Finnegan v. Campeau Corp., 1005

• Decision Date: 04 October 1990
• Docket Number: No. 1005,D,1005
• Citation: 915 F.2d 824
• Parties: , Fed. Sec. L. Rep. P 95,513, 1990-2 Trade Cases 69,213 Michael FINNEGAN, on behalf of himself and all others similarly situated, Plaintiff-Appellant, v. CAMPEAU CORP., a corporation, R.H. Macy & Co., Inc., a corporation and Macy Acquiring Corp., a corporation, Defendants-Appellees. ocket 89-9183.
• Court: U.S. Court of Appeals — Second Circuit

Page 824

915 F.2d 824

59 USLW 2230, Fed. Sec. L. Rep. P 95,513,

1990-2 Trade Cases 69,213

Michael FINNEGAN, on behalf of himself and all others similarly situated, Plaintiff-Appellant, v. CAMPEAU CORP., a corporation, R.H. Macy & Co., Inc., a corporation and Macy Acquiring Corp., a corporation, Defendants-Appellees.

No. 1005, Docket 89-9183.

United States Court of Appeals Second Circuit.

Argued March 15, 1990.

Decided Oct. 4, 1990.

Robert A. Skirnick, New York City (Andrew Davidovits, Wechsler Skirnick Harwood Halebian & Feffer, New York City, Guido Saveri, Saveri & Saveri, San Francisco, Cal., Perry Goldberg, Specks & Goldberg, Chicago, Ill., Jeremiah F. Hallissey, Hallisey & Johnson, San Francisco, Cal., Gene I. Mesh, Gene Mesh & Associates, Cincinnati, Ohio, all of counsel), for plaintiff-appellant Michael Finnegan.

Helene D. Jaffe, New York City (Harris J. Yale, Judith M. Yellin, Weil, Gotshal & Manges, New York City, of counsel), for defendant-appellee R.H. Macy & Co., Inc.

Before KEARSE, CARDAMONE and MAHONEY, Circuit Judges.

CARDAMONE, Circuit Judge:

Before us is an appeal brought by Michael Finnegan, the representative of disgruntled shareholders of a target company, Federated Department Stores, Inc. (Federated), who alleges that he suffered economic injury actionable under the antitrust laws when R.H. Macy & Co., Inc. (Macy's) and Campeau Corp. (Campeau)--two rival bidders for a controlling interest in the target company--entered into a mutually advantageous agreement, effectively reducing the amount of money needed to gain control of Federated.

It is recognized that competition is the touchstone of the antitrust laws, while in the regulated securities industry the emphasis is on requiring full disclosure without otherwise changing the balance in the market for corporate control. Tension and

at times conflict exist between these established public policies. That conflict is present in this case. Since we cannot assume that Congress was so muddled that it gave with the right hand of securities regulation that which it then took away with the left hand of antitrust law, this lawsuit may not proceed. Although appellant makes an innovative argument for the application of the antitrust laws--more suitable for and in fact the topic of a law review article, see Rock, Antitrust and the Market for Corporate Control, 77 Calif.L.Rev. 1365, 1388-90 (1989)--those laws have no application to the instant litigation and appellant's redress, if any, must be found under the corporate or securities laws.

BACKGROUND

The allegations of the complaint, which we must accept as true for purposes of reviewing this dismissal under Rule 12(b)(6), are fully set forth in the district court's opinion. See Finnegan v. Campeau Corp., 722 F.Supp. 1114 (S.D.N.Y.1989). We recite only those necessary to our discussion of the issues on appeal. In March 1988 Federated was "put into play," that is, offered for sale to the highest bidder and a battle for its control between Macy's and Campeau began. At first the rival bidders pushed up the price of Federated stock with each submitting a bid one step higher than the other. In April 1988 it dawned on the contestants that constantly raising the price of the target company was economically disadvantageous for them. Consequently, they allegedly reached an understanding under which Macy's agreed to withdraw its latest bid and allow Campeau to acquire Federated. In exchange, Campeau agreed to permit Macy's to purchase two Federated divisions--I. Magnin and Bullock's Wilshire--and to pay Macy's $60 million to cover its legal and investment banking expenses. The difference between the $73.50 a share ultimately paid by Campeau to acquire Federated and Macy's withdrawn bid of $75.51 amounted to about $172 million. Whether Campeau's purchase was worth the price it had to pay is questionable in light of Campeau's present insolvent condition and Federated's Chapter 11 petition filed in the United States Bankruptcy Court in Cincinnati, Ohio. See N.Y.L.J., May 17, 1990, at 7, col. 3.

In his complaint Finnegan charges that the agreement between Macy's and Campeau constitutes a conspiracy in violation of Sec. 1 of the Sherman Act (Act), 15 U.S.C. Sec. 1 (1988). Specifically, he asserts that Macy's and Campeau conspired to "refrain[ ] from bidding against each other for the purchase of the shares of common stock of Federated in order to supress [sic], ... and eliminate competition in the market for Federated common stock and to cause the sale of said shares at a price lower than a competitive price." Macy's moved to dismiss Finnegan's complaint under Fed.R.Civ.P. 12(b)(6) and the United States District Court for the Southern District of New York (Haight, J.) granted the motion. See also Case v. R.H. Macy & Co., N.Y.L.J., May 17, 1990, at 25, col. 3 (N.Y.Sup.Ct.) (dismissing claim by Federated shareholders under the state antitrust laws).

