City Investing Co. v. Simcox, IP 79-462-C.

• Decision Date: 27 July 1979
• Docket Number: No. IP 79-462-C.,IP 79-462-C.
• Citation: 476 F. Supp. 112
• Parties: CITY INVESTING COMPANY, GDV, Inc. v. Edwin J. SIMCOX, Secretary of State of Indiana, Stephen M. Coons, Securities Commissioner, Indiana Securities Division, Office of Secretary of State, Theodore L. Sendak, Attorney General of Indiana, Stokely-Van Camp, Inc., Intervenor.
• Court: U.S. District Court — Southern District of Indiana

476 F. Supp. 112

CITY INVESTING COMPANY, GDV, Inc. v.Edwin J. SIMCOX, Secretary of State of Indiana, Stephen M. Coons, SecuritiesCommissioner, Indiana Securities Division, Office of Secretary of State, Theodore L. Sendak, Attorney General of Indiana, Stokely-Van Camp, Inc., Intervenor.

No. IP 79-462-C.

United States District Court, S. D. Indiana, Indianapolis Division.

July 27, 1979.

Harry L. Gonso, Bingham, Summers, Welsh & Spilman, Indianapolis, Ind., for plaintiffs.

Jerry P. Belknap and James A. Strain, Barnes, Hickam, Pantzer & Boyd, Ronald J. Semler, Deputy Atty. Gen., Theodore L. Sendak, Atty. Gen. of Ind., Indianapolis, Ind., for defendants.

OPINION

HOLDER, District Judge.

This is an action, filed June 1, 1979, against defendants, Simcox, Secretary of State of the State of Indiana, Coons, Securities Commissioner of the State of Indiana, and Sendak, Attorney General of the State of Indiana, by City Investing Company, a Delaware corporation with its principal place of business in New York City and its subsidiary, GDV, Inc., also a Delaware corporation with its principal place of business in New York City.The complaint, which is in three counts, avers that in applying the Indiana Takeover Offers Act(Ind. Code § 23-2-3.1-1 et seq.) to the conduct of the plaintiffs in connection with GDV's purchases of the stock of Stokely-Van Camp, Inc.("Stokely"), an Indiana corporation with its principal place of business in Indianapolis, defendants have denied plaintiffs due process of law and that the Takeover Offers Act violates the Supremacy and Commerce Clauses on its face and as applied.The complaint demands a declaratory judgment, an order preliminarily and permanently enjoining defendants from taking any action to enforce the Takeover Offers Act against City and GDV in connection with their purchases of Stokely Stock, and money damages in an unspecified amount.On June 8, 1979, Stokely moved to intervene as a partydefendant, and the motion was granted on June 12, 1979.Stokely's answer was filed on June 25, 1979.On July 20, 1979, defendants, Simcox, Coons and Sendak, orally moved in open court to strike the claim for money damages in the complaint.The motion was granted.Defendants, Simcox, Coons and Sendak, closed the issues by responding to the complaint in open court on the record.On July 3, 1979, plaintiffs moved for an order "temporarily and preliminarily enjoining the Defendants * * * from issuing or enforcing any Cease and Desist Order, any other Order, or taking any other action whatsoever to enforce or apply the Indiana Takeover Offers Act, I.C. 23-2-3.1-1, et seq. and the Indiana Securities Regulation Act, I.C. 23-2-1-1, et seq. in connection with City's and GDV's purchase of the shares of Stokely-Van Camp, Inc."(Motion for Temporary Restraining Order and Preliminary Injunction, filed July 3, 1979).Plaintiffs contended that they were denied a fair hearing before an unbiased decision maker, due to alleged prejudgment of the case by defendant, Coons, and that the Takeover Offers Act violates the Supremacy and Commerce Clauses of the Unitied States Constitution both on its face and as applied to City and GDV in this case.(Plaintiffs' Memorandum of Law, filed July 3, 1979, at pp. 1-2).The claim of unconstitutionality as applied was withdrawn in open court by plaintiffs on July 20, 1979.The Court set July 20th for hearing on the motion.On that date, pursuant to Federal Rules of Civil Procedure 65, the Court ordered the motion consolidated with trial on the merits of the permanent injunction claim and received evidence from all parties.Arguments were heard, and supplemental memoranda received, on July 23rd.The Court, being fully advised in the premises, finds that the case is now ready for decision.

