In re Jones & Laughlin Steel Corp.

• Decision Date: 01 June 1984
• Citation: 328 Pa.Super. 442,477 A.2d 527
• Parties: In re JONES & LAUGHLIN STEEL CORPORATION, Appellant.
• Court: Pennsylvania Superior Court

477 A.2d 527

328 Pa.Super. 442

In re JONES & LAUGHLIN STEEL CORPORATION, Appellant.

Superior Court of Pennsylvania.

June 1, 1984

Argued Oct. 26, 1983.

Reargument Denied Aug. 14, 1984.

James H. McConomy, Pittsburgh, for appellant.

Before CAVANAUGH, MONTGOMERY and HESTER, JJ.

CAVANAUGH Judge:

This is an appeal by Jones & Laughlin Steel Corporation from an order of the Allegheny County Common Pleas Court which awarded dissenting shareholders the sum of $113.30 for each share owned by the dissenters as well as an award to the dissenters' counsel. ^[1] The award was made in an appraisal proceeding under § 515 of the Pennsylvania Business Corporation Law, 15 Pa.S.A. § 1515. The history preceding this award involves a number of entities involved directly or indirectly in a Plan of Merger which took effect in November of 1974. The corporate entities were:

LTV Corporation (LTV), Parent

Jones and Laughlin Industries (J & L I), Subsidiary of LTV

JLI-II Corporation, Subsidiary of Jones and Laughlin Industries

Jones and Laughlin Steel Corporation (J & L), merged and into JLI-II

At the time of the merger JLI-II was already the holder of approximately 81% of the shares of J & L. For most purposes on this appeal, we need only to refer to Jones and Laughlin Steel Corporation (J & L). The Business Corporation Law provides for judicial determination of fair value when shareholders wish to dissent to a merger plan. Appellant, J & L, instituted the present action to determine fair value, on the basis, it states, that certain shareholders had elected to exercise their dissenters' rights. Before the institution of this action, however, a class action had been initiated in the United States District Court for the Southern District of New York. This case has been referred to by the parties herein as the Tanzer/Voege case. In that case, dissenting shareholders made a series of allegations which included, inter alia, claimed violations of provisions of the Securities Exchange Act of 1934 and regulations thereunder. Multiple relief was sought including injunctive relief, a declaration that the plan and merger be declared null and void and damages amounting to the difference between the merger price of $29.00 a share and fair market value of the J & L stock held by the class.

The Tanzer/Voege litigation resulted in a settlement agreement which was finally approved by the court in July of 1980.

Meanwhile, in the present Pennsylvania action, certain dissenters sought to have the merger declared invalid. This resulted in an appeal to this court which determined that under the Pennsylvania Business Corporation Law the remedy of appraisal is exclusive and there is no alternative of recission. In re Jones &amp Laughlin Steel Corp., 263 Pa.Super. 378, 398 A.2d 186 (1979). The Supreme Court affirmed. In re Jones &amp Laughlin Steel Corp., 488 Pa. 524, 412 A.2d 1099 (1980). Following these appeals, the Allegheny County court proceeded with the appraisal hearings. J & L sought in the trial court to dismiss the claims of those who had not chosen to opt out of the Tanzer/Voege class action, or alternatively to dismiss the claims of those who had executed releases in the Tanzer/Voege settlement. The trial court refused these dismissal motions without determination of the specific merits, since it felt constrained to proceed to the appraisal by mandate of the previous appellate court opinions.