In deciding that the present transaction did not involve "trade or commerce" within the ambit of Sec. 1 of the Act the district court relied on Bucher v. Shumway, 452 F.Supp. 1288 (S.D.N.Y.1978), aff'd mem., 622 F.2d 572 (2d Cir.), cert. denied, 449 U.S. 841, 101 S.Ct. 120, 66 L.Ed.2d 48 (1980), and Kalmanovitz v. G. Heileman Brewing Company, 769 F.2d 152 (3d Cir.1985). See 722 F.Supp. at 1116. Following the conclusion that the antitrust laws were inapplicable, it reasoned that applying those laws would be inconsistent with the federal securities laws' regulatory scheme and pointed, as an example, to the limitation of damages under the securities laws to actual damages versus the treble damages available under Sec. 4 of the Clayton Act, as did the court in Schaefer v. First National Bank, 326 F.Supp. 1186, 1192 (N.D.Ill.1970), aff'd in pertinent part, 509 F.2d 1287 (7th Cir.1975), cert. denied, 425 U.S. 943, 96 S.Ct. 1682, 48 L.Ed.2d 186 (1976). 722 F.Supp. at 1118. Campeau apparently did not move in the district court, though it received the benefit of the dismissal, see 722 F.Supp. at 1118, and did not

submit briefs or participate in oral argument in our Court in response to Finnegan's appeal from the dismissal of his complaint.

DISCUSSION

As a preliminary matter we note that Finnegan has standing to bring this civil action under Sec. 4 of the Clayton Act, 15 U.S.C. Sec. 15 (1988), which provides "any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor" in federal court.

A claim analogous to the one at bar was presented in Bucher, and dismissal there was affirmed in an unpublished opinion. Appellant urges that we not apply the reasoning of the district court in Bucher because his claim is factually distinguishable. In Bucher the Signal Companies and Gulf and Western Industries made a joint tender offer for one-third of the outstanding shares of Signal. Suit was brought by shareholders of Signal who alleged that they received a lower price for their shares because Signal and Gulf and Western did not compete against each other for the company and against a third bidder, Dresser Company, but made a joint bid for the company. Presumably the difference between Bucher and the present case is that in the former the two bidders, Signal and Gulf and Western, made a joint bid at the outset, while in the case at hand Macy's and Campeau entered the takeover battle as active competitors, and only during the bidding process did they reach agreement on the acquisition of Federated.

I Applicability of the Sherman Act

Although we agree with the ultimate conclusion reached in the trial court that the Sherman Act has no application to this case, we reach it for somewhat different reasons. We do not, as did that court, adopt the rationales of Bucher and Kalmanovitz. See Finnegan, 722 F.Supp. at 1116. These courts premised their decisions to dismiss antitrust claims on the theory that the sale of the stock of a single company is not within the meaning of "trade or commerce" under the Sherman Act as that Act was construed in Apex Hosiery Co. v. Leader, 310 U.S. 469, 60 S.Ct. 982, 84 L.Ed. 1311 (1940):

The end sought [by the Act] was the prevention of restraints to free competition in business and commercial transactions which tended to restrict production, raise prices or otherwise control the market to the detriment of purchasers or consumers of goods and services, all of which had come to be regarded as a special form of public injury.

Id. at 493, 60 S.Ct. at 992 (emphasis supplied). Based upon this language those courts found the Act inapplicable because "a share of stock is not an item of goods." Bucher, 452 F.Supp. at 1290; accord Kalmanovitz, 769 F.2d at 156-57.

We think this isolated statement in Apex Hosiery has been misperceived. The Supreme Court did not intend the application of the antitrust laws to be limited to "goods" qua "item of goods." Black's Law Dictionary acknowledges that "goods" is "[a] term of variable content. It may include every species of personal property or it may be given a very restricted meaning." Black's Law Dictionary 823 (4th ed. 1968). That the Supreme Court meant the term "goods" to be viewed in the broader sense is evidenced by its holding during the same term as Apex Hosiery was decided that the antitrust laws covered agreements to restrain "the price of a commodity in interstate or foreign commerce," United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 223, 60 S.Ct. 811, 844, 84 L.Ed. 1129 (1940) (emphasis supplied), and subsequent Supreme Court decisions have adhered to this broader position, see, e.g., Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643, 647, 100 S.Ct. 1925, 1927, 64 L.Ed.2d 580 (1980) (per curiam). See also Black's Law Dictionary 343 (4th ed. 1968) (defining "commodity" as "any movable or tangible thing that is produced or used as the subject of barter or sale").

The Court also has refused to exempt banks from the antitrust laws simply...