Rand-Whitney Packaging Corp. v. Robertson Group

• Decision Date: 04 September 1986
• Docket Number: Civ. A. No. 86-1393-W.
• Citation: 651 F. Supp. 520
• Parties: RAND-WHITNEY PACKAGING CORP., Plaintiff, v. The ROBERTSON GROUP, INC., Robertson Paper Box Co., Inc. and Simkins Industries, Inc., Defendants.
• Court: U.S. District Court — District of Massachusetts

651 F. Supp. 520

RAND-WHITNEY PACKAGING CORP., Plaintiff, v. The ROBERTSON GROUP, INC., Robertson Paper Box Co., Inc. and Simkins Industries, Inc., Defendants.

Civ. A. No. 86-1393-W.

United States District Court, D. Massachusetts.

July 31, 1986.

Judgment by Consent September 4, 1986.

James Delphy, Daniel L. Goldberg, Bingham, Dana & Gould, Boston, Mass., for plaintiff.

Frank Bailey, David Cavers, Jr., Richard Mable, Robert Witolmes, Jr., Powers and Hall, Boston, Mass., for defendants.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

WOLF, District Judge.

This is a case which, as you know, started on May 5th, 1986. And on May 6th, 1986, I entered a temporary restraining order precluding the Defendant from transferring the assets at issue in this case.

We had, as I said when I saw you last week, an expedited trial because I was concerned that the pendency of a temporary restraining order and a possible preliminary injunction would hold the Defendant hostage to running a business that, at least at the outset of the case, was losing money. I understand it has since been realized that it has been earning money at least in some months.

I was also influenced in giving an expedited trial by the fact that if the Plaintiff prevailed and persuaded the Court that specific performance was appropriate, it would be important that the Plaintiff acquire the company it intended to purchase. It was recognized that the passage of several years through trial in the ordinary course could radically alter the nature or value of the assets at issue.

It is those same considerations that have caused me to have you here today so I could give you my decision in this form. I have decided that the April 18, 1986 letter constitutes a contract, that is a binding agreement between Rand-Whitney and Robertson Group Inc., to sell the assets of the Robertson Paper Box Company.

I've also decided that specific performance is at least part of the appropriate remedy. These two decisions raise issues regarding the careful fashioning of a remedy which Mr. Cavers, in his closing argument, asked for an opportunity to address further should we reach this point.

The most prominent of those questions is whether specific performance ought to be ordered on the basis of the April 18, 1986 letter alone or on what you'll recognize when I call it "Exhibit G," that is the April 18 letter integrated with the purchase and sale agreement drafted by Powers & Hall which is an exhibit in the case.

Rather than take the time to write an opinion, and have it go through the numerous drafts that such opinions often do, since I very carefully considered this case since I saw you last, and had very recent and intensive exposure to it, I've decided to inform you of the reasons for my decision, my findings of fact and conclusions of law, today subject to my reservation of rights to read the transcript, to edit and clarify the findings of fact, and to edit and elaborate the conclusions of law. I may not mention all of the authority I now believe exists for the conclusions of law which I'll inform you of.

Basically, this has been a case where there has been a very energetic and effective presentation by counsel. It has been very illuminating to me. In reviewing the very detailed notes I have of the testimony, I feel I can appropriately render this decision in this form. I will do so.

The findings of fact in this case are as follows. Having considered all of the evidence and having made judgments regarding credibility in the areas where that was necessary and appropriate (I might say few, if any, of those areas related to the testimony of Mr. Grieb which you ultimately agreed, and I agree, could properly be taken through deposition.) I find that the Plaintiff has proven the following facts by a preponderance of the credible evidence.

First, with regard to the parties, the Rand-Whitney Packaging Corporation is a Massachusetts corporation with its usual place of business in Leominster, Massachusetts. It makes paper and packaging materials. It also has facilities in Worcester, Massachusetts, Rhode Island, New Hampshire and Delaware. It does not own a board mill. Rather, it buys its paper products from others. The Robertson Group Inc. is a Delaware Corporation with its usual place of business in Connecticut. It owns 100 percent of the Robertson Paper Box Company which is also a corporation with its principal place of business in Connecticut. Robertson Paper Box Company is in business of manufacturing paper and packaging materials. It does own a board mill, and it produces a product which Robertson Paper Box uses and which Rand-Whitney could use.

