Credit & Finance Corp. v. Warner & Swasey Co.

OWEN, District Judge

(dissenting):

Plaintiffs bought the stock of Raneo in anticipation of — or perhaps more properly phrased as “on the gamble that” — Warner & Swasey would effect a friendly takeover of Raneo or, failing that, would make a hostile tender offer directly to the shareholders. At no time, however, did either Raneo or W&S make any representation that there would be a hostile tender offer if W&S’s friendly offer were rebuffed. There was no statement by either Raneo or W&S that a hostile tender offer was contemplated, and, in fact, one was never made. Indeed, the only comment of either party specifically addressed to that subject appears in Ranco’s July 12th press release, and that statement was to the contrary, i. e., that in the event a friendly takeover were to be rejected by the Raneo board, “no hostile tender offer is anticipated.” In the face of Ranco’s affirmative statement, which turned out to be true, that no hostile tender offer was in the offing, mere “impression[s]” which plaintiffs allege led them to a contrary conclusion cannot, in my view, give rise to a claim of fraudulent misrepresentation under the federal securities laws.

Next, plaintiffs contend they were defrauded by Ranco’s statement that it would “consider and evaluate” W&S’s offer. They attack the bona fides of the anticipated consideration and evaluation, alleging that Raneo had, in fact, predetermined to reject the offer. These allegations, judged in light of the specificity required by Fed.R. Civ.P. 9(b), are, in my view, wanting. In Siegel v. Gordon, 467 F.2d 602 (2d Cir. 1972), this Court stated:

It is a serious matter to charge a person with fraud and hence no one is permitted to do so unless he is in a position and is willing to put himself on record as to what the alleged fraud consists of specifically.

While it has sometimes been held to be sufficient specificity to set forth the attacked representation in the compláint and merely denominate it as false, I do not believe that the requirements of Rule 9(b) are- met in this case by such a bare recital. Additional facts must be pleaded from which a reasonable inference of fraud would logically follow. Ross v. A. H. Robins Company, Inc., 607 F.2d 545 (2d Cir. 1979).

Perhaps concerned with these pleading requirements, plaintiffs did recite the well-known antagonistic relationship between the parties, which was summarized in the W&S July 12 letter and the Raneo July 12 and 16 press releases. But while an awareness of this relationship would lead any reasonable investor to conclude that Raneo would approach W&S’s offer negatively, and in all probability would not accept it, the pleaded facts do not go so far as to give rise to the necessary inference that Ranco’s statement that it would “consider and evaluate” the offer was in fact false when made. Rule 9(b) requires more in this situ *568 ation. See Ross v. A. H. Robins Company, Inc., supra.

In sum, from what plaintiffs have been able to allege — and plaintiffs have declined the offer of the court below to allege more — one can view them as simply knowledgeable speculators who took a risk and lost. I do not deem it appropriate to permit the plaintiffs to use an inadequately pleaded fraud action as the means to seek a basis to recover such a loss. Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723 at 741 , 95 S.Ct. 1917 at 1928 , 44 L.Ed.2d 539 (1975); Siegel v. Gordon, supra, 467 F.2d at 607-8 .

I would affirm.