Viacom Intern. Inc. v. Icahn

• Decision Date: 14 September 1990
• Docket Number: 86 Civ. 4215 (RPP).
• Citation: 747 F. Supp. 205
• Parties: VIACOM INTERNATIONAL INC., Plaintiff, v. Carl C. ICAHN, Icahn Holding Corporation, Icahn Capital Corporation, Heron Investors Plan Inc., ACF Industries, Incorporated, Unicorn Associates Corporation, GNU Corp., Excalibur Partners, Health Investors Limited Partnership, Longview Investors Limited Partnership, Harmonious Associates Limited Partnership and Stork Associates Limited Partnership, Defendants and Third-Party Plaintiffs, v. Ralph M. BARUCH, Terrence A. Elkes, Kenneth F. Gorman, John W. Goddard, Leo Cherne, Joseph F. Condon, Theordore C. Jackson, Allan R. Johnson, Paul A. Norton, Harry M. Plotkin, Nancy C. Reynolds and John F. White, Third-Party Defendants.
• Court: U.S. District Court — Southern District of New York

747 F. Supp. 205

VIACOM INTERNATIONAL INC., Plaintiff, v. Carl C. ICAHN, Icahn Holding Corporation, Icahn Capital Corporation, Heron Investors Plan Inc., ACF Industries, Incorporated, Unicorn Associates Corporation, GNU Corp., Excalibur Partners, Health Investors Limited Partnership, Longview Investors Limited Partnership, Harmonious Associates Limited Partnership and Stork Associates Limited Partnership, Defendants and Third-Party Plaintiffs, v. Ralph M. BARUCH, Terrence A. Elkes, Kenneth F. Gorman, John W. Goddard, Leo Cherne, Joseph F. Condon, Theordore C. Jackson, Allan R. Johnson, Paul A. Norton, Harry M. Plotkin, Nancy C. Reynolds and John F. White, Third-Party Defendants.

86 Civ. 4215 (RPP).

United States District Court, S.D. New York.

September 14, 1990.

COPYRIGHT MATERIAL OMITTED

Lowey, Dannenberg, Bemporad, Brachtl & Selinger, P.C., Stephen Lowey, Wolf, Popper, Ross, Wolf & Jones, Lester L. Levy, Goodkind, Labaton & Rudoff, New York City, for plaintiff.

Weil, Gotshal & Manges, Dennis J. Block, New York City, for defendants and third-party plaintiffs.

Sherman & Sterling, Dennis P. Orr, New York City, for third-party defendants.

OPINION AND ORDER

ROBERT P. PATTERSON, Jr., District Judge.

This is a motion by defendants for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c) or for summary judgment pursuant to Federal Rule of Civil Procedure 56.

Background

On May 15, 1986 the defendants filed a Schedule 13D with the Securities and Exchange Commission stating that by the close of business on May 9, 1986, defendant Carl C. Icahn ("Icahn), along with defendant corporations and partnerships which Icahn controlled, had acquired "approximately 16.95 percent" of the common stock shares of plaintiff Viacom International, Inc. ("Viacom"). In the first four months of 1986, defendants had purchased 998,200 shares of Viacom common stock (4.8 percent of shares outstanding) and within ten days of May 9, 1986, defendants purchased another 2.5 million shares of Viacom common stock, bringing Icahn's aggregate control to 3,498,200 shares of common stock. A share of Viacom common stock had a market value of $65 at the close of business on May 5, 1986 and a market value of $72 at the close of business on May 9, 1986.

Item 4 of May 15, 1986 Schedule 13D set forth the "purpose" of defendants' "obtaining an equity position in the Issuer Viacom." Defendants stated that they had interests in using that "equity position" to pursue a variety of options: to "acquire for cash" "all of the outstanding Common Stock of the issuer" — in which context defendants "would be prepared to pay $75 per share (pre-split) for all of the Issuer's common stock"; to "enter into a standstill agreement with respect to their defendants' shares of Common Stock coupled with an exchange of the shares of Common Stock of the Issuer owned by the Reporting Persons defendants for a combination of securities of the Issuer and/or cash and a joint venture between the Issuer and an entity controlled by the Reporting Persons for the purpose of making acquisitions of companies involved in the entertainment industry"; to "continue to explore the feasibility of, and strategies for seeking control of the Issuer"; to "acquire additional shares of the Common Stock (subject to availability of shares at prices deemed favorable) from time to time in the open market, in privately negotiated transactions, by tender offer or otherwise"; or "to dispose of shares of Common Stock in the open market, in privately negotiated transactions with third parties or to the Issuer for cash or otherwise."

