Tracinda Corp. v. Daimlerchrysler Ag

Decision Date07 April 2005
Docket NumberNo. CIV.A. 00-993-JJF.,CIV.A. 00-993-JJF.
Citation364 F.Supp.2d 362
PartiesTRACINDA 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; and Manfred Gentz, a citizen of the Federal Republic of Germany, Defendants.
CourtU.S. District Court — District of Delaware

A. Glichrist Sparks, III, Alan J. Stone, and Natalie J. Watson, Morris, Nichols, Arsht & Tunnell, Wilmington, DE, Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP, Los Angeles, CA (Terry N. Christensen, Mark G. Krum, Eric P. Early, of counsel), Fried, Frank, Harris, Shriver & Jacobson, New York, NY (William G. McGuinness, Julie E. Kamps, of counsel), for Plaintiff Tracinda Corporation.

Thomas J. Allingham II, and Robert S. Saunders, of Skadden, Arps, Slate, Meagher & Flom LLP, Wilmington, DE, Skadden, Arps, Slate, Meagher & Flom LLP, New York, NY (Jonathan J. Lerner, Lea Haber Kuck, Joseph N. Sacca, of counsel), for Defendants DaimlerChryler AG, Daimler-Benz AG, Jurgen Schrempp and Manfred Gentz.

OPINION

FARNAN, District Judge.

INTRODUCTION

This action was brought by Plaintiff, Tracinda Corporation, ("Tracinda") against Defendants, DaimlerChrysler AG, Daimler-Benz AG ("Daimler-Benz" or "Daimler"), Jurgen Schrempp and Manfred Gentz (collectively, "Defendants") alleging violations of securities laws, common law fraud and conspiracy in connection with the November 1998 merger between Chrysler Corporation ("Chrysler") and Daimler-Benz AG ("Daimler-Benz"). A thirteen day bench trial was held on the claims and defenses raised by the parties. This Memorandum Opinion constitutes the Court's Findings of Fact and Conclusions of Law on the issues tried before the Court.

JURISDICTION AND VENUE

The Court has subject matter jurisdiction over this action pursuant to Section 27 of the Securities Exchange Act of 1934, 15 U.S.C. § 78aa, and the doctrine of supplemental jurisdiction. Additionally, the Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1332(a)(2), because the amount in controversy exceeds $75,000, exclusive of interest and costs, and the matter arises between citizens of a State and citizens of a foreign state.

Venue in this judicial district is uncontested and is appropriate pursuant to Section 27 of the Exchange Act, 15 U.S.C. § 78aa, and 28 U.S.C. § 1391(b), because the transactions giving rise to this action occurred in substantial part in the District of Delaware, and Defendants conduct or transact business in the District of Delaware. In addition, venue is appropriate in this district under the terms of the Stockholder Agreement dated May 7, 1998, between and among, Daimler-Benz, Chrysler and Tracinda, which provides that the parties consent "to the personal jurisdiction of any federal court located in the State of Delaware or any Delaware state court in the event any dispute arises out of or relates to this Agreement or any of the transactions contemplated by this Agreement." DX 108 at 5-6. The Stockholder Agreement also provides that the Agreement "shall be governed by and construed in accordance with the laws of the State of Delaware without regard to the principles of conflicts of law thereof." Id. at 6.

PROCEDURAL BACKGROUND

Tracinda filed its Complaint in this action on November 27, 2000, alleging claims for violations of Sections 10(b), 14(a) and 20(a) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rules 10b-5 and 14a-9 of the rules promulgated thereunder, Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 (the "Securities Act") and claims for common law fraud and conspiracy. In addition to naming Defendants, Tracinda also sued Hilmar Kopper.

Separate motions to dismiss were filed by Defendants and Hilmar Kopper. The Court granted Defendants' motions on Tracinda's claim for civil conspiracy, but denied the motions, as they applied to Tracinda, in all other respects. Tracinda Corporation v. DaimlerChrysler AG, 197 F.Supp.2d 42 (D.Del.2002) ("Tracinda"). By separate Memorandum Opinion and Order, the Court denied Defendant Kopper's motion to dismiss for lack of personal jurisdiction with leave to renew.1 In re DaimlerChrysler AG Securities Litigation, 197 F.Supp.2d 86 (D.Del.2002) ("In re DaimlerChrysler I"). After the parties engaged in discovery, Defendant Kopper renewed his motion to dismiss for lack of personal jurisdiction. Defendants and Hilmar Kopper also separately moved for summary judgment. The Court granted Defendant Kopper's motion to dismiss for lack of personal jurisdiction, In re DaimlerChrysler AG Securities Litigation, 247 F.Supp.2d 579 (D.Del.2003) ("In re DaimlerChrysler II"), and denied Defendants' Motions for Summary Judgment issuing two opinions, one on the question of whether the claims against Defendants were time-barred under the applicable statute of limitations and one on the remaining issues raised by Defendants. In re DaimlerChrysler AG Sec. Litig., 269 F.Supp.2d 508 (D.Del.2003) (discussing statute of limitations issue) ("In re DaimlerChrysler III"); In re DaimlerChrysler AG Sec. Litig., 294 F.Supp.2d 616 (D.Del.2003) ("In re DaimlerChrysler IV").

