Sea Containers Ltd. v. Stena AB, s. 89-7115

Citation890 F.2d 1205
Decision Date01 December 1989
Docket Number89-7147,Nos. 89-7115,89-7146,s. 89-7115
Parties, 58 USLW 2347, Fed. Sec. L. Rep. P 94,804 SEA CONTAINERS LTD., et al., Appellee, v. STENA AB, et al., Appellant.
CourtUnited States Courts of Appeals. United States Court of Appeals (District of Columbia)

Appeal from the United States District Court for the District of Columbia (No. 89-00752).

Robert E. Zimet, New York City, with whom John M. Nannes and Richard L. Brusca, Washington, D.C., were on the brief for appellants Stena Finance AB, et al. in 89-7115 and 89-7146.

Douglas D. Broadwater, New York City, with whom John H. Pickering, Max O. Truitt, Jr., and James Robertson, Washington, D.C., were on the brief for appellant Tiphook plc in 89-7147.

Paul L. Friedman, Washington, D.C., with whom John J. McAvoy, Washington, D.C., was on brief for appellees Sea Containers Ltd., et al.

Before: SILBERMAN, WILLIAMS and D.H. GINSBURG, Circuit Judges.

Opinion for the Court filed by Circuit Judge D.H. GINSBURG.

D.H. GINSBURG, Circuit Judge:

These appeals arise out of the cross-fire between the parties to a hostile tender offer. The tender offer was launched by Stena Finance B.V., a Netherlands corporation, and Tiphook plc, an English company, acting through their joint subsidiary, Temple Holdings Ltd., a Bermuda corporation. The target is Sea Containers Ltd., also a Bermuda corporation.

The battle was first heralded on March 13, 1989, when Stena Finance B.V., its parent AB Stena Finans, its grandparent Stena AB, and the grandparents' sole stockholders Dan Sten Olsson and Sten Allan Olsson (hereinafter collectively "Stena" or "the Stena parties"), filed with the Securities and Exchange Commission a Schedule 13D reporting that they had acquired more than 8% of the common stock of Sea Containers. Sea Containers promptly entered the lists by filing suit in district court against Stena, challenging the accuracy of its Schedule 13D. The Stena parties then counterclaimed against Sea Containers, its president James Sherwood, and three wholly owned subsidiaries--Sea Containers House Ltd., Marine Container Insurance Co. Ltd., and Strider 8 Ltd.--(hereinafter collectively "Sea Containers" or "the Sea Containers parties") for violations of fiduciary duty, of Bermuda company law, and of United States securities laws. Included in the last category was a claim that the Sea Containers parties failed to file, or filed false and misleading, Schedules 13D in connection with their purchases of Sea Containers stock pursuant to an announced share repurchase program.

Stena appeals the district court order denying its motion for a preliminary injunction requiring Sea Containers, its subsidiaries, and Sherwood to amend their Schedules 13D, and prohibiting them from trading in Sea Containers stock for 30 days thereafter. We affirm that order because we find that Stena failed to show the requisite degree of irreparable harm to warrant preliminary relief.

Stena, joined by Tiphook, also appeals the district court's grant of Sea Containers' motion for a preliminary injunction restraining Stena from pursuing its tender offer for the shares of Sea Containers. The district court issued that order after Stena sued Sea Containers in Bermuda and there obtained a preliminary injunction preventing the Sea Containers parties from dealing in Sea Containers stock. We stayed the district court's anti-tender offer injunction on June 23, 1989. We now reverse the district court and vacate the injunction because it lacks any basis in law.

I. BACKGROUND

When a person or a group of persons acting in concert acquires beneficial ownership of more than 5% of any class of equity securities, section 13(d) of the Securities Exchange Act of 1934 (the "Williams Act"), 15 U.S.C. Sec. 78m(d), requires that person or group within ten days to file with the Securities and Exchange Commission a statement, called a Schedule 13D, containing certain information specified by statute and regulation. See 17 C.F.R. Sec. 240.13d-101. The items of information at issue in this case are whether the filing party is part of a "group" of persons acting in concert, and the "purpose" for which the acquisition was made. See 15 U.S.C. Sec. 78m(d)(1)(C)-(D).

When the Stena parties filed a Schedule 13D disclosing the acquisition of 927,700 shares of common stock (8.17%) of Sea Containers, they stated that they acquired the stock as "an attractive investment opportunity" and that they were "consider[ing] a number of possibilities including ... a business combination or acquisition of all or part of [Sea Containers'] businesses." Sea Containers' complaint in district court alleged that Stena's Schedule 13D was false and misleading, however, because it failed to reveal that Stena's true purpose in acquiring the stock was to gain control of Sea Containers.