On May 21, 1986, Icahn, on behalf of all defendants, signed three agreements with Viacom. The first agreement, entitled "Exchange Agreement," referred to Viacom as "Company," to the 3,498,200 shares controlled by defendants as "Company Shares," and to defendants as "Seller Group" and "Warrant Group."¹ The Exchange Agreement stated:

The Seller Group beneficially owns 3,498,200 (pre-Stock Split as defined herein) shares (the "Company Shares") of Common Shares, $1.00 par value, of the Company (the "Common Stock") and has agreed with the Company to sell the Company Shares to the Company. This Agreement sets forth the terms and conditions upon which the entities listed on Annex B (the "Warrant Group") (such entities being the direct beneficial owners of the Company shares) are selling, transferring and assigning to the Company the Company Shares in exchange for $216,888,400 in cash (or $62 per share pre-Stock Split) and warrants (the "Warrants") to purchase 2,500,000 shares of Common Stock (pre-Stock Split), issued pursuant to a Warrant Agreement dated as of May 21, 1986 between the Company and the Warrant Group (the "Warrant Agreement"), substantially in the form of Annex C attached hereto.

Def. 3(g), Ex. A.² The Exchange Agreement also contained a covenant which bars defendants from purchasing Viacom stock or otherwise seeking to control Viacom for a period of eleven years. Id.

Pursuant to the terms of the paragraph quoted above, a second agreement, entitled "Warrant Agreement," was annexed to the Exchange Agreement and set forth the terms of the issuance of warrants to defendants.

On May 21, 1986, there was also a third written agreement reached between defendants and plaintiff. The third written agreement provides for Viacom to give defendants access to commercial air time on the radio and television stations owned by plaintiff. The third agreement is referred to in a passage at the end of the Exchange Agreement: "This Exchange Agreement, the Warrant Agreement and an agreement with respect to advertising entered into on the date hereof, contain the entire understanding of the parties with respect to their subject matter." The third agreement (the "Advertising Agreement") is in the form of a letter agreement written to defendants from plaintiff. The Advertising Agreement states:

Reference is made to the Exchange Agreement (the "Exchange Agreement") of even date herewith wherein it was agreed that Viacom International Inc. (the "Company") would acquire from the Seller Group (as defined in the Exchange Agreement) all of the common stock now owned by you defendants in the Company (including common stock which you have a right to receive pursuant to a two-for-one stock split declared by the Company on May 1, 1986) in exchange for cash and certain warrants. In consideration of the covenants contained in the Exchange Agreement, the Company hereby agrees to provide the consideration described in this Agreement to you or your designated affiliates and assignees as part of the consideration for the shares of common stock of the Company being acquired by the Company pursuant to the Exchange Agreement.

The Company agrees to provide to you air time at no cost, with a Value (as defined below) of $10,000,000, on the Company's present and future communication facilities (the "Facilities")....

Def. 3(g), Ex. A.³

Defendants "accept for purposes of this motion — that the three agreements resulted in plaintiff paying defendants consideration equal to approximately $79.50 per share." Def. 3(g) at 2, ¶ 2. The $79.50 per share figure consists of the cash payments, the value of the warrants and the value to plaintiff of the advertising time. The actual market value of a share of Viacom common stock on May 22, 1986 was $62 per share. See Pl. 3(g) at 6, ¶ B(20); Def. 3(g) at 3, ¶ 3.

On May 28, 1986, plaintiff filed this suit alleging that defendants violated the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1962. The Amended Complaint filed on October 11, 1988, alleges that defendants engaged in a pattern of racketeering activity involving violations of the Hobbs Act, 18 U.S.C. § 1951, and fraud in the sale of securities. Plaintiff claims that defendants conduct caused damages to plaintiff in the sum of $60,525,000, which is approximately the difference between the market price of 3,498,200 shares of Viacom common stock on May 21, 1986 and the alleged value of the consideration transferred by plaintiff to defendants for 3,498,200 shares of Viacom common stock on May 21, 1986.

Discovery has yet to be completed. In particular, plaintiff has yet to depose Icahn. Nevertheless, defendants move for summary judgment based on the contention that as a matter of law plaintiff's case must fail regardless of any facts that might be brought out by additional discovery.⁴

Discussion

To grant a motion for summary judgment a court must find that there is no genuine issue as to any material fact, and that the moving party is entitled to judgment as a matter of law because, after sufficient time for discovery, the non-moving party has failed to make a sufficient showing of an essential element of its case as to which it has the burden of proof. Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The Court must deny summary judgment if it is found that the deposition of of Icahn or the conduct of other discovery, in which plaintiff has yet to engage, could shed light on material facts. See Federal Rule of Civil Procedure 56(f) (summary judgment is inappropriate "should it appear from the affidavits of a party opposing the motion that the party cannot for reasons stated present by affidavit facts essential to justify the party's opposition").

Despite the timing of this motion, defendants contend that the law and facts currently available show conclusively that plaintiff will be unable to establish two elements of its RICO claim: (1) that defendants engaged in the predicate RICO acts of violating the Hobbs Act by committing extortion and engaging in securities fraud (2) that plaintiff suffered damages. Although stating a RICO claim requires satisfaction of several other elements, those two issues are the only ones which the parties have argued on this motion and accordingly are the only ones addressed by the Court.

I. RICO

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