Grand Metropolitan PLC v. Pillsbury Co.

• Decision Date: 01 November 1988
• Docket Number: Civ. A. No. 88-555 LON.
• Citation: 704 F. Supp. 538
• Parties: GRAND METROPOLITAN PLC and Wendell Investments Limited, Plaintiffs, v. The PILLSBURY COMPANY, Defendant.
• Court: U.S. District Court — District of Delaware

704 F. Supp. 538

GRAND METROPOLITAN PLC and Wendell Investments Limited, Plaintiffs, v. The PILLSBURY COMPANY, Defendant.

Civ. A. No. 88-555 LON.

United States District Court, D. Delaware.

November 1, 1988.

R. Franklin Balotti, C. Stephen Bigler, Nathan B. Ploener, and Robert J. Shaughnessy, of Richards, Layton & Finger, Wilmington, Del.; Cravath, Swain & Moore, of counsel, for plaintiffs.

Stephen J. Rothschild, Stuart L. Shapiro, Randolph K. Herndon, David J. Margules, Wilmington, Del., and George A. Zimmerman, and Joseph Guglielmelli, New York City, of Skadden, Arps, Slate, Meagher & Flom, for defendant.

OPINION

LONGOBARDI, District Judge.

On October 4, 1988, Plaintiffs Grand Metropolitan PLC and Wendell Investments Limited (collectively "Grand Met") announced an offer to purchase all the outstanding shares of common stock (the "tender offer") of Defendant The Pillsbury Company ("Pillsbury") at a price of $60.00 net per share and associated rights. Docket Item ("D.I.") 1, ¶ 1. In Count I of its Second Amended Verified Complaint ("Complaint"), D.I. 29, Grand Met asked the Court to (1) declare that the laws of the State of Delaware govern the internal corporate affairs of Pillsbury to the exclusion of any other state with respect to the tender offer and any subsequent merger; (2) declare that the antitakeover statutes of any state other than Delaware, including but not limited to those of Florida, Louisiana and Tennessee,¹ are unconstitutional and inapplicable to the tender offer and any subsequent merger; (3) enjoin Pillsbury and its successors and assigns, its directors, officers, agents, employees, attorneys, subsidiaries and stockholders, and persons acting in concert or participation with it and all other persons that have actual notice of the Order from invoking the antitakeover statutes of Florida, Louisiana or Tennessee, or of any other state other than Delaware; and (4) enjoin Pillsbury and its successors and assigns, its directors, officers, agents, employees, attorneys, subsidiaries and stockholders, and persons acting in concert or participation with it and all other persons that have actual notice of the Order from commencing any judicial proceeding in any forum other than this Court regarding the applicability or validity of the antitakeover statutes of Florida, Louisiana or Tennessee, or of any other state other than Delaware.

Grand Met applied for a temporary restraining order and moved for a preliminary injunction seeking remedies three and four noted above. D.I. 3. This Court denied the temporary restraining order because Grand Met did not establish that the denial of injunctive relief would result in irreparable harm. D.I. 14. Pillsbury moved to dismiss Count I of the Complaint on the grounds of (1) lack of subject matter jurisdiction due to a lack of case or controversy; and (2) the principle of forum non conveniens. D.I. 20.

On October 25, 1988, the Court held a hearing on Pillsbury's motion to dismiss and Grand Met's motion for a preliminary injunction. During oral argument, counsel for Grand Met revised its requested relief. Instead of asking the Court to enjoin Pillsbury from invoking any state antitakeover statute other than Delaware's, counsel stated that Grand Met wanted the Court to enjoin Pillsbury from invoking only the Florida, Louisiana and Tennessee statutes. Transcript, D.I. 38 at 35. Grand Met's counsel explained that such an injunction would require the Court to order Pillsbury to (1) "opt-out" of the Florida Business Combination Statutes and (2) not "opt-in" to either the Louisiana Control-Share Acquisitions Statute or the Tennessee Authorized Corporation Protection Act. Id.

DISCUSSION

In this case, Grand Met's request for declaratory relief is based upon 28 U.S. C. § 2201 which provides in pertinent part: "In the case of actual controversy within its jurisdiction ... any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration...." The presence of an "actual controversy" is a perquisite to the court's jurisdiction in an action seeking a declaratory judgment. Golden v. Zwickler, 394 U.S. 103, 108, 89 S.Ct. 956, 959, 22 L.Ed.2d 113 (1969). The requirement of an actual controversy represents a congressional recognition of the limitation of federal judicial power contained in the "case or controversy" provision of Article III, section 2 of the Constitution. See Diamond v. Charles, 476 U.S. 54, 62, 106 S.Ct. 1697, 1703, 90 L.Ed.2d 48 (1986); Bender v. Williamsport School District, 475 U.S. 534, 541, 106 S.Ct. 1326, 1331, 89 L.Ed.2d 501 (1986). Furthermore, the standard for finding a justiciable "case or controversy" is not any less stringent in a declaratory judgment action than in an action seeking traditional coercive relief. Bender, 475 U.S. at 541, 106 S.Ct. at 1331; City of Los Angeles v. Lyons, 461 U.S. 95, 111-13, 103 S.Ct. 1660, 1670-71, 75 L.Ed.2d 675 (1983).

