Walpert v. Bart, Civ. A. No. 17539.

• Citation: 280 F. Supp. 1006
• Decision Date: 13 June 1967
• Docket Number: Civ. A. No. 17539.
• Parties: Alfred M. WALPERT v. Harry BART et al.
• Court: U.S. District Court — District of Maryland

280 F. Supp. 1006

Alfred M. WALPERT v. Harry BART et al.

Civ. A. No. 17539.

United States District Court D. Maryland.

June 13, 1967.

COPYRIGHT MATERIAL OMITTED

Martin B. Greenfeld, Greenfeld & Greenfeld, Baltimore, Md., and Sidney B. Silverman, New York City, for plaintiff.

William L. Marbury, Decatur H. Miller, E. Stephen Derby, and Piper & Marbury, Baltimore, Md., for defendants with exception of A. Lee Loomis, Jr.

Cahill, Gordon Reindel & Ohl, New York City, of counsel for defendant August Belmont.

NORTHROP, District Judge.

The complaint in this case arises out of the acquisition by Community Research & Development, Inc. (CRD) of all the issued and outstanding capital stock of James W. Rouse & Company, Inc. (JWR). The following facts are undisputed. JWR is a Maryland corration engaged in the mortgage banking business. Before its acquisition by CRD approximately 45% of its common stock was owned by James W. Rouse, its president, and the remainder of its stock was owned by other officers and employees of the company. CRD was also a Maryland corporation, engaged principally in the business of constructing and operating shopping centers. James W. Rouse was president of CRD. Since the formation of CRD it had operated under a management contract with JWR. The stock of CRD was publicly held and was traded in the over-the-counter market. On February 8, 1966, the boards of directors of CRD and JWR approved a plan of reorganization under which CRD would acquire JWR by exchanging shares of its common and preferred stock for all the outstanding stock of JWR. A special meeting of the holders of CRD common stock was called to be held on June 10, 1966, to consider the proposed acquisition. On May 21, 1966, a proxy statement was mailed to the stockholders of CRD containing information regarding the proposed acquisition. On June 10, 1966, the stockholders of CRD overwhelmingly approved the acquisition, and on June 20, 1966, the exchange of stock was consummated. JWR became a wholly owned subsidiary of CRD, and CRD changed its name to The Rouse Company.

On August 11, 1966, this action was brought by the holder of 100 shares of The Rouse Company's common stock against The Rouse Company, its directors and certain of its officers. The complaint purports to state a derivative cause of action based upon Section 14(a) of the Securities Exchange Act of 1934 and Rule 14a-9 of the Securities and Exchange Commission. The complaint charges that the approval of the acquisition is null and void because it was based upon a false and misleading proxy statement. The court is asked to rescind the transaction and require the individual defendants to account to The Rouse Company for its losses.

All of the defendants, with the exception of A. Lee Loomis, Jr., who has not been served, move for summary judgment on the grounds that as a matter of law, because no genuine issue of material fact is raised, and/or because the case is barred by laches they are entitled to such judgment.

At this point, the court will review the evidence submitted to this court. Before considering the merits of the defendants' motion for summary judgment, this court must first rule on the defendants' motion to strike Sidney B. Silverman's affidavit of February 23, 1967, and the exhibits attached thereto. Mr. Silverman is the plaintiff's New York counsel. The defendants attack Silverman's affidavit on the grounds that it does not comply with Rule 56(e) of the Federal Rules of Civil Procedure because it is not made on personal knowledge and because it does not show affirmatively that the affiant is competent to testify to the matters stated therein. The defendants' motion to strike all of the exhibits attached to Mr. Silverman's affidavit, dated February 23, 1967, rests on the ground that the exhibits are not sworn or certified copies and that they would not be admissible into evidence.

Rule 56(e) of the Federal Rules of Civil Procedure in its pertinent parts reads as follows:

"Supporting and opposing affidavits shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein. Sworn or certified copies of all papers or parts thereof referred to in an affidavit shall be attached thereto or served therewith."

In his affidavit, Mr. Silverman says that he is fully familiar with the proceedings in this case. The affiant, however, has failed to set forth that he has personal knowledge of the things set forth in his affidavit and that he would be competent to testify to the matters stated therein. Therefore, the court has no other choice than to grant the defendants' motion to strike the affidavit of Mr. Silverman.