Shortly before trial, Tracinda voluntarily dismissed its claims under Sections 11, 12 and 15 of the Securities Act, leaving for trial the common law fraud claim and the claims under the Exchange Act. Trial commenced on December 1, 2003, but was recessed due to a discovery production issue that arose near the end of the trial. Trial was completed in February 2004, and post-trial briefing was completed in May 2004.2

FINDINGS OF FACT

The Court makes the following findings with regard to the factual background related to this action. The Court makes additional findings where necessary in the context of its legal analysis under the heading "Conclusions of Law."

I. The Parties
A. Tracinda Corporation

Tracinda is a holding company incorporated in Nevada with its principal place of business located in Beverly Hills, California. Tracinda is primarily engaged in the business of investing in other companies, particularly companies listed on the New York Stock Exchange. Kerkorian Tr. Vol. B. at 270:12-271:1; Mandekic Tr. Vol. A. 114:17-19. Kirk Kerkorian is the Chairman, Chief Executive Office and sole shareholder of Tracinda. Joint Pretrial Order, Ex. 1 at ¶ 1; DX 1 at ¶ 11. As of May 6, 1998, Tracinda was Chrysler's largest stockholder. Joint Pretrial Order, Ex. 1 at ¶ 1. Based on its line of business and its experience, Tracinda is properly considered a sophisticated investor. In re DaimlerChrysler AG IV, 294 F.Supp.2d at 625.

B. DaimlerChrysler AG

DaimlerChrysler AG ("DaimlerChrysler") was formed in 1998, as a result of the merger between Daimler-Benz and Chrysler (the "Merger"). DaimlerChrysler is a stock corporation organized under the laws of the Federal Republic of Germany. Joint Pretrial Order, Ex. 1 at ¶ 2. Currently, DaimlerChrysler ordinary shares trade on the New York Stock Exchange under the trading symbol "DCX." Id. DaimlerChrysler shares are also traded on other domestic and foreign stock exchanges. Id. Since its formation and continuing to date, DaimlerChrysler has had two headquarters, one in Auburn Hills, Michigan and one in Stuttgart, Germany.

C. Daimler-Benz AG

Prior to the Merger, Daimler-Benz was a stock corporation organized and existing under the laws of the Federal Republic of Germany, with its principal place of business in Stuttgart, Germany. Id. at ¶ 3. Until November 17, 1998, Daimler-Benz was the issuer of American Depository Shares trading on the New York Stock exchange under the trading symbol "DAI." Daimler-Benz also traded ordinary shares on the Frankfurt Stock Exchange. Id.

D. Chrysler Corporation

Prior to the Merger, Chrysler was a corporation organized and existing under the laws of the State of Delaware with its principal place of business located in Auburn Hills, Michigan. Until November 12, 1998, Chrysler common stock traded on the New York Stock Exchange under the trading symbol "C." Id. at ¶ 4.

E. Jürgen Schrempp

Jurgen Schrempp is a citizen of the Federal Republic of Germany. Since November 1998, Schrempp has been a Chairman of the DaimlerChrysler Board of Management. Prior to that time, Schrempp served as Chairman of the Daimler-Benz Board of Management. Id. at ¶ 5. Schrempp does not serve and has never served on the Supervisory Board of either DaimlerChrysler or Daimler-Benz.

F. Manfred Gentz

Manfred Gentz is a citizen of the Federal Republic of Germany. Since November 1998, Gentz has been a member of DaimlerChrysler's Management Board. In this capacity, Gentz is responsible for Finance and Controlling. Prior to the Merger, Gentz served in a similar position and capacity on Daimler-Benz's Board of Management. Id. at ¶ 6. Gentz does not serve and has never served on the Supervisory Boards of either Daimler-Benz or DaimlerChrysler.

II. Tracinda's Historical Relationship With Chrysler

Tracinda's interest in Chrysler began when Kerkorian met Lee Iacocca, who was then Chairman of Chrysler, in 1990. Kerkorian Tr. Vol. B. 280:6-12, 314:13-21; DX 24 at 13. Shortly thereafter, Tracinda started investing in Chrysler, acquiring approximately 9.9% of Chrysler's outstanding stock in 1990. Kerkorian Tr. Vol. B. 281:15-17, DX 24 at 12. Two years later, Kerkorian sought representation for Tracinda on the Chrysler Board, and threatened a proxy fight to obtain such representation. DX 24 at 13-14; Kerkorian Tr. Vol. B. 315:8-318:1. In response, Iacocca, his designated successor Robert Eaton and the Chairman of the Nominating Committee of Chrysler's Board of Directors met with Kerkorian. As a result of these discussions, Kerkorian withdrew his request for board representation. DX 24 at 14.

During the next year and a half, Tracinda sought a possible stock split and dividend increase for...

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