Tracinda Corp. v. Daimlerchrysler Ag

• Decision Date: 22 March 2002
• Docket Number: Nos. CIV.A.00-993-JJF, CIV.A.00-984-JJF, CIV.A.01-004-JJF.,s. CIV.A.00-993-JJF, CIV.A.00-984-JJF, CIV.A.01-004-JJF.
• Citation: 197 F.Supp.2d 42
• Court: U.S. District Court — District of Delaware
• Parties: TRACINDA CORPORATION, a Nevada Corporation, Plaintiff, v. DAIMLERCHRYSLER AG, a Federal Republic of Germany corporation; Daimler-Benz AG, a Federal Republic of Germany corporation; Juergen Schrempp, a citizen of the Federal Republic of Germany; Manfred Gentz, a citizen of the Federal Republic of Germany; Hilmar Kopper, a citizen of the Federal Republic of Germany, Defendants. Glickenhaus & Co., et al., Plaintiffs, v. Daimlerchrysler AG, et al., Defendants

197 F.Supp.2d 42

TRACINDA CORPORATION, a Nevada Corporation, Plaintiff, v. DAIMLERCHRYSLER AG, a Federal Republic of Germany corporation; Daimler-Benz AG, a Federal Republic of Germany corporation; Juergen Schrempp, a citizen of the Federal Republic of Germany; Manfred Gentz, a citizen of the Federal Republic of Germany; Hilmar Kopper, a citizen of the Federal Republic of Germany, Defendants.

Glickenhaus & Co., et al., Plaintiffs, v. Daimlerchrysler AG, et al., Defendants;

Nos. CIV.A.00-993-JJF, CIV.A.00-984-JJF, CIV.A.01-004-JJF.

United States District Court, D. Delaware.

March 22, 2002.

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Joseph A. Rosenthal, Esquire, and Carmella P. Keener, Esquire of Rosenthal, Monhait, Gross & Goddess, P.A., Wilmington, Delaware. Of Counsel: Stephen Lowey, Esquire, Richard Bemporad, Esquire, David Harrison, Esquire, Thomas Skelton, Esquire, Lowey Dannenberg Bemporad & Selinger, P.C., White Plains, New York. Attorneys for Glickenhaus Plaintiffs.

A. Glichrist Sparks, III, Esquire, Alan J. Stone, Esquire, and Jessica Zeldin, Esquire of Morris, Nichols, Arsht & Tunnell, Wilmington, Delaware. Of Counsel: Terry Christensen, Esquire, Mark G. Krum, Esquire, Steven J. Aaronoff, Esquire, and Mark I. Labaton, Esquire of Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP, Los Angeles, California. William G. McGuinness, Esquire and Julie E. Kamps, Esquire of Fried, Frank, Harris, Shriver & Jacobson, New York, New York. Attorneys for Plaintiff Tracinda Corporation.

Jay W. Eisenhofer, Esquire, Abott A. Leban, Esquire, and Richard M. Donaldson, Esquire of Grant & Eisenhofer, P.A., Wilmington, Delaware. Of Counsel: Vincent R. Cappucci, Esquire, Johnston de F. Whitman, Jr., Esquire and Catherine Torell, Esquire, Entwistle & Cappucci LLP, New York, New York. Jeffrey A. Klafter, Esquire, Steven Mellen, Esquire and Stacy E. Osborne, Esquire of Bernstein Litowitz Berger & Grossmann LLP, New York, New York. Jeffrey W. Golan, Esquire and Samuel R. Simon, Esquire of Barrack Rodos & Bacine, Philadelphia, Pennsylvania. Attorneys for Co-Lead Plaintiffs, The Florida State Board of Administration, Municipal Employees Annuity and Benefit Fund of Chicago, Denver Employees Retirement Plan, Policemen's Annuity and Benefit Fund of Chicago, and Municipal Employees Annuity and Benefit Fund of Chicago.

