In re Rockefeller Center Properties, Inc., 01-1755.

CourtUnited States Courts of Appeals. United States Court of Appeals (3rd Circuit)
Citation311 F.3d 198
Docket NumberNo. 01-1755.,No. 01-1756.,01-1755.,01-1756.
PartiesIn re: ROCKEFELLER CENTER PROPERTIES, INC. SECURITIES LITIGATION, Charal Investment Company Inc., a New Jersey Corporation; C.W. Sommer & Co., a Texas Partnership, on behalf of themselves and all others similarly situated; Alan Freed; Jerry Crance; Helen Scozzanich; Sheldon P. Langendorf; Rita Walfield; Robert Flashman; Renee B. Fisher Foundation Inc.; Frank Debora; Wilson White; Stanley Lloyd Kaufman, Jr.; Joseph Gross v. David Rockefeller; Goldman Sachs Mortgage Co.; Goldman Sachs Group LP; Goldman Sachs & Co.; Whitehall Street Real Estate Limited Partnership V; WH Advisors Inc. V; WH Advisors LP V; Daniel M. Neidich; Peter D. Linneman; Richard M. Scarlata Frank Debora; Wilson White; Stanley Lloyd Kaufman, Jr.; Joseph Gross, Charal Investment Company Inc., a New Jersey Corporation; C.W. Sommer & Co., a Texas Partnership, on behalf of themselves and all others similarly situated; Alan Freed; Jerry Crance; Helen Scozzanich; Sheldon P. Langendorf; Rita Walfield; Robert Flashman; Renee B. Fisher Foundation Inc.; Frank Debora; Wilson White; Stanley Lloyd Kaufman, Jr.; Joseph Gross v. David Rockefeller; Goldman Sachs Mortgage Co.; Goldman Sachs Group LP; Goldman Sachs & Co.; Whitehall Street Real Estate Limited Partnership V; WH Advisors Inc. V; WH Advisors LP V; Daniel M. Neidich; Peter D. Linneman; Richard M. Scarlata Charal Investment Company Inc.; C.W. Sommer & Co.; Renee B. Fisher Foundation; Helen Scozzanich; Jerry Crance; Alan Freed; Sheldon P. Langendorf; Rita Walfield; Robert Flashman,
Decision Date08 November 2002
311 F.3d 198
In re: ROCKEFELLER CENTER PROPERTIES, INC. SECURITIES LITIGATION,
Charal Investment Company Inc., a New Jersey Corporation; C.W. Sommer & Co., a Texas Partnership, on behalf of themselves and all others similarly situated; Alan Freed; Jerry Crance; Helen Scozzanich; Sheldon P. Langendorf; Rita Walfield; Robert Flashman; Renee B. Fisher Foundation Inc.; Frank Debora; Wilson White; Stanley Lloyd Kaufman, Jr.; Joseph Gross
v.
David Rockefeller; Goldman Sachs Mortgage Co.; Goldman Sachs Group LP; Goldman Sachs & Co.; Whitehall Street Real Estate Limited Partnership V; WH Advisors Inc. V; WH Advisors LP V; Daniel M. Neidich; Peter D. Linneman; Richard M. Scarlata
Frank Debora; Wilson White; Stanley Lloyd Kaufman, Jr.; Joseph Gross,
Charal Investment Company Inc., a New Jersey Corporation; C.W. Sommer & Co., a Texas Partnership, on behalf of themselves and all others similarly situated; Alan Freed; Jerry Crance; Helen Scozzanich; Sheldon P. Langendorf; Rita Walfield; Robert Flashman;

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Renee B. Fisher Foundation Inc.; Frank Debora; Wilson White; Stanley Lloyd Kaufman, Jr.; Joseph Gross
v.
David Rockefeller; Goldman Sachs Mortgage Co.; Goldman Sachs Group LP; Goldman Sachs & Co.; Whitehall Street Real Estate Limited Partnership V; WH Advisors Inc. V; WH Advisors LP V; Daniel M. Neidich; Peter D. Linneman; Richard M. Scarlata Charal Investment Company Inc.; C.W. Sommer & Co.; Renee B. Fisher Foundation; Helen Scozzanich; Jerry Crance; Alan Freed; Sheldon P. Langendorf; Rita Walfield; Robert Flashman,
No. 01-1755.
No. 01-1756.
United States Court of Appeals, Third Circuit.
Argued January 17, 2002.
Decided November 8, 2002.

