Kalmanovitz v. G. Heileman Brewing Co., Inc., Civ. A. No. 82-797

• Citation: 595 F. Supp. 1385
• Decision Date: 28 September 1984
• Docket Number: C83 0704).,(Formerly California A. No. C83 0196,Civ. A. No. 82-797
• Parties: Paul KALMANOVITZ, individually and as a shareholder of Pabst Brewing Company, and S & P Company, a California corporation, Plaintiffs, v. G. HEILEMAN BREWING COMPANY, INC., a Wisconsin corporation, Russell G. Cleary, HBC Acquisition, Inc., a Delaware corporation, Pabst Brewing Company, a Delaware corporation, William F. Smith, Jr., Irwin L. Jacobs, Dennis Mathisen, Gerald A. Schwalbach and Daniel T. Lindsay, Defendants. Paul KALMANOVITZ, an individual, and S & P Company, a California corporation, Plaintiffs, v. Irwin JACOBS, an individual, Dennis Mathisen, an individual, Gerald A. Schwalbach, an individual, and Daniel T. Lindsay, an individual, Defendants.
• Court: United States District Courts. 3th Circuit. United States District Court (Delaware)

595 F. Supp. 1385

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

Paul KALMANOVITZ, an individual, and S & P Company, a California corporation, Plaintiffs, v. Irwin JACOBS, an individual, Dennis Mathisen, an individual, Gerald A. Schwalbach, an individual, and Daniel T. Lindsay, an individual, Defendants.

Civ. A. No. 82-797, (Formerly California A. Nos. C83 0196, C83 0704).

United States District Court, D. Delaware.

September 28, 1984.

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Robert K. Payson and Peter M. Sieglaff of Potter, Anderson & Corroon, Wilmington, Del., and Joseph L. Alioto, Joseph M. Alioto, John I. Alioto, and Gary D. Elion of Alioto & Alioto, San Francisco, Cal., for plaintiffs.

R. Franklin Balotti of Richards, Layton & Finger, Wilmington, Del., and Harry Davidow of Weil, Gotshal & Manges, New York City, for defendants Irwin L. Jacobs, Dennis M. Mathisen, Gerald A. Schwalbach and Daniel T. Lindsay.

Bruce M. Stargatt of Young, Conaway, Stargatt & Taylor, Wilmington, Del., Maurice J. McSweeney of Foley & Lardner, Milwaukee, Wis., and Leslie C. Smith of Foley, Lardner, Hollabaugh & Jacobs, Washington, D.C., for defendants G. Heileman Brewing Co., Inc., Russell G. Cleary, and HBC Acquisition, Inc.

A. Gilchrist Sparks, III, Eric Howard and Michael Houghton of Morris, Nichols, Arsht & Tunnell, Wilmington, Del., and Willis B. Snell of Sutherland, Asbill & Brennan, Washington, D.C., for defendants Pabst Brewing Co. and William F. Smith, Jr.

OPINION

LATCHUM, Senior District Judge.

I. BACKGROUND

Plaintiffs, Paul Kalmanovitz¹ ("Kalmanovitz"), individually and as a shareholder of Pabst Brewing Company ("Pabst"), and S & P, a California corporation ("S & P") (collectively "plaintiffs"), brought this action on December 10, 1982, pursuant to (a) Sections 10(b), 13(e), 14(d), and 14(e) of the Exchange Act, 15 U.S.C. §§ 78j(b), 78m(e), 78n(d), and 78n(e), and the rules and regulations promulgated by the SEC thereunder; (b) Section 1 of the Sherman Act, Section 7 of the Clayton Act, 15 U.S.C. §§ 1, 18; and (c) the laws of the State of Delaware. (Docket Item "D.I." 1 at 3.)

Originally, three separate lawsuits were filed, however, the cases have subsequently been consolidated into this present case. This lawsuit began in 1982, the result of the fierce battle for control of Pabst between Kalmanovitz, the Jacobs Group which included Irwin L. Jacobs ("Jacobs"), Dennis Mathisen ("Mathisen"), Gerald A. Schwalbach ("Schwalbach") and Daniel I. Lindsay ("Lindsay"), and G. Heileman Brewing Company, Inc. ("Heileman"). Presently pending before this Court are two motions: (a) defendants' motion to dismiss Counts I through X of the Complaint² (D.I. 166); and (b) plaintiffs' motion to certify the antitrust and tortious interference claims for appeal pursuant to Fed.R.Civ.P. 54(b). (D.I. 160.)

II. FACTS

Because this Court has already recounted the details of the battle for control of Pabst,³ this discussion therefore will be limited to a thumbnail sketch of the operative facts.

On October 26, 1982, Kalmanovitz and Jacobs, along with three of Jacobs' associates (the "Jacobs Group"), entered into a Memorandum of Terms (the "October 26 contract"), by which Kalmanovitz and the Jacobs Group, through JMSL Acquiring Corporation ("JMSL"),⁴ agreed to make a tender offer for 3,000,000 Pabst shares at $24 per share.⁵ (D.I. 121, Ex. 1 at 2.) Acquisition of these 3,000,000 shares, combined with 1,440,305 Pabst shares the Jacobs Group already owned, would have given the parties to the agreement a majority of outstanding Pabst stock.

