Rosen v. Alleghany Corporation

• Decision Date: 06 August 1955
• Citation: 133 F. Supp. 858
• Parties: Samuel R. ROSEN, individually and as a common stockholder of Alleghany Corporation, and Randolph Phillips, Myron Neisloss and Edward C. Sterling, as members of the Protective Committee for Common Stockholders of the Alleghany Corporation and as common stockholders of Alleghany Corporation, Plaintiffs, v. ALLEGHANY CORPORATION and Robert R. Young, Defendants.
• Court: U.S. District Court — Southern District of New York

133 F. Supp. 858

Samuel R. ROSEN, individually and as a common stockholder of Alleghany Corporation, and Randolph Phillips, Myron Neisloss and Edward C. Sterling, as members of the Protective Committee for Common Stockholders of the Alleghany Corporation and as common stockholders of Alleghany Corporation, Plaintiffs, v. ALLEGHANY CORPORATION and Robert R. Young, Defendants.

United States District Court S. D. New York.

August 6, 1955.

COPYRIGHT MATERIAL OMITTED

Rosston, Hort & Brussel, New York City, for plaintiff.

George Brussel, Jr., Eugene G. King, New York City, of counsel.

Randolph Phillips, pro se.

White & Case, New York City, for defendants.

David Hartfield, Jr., J. Adam Murphy, Andrew O. Miller, Morton Moskin, New York City, of counsel.

DIMOCK, District Judge.

Three motions are now before me:

A. Plaintiffs, Samuel R. Rosen, individually and as a common stockholder of Alleghany Corporation, and three others, as members of a protective committee for common stockholders and as common stockholders, move for an order (1) directing defendants, Alleghany Corporation and Robert R. Young, forthwith to cause certain proxy material of plaintiffs Phillips, Neisloss and Sterling, the "Committee", to be addressed and mailed to the stockholders of Alleghany, (2) directing defendant Alleghany to permit plaintiff Rosen to inspect and make extracts from the stock list of Alleghany and, pending such inspection, restraining defendants from making any proxy solicitation, (3) directing Alleghany to cause its deferred annual stockholders' meeting to be held at a date, subsequent to Rosen's inspection, to be fixed by the court, (4) restraining defendants from soliciting proxies for use at Alleghany's deferred stockholders' meeting until plaintiffs have been accorded the relief requested under (1), (2) and (3), above and (5) restraining defendants from employing or using The Kissel Organization or any other proxy solicitors for the purpose of soliciting proxies for the election of directors at Alleghany's deferred annual stockholders' meeting.

B. Defendants move, pursuant to Rule 12, F.R.C.P., 28 U.S.C., for an order (1) dismissing plaintiffs' second claim contained in the complaint, (2) dismissing plaintiffs' third claim contained in the complaint, (3) dismissing plaintiffs' fourth claim contained in the complaint and, pursuant to Rules 23, 17(b) and 12(f), F.R.C.P., (4) striking from the complaint all reference to the "Committee".

C. Defendants move for an order (1) declaring plaintiffs' proxy material to be violative of Rule X-14A-9 of the Regulations of the Securities and Exchange Commission, (2) restraining plaintiffs, individually and/or as a Committee, and their agents, etc., from taking any steps to cause defendants, any of them or their agents, etc., to mail plaintiffs' proxy material to the stockholders of Alleghany and (3) restraining plaintiffs and their agents, etc., from attempting to communicate, by mail or otherwise, with stockholders of Alleghany regarding plaintiffs' proxy material.

The complaint sets forth five "claims":

The first alleges that defendants have already begun solicitation of Alleghany's stockholders with a view to influencing them not to execute plaintiffs' proxies and that this solicitation by Alleghany entitles plaintiffs to have Alleghany mail their proxy material to stockholders under Rule X-14A-7 of the Regulations of the Securities and Exchange Commission. Federal jurisdiction is alleged to exist under the Securities and Exchange Act of 1934, 15 U.S.C. §§ 78a, 78aa. The relief sought is (1) a declaration that the alleged acts of defendants do constitute proxy solicitation by Alleghany and (2) a direction that Alleghany forthwith cause plaintiffs' proxy material to be mailed in accordance with plaintiffs' orders.