Whether a party has presented a justiciable case or controversy in an action seeking declaratory relief or merely has presented an abstract or hypothetical question must be determined on a case-by-case basis. Babbit v. United Farm Workers National Union, 442 U.S. 289, 297-98, 99 S.Ct. 2301, 2308-09, 60 L.Ed.2d 895 (1979); Simmonds Aerocessories, Ltd. v. Elastic Stop Nut Corp., 257 F.2d 485, 489 (3rd Cir.1958) (whether there is an actual controversy is a question which turns on the facts of each individual case). The United States Supreme Court has provided a well-established principle that the "controversy must be definite and concrete, touching the legal relations of parties having adverse legal interest ... and must be a real and substantial controversy admitting of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts." Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 241, 57 S.Ct. 461, 464, 81 L.Ed. 617 (1937). Although the considerations set forth in the Aetna Life case are something less than a sure guide to decision, McCahill v. Borough of Fox Chapel, 438 F.2d 213, 215 (3rd Cir.1971), the Supreme Court has stated that in determining the difference between an abstract question and a controversy in an action for declaratory judgment, the basic "question is whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273, 61 S.Ct. 510, 512, 85 L.Ed. 826 (1941). The case or controversy must have existed at the time the complaint was filed. Luis v. Dennis, 751 F.2d 604, 608 (3rd Cir.1984).

The Court applied this teaching in Electric Bond & Share Co. v. SEC, 303 U.S. 419, 58 S.Ct. 678, 82 L.Ed. 936 (1938). In that case, the defendants were a group of holding companies that controlled, through stock ownership, the service of gas and electricity to the public in various states. The SEC brought suit against Electric Bond and fourteen associated public utility companies to enforce the filing requirements of sections 4(a) and 5(b) of the Public Utility Holding Company Act of 1935, 15 U.S.C. § 79e. The defendants contested the validity of Sections 4(a) and 5(b) and sought by cross bill a declaratory judgment that the entire Act was unconstitutional. Id. at 426-28, 58 S.Ct. at 679-80. The District Court in the case dismissed the cross bill for lack of any actual controversy because there was no threat of enforcement of the entire Act and the Supreme Court affirmed. By seeking a judgment that each and every provision of the Act is unconstitutional, the defendants essentially sought "an advisory decree about the validity of the other provisions based upon a hypothetical set of facts." Id. at 443, 58 S.Ct. at 687. Because only Sections 4(a) and 5(b) were involved in the litigation, the Court observed that the situation presented "a variety of hypothetical controversies which may never become real. We are invited to enter into a speculative inquiry for the purpose of condemning statutory provisions the effect of which in concrete situations, not yet developed, cannot now be definitely perceived. We must decline that invitation." Id.; accord Communist Party of Am. v. Subversive Activities Control Bd., 367 U.S. 1, 70-81, 81 S.Ct. 1357, 1396-02, 6 L.Ed.2d 625 (1961).

The Supreme Court further developed this line of reasoning in International Longshoremen's & Warehousemen's Union, Local 37 v. Boyd, 347 U.S. 222, 74 S.Ct. 447, 98 L.Ed. 650 (1954). The labor union in Boyd had alien members who were working temporarily in Alaska. The union requested the Court to enjoin the District Director of Immigration and Naturalization at Seattle from treating its alien members, under Section 212(d)(7) of the Immigration and Nationality Act of 1952, 8 U.S.C. § 1182(d)(7), as aliens entering the United States for the first time. The Union also asked the Court to declare Section 212(d)(7) unconstitutional if it required its members to be treated as first-time aliens. Id. at 222-23, 74 S.Ct. at 447-48. The Court rejected the Union's request:

Appellants in effect asked the District Court to rule that a statute the sanctions of which had not been set in motion against individuals on whose behalf relief was sought, because an occasion for doing so had not arisen, would not be applied to them if in the future such a contingency should arise. That is not a lawsuit to enforce a right; it is an endeavor to obtain a court's assurance that a statute does not govern hypothetical situations that may or may not make the challenged statute applicable. Determination of the scope and constitutionality of legislation in advance of its immediate adverse effect in the context of a concrete case

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