The Boards of Directors of the Robertson Group Inc. and Robertson Paper Box usually hold simultaneous Board of Directors meetings. They did so on April 17, 1986, a key date in this case. As a practical matter, the Robertson Group Inc. and its directors are an alter ego for the Robertson Paper Box Company and its directors. When I use the term "Robertson" in this decision, I am referring both to Robertson Group Inc. and to Robertson Paper Box unless I indicate otherwise.

In April 1985, the Robertson companies were substantially owned by the Powers family, and Richard Powers controlled the majority of voting stock. At that time, Mr. Powers was replaced as the Chairman and Chief Executive Officer of Robertson by J. Richard Grieb. That occurred, in part, as the result of a family dispute relating to the business. Mr. Grieb was the former President of Smirnoff Beverages, and former president of Heinz U.S.A., and held other high level executive positions.

At about this time the Board of Robertson began discussing selling Robertson Paper Box. In this period Robertson Paper Box was losing about a $125,000 a month. These monthly losses continued until April 1986 when it now appears that Robertson earned a profit. The discussion of selling Robertson Paper Box was influenced by the family disputes, and also influenced by the fact that Robertson did not have the capital to invest in the box company to make it competitive and profitable.

A committee of Robertson was set up to explore the possibility of selling the box company. The committee consisted of Mr. Grieb, Mr. Tracy, the Robertson's engagement partner at Arthur Anderson, and Mr. Morrison, an outside director of a firm. The committee, at least in that period, was hoping that it could get book value, or the amount of shareholder equity, for the company. They considered that to be a figure in the range of 2.8 to 3.5 million at that time. They also expected that they might have to take a discount on shareholder equity in order to sell the company.

By January of 1986, when the Robertson Board met, there were no live prospects for the purchase of the company. There was, however, then a definite consensus on the Board to sell the company if a purchaser could be found by April. In addition, the Board determined that if there was no purchaser by April 1986, strong consideration would have to be given to closing Robertson Paper Box and liquidating the company. This was recognized as an unattractive alternative because of the impact it would have on Robertson's employees, and also the adverse impact that it would have financially on shareholders. Mr. Grieb was given the responsibility to deal with the potential buyers.

In February of 1986, Rand-Whitney learned that Robertson was for sale. Nicholas Willard, the Vice President and General Manager of Rand-Whitney, was placed in charge of exploring possible acquisitions. Mr. Willard contacted Mr. Grieb and arranged for himself and Mr. Petro of Rand-Whitney to visit Robertson in February, 1986.

At that time, the Rand-Whitney representatives toured the Robertson plant and mill. They discussed their potential interest in buying all of the real estate owned by Robertson Paper Box, consisting of about 73 acres in addition to the property at which the operating assets were located. They received a list of major equipment from Mr. Grieb. They also discussed what kind of capital investment would be needed to make the improvements desirable to enhance the competitiveness and efficiency of Robertson. This included contemplated investments of about 1.5 million for the plant and $500,000 for the mill.

Mr. Willard was immediately interested and engaged by the prospect of Rand-Whitney acquiring Robertson. The mill promised an opportunity to gain a degree of vertical integration otherwise unavailable. The mill had potential to furnish supplies to Rand-Whitney facilities in Massachusetts, Rhode Island, and Delaware. The central Connecticut location of Robertson would place Rand-Whitney faclities closer to its New York sales office. Robertson had a good reputation in the industry and some useful equipment. It also provided a good location for the trucking operations of Rand-Whitney. In addition, the mill would provide a good fit with Rand-Whitney's affiliate, International Forest Products, which could use the mill's paper scraps in its recycling operations.

From mid-February to April 8, 1986, Mr. Willard and Mr. Grieb were in frequent contact. Rand-Whitney was investigating the desirability of purchasing Robertson if it could. In connection with this, Mr. Grieb gave Mr. Willard all the information which Mr. Willard requested. This included customer information, financial information, and other information. In addition, Rand-Whitney had several experts go to the plant and mill in order to evaluate and report on the quality of the plant, the equipment, and other items.

In this period, Mr. Grieb told Mr. Willard that the selling price for Robertson would be an amount equal to book value or shareholder equity, which he expected in dollar terms would translate into three to three-and-a-half million dollars. Mr. Grieb also told Mr. Willard that there were others who were interested in the possible Robertson acquisition. In this period Rand-Whitney decided that it...