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Michael D. Donovan (argued), Donovan Searles, LLC, Philadelphia, PA, for Appellants.

Pamela S. Tikellis, Chimicles & Tikellis, LLP, Wilmington, DE, for Appellants.

James R. Malone, Jr., Chimicles & Tikellis, LLP, Haverford, PA, for Appellants.

Ann Miller, Philadelphia, PA, for Appellants.

Max Gitter (argued), Cleary Gottlieb Steen & Hamilton, New York, NY, for Appellees, Goldman Sachs Mortgage Co., Goldman Sachs Group LP, Goldman Sachs & Co., Whitehall, Street Real Estate Limited, Partnership V, WH Advisors, Inc., WH Advisors LP V, and Daniel M. Neidich.

Richard A. Rosen, Robert N. Kravitz, Paul, Weiss, Rifkind, Wharton & Garrison, New York, NY, for Appellees, Goldman Sachs Mortgage Co., Goldman Sachs Group LP, Goldman Sachs & Co., Whitehall, Street Real Estate Limited, Partnership V, WH Advisors, Inc., WH Advisors LP V, and Daniel M. Neidich.

Robert K. Payson, Potter Anderson & Corroon LLP, Wilmington, DE, for Appellees, Peter D. Linneman and Richard M. Scarlata.

Russell E. Brooks, Milbank, Tweed, Hadley & McCloy, New York, NY, for Appellee, David Rockefeller.

Richard D. Allen, Morris, Nichols, Arsht & Tunnell, Wilmington, DE, for Appellee, David Rockefeller.

Before: RENDELL, FUENTES, and MAGILL,* Circuit Judges.

OPINION OF THE COURT

FUENTES, Circuit Judge.


This appeal marks the second time that we address the underlying dispute between the parties. The controversy relates

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to the landmark Rockefeller Center in midtown Manhattan and arises out of the proxy solicitation in connection with the acquisition of Rockefeller Center Properties, Inc. ("RCPI") by a consortium of investors, including David Rockefeller, Whitehall Street Real Estate Limited Partnership V ("Whitehall") and its affiliates, various divisions of the Goldman Sachs Group, Inc. ("Goldman Sachs"), and three individuals associated with those entities.1 The proxy statement painted a bleak financial picture of Rockefeller Center and included management's recommendation to approve the merger. One month after the shareholders of RCPI voted to approve the merger, the new owners of Rockefeller Center, the Investor Group, sold approximately 20% of the property to the National Broadcasting Company and its parent, the General Electric Company ("GE/NBC"), for $440 million.

Plaintiffs, the shareholders of RCPI (the "Shareholders"), contend that the Investor Group fraudulently omitted from the proxy statement and other supporting materials the fact that RCPI had been negotiating the sale with GE/NBC prior to the proxy vote and that RCPI had formed an intent to consummate the sale during those pre-vote negotiations, thereby running afoul of the federal securities laws. As a result of the allegedly fraudulent omissions, the Shareholders contend that they were deceived into relinquishing their ownership rights and that they could have realized more value from their investments. The Investor Group moved to dismiss the Shareholders' Second Consolidated Amended Class Action Complaint ("Second Amended Complaint"). The District Court granted the motion and dismissed the Second Amended Complaint. The matter comes before us on the Shareholders' appeal of the dismissal.

We agree with the District Court insofar as it held that the Shareholders had failed to meet the heightened pleading requirements of securities fraud actions set forth in Rule 9(b) of the Federal Rules of Civil Procedure and the Private Securities Litigation Reform Act of 1995,2 15 U.S.C. § 78u-4(b)(1) (the "Reform Act"). Accordingly, we affirm the judgment of the District Court.

I.

