Copperweld Corporation v. Imetal

• Decision Date: 23 October 1975
• Docket Number: Civ. A. No. 75-1119.
• Citation: 403 F. Supp. 579
• Parties: COPPERWELD CORPORATION, a Pennsylvania Corporation, Plaintiff, and United Steelworkers of America, AFL-CIO, Plaintiff-Intervenor, v. IMETAL, a French Corporation, Defendant.
• Court: U.S. District Court — Eastern District of Pennsylvania

403 F. Supp. 579

COPPERWELD CORPORATION, a Pennsylvania Corporation, Plaintiff and United Steelworkers of America, AFL-CIO, Plaintiff-Intervenor, v. IMETAL, a French Corporation, Defendant.

Civ. A. No. 75-1119.

United States District Court, W. D. Pennsylvania.

October 23, 1975.

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Frank L. Seamans, John H. Morgan, Eckert, Seamans, Cherin & Mellott, Carl B. Frankel, Pittsburgh, Pa., for plaintiff-intervenor.

J. Tomlinson Fort, Reed, Smith, Shaw & McClay, Pittsburgh, Pa., Robert W. Sweet, Skadden, Arps, Slate, Meagher & Flom, New York City, for defendant.

OPINION

JOHN L. MILLER, District Judge.

INTRODUCTION

For whatever reasons, great interest rarely descends upon the fields of combat ?€” the nation's courtrooms ?€” when domestic corporations seek to resolve their differences. Aided by an interested public and the presence of a foreign combatant the present day's continuing saga of corporate warfare has brought before this Court what might appropriately be termed an epic battle.

On September 4, 1975, Societe Imetal (Imetal) advertised in the New York Times and the Wall Street Journal its Offer to Purchase all outstanding shares of the common stock of Copperweld Corporation (Copperweld) at $42.50 net per share and all outstanding five per cent convertible debentures due December 1, 1979, at $1,517.86 net per $1,000 principal amount of debentures. There are almost 2? million shares of Copperweld common stock outstanding and $4? million principal amount of debentures outstanding. If Imetal were completely successful in making this tender offer the price for the securities would run well over $110 million.

On September 5 this novel suit, officiously labelled a "Tender Offer" case in some business circles, was commenced to block consummation of the transaction. In essence Copperweld seeks to enjoin the attempted acquisition on the ground that Imetal has violated the securities laws through the communication of its tender offer and that the acquisition, if realized, would violate the antitrust laws.

BACKGROUND

Parties

Plaintiff Copperweld is a publicly held corporation organized under the laws of the Commonwealth of Pennsylvania with its principal place of business in Pittsburgh, Pennsylvania. Its common stock and debentures are listed and traded on the New York and PBW Stock Exchanges. Copperweld manufactures specialty metal products which can be classified into three major groups: (1) alloy steel, (2) tubing, and (3) bimetallic products.

Plaintiff-Intervenor United Steelworkers of America, AFL-CIO (Union) is a national labor organization which is headquartered in Pittsburgh, Pennsylvania. It is the collective bargaining representative of all the production and maintenance workers employed by Copperweld at its Glassport (Pennsylvania), Warren, and Shelby (Ohio) plants.

Defendant Imetal is a corporation organized under the laws of France as a holding company with its headquarters in Paris. Formerly named Le Nickel it was for many years an operating company which engaged primarily in the business of mining nickel ore. Le Nickel at that time had two major subsidiaries, Pennarroya and Mokta, both of which mined and processed other minerals and metals. Mainly because Le Nickel wanted to lessen its dependency on nickel and needed capital for diversification and other business-related purposes, it decided to reorganize into a holding company which it did in 1974 after a transfer of its entire Nickel Division to a new company, Societe Metallurgique Le Nickel-SLN (SLN) and the sale of half of its holdings in SLN to Societe Nationale des Petroles d'Aquitane (Aquitane), a French petroleum company. Most of the proceeds from this sale to Aquitane were allocated for diversification and investment in the United States. A vastly held public company, Imetal's shares are traded on the Paris Bourse, France's principal stock exchange. Today it engages principally in mining and mineral processing. It has subsidiaries and affiliates throughout the world, some of which enable Imetal to conduct its business as "a major integrated industrial concern.¹" Imetal has no processing facilities in the United States.

