Washington Steel Corp. v. TW Corp., Civ. A. No. 79-166.
| Decision Date | 16 February 1979 |
| Docket Number | Civ. A. No. 79-166. |
| Parties | WASHINGTON STEEL CORPORATION, a corporation, Plaintiff, v. TW CORPORATION, Talley Industries, Inc., B. Paul Barnes, William H. Mallender, Roger S. Carlson, Donald L. Corey, Joseph D. DiSesa, Gerard G. Ellis, Townsend Hoopes, John D. MacNaughton, Emiel T. Nielsen, Jr., Thomas F. Reddy, Jr., Ralph A. Rockow, Fred G. Schuller, Wesley A. Stanger, Jr., John W. Stodder, Marvin A. Pohlman, M. Kimelman & Company, Robert Euler, Michael Kimelman, Joseph E. Giattino, Sheila M. Baird, Oscar Kimelman, and Chemical Bank, Defendants. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
J. Tomlinson Fort, Reed, Smith, Shaw & McClay, Pittsburgh, Pa., for plaintiff.
Peter D. McKenna, Wachtell, Lipton, Rosen & Katz, New York City, for TW Corp. and Talley Industries, Ralph F. Scalera, Thorp, Reed & Armstrong, Pittsburgh, Pa., of counsel.
Gregory Markel, Cravath, Swaine & Moore, New York City, for Chemical Bank, Harold Schmidt, Rose, Schmidt, Dixon, Hasley, Whyte & Hardesty, Pittsburgh, Pa., of counsel.
Frederick T. Davis, Patterson, Belknap, Webb & Tyler, New York City, for M. Kimelman & Co.
INTRODUCTION, FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER
A. INTRODUCTION
The matter of Washington Steel Corporation versus TW Corporation, et al, at Civil Action Number 79-166, is now ripe for a decision. Very briefly stated:
On January 26th, 1979, Defendant Talley Industries filed a Schedule 14D-1 Statement with the Securities & Exchange Commission covering the subject corporation, Washington Steel, the Plaintiff in this case.
On February 5th, 1979, Plaintiff Washington Steel filed a complaint with this Court against TW Corporation, Talley Industries, Incorporated, certain officers and directors of Talley Industries, Inc., and TW Corporation, M. Kimelman & Co., a broker-dealer partnership, and certain of its partners, and Chemical Bank, a banking association. The complaint contained four counts.
First, Count I alleged a violation of Section 14(d) of the Exchange Act. Plaintiff Washington Steel alleged that pursuant to Section 14(d) of the Exchange Act, 15 U.S.C. 78n, the Schedule 14D-1 of the offering statement (Exhibit A to Plaintiff's Complaint) filed by Defendant Talley, does not adequately inform or disclose particular information to the shareholders of Washington Steel as is required by law.
The second count alleged a violation of Section 14(e) of the Exchange Act. Here, Plaintiff Washington Steel alleged in the second count that all the Defendants have violated Section 14(e) of the Exchange Act by meeting with each other, and especially by meeting with the representatives of the broker-dealer partnership, M. Kimelman & Company. This meeting was held at a time prior to the aforementioned offer wherein M. Kimelman & Company is accused of seeking information for the purpose of advising customers on long-term investments when, in fact, they were seeking the information in order to help Defendant Talley Industries to take over the Plaintiff Washington Steel.
In addition, Washington Steel alleges that the Defendant Chemical Bank used confidential information obtained in the course of its business relationship with Washington Steel in determining whether to arrange short-term financing for the Defendant Talley's proposed offer at a time when the Defendant Chemical Bank was an agent of Washington Steel.
Count Three alleged that Chemical Bank violated its common law fiduciary duty owed to Washington Steel by using confidential information under all of the circumstances for the benefit of the Defendants.
Count Four alleged that the deceptive practices of M. Kimelman & Company and its officers, during the meetings with representatives of Plaintiff Washington Steel, resulted in M. Kimelman & Company misappropriating confidential and proprietary information of the Plaintiff contrary to Pennsylvania Law.
Plaintiff Washington Steel generally averred irreparable injury.
At this juncture of the litigation, Washington Steel is seeking a preliminary injunction, requesting the Court to restrain TW Corporation and Talley Industries, Inc., from proceeding with its proposed offer to purchase any and all of the outstanding shares of common stock of Plaintiff Washington Steel for $37.50 net per share.
The Court after hearing all of the evidence, makes the following findings of fact:
B. FINDINGS OF FACT
1. Plaintiff, WASHINGTON STEEL CORPORATION ("Washington Steel"), is a corporation organized under the laws of the Commonwealth of Pennsylvania and maintains its principal place of business at Woodland and Griffith Avenues, Washington, Pennsylvania 15301.
