Icahn v. Blunt, 85-4279-CV-C-9.

• Decision Date: 24 June 1985
• Docket Number: No. 85-4279-CV-C-9.,85-4279-CV-C-9.
• Citation: 612 F. Supp. 1400
• Parties: Carl C. ICAHN, Plaintiff, v. Roy BLUNT, Secretary of State of the State of Missouri, the State of Missouri, and Trans World Airlines, Inc., Defendants.
• Court: U.S. District Court — Western District of Missouri

612 F. Supp. 1400

Carl C. ICAHN, Plaintiff, v. Roy BLUNT, Secretary of State of the State of Missouri, the State of Missouri, and Trans World Airlines, Inc., Defendants.

No. 85-4279-CV-C-9.

United States District Court, W.D. Missouri, Central Division.

June 24, 1985.

COPYRIGHT MATERIAL OMITTED

Harvey M. Tettlebaum, Duane Benton, Jefferson City, Mo., Andrew Rothschild, Barry A. Short, Lewis & Rice, St. Louis, Mo., Weil, Gotshal & Manges, Irwin Warren, Dennis J. Block, Stephen Radin, New York City, Frederick H. Riesmeyer, II, James C. Wirken, Kansas City, Mo., for plaintiff.

Phillip K. Gebhardt, Mo. Atty. Gen., Jefferson City, Mo., for Blunt and State of Mo.

John C. Noonan, Stinson, Mag & Fizzell, Kansas City, Mo., Skadden, Arps, Slate, Meagher & Flom, New York City, Thomas J. Guilfoil, Jim J. Shoemake, J. Richard McEarchern, St. Louis, Mo., for Trans World Airlines, Inc.

ORDER GRANTING DECLARATORY AND INJUNCTIVE RELIEF

BARTLETT, District Judge.

On May 30, 1985, shortly after the Governor of Missouri signed into law Senate Committee Substitute for House Bill No. 117 (H.B. No. 117), plaintiff, Carl C. Icahn filed this action seeking to enjoin the defendants Trans World Airlines, Inc. (TWA), Roy Blunt, the Missouri Secretary of State, and the State of Missouri from attempting to invoke or enforce H.B. No. 117, the Missouri Control Share Acquisition Statute, Mo.Rev.Stat. § 351.407, and the Missouri Takeover Bid Disclosure Act, Mo.Rev.Stat. Chapter 409, with respect to the purchase by plaintiff of shares of common stock of TWA.

On June 3, 1985, Icahn filed his amended complaint reasserting his request for injunctive relief and seeking a declaratory judgment that H.B. No. 117, the Missouri Control Share Acquisition Statute, and the Missouri Takeover Bid Disclosure Act are invalid because they violate the following provisions of the United States Constitution and the Missouri Constitution:

1) the Commerce Clause, U.S. Const., art. I, § 8, cl. 3 (Count I);

2) the Supremacy Clause, U.S. Const., art. VI, cl. 2 (Count II); 3) the right to freedom of contract guaranteed by the Fourteenth Amendment to the United States Constitution (Count III);

4) the right of alienation of property guaranteed by the Fourteenth Amendment to the United States Constitution (Count IV);

5) the Contract Clause, U.S. Const., art. I, § 10, cl. 1 (Count V);

6) the Full Faith and Credit Clause, U.S. Const., art. IV, § 1 (Count V);

7) Mo. Const., art. III, § 21, prohibiting the amending of a bill in its passage through either house so as to change its original purpose (Count VII);

8) Mo. Const., art. III, § 23, requiring that a legislative bill contain only one subject which is clearly expressed in its title (Count VIII); and

9) Mo. Const., art. III, § 40(28); Mo. Const., art. XI, § 2; and Mo. Const., art. I, § 13 prohibiting a grant of exclusive and special rights to a corporation (Count IX).

Also, plaintiff asserts a claim under 42 U.S.C. § 1983 for deprivation of rights, privileges, and immunities guaranteed by the Commerce Clause, the Supremacy Clause, the Contract Clause, the Fourteenth Amendment to the United States Constitution and by the Williams Act amendments to the Securities Exchange Act of 1934, 15 U.S.C. § 78m(d)-(e); 78n(d)-(f) (Count VI).

Besides disputing each of the constitutional challenges raised by Icahn, defendants argue that:

1) the claims asserted by Icahn are moot;

2) this Court is without jurisdiction because there is no case or controversy as required by Article III of the United States Constitution;

3) this Court is precluded from granting Icahn's requests for injunctive relief by the Anti-Injunction Act, 28 U.S.C. § 2283;

4) this Court should defer to pending state court proceedings under Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746 27 L.Ed.2d 669 (1971); and

5) this Court should abstain from deciding Icahn's motion for injunctive relief under Railroad Comm'n. of Texas v. Pullman Co., 312 U.S. 496, 61 S.Ct. 643 61 S.Ct. 643, 85 L.Ed. 971 (1941).