Although prior decisions have set forth the facts of this case in some detail, the present appeal arises out of the Shareholders' Second Amended Complaint which contains several new allegations not before the Court in its prior ruling. See, e.g., In re Rockefeller Center Properties, Inc. Securities Litigation, 184 F.3d 280 (3d Cir. 1999); Charal Investment Co., Inc. v. Rockefeller, 131 F.Supp.2d 593 (D.Del. 2001). Therefore, we review the factual background, accepting the well-pleaded allegations in the Second Amended Complaint as true and considering the documents incorporated by reference therein. See In re Burlington Coat Factory Securities Litigation, 114 F.3d 1410, 1420, 1426 (3d Cir.1997) ("A motion to dismiss pursuant to Rule 12(b)(6) may be granted only if, accepting all well pleaded allegations in the complaint as true, and viewing them in

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the light most favorable to plaintiff, plaintiff is not entitled to relief.... [A] `document integral to or explicitly relied upon in the complaint' may be considered `without converting the motion [to dismiss] into one for summary judgment.'") (citations omitted).

A.

Rockefeller Center (or the "Property") is comprised of several commercial and retail buildings in a large midtown Manhattan complex. The Shareholders contend that the Rockefeller family exercised ownership and control over the Property through a network of related entities. Second Amended Complaint, at ¶ 28. Prior to 1996, the Rockefeller Group, Inc. ("RGI") owned the Property through its control over two partnerships, Rockefeller Center Properties and RCPI Associates (the "Partnerships").3 RCPI was a real estate investment trust ("REIT") created in 1985 for the purpose of funding the Partnerships with a $1.3 billion loan. RCPI obtained the funds for the loan through an initial public offering of 37.5 million shares at a price of $20 per share, resulting in proceeds of $750 million. The remainder of the funds came from two offerings of convertible debentures. RCPI secured its $1.3 billion loan by receiving two mortgages on the Property.

Despite the substantial capitalization in 1985, Rockefeller Center, RCPI, and the Partnerships soon confronted mounting financial difficulties.4 By the Fall of 1994, RCPI realized that it would be unable to honor upcoming debenture payments without additional financing. To avoid default, RCPI turned to Goldman Sachs and Whitehall for an additional cash infusion of $225 million.5 Under the terms of the financing, Goldman Sachs agreed to loan $150 million to RCPI, and Whitehall provided for the issuance of $75 million more in debentures. In return, both Goldman Sachs and Whitehall obtained equity interests in RCPI by partial assignments of the Rockefeller Center mortgage, and Goldman Sachs received a seat on RCPI's Board of Directors.6

The Shareholders assert that several aspects of the 1994 financing agreement made it disadvantageous for RCPI. First,

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the financing included a "cash-sweep" provision requiring RCPI to pay directly to Goldman Sachs any funds falling within the definition of "excess" cash. Id., at ¶ 31. According to the Shareholders, the cash-sweep provision further jeopardized the liquidity of RCPI. Id. Because the cash-sweep provision required "mandatory prepayment from RCPI's net cash flow," the proceeds from any subsequent sale of equity or assets of RCPI would be applied first to pay down the REIT's outstanding debt to Goldman Sachs. Id. at ¶ 33.7

In addition, the agreement contained an anti-dilution provision intended to protect Goldman Sachs' equity interest. The anti-dilution provision meant that any subsequent bidder competing with Goldman Sachs for an outright purchase of RCPI would have to exceed Goldman Sachs' own bid by over $1.00 per share. Id. at ¶ 32.

RCPI's financial problems did not end with the additional cash infusion of $225 million in late 1994. In particular, the Partnerships continued to experience severe cash flow difficulties. On May 11, 1995, the Partnerships suspended all interest payments due on the mortgage loan to RCPI and filed petitions for relief pursuant to Chapter 11 of the Bankruptcy Code. In turn, RCPI came to the realization that it would not be able honor its own obligations under the debentures without the interest payments from the Partnerships, which led it to consider a number of recapitalization alternatives.

RCPI's exploration of financing alternatives triggered a bidding war that resulted in various types of recapitalization proposals from many different bidders. As this Court noted...

