CONSOLIDATED GOLD FIELDS v. Anglo American Corp., 88 Civ. 7191 (MBM).

• Decision Date: 16 May 1989
• Docket Number: No. 88 Civ. 7191 (MBM).,88 Civ. 7191 (MBM).
• Citation: 713 F. Supp. 1479
• Parties: CONSOLIDATED GOLD FIELDS, PLC, Newmont Mining Corporation, Newmont Gold Company, and Gold Fields Mining Corporation, Plaintiffs, v. ANGLO AMERICAN CORPORATION OF SOUTH AFRICA LIMITED, De Beers Consolidated Mines Limited, and Minorco, S.A., Defendants.
• Court: U.S. District Court — Southern District of New York

713 F. Supp. 1479

CONSOLIDATED GOLD FIELDS, PLC, Newmont Mining Corporation, Newmont Gold Company, and Gold Fields Mining Corporation, Plaintiffs, v. ANGLO AMERICAN CORPORATION OF SOUTH AFRICA LIMITED, De Beers Consolidated Mines Limited, and Minorco, S.A., Defendants.

No. 88 Civ. 7191 (MBM).

United States District Court, S.D. New York.

May 16, 1989.

Richard J. Holwell, White & Case, New York City, for plaintiffs Newmont Mining Corp. and Newmont Gold Co.

Jeremy G. Epstein, Shearman & Sterling, New York City, for defendant Minorco, S.A.

OPINION AND ORDER

MUKASEY, District Judge.

Defendant Minorco, S.A. ("Minorco") moves pursuant to Fed.R.Civ.P. 65 to dissolve the preliminary injunction issued against its proposed takeover of Consolidated Gold Fields PLC ("Gold Fields"). The background and course of this contested takeover are detailed in this court's initial decision enjoining the takeover because the resulting combination would control 32.3% of the non-communist world gold market, 698 F.Supp. 487, the Second Circuit's decision affirming the injunction, 871 F.2d 252 (2d Cir. March 22, 1989), and this court's April 17 and April 24 opinions rejecting Minorco's proposal to hold separate Gold Fields' minority interest in three gold-producing companies, including plaintiffs Newmont Mining Corp. and Newmont Gold Corp. (collectively "Newmont"), pending divestiture. Familiarity with that history is assumed, and it will not be recounted here.

After this court's last decision, the Panel on Takeovers and Mergers of the City of London (the "Panel") directed Gold Fields, a British corporation, and its wholly-owned subsidiary Gold Fields Mining Corp. ("GFMC"), to discontinue this lawsuit unless they obtained shareholder approval. On May 9, 1989, Gold Fields and GFMC voluntarily dismissed this action, leaving the Newmont companies as the only plaintiffs. Although the Panel considered whether to forbid Newmont as well from pursuing this litigation, it found that Gold Fields "does not in a legal sense control Newmont" and, thus, that the Panel could not stop Newmont—a United States company not subject to British regulations—from pursuing this litigation. (Epstein Aff., Exh. E at 20) On May 10, 1989, Newmont moved to hold Minorco in contempt, contending that Minorco was seeking to find a buyer for Newmont who would coerce Newmont into dropping this lawsuit. That application was denied as premature, based in part on Minorco counsel's representations that no such evasions were being considered.

Minorco now moves to dissolve the preliminary injunction, claiming that because Newmont told the Panel it was not controlled by Gold Fields, Newmont can no longer allege antitrust injury, and thus has no standing to continue this litigation. Specifically, Minorco claims that Newmont's assertion to the Panel that it is independent of Gold Fields directly contradicts its assertion here that, if Minorco takes over Gold Fields and holds 49.3% of Newmont's shares, Minorco could successfully limit production in Newmont's more efficient mines, and maximize profits by concentrating in the short run on less efficient South African gold production. Minorco claims that Newmont's representations to the Panel, made within the last two weeks, are changed conditions which warrant modification or dissolution of the preliminary injunction. Ass'n Against Discrimination in Employment v. City of Bridgeport, 710 F.2d 69, 74 (2d Cir.1983); King-Seeley Thermos Co. v. Aladdin Ind., Inc., 418 F.2d 31, 35 (2d Cir.1969).

The issue before the Panel was whether Gold Fields, a British corporation, exercised control over Newmont, a United States corporation, to such a degree that Newmont was essentially an alter ego of Gold Fields and therefore was subject to direction by the Panel. If Newmont were Gold Fields' alter ego, the Panel could apply British regulations to Newmont and require Newmont to withdraw from this litigation. That issue is distinctly different from the issue here: namely, whether Gold Fields has considerable influence over Newmont such that, if the takeover were completed and Minorco acquired Gold Fields' 49.3% ownership of Newmont, Minorco would be able to exert control over Newmont to suppress competition. The Panel's decision makes this distinction clear:

We accept that, in view of its shareholding, Consgold may have considerable influence in regard to the general direction of the affairs of Newmont particularly in so far as its corporate plans might require the raising of new capital. We do not, however, consider that Consgold has controlled, procured or been a dominant influence in the commencement of continuance of the legal proceedings by Newmont.

(Epstein Aff., Exh. E at 20) Therefore, Newmont's representations to the Panel that it was not legally controlled by Gold Fields do not undercut its earlier position taken here that Gold Fields or an entity controlling Gold Fields' shares could inflict significant antitrust injury on Newmont's operations such that Newmont has antitrust standing.

Minorco claims also that both this court and the Court of Appeals misread the standstill agreement between Gold Fields and Newmont. It claims that the standstill agreement would operate even if Gold Fields' shares passed into Minorco's hands and, thus, that the agreement would prevent Minorco from exercising any control over Newmont's future. Minorco's claim that the standstill agreement would bind it because the agreement follows the shares seems far-fetched. But even conceding that the standstill agreement would remain in force, Minorco, if the takeover is consummated, would still have considerable influence over Newmont such that Newmont would incur antitrust injury. Although Gold Fields has 49.3% of Newmont's shares which Minorco would acquire, it is allotted only 40% of the voting directors on the board. Twenty percent of the Board is made up of Newmont's management. The rest of the Board—40%—must be independent of Gold Fields or its successor Minorco. Thus, a purchase of 1% or 10% will not give Gold Fields, or Minorco, absolute control—or, as the Panel put it, control "in a legal sense" —over Newmont. Again, however, Minorco confuses absolute control with substantial influence. Even assuming that...