Defendants, Simcox, Coons and Sendak, are respectively Secretary of State, Securities Commissioner and Attorney General of the State of Indiana.Defendant, Stokely, is an Indiana corporation with its principal place of business and substantial assets in Indiana.Plaintiffs, City Investing and GDV, are Delaware corporations with their principal places of business in New York City.

On May 22, 1979, defendant, Coons, following an investigation pursuant to Ind. Code § 23-2-3.1-10(a), issued an order preliminarily directing plaintiffs to cease and desist from purchases of Stokely stock until they had complied with the Takeover Offers Act and the anti-fraud provisions of the Indiana Securities Regulation Act(Ind. Code § 23-2-1-12).The cease and desist order provided for a prompt hearing upon request of plaintiffs.On May 22, 1979, as authorized by Ind. Code § 23-2-3.1-10(a), the State of Indiana on relation of defendant, Coons, instituted an action for injunctive relief in the Superior Court for Marion County and obtained from Judge Applegate of that court an order temporarily restraining plaintiffs from making further purchases of Stokely shares.On June 1, 1979, plaintiffs filed motions to dissolve the temporary restraining order and cease and desist order and to dismiss the complaint.In support of their motions, plaintiffs argued that application of the Takeover Offers Act to their conduct violated the Supremacy and Commerce Clauses of the United States Constitution.On June 4, 1979, Judge Applegate held an evidentiary hearing on the State's motion for a preliminary injunction, and defendant, Coons, testified at the hearing.At the hearing argument was also received on plaintiffs' motion to set aside the cease and desist order and to dismiss the complaint.At the hearing, substantive testimony was heard from one witness and five documents were received in evidence, but a substantial part of the evidence offered by the State was excluded on technical objections by plaintiffs.At the conclusion of the hearing, the State's motion for a preliminary injunction was denied, and plaintiffs' motions, inter alia, to set aside the cease and desist order, were denied."Findings of Fact and Order" were entered by Judge Applegate on June 7, 1979.

On June 7, 1979, defendant, Coons, ordered that an administrative hearing be held on June 15, 1979, on the merits of the May 22nd cease and desist order.On June 11, 1979, plaintiffs filed a verified answer and counterclaim in the Superior Court action.Count II of the counterclaim demanded an injunction, asserting as irreparable injury that plaintiffs"are and will continue to be subject to penalties for failure to comply with the unconstitutional provisions of the Takeover Act."This claim is still pending.On June 13, 1979, asserting the same grounds of unfairness now raised before this Court, plaintiffs made emergency application to Judge Applegate for an order setting aside the May 22nd cease and desist order and prohibiting the hearing set for June 15th.After a hearing on June 14, 1979, Judge Applegate set aside the cease and desist on the sole ground that a hearing was required, but expressly refused to prohibit the June 15th hearing or any other action by defendant, Coons.

On June 15, 1979, defendant, Coons, held a day-long administrative hearing.At the hearing plaintiffs were represented by three attorneys from the Indianapolis firm of Bingham Summers Welsh and Spilman and the New York firm of Skadden, Arps, Slate, Meagher & Flom who participated fully at the hearing in examination, cross examination and argument.Defendant, Stokely, similarly participated through its counsel.The testimony of five witnesses was taken at the hearing, and transcripts of the deposition testimony of five additional witnesses were received, together with the exhibits thereto.Twenty-five further exhibits, including the affidavits of two additional persons, were also admitted in evidence.On June 19,...