Selecting Copperweld

In conducting a search for the kind of American firm Imetal wanted it retained New Court Securities Corporation (New Court) to help with the investigation. Copperweld was one of 39 companies under consideration in November of 1974. Imetal's Managing Director, Bernard de Villemejane, bore the primary responsibility for finding a suitable firm. During the course of the investigatory effort the American consultants were supplied with memoranda containing policies, objectives, corporate structure, financial and product information, etc. so that the company selected would in every possible way be compatible with Imetal's operations.²

In February of this year the search had narrowed to 11 with Copperweld's name still in the running. Mr. Harold Tanner, a representative of New Court, telephoned plaintiff's President, Phillip H. Smith, expressing a desire to meet with him concerning Imetal's possible interest. Mr. Smith, not seeing any business advantage for Copperweld, declined to meet with him.³

In the spring many more companies were considered and another investment firm, Kuhn Loeb & Co. (Kuhn), was retained to assist New Court. By early summer the defendant had whittled the list to three and, because defendant was giving each a very hard look at this stage, they were assigned the code names of Bread, Butter, and Garlic.⁴ In the latter part of June Villemejane was decidedly favoring Bread (Copperweld) and thereafter initiated an all out effort to uncover whatever knowledge he could about the company.

In August the plans were made by Imetal in New York with its legal and investment advisors on how to properly execute the tender offer. Contact by phone was again made on August 29 between Alvin E. Friedman, a Kuhn representative, and Howell A. Breedlove, a Copperweld Vice President, which resulted in a meeting between the parties on September 2, 1975. Copperweld's reaction to the proposal was again negative and the fighting began with vigor.

Prior Proceedings

Pursuant to Rule 65(b) of the Federal Rules of Civil Procedure this Court on September 5 granted Copperweld's request for a temporary restraining order which had been simultaneously filed with a verified complaint⁵ and a motion for a preliminary injunction. After rather extensive expedited discovery by both sides a hearing on plaintiff's motion for preliminary injunction commenced on September 15, at which time plaintiff United Steelworkers of America (Union) was permitted to intervene.⁶ After six days of testimony and reception of scores of exhibits we concluded the hearing on September 22. Briefs from all parties were submitted on September 29 with oral argument concluding the formalities on October 1.⁷

APPLICABLE LAW

Substantive

The antitrust issues raised by the complaint involve Section 7 of the Clayton Act, 15 U.S.C. ? 18, and Section 1 of the Sherman Act, 15 U.S.C. ? 1. The purported securities violations deal with Sections 9(a)(2), 10(b), 13(d), 14(d) and 14(e) of the Securities Exchange Act of 1934 (Exchange Act), as amended by the Williams Act of 1968,⁸ 15 U. S.C. ?? 78i(a)(2), 78j(b), 78m(d), 78n(d) and 78n(e).⁹ Jurisdiction for this suit obtains from 15 U.S.C. ?? 26, 78aa and 28 U.S.C. ? 1337.

Procedural

Before undertaking the real task engendered by this suit the Court wishes to clarify the preliminary injunction standards by which plaintiff's case will be measured.

Pursuant to Section 16 of the Clayton Act, 15 U.S.C. ? 26, this Court is empowered to enjoin "threatened loss or damage by a violation of the antitrust laws" in the same manner and under the same principles as any other action for which such relief is sought.¹⁰ The Court is well aware of the requirements plaintiff must meet to obtain a preliminary injunction in this jurisdiction. Only last year the test was again spelled out rather clearly by the Third Circuit:

As a prerequisite to the issuance of a preliminary injunction the moving party must generally show: (1) a reasonable probability of eventual success in the litigation, and (2) that it will be irreparably injured pendente lite if relief is not granted to prevent a change in the status quo. A. L. K. Corp. v. Columbia Pictures Industries, Inc., 440 F.2d 761, 763 (3 Cir. 1971).

Delaware River Port Authority v. Transamerican Trailer Transport, Inc., 501 F.2d 917, 919-920 (3 Cir. 1974). Writing for the Court Judge Rosenn also pointed to additional criteria that should, when relevant, be considered by the district court. Added to the above are ". . . (3) the possibility of harm to other interested persons from the grant or denial of the injunction, and (4) the public interest." Delaware River, supra, at 920. (Footnote omitted.)

In view of Delaware River and other Third Circuit cases¹¹ which have addressed the standards by which a preliminary injunction should issue, we were initially disturbed when plaintiff advanced what the Court considers to be a less stringent test that has been adopted by a line of cases in the Second Circuit. This different standard, though recognized in earlier decisions,¹² was succinctly set forth in Stark v. New York Stock Exchange, 466 F.2d 743, 744 (2 Cir. 1972) (per curiam) as follows:

Appellants assumed the burden of demonstrating either a combination of probable success and the possibility of irreparable injury or that they had raised serious questions going to the merits and that the balance of hardships tipped sharply in their favor. (Emphasis added.)

In later decisions the Second Circuit has indicated that this relaxed standard is particularly well-suited to gauging the propriety of a preliminary injunction in a tender offer situation:

Recently we have emphasized the importance of demonstrating

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