORDER ___________________________________ 390
SUMMARY ____________________________________________________ 392
Before MANSFIELD and TIMBERS, Circuit Judges, and GURFEIN, District Judge.*
TIMBERS, Circuit Judge:
PRELIMINARY STATEMENT
These consolidated appeals present important questions, some of first impression, involving the antifraud provisions of the federal securities laws in their application to a contest for acquisition of a controlling stock interest in a target corporation. Among the questions presented are those involving the scope of liability and relief under Section 14(e) of the Securities Exchange Act of 1934 and the type of relief necessary, in an SEC enforcement proceeding, to effectuate the broad remedial purposes of the federal securities laws.
The appeals are from judgments entered after non-jury trials of three separate but related civil actions in the Southern District of New York before Milton Pollack, District Judge.
In Chris-Craft Industries, Inc. v. Piper Aircraft Corporation, et al. (No. 72-1064), Chris-Craft appeals from the district court's dismissal after trial of its complaint against all defendants, 337 F. Supp. 1128 (S.D.N.Y.1971), essentially on the grounds that many of the alleged securities laws violations had not been proven, that those proven had not caused injury to Chris-Craft and that Chris-Craft had failed to prove its claim for damages. We reverse and remand.
In Bangor Punta Corporation v. Chris-Craft Industries, Inc. (No. 72-1120), Bangor Punta appeals from the district court's dismissal after trial of its complaint, 337 F.Supp. 1147 (S.D.N.Y.1971), on the ground of insufficient evidence to support Bangor Punta's claims that Chris-Craft had violated the securities laws or that such violations had caused injury to Bangor Punta. We affirm.
In SEC v. Bangor Punta Corporation (Nos. 72-1053 and 72-1140), the SEC appeals from those provisions of the district court's judgment after trial, 331 F.Supp. 1154 (S.D.N.Y.1971), which denied a permanent injunction against further violations of the securities laws and which imposed a condition upon Bangor Punta's rescission offer to former Piper shareholders. On the SEC's appeal, to the extent the judgment is appealed from, we affirm in part, and reverse and remand in part. On Bangor Punta's cross-appeal, we affirm.
I.
EVENTS LEADING TO INSTANT LITIGATION
Before turning to the issues raised on appeal in each of the three actions, we shall set forth a narrative of the events, beginning in the latter part of 1968 and during 1969 in connection with the contest for control of Piper Aircraft Corporation, which culminated in the instant litigation. Facts having specific bearing upon the issues in each of the three appeals will be discussed in more detail in connection with our rulings below on those issues in each case.1 Our task on these appeals has been greatly facilitated by Judge Pollack's detailed, comprehensive findings of fact, and particularly by his evaluation of the facts as found. While we disagree with certain
Chris-Craft Industries, Inc. (CCI) is a Delaware corporation. It is a diversified manufacturer of recreational products. Its securities, common and preferred stock and convertible debentures, are traded on the New York Stock Exchange (NYSE).
Piper Aircraft Corporation (Piper) is a Pennsylvania corporation. It is one of the nation's leading manufacturers of light aircraft. Its 1,644,890 shares of issued and outstanding stock were traded (during periods relevant to these appeals) on the NYSE from October 1, 1968 to August 11, 1969 and then on the Philadelphia-Baltimore-Washington Stock Exchange (PBWSE). The three individual Piper defendants (referred to herein as the "Piper family") were officers and directors of Piper and owned about 325,000 of the 1,644,890 outstanding Piper shares.
Bangor Punta Corporation (BPC) is a Delaware corporation. It is a conglomerate with holdings in diversified fields. Its securities are traded on the NYSE. Defendants Nicolas M. Salgo and David W. Wallace are principal officers and directors of BPC.
The First Boston Corporation (First Boston) is a Massachusetts corporation. It is an investment banking firm and also a registered broker-dealer. In connection with the events involved herein, it served as investment adviser to Piper and as underwriter for BPC. Defendant Paul L. Miller is president of First Boston and defendant Nicholas H. Bayard is a vice president in its underwriting department.