Mr. Silverman, in an affidavit dated April 5, 1967, attempts to save the exhibits attached to his first affidavit by certifying all of the exhibits, which were attached to his first affidavit, as true copies of documents obtained by him from public files and records. Thus for the purpose of the motion to strike the exhibits, the court accepts this belated certification. However, for the exhibits to be considered by the court, they must be attached to an affidavit which meets the requirements of Rule 56(e) because the second sentence refers only to those papers or exhibits mentioned in an affidavit. Inasmuch as the exhibits are attached to an affidavit that does not meet the requirements of Rule 56(e), they must fall. In order for the court to have considered these exhibits, they would have had to be attached to a person's affidavit through whom they could be admitted and be admissible into evidence. Therefore, the court grants the defendants' motion to strike the exhibits attached to Mr. Silverman's first affidavit.

Plaintiff's papers for the purpose of this motion consist of: (1) The verified complaint made upon information and belief and upon actual knowledge. However, the plaintiff has actual knowledge only that he owns 100 shares of The Rouse Company's common stock and has owned such shares continuously since May of 1961. Inasmuch as the complaint is verified, it will be regarded as an affidavit.

"It is clear that an affidavit made on information and belief cannot support on summary judgment the averments it attempts to uphold."

Schoenbaum v. Firstbrook et al., 268 F.Supp. 385 (S.D.N.Y.1967). See Automatic Radio Manufacturing Co., Inc. v. Hazeltine Research, Inc., 339 U.S. 827, 831, 70 S.Ct. 894, 896, 94 L.Ed. 1312 (1950); 6 Moore, Federal Practice ¶ 56.221 (2d ed. 1966). (2) An affidavit of the plaintiff, which is not contested by the defendants. (3) An affidavit of the plaintiff's New York counsel, which is dated April 5, 1967, submitted in opposition to the defendants' motion to strike Mr. Silverman's first affidavit and in support of plaintiff's application for discovery pursuant to Rule 56(f) of the Federal Rules of Civil Procedure.

In addition to the portion quoted above, Rule 56(e) provides further:

"When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of his pleadings, but his response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If he does not so respond, summary judgment, if appropriate shall be entered against him."

The plaintiff in this case has chosen to rely on the allegations in his complaint because none of the affidavits submitted by him or on his behalf set forth specific facts showing that there is a genuine issue of material fact in dispute. The plaintiff relies upon the hope that the defendants, as the moving party, have failed to meet the heavy burden placed upon them to show that no genuine issue of material fact is present. It is the court's understanding that both parties wished to go forward with the motion on the record as it now stands, without the submission of additional affidavits.

In contrast to the plaintiff's barrenness, the defendants have submitted affidavits of those defendants and others who would have knowledge of the events to which plaintiff's allegations are directed. Defendants have complied with the mandate of Rule 56(e) and have produced impressive and numerous documents in the form of affidavits and exhibits attesting to their version of the facts.

Nevertheless, the movant has the task to show that there is no genuine issue of material fact for trial, 6 Moore, Federal Practice ¶ 56.153 (2d ed. 1966). The plaintiff contends that the defendants have failed to meet this heavy burden because the issue of credibility arises when the defendants attempt to support their position with their own affidavits. He alleges that inasmuch as several of his allegations can be proved only from documents held by and the testimony of the defendants, it would be inappropriate for the court to grant summary judgment. The plaintiff's contentions on the issue of credibility and access will be reached when the court discusses the plaintiff's second allegation.

As stated earlier, the plaintiff contends that the proxy statement is false and misleading; and as such it violates Section 14(a) of the Securities Exchange Act of 1934 (15 U.S.C. § 78n) and a regulation made pursuant thereto.

Section 14(a) of the Securities Exchange Act of 1934 (15 U.S.C. § 78n) provides:

"It shall be unlawful for any person, by the use of the mails or any means or instrumentality of interstate commerce or of any facility of a national securities exchange or otherwise, in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors, to solicit or to permit the use of his name to solicit any proxy or consent or authorization in respect to any security (other than an exempted security) registered pursuant to section 12 (78l) of this

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