Kalmanovitz v. G. Heileman Brewing Co., Inc., 84-5682

• Decision Date: 01 August 1985
• Docket Number: No. 84-5682,84-5682
• Citation: 769 F.2d 152
• Parties: , Fed. Sec. L. Rep. P 92,238, 1985-2 Trade Cases 66,733 Paul KALMANOVITZ, individually and as a shareholder of Pabst Brewing Company, and S & P, a California Corporation, Appellants, v. G. HEILEMAN BREWING COMPANY, INC., a Wisconsin corporation; Russell G. Cleary; HBC Acquisition, Inc., a Delaware corporation; Pabst Brewing Company, a Delaware corporation; and William F. Smith, Jr., Irwin Jacobs, Dennis Mathisen, Gerald A. Schwalbach, and Daniel T. Lindsay, individuals.
• Court: U.S. Court of Appeals — Third Circuit

Page 152

769 F.2d 152

54 USLW 2120, Fed. Sec. L. Rep. P 92,238,

1985-2 Trade Cases 66,733

Paul KALMANOVITZ, individually and as a shareholder of Pabst Brewing Company, and S & P, a California Corporation, Appellants, v. G. HEILEMAN BREWING COMPANY, INC., a Wisconsin corporation Russell G. Cleary; HBC Acquisition, Inc., a Delaware corporation; Pabst Brewing Company, a Delaware corporation and William F. Smith, Jr., Irwin Jacobs, Dennis Mathisen Gerald A. Schwalbach, and Daniel T. Lindsay, individuals.

No. 84-5682.

United States Court of Appeals Third Circuit.

Argued June 17, 1985.

Decided Aug. 1, 1985.

Alioto & Alioto, Joseph L. Alioto, Joseph M. Alioto, John I. Alioto (argued), Gary D. Elion, San Francisco, Cal., for appellants.

Young, Conaway, Stargatt & Taylor, Bruce M. Stargatt, David C. McBride, Wilmington, Del. (Foley, Lardner, Hollabaugh & Jacobs, Maurice J. McSweeney (argued), Washington, D.C., of counsel), for appellees G. Heileman Brewing Co., Inc., Russell G. Cleary and HBC Acquisition, Inc.

Morris, Nichols, Arsht & Tunnell, A. Gilchrist Sparks, III (argued), Michael Houghton, Wilmington, Del., Sutherland, Asbill & Brennan, Washington, D.C., Michael, Best & Friedrich, Milwaukee, Wis., for appellees Pabst Brewing Co. and William F. Smith, Jr.

James W. Quinn (argued), New York City (Weil, Gotshal & Manges, Jay N. Fastow, Richard B. Friedman, New York City, Richards, Layton & Finger, R. Franklin Balotti, Wilmington, Del., of counsel), for appellees Irwin L. Jacobs, Dennis Mathisen, Gerald A. Schwalbach and Daniel T. Lindsay.

Before ADAMS and HUNTER, Circuit Judges, and FISHER, District Judge ^*.

OPINION OF THE COURT

ADAMS, Circuit Judge.

This appeal, certified to us by the district court, arises in the aftermath of a bitter fight to gain control of Pabst Brewing Company. Plaintiff, a disappointed tender offeror, has sued his former partner, the successful acquiring company, and the target company, alleging violations of the federal antitrust and securities laws; in addition, plaintiff raised a variety of state law claims. Except for a breach of contract claim, the district court either dismissed or granted summary judgment to the defendants on all federal and state law causes of action. We will affirm the district court's judgment and remand the case for further proceedings on the breach of contract claim.

I.

On October 26, 1982, Paul Kalmanovitz and Irwin L. Jacobs, along with three of Jacobs' associates (the Jacobs Group), ¹ signed a Memorandum of Terms. According to this memorandum, Kalmanovitz and the Jacobs Group agreed to make a tender offer for three million shares of Pabst Brewing Company at $24 per share through JMSL Acquiring Corporation. The Jacobs Group already owned more than 1.14 million shares of Pabst; acquisition of the additional three million shares would have given the parties a majority of the outstanding Pabst shares.

As part of the agreement Kalmanovitz and the Jacobs Group each were to become 50 percent shareholders in PST Acquiring Corporation, which wholly owned JMSL. On the day after JMSL accepted the three million shares on its tender offer, the Jacobs Group was to exchange its 1.14 million Pabst shares for additional shares of PST. In addition, Kalmanovitz was to contribute $26.4 million to PST in exchange for additional shares of the company. The agreement and the material accompanying the tender offer contemplated a subsequent merger of Pabst and JMSL.

On October 27, 1982, JMSL made public the terms of its tender offer. The management of Pabst opposed the offer. Thereafter, William F. Smith, Jr., Pabst's president, instituted a series of meetings with Russell G. Cleary, chief executive officer of Heileman Brewing Co., in search of a "white knight"--i.e., another entity willing to make an offer more acceptable to the management of the target company. As a result of these meetings, on November 10, 1982, HBC Acquisition, Inc., a wholly-owned subsidiary of Heileman, commenced a competing tender offer for 5.5 million shares of Pabst at $27.50 per share.