The second claim alleges that Alleghany's 1955 annual stockholders' meeting, originally scheduled for May 4, 1955, was unlawfully postponed by defendants and that plaintiff Rosen is entitled, by virtue of section 113 of the Stock Corporation Law of New York, McKinney's Consol.Laws, c. 59, to inspect and make extracts from Alleghany's stock lists and has been denied the exercise of this right by defendants. Federal jurisdiction is alleged to exist by virtue of diversity of citizenship. The relief sought is (1) a direction that Alleghany permit "plaintiffs" to inspect its stock list and make extracts therefrom and that Alleghany refrain from making any proxy solicitation until this relief is granted and (2) a direction that Alleghany cause its deferred annual stockholders' meeting to be held at a date, subsequent to Rosen's inspection, to be fixed by the court. By virtue of the first and second claims plaintiffs also seek (a) a declaration that defendants' alleged solicitations were false and misleading in violation of Regulation X-14 of the Securities and Exchange Commission and (b) a direction that defendants refrain from soliciting proxies for the election of directors at Alleghany's deferred annual stockholders' meeting until plaintiffs have been afforded the relief requested under (2) above, of the first claim and (1) and (2) above, of the second claim.

The third claim alleges that defendant Young has conspired with Alleghany and its officers to prevent plaintiffs from communicating with the stockholders of Alleghany in respect of plaintiffs' proxy material and alleges that the matters alleged in the first and second claims are acts done in furtherance of the conspiracy. Federal jurisdiction is alleged to exist by virtue of diversity of citizenship. The relief sought is damages.

The fourth claim alleges that defendants intend to hire The Kissel Organization to solicit proxies for the management in connection with Alleghany's deferred annual stockholders' meeting and that it is improper for the corporation to expend its funds for these services. Federal jurisdiction is alleged to exist by virtue of diversity of citizenship. The relief sought is a direction that defendants refrain from employing or using The Kissel Organization or any other proxy solicitors for the purpose of soliciting proxies for the election of directors at Alleghany's deferred annual stockholders' meeting.

The fifth claim alleges that the alleged acts of defendants relied upon by plaintiffs as solicitation warranting plaintiffs' request that Alleghany be directed to mail plaintiffs' proxy material were libelous with respect to plaintiffs Phillips, Neisloss and Sterling, the "Committee", and that each of these plaintiffs have been injured thereby in the amount of $250,000. Federal jurisdiction is alleged to exist by virtue of diversity of citizenship. The relief sought is damages.

It will be observed that the relief sought by plaintiffs in their motion now before me has the following relationship to the complaint:

Part (1)¹ of plaintiffs' motion is based upon the first claim in the complaint.

Parts (2) and (3) of plaintiffs' motion are based upon the second claim in the complaint.

Part (4) of plaintiffs' motion is based upon the first and second claim in the complaint.

Part (5) of plaintiffs' motion is based upon the fourth claim in the complaint.

I shall deal first with plaintiffs' motion and the parts of defendants' motion, designated "B" above, which bear upon the disposition of plaintiffs' motion. Next I shall take up the remaining parts of defendants' motion "B". Finally, I shall deal with defendants' motion designated "C", above.

Plaintiffs' Motion

Plaintiffs' Request for Injunctive Relief With Respect to the Mailing of Their Proxy Material.

Plaintiffs seek an order directing defendants to mail proxy material prepared by the "Protective Committee".

Rule X-14A-7(b) of the Regulations promulgated by the Securities and Exchange Commission provides, in material part, as follows:

"(b) Copies of any proxy statement form of proxy or other communication furnished by the security holder shall be mailed by the issuer to such of the holders of record * * * as the security holder shall designate. The issuer shall also mail to each banker, broker or other person * * * a sufficient number of copies of such proxy statement, form of proxy or other communication as will enable the banker, broker or other person to furnish a copy thereof to each beneficial owner solicited or to be solicited through him. Such material shall be mailed by the issuer with reasonable promptness after receipt of a tender of the material to be mailed, of envelopes or other containers therefor and of postage or payment for postage, except that such material need not be mailed prior to the first day on which the solicitation is made on behalf of the management. * * *"

Plaintiffs' application is based on their contention that both defendants have already begun to solicit the stockholders of Alleghany to refrain from giving proxies to the Committee. The utterances upon which plaintiffs rely were all oral or written statements made by defendant Young or by one David W. Wallace, Secretary-Treasurer of Alleghany, which were published in newspapers at no cost to Alleghany.

Defendants resist this branch of plaintiffs' motion upon the ground that the utterances relied upon by plaintiffs fail to constitute proxy solicitation. My view of this part of plaintiffs' motion makes it unnecessary for me to decide whether it is plaintiffs or defendants who are correct in their characterization of the utterances.

Assuming that the utterances may be characterized as solicitations which are subject to S.E.C. regulation the relief which plaintiffs seek would not be proper here.

In Securities and Exchange Commission v. Okin, 2 Cir., 132 F.2d 784, 786, the Court of Appeals, per Judge Learned Hand, had before it "* * * the question whether the power of the Commission under § 12(e) of the Public Utility Holding Company Act of 1935, 15 U.S.C. § 791(e) which is substantially identical with Section 14 of the Securities and Exchange Act...