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  • Powell v. Subaru of Am., Inc., 1:19-cv-19114
    • United States
    • United States District Courts. 3th Circuit. United States District Courts. 3th Circuit. District of New Jersey
    • November 24, 2020
    ...injecting precision and some measure of substantiation into their allegations of fraud." In re Rockefeller Ctr. Props., Inc. Sec. Litig., 311 F.3d 198, 216 (3d Cir. 2002) (internal quotation marks omitted). The purpose of this requirement is to "place the defendant on notice of the precise ......
  • Miller v. Zandieh, CIVIL NO. 1:15-CV-34
    • United States
    • United States District Courts. 3th Circuit. United States District Court of Middle District of Pennsylvania
    • February 11, 2015
    ...of injecting precision and some measure of substantiation into their allegations of fraud."' In re Rockefeller Ctr. Props. Secs. Litig., 311 F.3d 198, 216 (3d Cir.2002) (quoting In re Nice Sys., Ltd. Secs. Litig., 135 F.Supp.2d 551,Page 12577 (D.N.J.2001), emphasis supplied)." Animal Scienc......
  • In Re Synchronoss Securities Litigation., Civil Action No. 08-4437 (GEB).
    • United States
    • United States District Courts. 3th Circuit. United States District Courts. 3th Circuit. District of New Jersey
    • April 7, 2010
    ...means of injecting precision and some measure of substantiation into their allegations of fraud.” Rockefeller Ctr. Props. Sec. Litig., 311 F.3d 198, 216 (3d Cir.2002) (quoting Nice Sys., 135 F.Supp.2d at 577). In addition to the Rule 9(b) requirements, a plaintiff alleging securities fraud ......
  • In re Intelligroup Securities Litigation, Civil Action No. 04-1980 (GEB).
    • United States
    • United States District Courts. 3th Circuit. United States District Courts. 3th Circuit. District of New Jersey
    • November 13, 2007
    ...means of injecting precision and some measure of substantiation into their allegations of fraud." Rockefeller Ctr. Props. Sec. Litig., 311 F.3d 198, 216 (3d Cir.2002) (quoting Nice Sys., Ltd. Sec. Litig., 135 F.Supp.2d 551, 577 (D.N.J.2001)). Moreover, a "stringent" reading of the requireme......
  • Request a trial to view additional results
1069 cases
  • Powell v. Subaru of Am., Inc., 1:19-cv-19114
    • United States
    • United States District Courts. 3th Circuit. United States District Courts. 3th Circuit. District of New Jersey
    • November 24, 2020
    ...injecting precision and some measure of substantiation into their allegations of fraud." In re Rockefeller Ctr. Props., Inc. Sec. Litig., 311 F.3d 198, 216 (3d Cir. 2002) (internal quotation marks omitted). The purpose of this requirement is to "place the defendant on notice of the precise ......
  • Miller v. Zandieh
    • United States
    • United States District Courts. 3th Circuit. United States District Court of Middle District of Pennsylvania
    • February 11, 2015
    ...of injecting precision and some measure of substantiation into their allegations of fraud."' In re Rockefeller Ctr. Props. Secs. Litig., 311 F.3d 198, 216 (3d Cir.2002) (quoting In re Nice Sys., Ltd. Secs. Litig., 135 F.Supp.2d 551,Page 12577 (D.N.J.2001), emphasis supplied)." Animal Scienc......
  • In Re Synchronoss Securities Litigation., Civil Action No. 08-4437 (GEB).
    • United States
    • United States District Courts. 3th Circuit. United States District Courts. 3th Circuit. District of New Jersey
    • April 7, 2010
    ...means of injecting precision and some measure of substantiation into their allegations of fraud.” Rockefeller Ctr. Props. Sec. Litig., 311 F.3d 198, 216 (3d Cir.2002) (quoting Nice Sys., 135 F.Supp.2d at 577). In addition to the Rule 9(b) requirements, a plaintiff alleging securities fraud ......
  • In re Intelligroup Securities Litigation, Civil Action No. 04-1980 (GEB).
    • United States
    • United States District Courts. 3th Circuit. United States District Courts. 3th Circuit. District of New Jersey
    • November 13, 2007
    ...means of injecting precision and some measure of substantiation into their allegations of fraud." Rockefeller Ctr. Props. Sec. Litig., 311 F.3d 198, 216 (3d Cir.2002) (quoting Nice Sys., Ltd. Sec. Litig., 135 F.Supp.2d 551, 577 (D.N.J.2001)). Moreover, a "stringent" reading of the requireme......
  • Request a trial to view additional results

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