Thomas J. Allingham II, Esquire, and Robert S. Saunders, Esquire, of Skadden, Arps, Slate, Meagher & Flom LLP, Wilmington Delaware. Of Counsel: Jonathan J. Lerner, Esquire, J. Michael Schell, Esquire, Joseph N. Sacca, Esquire and Jacob E. Hollinger, Esquire of Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York. Attorneys for Defendants DaimlerChryler AG, Daimler-Benz AG, Jürgen Schrempp and Manfred Gentz.

Michael D. Goldman, Esquire and Peter J. Walsh, Jr., Esquire of Potter Anderson & Corroon LLP, Wilmington, Delaware. Of Counsel: Jeffrey Barist, Esquire, Douglas W. Henkin, Esquire, William R. Spiegelberger, Esquire, and Stacey B. Menaker, Esquire of Milbank, Tweed, Hadley & McCloy LLP, New York, New York. Attorneys for Defendant Hilmar Kopper.

OPINION

FARNAN, District Judge.

Pending before the Court is a Motion To Dismiss (D.I.57)¹ filed by Defendants DaimlerChrysler AG, Daimler-Benz AG, Juergen Schrempp and Manfred Gentz (collectively, "Defendants").² By their Motion, Defendants seek to dismiss (1) the Complaint in Tracinda Corp. v. DaimlerChrysler AG et al., Civil Action No. 00-984-JJF (the "Tracinda Complaint"); (2) the Complaint in Glickenhaus & Co., et al. v. DaimlerChrysler AG, et al., Civil Action No. 01-004-JJF³ (the "Glickenhaus Complaint"); and (3) the First Amended Consolidated Class Action Complaint in In re DaimlerChrysler Securities Litigation, Master Docket No. 00-993-JJF (the "Amended Class Complaint") (collectively "the Complaints"), pursuant to Federal Rules of Civil Procedure 12(b)(6) and 9(b), and Section 21D of the Securities Exchange Act of 1934. For the reasons discussed, the Court will (1) deny Defendants' Motion To Dismiss the Glickenhaus Complaint; (2) grant Defendants' Motion To Dismiss the civil conspiracy claim alleged in the Tracinda Complaint, and deny the Motion To Dismiss the remaining claims in the Tracinda Complaint; and (3) grant Defendants' Motion To Dismiss the Amended Class Complaint.

BACKGROUND

I. Procedural Background

In November 2000, Plaintiff Tracinda Corporation ("Tracinda") filed its Complaint against Defendants alleging, among other things, violations of the securities laws in connection with the 1998 merger between Daimler-Benz and Chrysler Corporation. Thereafter, Plaintiff Glickenhaus & Co. and its related affiliates and clients ("Glickenhaus") filed a nearly identical complaint. In addition, 23 putative class action complaints were filed in this Court, Michigan, and New York alleging substantially similar facts and claims as the Tracinda and Glickenhaus Complaints.

The Michigan actions were transferred to this Court sua sponte by the United States District Court for the Eastern District of Michigan. The parties to the New York action subsequently agreed to transfer their action to this Court.

By Order dated March 30, 2001, the Court consolidated the putative class actions and appointed lead plaintiffs and lead counsel. On April 9, 2001, The Florida State Board of Administration, Municipal Employees Annuity and Benefit Fund of Chicago, Denver Employees Retirement Plan, Policemen's Annuity and Benefit Fund of Chicago, and Municipal Employees Annuity and Benefit Fund of Chicago as Lead Plaintiffs on behalf of the Class (collectively, "Class Plaintiffs") filed the Amended Class Complaint. Defendants' Motion To Dismiss all three actions followed.

On July 26, 2001, the Court consolidated the Glickenhaus, Tracinda and Class Action cases into Civil Action No. 00-993, the lead case. (D.I.87, 88). Thereafter, the parties completed the remaining briefing due on Defendants' Motion To Dismiss. Accordingly, the instant Motion is fully briefed and ripe for the Court's review.

