Travis v. Anthes Imperial Limited
| Decision Date | 24 June 1971 |
| Docket Number | No. 69 C 367 (4).,69 C 367 (4). |
| Citation | 331 F. Supp. 797 |
| Parties | Glen J. TRAVIS, on behalf of himself and as representative of a class of persons similarly situated, et al., Plaintiffs, v. ANTHES IMPERIAL LIMITED, a (Canadian) corporation, et al., Defendants. |
| Court | U.S. District Court — Eastern District of Missouri |
John J. Cole, Armstrong, Teasdale, Kramer & Vaughan, St. Louis, Mo., for plaintiffs.
Coburn, Croft, Shepherd & Herzog, St. Louis, Mo., for Anthes Imperial Limited and Molson Industries Limited.
Deacy & Deacy, Kansas City, Mo., for the Individual Moving Defendants and Dominion Securities Corp., Limited; Shearman & Sterling, New York City, of counsel.
This matter is before the Court on motions of the various defendants directed to the plaintiff's first amended complaint. The motions pending include the following: motions to dismiss for failure to state a claim upon which relief can be granted; motions to dismiss for lack of jurisdiction over the subject matter and for lack of jurisdiction over the persons of the defendants; motions to dismiss for improper venue; and motions to quash service. The parties were heard on oral argument and have submitted numerous and voluminous briefs and affidavits in support of and in opposition to the motions.
Also pending are plaintiffs' motion for an order that this action may proceed as a class action under Rule 23, Federal Rules of Civil Procedure, and a motion to compel discovery under Rule 37, Federal Rules of Civil Procedure.
Plaintiffs are Glen J. Travis, Claire N. Travis, and St. Louis Union Trust Company, a corporation, Josephine Travis and Glennon J. Travis, suing on behalf of themselves and as representatives of a class of persons similarly situated. Plaintiffs are citizens of St. Louis County, Missouri, and St. Louis Union Trust Company is a Missouri corporation with its principal place of business in Missouri. From August 1966 to July 1969, plaintiffs were the owners of record of 153,375 Class A common shares of Anthes Imperial, Limited. Plaintiffs seek to represent the class consisting of all United States shareholders who owned Class A or Class B common shares of Anthes Imperial, Limited, as of May 25, 1968.
Defendants are Anthes Imperial, Limited (hereinafter referred to as "Anthes"), a Canadian corporation with its head office in Toronto, Ontario; Molson Industries Limited (hereinafter referred to as "Molson"), a Canadian corporation; eleven individuals who were at all relevant times the controlling shareholders, officers and directors of Anthes, nine of whom are residents of Canada, one of whom is a resident of New York and one of whom is a resident of New Jersey; twelve individuals who were at all relevant times the controlling shareholders, officers and directors of Molson, all of whom reside in Canada; and Dominion Securities Corporation Limited (hereinafter referred to as "Dominion"), a Canadian corporation.
The first amended complaint asserts jurisdiction under Section 27 of the Securities Exchange Act of 1934, 15 U.S.C. § 78aa; and under 28 U.S.C. § 1332(a) (1) and (2); that is, diversity of citizenship and amount in controversy; and as for Count Two, principles of pendent jurisdiction.
The facts pertaining to jurisdiction will be outlined in discussion where applicable. However, briefly summarized, the facts giving rise to plaintiffs' claims are few. Count One, charges that the defendants conspired to defraud all United States shareholders of Anthes for the purpose of eliminating United States resident shareholders of Anthes, in violation of Rule 10b-5 of the Securities Exchange Act. The alleged acts in furtherance of the conspiracy appear to be that in 1968, Molson made a tender offer to acquire the share of non-United States shareholders of Anthes. Defendants represented to the plaintiffs that they should not attempt to exchange their shares because after the expiration of the tender offer, defendants would treat United States resident shareholders of Anthes on an equivalent basis, net after-taxes, as they treated non-United States resident shareholders of Anthes. Plaintiffs claim that they were thereby induced to refrain from selling their shares.
Plaintiffs allege that in June 1969, defendants advised them that they would not attempt to effectuate a tax-free exchange for them. Defendants allegedly then offered to purchase plaintiffs' Anthes shares for 1.7 Class A common of Molson plus $3 cash (Canadian) for each share of Anthes held by plaintiffs or an equivalent amount in cash at the then current price of Molson Class A common shares at $22 (Canadian) per share. On July 9, 1969, plaintiffs transferred their Anthes shares to Molson for $40.40 (Canadian) per share as a result of an alleged threat by Molson to refuse to make any subsequent purchase of plaintiffs' stock. Plaintiffs allege that the cash amount they received for their shares in July 1969 was substantially less than the value of the Molson shares they would have received in 1968 if the original tender offer would have been extended to them. Plaintiffs allege that the misrepresentations were made to them by the mails and long distance telephone calls. Plaintiffs seek damages for themselves in the amount of $1,050,619 (Canadian), and damages for the class.
Count Two incorporates substantially all of the allegations of Count One. Jurisdiction is alleged to be based on diversity of citizenship and amount in controversy and also pendent jurisdiction. The second count charges that the acts of the defendants alleged in Count One constituted a fraud and deceit upon the plaintiffs in violation of a fiduciary duty owed plaintiffs by defendants. Plaintiffs seek actual damages in excess of one million dollars and punitive damages against defendant Willmot.
The initial question is whether a tender offer by one Canadian corporation for the shares of another Canadian corporation, not extended to United States resident shareholders is within the subject matter jurisdiction of this Court.
Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j, provides:
Rule 10b-5 (17 CFR 240.10b-5), promulgated by the SEC pursuant to § 10 (b), provides:
Section 30(b) of the 1934 Act provides (15 U.S.C.A. § 78dd):
"The provisions of this chapter or of any rule or regulation thereunder shall not apply to any person insofar as he transacts a business in securities without the jurisdiction of the United States, unless he transacts such business in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate to prevent the evasion of this chapter."
With respect to the character of the tender offer by Molson to non-United States resident shareholders, the following facts are relevant. Neither Molson shares nor Anthes shares were at any relevant time registered with the United States Securities and Exchange Commission, and to have extended the tender offer to United States resident shareholders would have required Molson to register its shares with the SEC. Molson management decided that it could not afford the delay required to register the shares before making and implementing its tender offer. In other words, at the time the tender offer was made, to have extended it to United States resident shareholders would have been a violation of the federal securities laws.
Further, the tender offer included a combination of cash and Molson shares in exchange for Anthes shares, which Molson states was desirable in order to minimize the dilution of its per-share earnings. Thus, the tender offer would have had adverse capital gains tax consequences on United States resident Anthes shareholders if made to and accepted by them; consequences not applicable to non-United States resident shareholders. In fact, plaintiffs claim that they were entitled to additional compensation for their Anthes shares in order that they would be on an equivalent net-after-taxes basis with non-United States resident shareholders of Anthes.
While plaintiffs allege that the misrepresentations of defendants involved the use of the telephone and the mails, the facts remain that the transactions complained of involved two Canadian corporations, Canadian residents (except two individual defendants) and a tender offer made solely in Canada respecting shares not registered on any American securities exchange.
The exclusionary language of § 30(b) of the 1934 Act, 15 U.S.C. § 78dd, has been limited in its application so as to exempt from the 1934 Act only brokers, dealers and banks insofar as they transact business in securities without the jurisdiction of the United States. Schoenbaum v. Firstbrook, 405 F.2d 200 (2d Cir. 1968), ...
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