Stena's counterclaim alleged, inter alia, that Sherwood violated the Williams Act by failing to amend the Schedule 13D he had filed on May 21, 1987, reporting his ownership of 7.3% of the company's stock, to disclose that he had since directed and approved Sea Containers' adoption of various anti-takeover measures; and that he and the subsidiaries violated the Act by failing to report that they were acting as a group. Thereafter, Sherwood and two of the Sea Containers subsidiaries filed a joint Schedule 13D reporting aggregate holdings of 19.6% of Sea Containers common stock, but stating that their filing jointly "should not be deemed to be an admission that the Reporting Persons are members of a group for the purposes of Section 13(d)." Four days later the same Reporting Persons and the third Sea Containers subsidiary filed a new Schedule 13D reporting an aggregate position exceeding 30% of Sea Containers stock and again cautioning against the inference that they were acting as a "group."

Stena amended its counterclaim and moved for a preliminary injunction on the basis of its claim that the Sea Containers parties' Schedule 13D contained four inaccuracies: the "purpose" and "groupness" at issue here, one concerning the percentage of the stock owned and able to be voted by the Reporting Persons, and another concerning the source of funds for the subsidiaries' purchases. Stena asked the district court both to order the Sea Containers parties to correct their Schedule 13D and to impose a 30 day "cooling-off period" during which they would be barred from trading in Sea Containers stock. On May 8, 1989, the district court denied Stena's request for a preliminary injunction, ruling that Stena had failed to establish a likelihood of success on the merits and that Sea Containers had made sufficient disclosure to the public.

On May 26, Temple Holdings announced its tender offer and, together with Stena, sued the Sea Containers parties in the appropriate Bermuda trial court, challenging the legality, under Bermuda law, of the poison-pill shareholder rights plan that Sea Containers had adopted the previous year and arguing, again under Bermuda law, that Sea Containers and its subsidiaries could not lawfully deal in Sea Containers stock. The Bermuda court issued an ex parte order restraining Sea Containers from implementing the poison pill or acquiring or selling any Sea Containers shares. On June 9 the Bermuda court continued the injunction, having found at the first inter partes hearing, which was held on June 1, that Stena had presented an "arguable case" and that the shareholders might otherwise be done "irreparable damage."

Also on June 1, Sea Containers moved in district court for a temporary restraining order enjoining Stena from seeking an extension of the Bermuda injunction or, as an alternative, restraining Stena from pursuing the tender offer. Because the Bermuda hearing had been set for 9:00 a.m. Eastern Time, the district court held a morning telephone hearing; at the close of the hearing it advised counsel that it would issue a temporary restraining order barring Stena from dealing in the shares of Sea Containers, "effective immediately." On the following day the district court issued a written order to that effect, and a memorandum opinion issued on June 5. The temporary restraining order read as follows:

[T]he defendants and counterclaimant and ... all other persons acting in concert or participation with them or on their behalf, are temporarily enjoined from purchasing or dealing in ... any shares of Sea Containers Ltd. stock pursuant to the tender offer for Sea Containers Ltd. or otherwise, and from pursuing, facilitating, consummating ... the tender offer or any purchases of shares pursuant to the tender offer, or otherwise, and from exercising or procuring the exercise of any voting or other right attached to the shares of Sea Containers Ltd., except that nothing in this Order shall prevent any party from complying with its federal securities law obligations to make public disclosures.

The district court later embodied these terms in a preliminary injunction, and denied Stena's motion for a stay pending appeal. On June 23, we stayed the preliminary injunction, and on July 6, Chief Justice Rehnquist, in chambers, denied Sea Containers' application to vacate our stay. Letter from Joseph F. Spaniol, Jr., Clerk of the Supreme Court, to John Nannes (July 6, 1989).

II. ANALYSIS

Although the decision whether to grant a preliminary injunction under Rule 65(a), Fed.R.Civ.P., is left largely to the discretion of the trial court, its exercise of that discretion is subject to the Supreme Court's repeated admonition regarding the caution with which the district court should order any injunctive relief. As reiterated most recently in Weinberger v. Romero-Barcelo, 456 U.S. 305, 102 S.Ct. 1798, 72 L.Ed.2d 91 (1982): "An injunction should issue only where the intervention of a court of equity 'is essential in order effectually to protect property rights against injuries otherwise irremediable.' " Id. at 312, 102 S.Ct. at 1803 (quoting ...

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