I WAIVER ISSUE

Preliminarily the dissenters have argued on appeal by Motion to Dismiss, that appellant has waived the issues sought to be raised on appeal since the appeal was taken directly from the trial court's adjudication. Even though, say the dissenters, the appellant filed exceptions below and cross-exceptions were filed thereto, the appeal was taken before the exceptions were argued and the lower court was thus deprived of jurisdiction. Pa.R.A.P. 1701(b). Appellant answers that "statutory proceedings" under § 515 of the BCL are not governed by the Pennsylvania Rules of Civil Procedure unless specifically provided. Fort Pitt Bridge Works v. Malabar Construction, Inc., 116 P.L.J. 352 (1967) is cited in support of direct appealability. We need not decide this issue and will proceed to consider the merits for a number of reasons. First, we note that appellant, confessing to "procedural uncertainty," pursued dual post-trial actions, i.e., exceptions were filed and an appeal was taken to this court. Thus, if the appeal were to be quashed as procedurally defective, appellant could proceed below. The lower court has concluded in its adjudication, that it was compelled to proceed with the appraisal action by reason of the mandate of this court, affirmed by the Supreme Court. ^[2] In addition, the court denied the petition to dismiss the action on the basis of res judicata, estoppel and waiver for essentially the same reasons. The court's denial was on the basis that "[the dissenting shareholders] have had their right to appraisal adjudicated to finality by two appellate courts of this Commonwealth, to wit, the Supreme and the Superior." We need not opine as to whether the court properly interpreted the mandate of this court and the Supreme Court. Suffice it to say that there is no reason to conclude that if the matter were quashed the court would act other than it already has, i.e., determine that the threshold question of entitlement to participate in the appraisal action was foreclosed by the orders of our appellate courts. On the other hand, to give instruction to the court would be inconsistent with quashing the appeal. Dissenting shareholders, while arguing the impropriety of the appeal without disposition of the exceptions, retreat in their brief from a motion to dismiss the appeal, to a request for direction to the lower court to consider the exceptions while presumably retaining appellate jurisdiction. Finally, at oral argument, appellees asked that we consider the appeal on the merits.

In view of the fact that the issues are ones of law, that the trial court has read our prior decision, affirmed by the Supreme Court as precluding consideration of the threshold entitlement question on the merits; and the passage of time since the inception of their litigation, we accept the facial propriety of the appeal and address the merits.

II

The argument on appeal is that the court erred in not dismissing the claims of those who had not opted out of the Tanzer/Voege class. It is claimed that participation by these dissenters in the appraisal action should be barred under the doctrines of res judicata, collateral estoppel and choice of remedy. It is further argued that the present claims are barred by reason of a release given on behalf of the Tanzer/Voege class by its representative and in certain cases, by individual releases given by certain dissenters in order to participate in distribution by the settlement fund. Stated simply, the issue is, does failure to opt out of Tanzer/Voege preclude a dissenting shareholder from the benefit of the present appraisal action?

Appellant concedes that dissenters could pursue both the Tanzer/Voege suit and the appraisal action but that a judgment adjudicating these rights in Tanzer/Voege prohibits further pursuit of the appraisal claim.

Res judicata applies when, in two actions, there is (1) an identity in the thing sued upon (2) identity in the cause of action (3) identity of persons and parties to the action, and (4) identity of the capacity of the parties suing or sued. Duquesne Slag Products Co. v. Lench, 490 Pa. 102, 415 A.2d 53 (1980); Bearoff v. Bearoff Bros., Inc., 458 Pa. 494, 327 A.2d 72 (1974).

The essential inquiry is whether the ultimate and controlling issues have been decided in a prior proceeding in which the parties had an opportunity to appear and assert their rights. Callery v. Municipal Authority of Blythe, 432 Pa. 307, 243 A.2d 385 (1968); Schultz v. City of Philadelphia, 314 Pa.Super. 194, 460 A.2d 833 (1983); Notoro v. Estate of Hyer, 239 Pa.Super. 10, 361 A.2d 766 (1976). In making this evaluation our courts have looked to the basic issues and the harm sought to be remedied in the separate suits. Duquense Slag Products Co. v. pLenchp, supra; Safeguard Mutual Insurance Co. v. Williams, 463 Pa. 567, 345 A.2d 664 (1975). For a prior class action judgment to bar an action on the basis of res judicata the parties must be identical in both suits; the prior judgment must have been entered by a court of competent jurisdiction; there must have been a final judgment on the merits and the same cause of action must be presented in both cases. Sea-Land Services, Inc. v. Gaudet, 414 U.S. 573, 94 S.Ct. 806, 39 L.Ed.2d 9 (1974).

As to the identity of cause of action, rather than resting on the specific legal theory invoked, res judicata generally is thought to turn on the essential similarity of the underlying events giving rise to various legal claims. Whatever the conceptual difficulties inherent in the definition of a "cause of action" often the presence of a single cause of action is clear. Davis v. United States Steel Supply, 688 F.2d 166 (1982), cert. denied 460 U.S. 1014, 103 S.Ct. 1256, 75 L.Ed.2d 484 (applying Pennsylvania law). The Davis court recognized that in determining whether a single cause of action is present one may consider the identity of the acts complained of, the demand for recovery, the identity of witnesses, documents and facts alleged. A lack of identity of these facets would, of course, support the conclusion that there is no identity of cause of action.

Appellant in making its res judicata argument has made only broad out-of-context references to the Tanzer/Voege litigation. A separate examination of each of these actions leads us to conclude that there is no identity of...