NBT Bancorp Inc. v. Fleet/Norstar Financial Group Inc.

• Decision Date: 25 May 1995
• Parties: NBT BANCORP INC. et al., Appellants, v. FLEET/NORSTAR FINANCIAL GROUP INC. et al., Respondents.
• Court: New York Supreme Court — Appellate Division

Page 408

628 N.Y.S.2d 408

215 A.D.2d 990

NBT BANCORP INC. et al., Appellants, v. FLEET/NORSTAR FINANCIAL GROUP INC. et al., Respondents.

Supreme Court, Appellate Division,

Third Department.

May 25, 1995.

Metzger, Hollis, Gordon & Mortimer (Eugene J. Metzger, of counsel), Washington, DC and Lee, Emerson & Dean, Norwich, for appellants.

Cleary, Gottlieb, Steen & Hamilton (Richard F. Ziegler, of counsel), New York City and Hinman, Howard & Kattell, Binghamton, for respondents.

Before MIKOLL, J.P., and CREW, CASEY, YESAWICH and SPAIN, JJ.

MIKOLL, Justice Presiding.

Appeal from an order of the Supreme Court (Coutant, J.), entered August 8, 1994 in Chenango County, which granted defendants' motion for summary judgment dismissing the complaint.

This matter was previously before this court wherein we affirmed Supreme Court's dismissal of plaintiffs' complaint against defendants ¹ except as to a cause of action for tortious interference with prospective business relations (NBT Bancorp, Inc. v. Fleet/Norstar Financial Group, Inc., 159 A.D.2d 902, 553 N.Y.S.2d 864, appeal dismissed 76 N.Y.2d 886, 561 N.Y.S.2d 546, 562 N.E.2d 871, lv. dismissed 76 N.Y.2d 982, 563 N.Y.S.2d 770, 565 N.E.2d 519). We are now presented with Supreme Court's grant of summary judgment dismissing the remaining cause of action for tortious interference with business relations, from which plaintiffs appeal. Supreme Court found that plaintiff NBT Bancorp Inc. (hereinafter NBT) failed to demonstrate the existence of a triable issue of fact as to whether defendants used "wrongful means" to interfere with an attempted merger between NBT and Central National Bank (hereinafter Central) or, even if any wrongful means were used, that such means caused the stockholders to repudiate the merger. The court found that the actions of dissenting director Herbert Kling were a superseding cause of the termination of the merger.

To successfully oppose a motion for summary judgment on a cause of action for tortious interference with prospective business relations, plaintiffs must establish that defendants engaged in the use of wrongful or unlawful means to secure a competitive advantage over plaintiffs, or that defendants acted for the sole purpose of inflicting intentional harm on plaintiffs (see, e.g., Guard-Life Corp. v. S. Parker Hardware Mfg. Corp., 50 N.Y.2d 183, 190-191, 196, 428 N.Y.S.2d 628, 406 N.E.2d 445; Datlow v. Paleta Intl. Corp., 199 A.D.2d 362, 363, 605 N.Y.S.2d 119).

Prefatorily, we note that plaintiffs' complaint asserts that the wrongful acts of defendants were carried out for the purpose of securing an economic advantage over plaintiffs in competing for the acquisition of Central. As an economic purpose is lawful (see, e.g., Slifer-Weickel Inc. v. Meteor Skelly, 140 A.D.2d 320, 322, 527 N.Y.S.2d 553), defendants urge that this allegation constitutes a judicial admission that defendants' alleged wrongful acts were carried out for a legitimate purpose (see, e.g., Matter of Willard v. Haab, 170 A.D.2d 820, 821, 565 N.Y.S.2d 915, lv. denied 78 N.Y.2d 854, 573 N.Y.S.2d 467, 577 N.E.2d 1059) and, therefore, plaintiffs' argument against the grant of summary judgment is limited to whether defendants' activities satisfy the "wrongful means" prong of the test for tortious interference with prospective business relations. We concur with this contention. Wrongful means is defined as "physical violence, fraud or misrepresentation, civil suits and criminal prosecutions, and some degrees of economic pressure" (Guard-Life Corp. v. S. Parker Hardware Mfg. Corp., supra, at 191, 428 N.Y.S.2d 628, 406 N.E.2d 445).

The issue for resolution before us is whether plaintiffs established that a question of fact exists as to whether defendants engaged in wrongful means to abort the merger. The wrongful acts plaintiffs ascribe to defendants are two-fold. First, they contend that defendants dumped NBT stock in large numbers on the stock market, in their street name, to adversely and artificially affect the stock price for NBT stock, with the nefarious intent of dissuading Central's directors and shareholders from the merger. To prevail on this contention, plaintiffs need to establish that defendants engaged in an attempt to manipulate the market or to misrepresent the value of NBT stock in transferring their holding to its "street name" prior to the stock sale. Manipulation under the securities laws cannot be found unless there is misrepresentation or nondisclosure (Schreiber v. Burlington N., 472 U.S. 1, 12, 105 S.Ct. 2458, 2464-2465, 86 L.Ed.2d 1). Unlawful manipulation occurs where the appearance of transactions is created artificially as by "wash sales" or "matched orders" (see, Santa Fe Indus. v. Green, 430 U.S. 462, 476-477, 97 S.Ct. 1292, 1302-1303, 51 L.Ed.2d 480).

The instant sale was made in two block sales, several weeks apart. It was a bona fide sale, fully disclosed, and made on the open market in Norstar's street name to NBT's lead market maker for the highest price offered. Plaintiffs were fully aware of the sale. The transaction had no negative effect on the market price of NBT stock which was thereafter resold by First Albany Corporation at a profit, and despite the stock sale, plaintiffs' merger offer was nonetheless accepted by NBT's directors. We find that the record does not establish...