On October 27, 1982, Kalmanovitz and the Jacobs Group made the tender offer for 3,000,000 shares of Pabst stock at $24 per share (the "Jacobs-Kalmanovitz offer"). (Id. at Ex. 2.) The Jacobs-Kalmanovitz offer was opposed by the management of Pabst, e.g., William F. Smith, Jr., Pabst's president. As a result of a series of meetings between Smith and the chief executive officer of Heileman, Russell G. Cleary, on November 10, 1982, Heileman commenced a competing tender offer through a wholly-owned subsidiary called "HBC Acquisition, Inc." ("HBC"), a wholly-owned subsidiary of Heileman (the "Heileman offer"). (Id. at Ex. 3.) The Heileman offer was for 5,500,000 shares of Pabst stock at $27.50 per share.

On November 18, 1982, the Jacobs-Kalmanovitz offer was amended and increased to $30 per share. This increase in the Jacobs-Kalmanovitz offer was made possible by an amendment to the October 26 contract whereby Kalmanovitz agreed to increase his cash participation in the offer from $26,394,720 to $44,394,720. (Id. at Ex. 4.) At the same time, on November 18, 1982, defendant Jacobs promised, on behalf of the Jacobs Group in a letter to Kalmanovitz, that in the event the Jacobs Group decided to sell its 1,140,305 shares of Pabst stock, rather than continuing to bid higher, it would pay Kalmanovitz 50% of all amounts it received in excess of $24 per share for all the shares in the Group (the "Letter Agreement"). (Id. at Ex. 6.)

On November 23, 1982, the Jacobs-Kalmanovitz offer was further amended and increased to $35 per share. This increase in offer was accompanied by the further understanding that Kalmanovitz would increase his cash participation in the offer to $59,394,720. (Id. at Exs. 7 & 8.)

On November 24, 1982, this Court denied motions for preliminary injunctions against the Jacobs-Kalmanovitz offer (brought by the Heileman group) and against the Heileman offer (brought by the Jacobs Group and Kalmanovitz). Heileman announced after the hearing that it would reduce the number of shares sought in its offer to 4.25 million and that it had approximately 3.9 million shares already in its depository.

That afternoon, on November 24, 1982, Jacobs telephoned Cleary and expressed concern about his (Jacobs) ability to go ahead financially. Cleary gathered from the conversation that Jacobs felt that he didn't want to go any further from a resources standpoint and he asked for suggestions to resolve the situation. During this conversation, Jacobs told Cleary that he would withdraw from the bidding for Pabst shares in exchange for $7,500,000.

As a result of the negotiations begun on November 24, 1982, the Jacobs and Heileman groups entered into a contract on November 26, 1982, in which HBC agreed to terminate its old offer and announce a new offer which increased the number of shares to 5,600,000, raised the price to $29, and increased the value of notes to be paid to stockholders in a second-step merger from $20 to $24 per share. (Id. at Exs. 9, 10.) The Jacobs Group agreed to tender its shares into the new offer. The parties also agreed to dismiss all outstanding non-derivative litigation and that, upon dismissal, the Jacobs Group would be reimbursed $7.5 million for expenses incurred in its battle for control, this cost to be shared equally by Heileman and Pabst.

Also on November 26, 1982, Jacobs called Kalmanovitz's attorney and stated that "he worked out a deal with Heileman to pay Kalmanovitz $5,000,000 if he would agree to withdraw from the bidding." This offer to pay Kalmanovitz was accompanied by an offer that he might share with Jacobs "in a bargain purchase of Pabst's Milwaukee office building." Kalmanovitz rejected the offer.

On December 2, 1982, HBC made a new tender offer for Pabst shares (seeking 5,600,000 shares at $29 per share) (the "HBC Offer"). (Id. at Ex. 11.) Kalmanovitz made a competing offer on December 6, 1982 for 4,150,000 shares at $32 per share. (Id. at Ex. 13.) On December 10, 1982, Kalmanovitz filed this action and moved for a preliminary injunction to stop the HBC Offer.

On December 20, 1982, this Court denied Kalmanovitz's motion. HBC increased its offering price to $32 per share on December 15, 1982. On December 22, 1982 — the withdrawal date for the HBC Offer — Kalmanovitz increased his offering price to $40 per share. (Id. at Ex. 16.) On December 23, 1982, Heileman accepted for payment 5,600,000 shares of Pabst and the contest for control of Pabst ended.

III. DEFENDANTS' MOTION TO DISMISS

Because affidavits have been filed by plaintiffs and defendants in this proceeding, the Court will consider defendants' motion to dismiss as one for summary judgment pursuant to Rule 56. Fed.R. Civ.P. 12(b). Under Rule 56, a court may enter summary judgment only "if the pleadings, depositions, answers and admissions, together with affidavits, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Any reasonable inferences from the facts must be resolved in favor of the party against whom the judgment may be entered. Peterson v. Lehigh Valley Dist. Council, United Bhd. of Carpenters and Joiners, 676 F.2d 81, 84 (3d Cir.1982).

1. Plaintiffs' Claims For Injunctive Relief

Courts will not consider granting injunctions when "the circumstances are such that the injunction cannot be enforced by the court." 43 C.J.S. Injunctions § 34; Penn Central Co. v. Buckley & Co., 293 F.Supp. 653 (D.N.J.1963), aff'd, 415 F.2d 762 (3d Cir.1969).

It is presently infeasible to ask this Court to enjoin acts which purportedly will violate the federal securities laws and antitrust laws or Delaware state law when these acts have already occurred. See Kauffman v. Johnston, 454 F.2d 267 (3d Cir.1972) (petition to enjoin deprivation of religious rights in connection with 1969 Passover mooted by passing of the holiday); Tymiak v. Omodt, 676 F.2d 306 (8th Cir.1982) (plaintiff's request for injunction to prevent his ejectment was rendered moot by his...