In the wake of Heileman's offer, Jacobs allegedly told Kalmanovitz that the Jacobs Group could not put up any additional funding to compete against the new offer. Kalmanovitz therefore agreed to obtain additional financing, and on November 18, 1982, Kalmanovitz and the Jacobs Group amended the Memorandum of Terms by letter agreement providing that JMSL would raise its offering price to $30 per share and that Kalmanovitz would increase his cash participation in the deal to $44.4 million. In a separate letter written on the same date, Jacobs promised that

[i]n the event we decide that it is better for our group to sell our shares in Pabst, rather than continue to bid higher, you will receive fifty percent (50%) of all amounts in excess of $24.00 for all the shares in our group.

App. at 225.

On November 23, 1982, JMSL again raised its tender offer, this time to $35 per share. The new offer was made possible by Kalmanovitz' promise to increase his cash participation to $59.4 million. The next day, the district court denied cross-motions by JMSL and HBC to enjoin each others' offers. After the hearing, Heileman announced that it would reduce the number of shares sought to 4.25 million, that 3.9 million shares had already been tendered to it, and that the company would make a further announcement (presumably regarding the price offered per share) by November 26, 1982.

During the afternoon of November 24, Jacobs telephoned Cleary and expressed concern regarding the ability of the Jacobs Group to proceed further in the tender offer battle. Jacobs then informed Cleary that he would withdraw from the bidding in exchange for $7.5 million. Jacobs avers that the motivation for this decision was his attorney's advice that the HBC tender offer would probably prevail and his fear of being shut out of HBC's proration pool.

Negotiations between the Jacobs Group and Heileman ensued, and on November 26, 1982, they signed an agreement which provided that (1) HBC would make a new tender offer for 5.6 million Pabst shares at $29 per share; (2) the Jacobs Group would tender its 1.4 million shares under the new offer; (3) the parties would dismiss all outstanding non-derivative litigation; and (4) Pabst and Heileman would reimburse the Jacobs Group $7.5 million for its expenses.

Later that day, Jacobs informed Kalmanovitz of the new deal with Heileman and offered to pay plaintiff $5 million if he agreed to withdraw from the bidding. The offer was rejected. On December 2, 1982, HBC made its $29 tender offer, and JMSL withdrew its offer the following day. Not conceding defeat, Kalmanovitz then made a tender offer for 4.15 million shares at $32 per share through 21-115, Inc., a corporation wholly owned by plaintiff. Four days later, on December 10, 1982, Kalmanovitz instituted the present action in the district court in Delaware, requesting a preliminary injunction against HBC. On December 20, 1982, the district court denied the preliminary injunction, and on December 22, 1982--the withdrawal date for the HBC offer--Kalmanovitz increased his tender offer to $40 per share. On December 23, 1982, however, Heileman accepted for payment 5.6 million Pabst shares, thus ending the contest for control of the brewing company. To date plaintiff has not received any of the proceeds from the Jacobs Group's tender of its Pabst shares to HBC.

The procedural history of this case is somewhat complex inasmuch as the present appeal stems from the consolidation of three separate cases and has spawned no less than seven district court opinions. ² Initially, Kalmanovitz, as a disappointed tender offeror and as a shareholder of Pabst, and S & P Co., a California corporation wholly owned by Kalmanovitz, ³ brought suit in the district court in Delaware. The complaint alleged violations of federal securities and antitrust laws and Delaware corporate law by G. Heileman Brewing Company, Russell G. Cleary, HBC Acquisition, Inc., Pabst, and William F. Smith, Jr. ⁴

Subsequently, Kalmanovitz, individually and as a Pabst shareholder, filed suit in the district court in California, alleging similar federal claims and an additional California state law claim of tortious interference with contractual relations against the same parties and also against the members of the Jacobs Group. Almost immediately thereafter, plaintiff instituted a third action--based on breach of contract--in California state court against the Jacobs Group. After the latter case was removed to federal court in California, the two California federal cases were consolidated, transferred to Delaware, and then consolidated with the initial case.

In November of 1983, the district court dismissed plaintiff's claims based on Secs. 1 and 2 of the Sherman Act, 15 U.S.C. Secs. 1, 2 (1982), and his tortious interference with contract claim under Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief could be granted. Kalmanovitz v. G. Heileman Brewing Co., 576 F.Supp. 922 (D.Del.1983). In September of 1984, the district court granted partial summary judgment to defendants with regard to the federal securities and Delaware state law claims. 595 F.Supp. 1385 (D.Del.1984). All that remains is the breach of contract claim against the Jacobs Group. Finding no just reason to delay the appeal of the claims dismissed, the district court certified its rulings under Fed.R.Civ.P. 54(b) as final for purposes of appeal. This Court accepted appellate jurisdiction under 28 U.S.C. Sec. 1291 (1982).

II.

Kalmanovitz alleges that defendants conspired unreasonably to restrain trade in Pabst stock in violation of Sec. 1 of the Sherman Act, 15 U.S.C. Sec. 1 (1982). In particular, plaintiff contends that the November 26, 1982 agreement among the various defendants was an illegal scheme to eliminate competitive bidding for and to fix the price of Pabst stock at $29 per share. Defendants allegedly achieved...