II. Factual Background

A. The Complaints

Tracinda, Glickenhaus and the Class Plaintiffs (collectively, "Plaintiffs") have filed their respective Complaints in connection with the 1998 merger of Daimler-Benz and Chrysler Corporation ("Chrysler") that formed the combined entity known as DaimlerChrysler AG ("DaimlerChrysler" or "the Company"). By their Complaints, Plaintiffs allege federal securities laws claims under Sections 10(b), 14 and 20 of the Securities and Exchange Act of 1934 (the "Exchange Act") and Sections 11, 12, and 15 of the Securities Act of 1933 (the "Securities Act"). In addition, Tracinda alleges a claim for civil conspiracy, and Class Plaintiffs allege channel stuffing as an additional basis for their securities claims.

B. The Negotiations Between Daimler-Benz and Chrysler

By their Complaints, Plaintiffs allege that in mid-January 1998, Defendant Jurgen Schrempp, the then chairman and chief executive officer of Daimler-Benz, contacted Robert Eaton, the then chairman and chief executive officer of Chrysler to discuss the possibility of a business combination. (Amended Class Cmplt. at ¶¶ 26, 27; Tracinda Cmplt. at ¶ 17; Glickenhaus Cmplt. at ¶ 18). Shortly thereafter, Mr. Eaton met with Kirk Kerkorian, the sole stockholder of Tracinda to discuss the proposed business combination. At that time, Tracinda was the owner of approximately 13.7% of Chrysler's common stock. (Tracinda Cmplt. at ¶ 17).

On February 12, 1998, Mr. Eaton and Mr. Schrempp again discussed the proposed business combination. At that time, Mr. Eaton and Mr. Schrempp agreed that any business combination between Daimler-Benz and Chrysler would be an equal union of two powerful corporations, and not a take-over of one corporation by the other. (Tracinda Cmplt. at ¶ 18). Consistent with this agreement, Mr. Schrempp represented to Mr. Eaton that, in the event of a business combination between the two corporations, the following would occur (1) Chrysler's management would continue to run operations in the United States; (2) the management team at Daimler-Benz would jointly manage the combined entity with the Chrysler management team on a world-wide basis, and (3) appropriate internal structures would be implemented to create and maintain a management system consistent with "a merger of equals." Interested in Mr. Schrempp's proposal, Mr. Eaton met with other Chrysler executives and significant stockholders to discuss the proposed merger.

On February 20, 1998, Mr. Eaton again spoke with Tracinda's Mr. Kerkorian about Mr. Schrempp's proposal. In the conversation, Mr. Eaton explained to Mr. Kerkorian that Mr. Schrempp emphasized that the merger would be a "merger of equals" between the two corporations and that Chrysler would have an equal management role in the Company on a world-wide basis. (Tracinda Cmplt. at ¶ 18). Mr. Kerkorian and Mr. Eaton agreed that the proposal was interesting and could create significant business opportunities for Chrysler and its stockholders.

Between February and April 1998, Mr. Eaton, Mr. Schrempp, senior level executives from both companies and investment banking advisors met to refine plans for the proposed "merger of equals." (Amended Class Cmplt. at ¶¶ 28-36; Tracinda Cmplt. at ¶ 19; Glickenhaus Cmplt. at ¶¶ 19-21). During this time frame and with Mr. Schrempp's consent and knowledge, Mr. Eaton continually updated Tracinda's Mr. Kerkorian with the progress of the meetings, because Tracinda's approval of the transaction was necessary to accomplish the merger. Mr. Eaton repeatedly communicated to Mr. Kerkorian that during the negotiations, Mr. Schrempp continued to emphasize that the merger would be a merger of equals with a joint post-merger management structure that would reflect and ensure the contemplated "equality" between the two corporations. (Tracinda Cmplt. at ¶ 19).

During this same...