In the latter part of 1968, CCI undertook a large financing program designed to produce excess cash that could be used primarily for acquisitions. On October 30, 1968, CCI filed a registration statement and preliminary prospectus for an offering of 6% convertible debentures up to $26 million in principal amount. The offer was made to shareholders and executives of CCI. It was largely successful, producing over $25 million in excess cash. At about the same time, Herbert Siegel, CCI's president and chief executive officer, discussed with the Philadelphia National Bank the obtaining of a revolving line of credit of up to $15 million. Such credit was granted and was drawn upon in February 1969 when needed.
CCI made its first purchase of Piper stock on December 30, 1968.2 The purchase totalling 5200 shares was made through a confidential...
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S.E.C. v. Tambone, No. 07-1384.
...may arise "where the law imposes special obligations, as for accountants and brokers"); Chris-Craft Indus., Inc. v. Piper Aircraft Corp., 480 F.2d 341, 370 (2d Cir.1973) (finding an underwriter liable as an aider and abettor under section 14(e), which prohibits false or misleading statement......
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Steinberg v. Carey, No. 75 Civil 1695.
...themselves of the facts where they could have done so without any extraordinary effort. Chris Craft Indus., Inc. v. Piper Aircraft Corp., 480 F.2d 341, 363-64, 396-99 (2d Cir. 1973). The answer to the inquiry will of course depend upon the circumstances of the particular case, including the......
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In re Initial Public Offering Securities Lit., No. 21 MC 92(SAS).
...each case is what duty of disclosure the law should impose upon the person being sued." Chris-Craft Indus. Inc. v. Piper Aircraft Corp., 480 F.2d 341, 363 (2d Cir.1973). A duty to speak honestly may arise in a number of ways.150 "Under the securities laws, the duty to disclose is statutory,......
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S.E.C. v. Softpoint, Inc., No. 95 Civ. 2951(SS).
...fact in a securities registration statement violated Section 17(a)), modified sub nom. Chris-Craft Indus., Inc. v. Piper Aircraft Corp., 480 F.2d 341 (2d Cir.), cert. denied, 414 U.S. 910, 94 S.Ct. 231, 232, 38 L.Ed.2d 148 Section 10(b) of the Exchange Act ("Section 10(b)") prohibits the di......
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S.E.C. v. Tambone, No. 07-1384.
...may arise "where the law imposes special obligations, as for accountants and brokers"); Chris-Craft Indus., Inc. v. Piper Aircraft Corp., 480 F.2d 341, 370 (2d Cir.1973) (finding an underwriter liable as an aider and abettor under section 14(e), which prohibits false or misleading statement......
-
Steinberg v. Carey, No. 75 Civil 1695.
...themselves of the facts where they could have done so without any extraordinary effort. Chris Craft Indus., Inc. v. Piper Aircraft Corp., 480 F.2d 341, 363-64, 396-99 (2d Cir. 1973). The answer to the inquiry will of course depend upon the circumstances of the particular case, including the......
-
In re Initial Public Offering Securities Lit., No. 21 MC 92(SAS).
...each case is what duty of disclosure the law should impose upon the person being sued." Chris-Craft Indus. Inc. v. Piper Aircraft Corp., 480 F.2d 341, 363 (2d Cir.1973). A duty to speak honestly may arise in a number of ways.150 "Under the securities laws, the duty to disclose is statutory,......
-
S.E.C. v. Softpoint, Inc., No. 95 Civ. 2951(SS).
...fact in a securities registration statement violated Section 17(a)), modified sub nom. Chris-Craft Indus., Inc. v. Piper Aircraft Corp., 480 F.2d 341 (2d Cir.), cert. denied, 414 U.S. 910, 94 S.Ct. 231, 232, 38 L.Ed.2d 148 Section 10(b) of the Exchange Act ("Section 10(b)") prohibits the di......