After a hearing on June 3, 1985, an Order was issued temporarily restraining the enforcement of H.B. No. 117. On June 12, 1985, the parties presented evidence on plaintiff's request for a preliminary injunction. At the conclusion of the evidentiary presentation, the parties announced that no further evidence would be presented on plaintiff's request for permanent relief. Therefore, it was agreed by all parties that the oral argument scheduled for June 18, 1985, would conclude the presentation of this case.

The Parties

Plaintiff Carl C. Icahn (Icahn) is a resident of the State of New York. On June 12, 1985, Icahn and entities controlled by Icahn owned 32.779% of the total outstanding shares of common stock of TWA. Icahn and his group stated in Amendment No. 3 to their Schedule 13D filed with the Securities and Exchange Commission on May 23, 1985, that they "have determined to seek control of the Issuer so as to protect their substantial equity interest." Plaintiff also disclosed in Amendment No. 3 that he had proposed a cash merger between TWA and a corporation to be formed by plaintiff "pursuant to which all holders of Shares (other than the Registrants and their affiliates) would receive $18 a Share in cash in exchange for their Shares."

If the Registrants' cash merger proposal is not accepted by the Issuer's Board of Directors, the Registrants intend to continue to explore strategies for seeking control. In this context, the Registrants intend to pursue the stockholder consent procedure referred to above and the Registrants (or any one of them) intend to acquire additional Shares (subject to availability of Shares at prices deemed favorable) from time to time in the open market, through a tender offer, in privately negotiated transactions or otherwise.

On June 17, 1985, Icahn filed with the Securities and Exchange Commission Amendment 8 to his Schedule 13D in which he commented as follows on his intentions in light of the announced merger agreement between Texas Air and TWA:

On June 13, 1985, Carl C. Icahn issued a press release in which he stated, among other things, that he is not presently taking a position on the offer and does not presently intend to make a counter-bid or to purchase additional Shares, although Mr. Icahn reserved the right to do so. Mr. Icahn intends to continue to explore each of these possibilities including, specifically, the purchase of additional Shares in open market or privately negotiated transactions.

Defendant Roy Blunt is the Secretary of State of the State of Missouri and the public official expressly authorized by H.B. No. 117 to seek injunctive relief to secure compliance by certain foreign corporations with Missouri's Control Share Acquisition Statute.

TWA is a Delaware corporation with its headquarters in New York City. TWA is a common carrier engaged primarily in transporting people and cargo by air. As of March 1, 1985, there were 32,853,932 shares of common stock outstanding.

Lambert-St. Louis International Airport (Lambert Airport) in St. Louis, Missouri, is a major hub for TWA's domestic flight operations. TWA currently uses 30 of its 62 gates. TWA has 189 domestic departures daily from Lambert Airport and plans to increase the number of departures in the near future. TWA also provides non-stop international service from St. Louis to London, Paris and Frankfurt. TWA landings represent 45% of all landings at Lambert Airport. TWA generates 57.7% of all landing fees at Lambert Airport amounting to $6,619,000 annually. TWA has 4,232 employees in the St. Louis area. TWA utilizes and pays for 59% of the total terminal and concourse space which generates $4,537,830 in revenue for Lambert Airport. According to the undisputed affidavit of the Assistant Director for Business and Finance of Lambert Airport, if TWA should cease to operate at Lambert Airport, St. Louis' ability to develop and maintain the physical plant necessary for convenient, safe, efficient and economical air travel would be jeopardized. Specifically, the maintenance and extension of the airfield and periodic maintenance on the entire complex would be threatened.

While expanding service out of St. Louis, TWA has reduced its number of departures from Kansas City. However, TWA's Kansas City Administrative Center processes a substantial part of the system-wide payroll, purchasing and disbursements. TWA's principal technical base for overhauling and servicing aircraft is located in Kansas City. Also, TWA's pilots, flight crews and cabin attendants are trained at the Kansas City Flight Training Center. TWA has 6,597 employees in the Kansas City area. TWA estimates that its purchases of materials, supplies, fuel, food and beverages from vendors in the Kansas City, Missouri, area during 1985 will amount to approximately $280,000,000. TWA's total contribution to the economy of the Kansas City area is more than $518,000,000 yearly.

Revenue bonds issued by Kansas City and St. Louis totalling in excess of $313,000,000 have financed capital improvements at Lambert Airport and at Kansas City International Airport. In St. Louis, the City of St. Louis and TWA are parties to a long-term lease which St. Louis relied upon in extending the east concourse for TWA at a cost of $17,848,000 and a new cargo building at the cost of $5,607,000. The debt incurred for these capital improvements was financed through revenue bonds, which, if the anticipated revenue from TWA's operations was not to be realized, would have to be supported from other airport revenues. According to the affidavit of the Assistant Director of Lambert Airport, the future marketability of airport revenue bonds could be adversely affected if TWA were to leave Lambert Airport. Also, further development of Lambert Airport would be hindered if TWA terminated its St. Louis operations.

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