2. Defendant, TW CORPORATION, is a corporation organized under the laws of the State of Delaware and maintains a principal place of business at 3500 North Greenfield Road, Mesa, Arizona 85205.
3. Defendant, TALLEY INDUSTRIES, INC., ("Talley"), is a corporation organized under the laws of the State of Delaware and maintains a principal place of business at 3500 North Greenfield Road, Mesa, Arizona 85205.
4. Defendant, B. PAUL BARNES, is a Director and President and Treasurer of Defendant TW Corporation and is a Director and President of Talley. He maintains a place of business at 3500 North Greenfield Road, Mesa, Arizona 85205 and is a resident of the State of Arizona.
5. Defendant, WILLIAM H. MALLENDER, is a Director and Executive Vice President and Secretary of Defendant TW Corporation and is a Director and Executive Vice President, General Counsel and Secretary of Talley. He maintains a place of business at 3500 North Greenfield Road, Mesa, Arizona 85205 and is a resident of the State of Arizona.
6. Defendant, FRED G. SCHULLER, is a Director of Talley. He resides at 1833 East Gary, Mesa, Arizona 85203.
7. Defendant, MARVIN A. POHLMAN, is an individual who is believed to have an employment relationship with either Defendant TW Corporation or Talley and is believed to be presently a resident of the State of Arizona.
8. Defendant, M. KIMELMAN & CO., is a partnership registered as a broker-dealer under the Securities Exchange Act of 1934 and maintains a place of business at Suite 1105, 100 Park Avenue, New York, New York 10017.
9. Defendant, MICHAEL KIMELMAN, is a partner of defendant M. Kimelman & Co. He maintains a place of business at Suite 1105, 100 Park Avenue, New York, New York 10017 and is a resident of the State of New York.
10. Defendant, CHEMICAL BANK, is a banking association organized and existing under the laws of the State of New York and maintains its principal place of business at 20 Pine Street, New York, New York.
11. Pursuant to Section 14(d) of the Securities Exchange Act of 1934, 15 U.S.C. 78n (Exchange Act), and the requirements of Schedule 14D-1 issued by the Securities and Exchange Commission, on January 26, 1979 Defendants TW Corporation and Talley filed a Statement on Schedule 14D-1 concerning the subject corporation, Washington Steel. Included in such filing is a proposed Offering Statement addressed to the shareholders of Washington Steel which solicits them to tender any and all of their stock to Defendant TW Corporation, for $37.50 per share. A copy of this Schedule 14D-1, including Offering Statement, is the Exhibit "D" which was attached to the complaint.
12. Defendants TW Corporation and Talley offered into evidence a revised Offer to Purchase which they propose to file with the Securities and Exchange Commission as an amendment to the filing originally made on January 26, 1979. This has been marked as Defendants' Exhibit B.
13. In addition, Defendants TW Corporation and Talley offered into evidence a proposed Exhibit B to the revised Offer to Purchase which includes a description of the business and properties of Talley as contained in Talley's Form 10-K for the fiscal year ended March 31, 1978, Talley's consolidated balance sheets as of March 31, 1978 and 1977, a five-year summary of operations as contained in Talley's 1978 annual report and interim (unaudited) financial information as contained in Talley's Form 10-Q for the fiscal quarter ended December 31, 1978. This proposed Exhibit B to the revised Offer to Purchase was marked Exhibit C for the purpose of this litigation.
14. The tender offer referred to in Paragraph 11 of these findings of fact was made for the avowed and immediate purpose of gaining control of Plaintiff Washington Steel's assets and with the ultimate purpose of extinguishing the Plaintiff corporation as it now exists as a corporate entity by merging it, i. e., Washington Steel, with TW Corporation, a wholly-owned subsidiary of Defendant Talley.
15. In order to effectuate the take-over of Plaintiff Washington Steel by Defendants TW Corporation and Talley Industries, Inc., the said two Defendants engaged the services of Defendant Chemical Bank as their agent for the purpose of having the said Chemical Bank arrange for a short-term loan in the amount of $70,000,000.00, which loan was very necessary in order to effectuate the purchase of Plaintiff Washington Steel's stock in order to take over the assets of the Plaintiff Washington Steel Corporation by TW Corporation and Talley Industries, Inc.
16. The Defendant Chemical Bank, as Talley's agent under the above recited circumstances, was advancing at all relevant times the several corporate purposes of Defendant TW and Defendant Talley a number of months prior to January 1st, 1979, and up to and including the present time.
17. Prior to the formulation of Defendants Talley and TW's plan to take over and control the assets of Plaintiff Washington Steel, and at all relevant times thereafter, Defendant Chemical Bank was the agent of the Plaintiff Washington Steel and was purporting to advance the several corporate purposes of Plaintiff Washington Steel at all relevant times, and in particular said Chemical Bank was the transfer agent of Plaintiff Washington Steel.
18. Prior to Defendants...
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