# Petition — Dickinson v. Securities & Exchange Commission > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385010_0180%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition - **Published:** January 1, 1983 - **Citation:** 460 U.S. 1069 ## Text 8 = wad 0 rd 9g Office - Supreme Court, U.S. ‘ FILED DEC 22 1982 Supreme Court of the Uniteh Sister | October Term, 1982 IN THE FAIRLEIGH S. DICKINSON, JR., Petitioner, against SECURITIES AND EXCHANGE COMMISSION, ARNOLD S. WELLMAN, MORTON PUPKO, RUBIN POLNE, MORDECAI ROSENFELD, JAY-GRO FABRICS, INC. PENSION TRUST, BECTON, DICKINSON & CO., Respondents. PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT Suetpon H. Exsen Attorney for Petitioner One Rockefeller Plaza New York, New York 10020 (212) 586-2211 Of Counsel: Orans, Exsen & Luperr Lesure A, Lupert Sytvia WzRTHEIMER One Rockefeller Plaza New York, New York 10020 December 22, 1982 Questions Presented 1. Under Section 13(d) of the Securities Exchange Act (‘‘the Williams Act’’), wiich requires a filing with the S.E.C. and company management by certain groups which are beneficial owners of more than five percent of a public company’s stock, should the test of beneficial ownership be objective, i.e., voting control and economic interest (the Seventh Circuit test), or should the test be subjective and deem such persons as an investment advisor to be a bene- ficial owner if he has influence over stockhoiders he advises (the test handed down in this case by a sharply divided Second Circuit) ? 2. Can a person violate Section 13(d) unknowingly, or is the filing requirement triggered only by an agreement, made with knowledge that a group has been formed which has beneficial ownership of more than five percent of the company’s stock? 3. Must a group of stockholders who seek to sell blocks deemed to aggregate five percent or more of the stock in a public company make a filing under the Williams Act when they are only selling but not acquiring stock in the public company, as the Second Circuit has held, despite a contrary holding by the Seventh Circuit and the statutory language which states that a filing must be made ‘“‘after acquiring’’ securities ?* * The lower court consolidated seven actions for trial. The only laintiffs-respondents not mentioned in the caption are the co-plaintiffs in the action commenced by plaintiff-respondent Becton, Dickinson & Co.: Marvin S. Asnes, Theodore J. Bauer, Henry P. Becton, Su- zanne B. Chapman, Benedict T. Harter, Wesley J. Howe, William S. Little, Foxhall A. Parker, Foxhall A. Parker and R. Milton Boyce as Trustees of The Morgan Parker 1967 Trust, C. Albert Rollenhagen, Harry Roth, Fred R. Sullivan, and Raymond S. Troubh. Ii! TABLE OF CONTENTS PAGE Questions Presented 0.0... eae I A 1 a Beles 2 Statutes and Regulations Involved ............. 2 Statement of the Case . | re Reasons for Granting the Writ 00.0.0... ees 9 Point I—The Ambiguous Concept of a ‘‘ Power to Commit’’ Shares Undercuts Congressional Pol- icy and Provides an Inadequate Basis to Deter- mine ‘‘ Beneficial Ownership’? Within the Mean- ing of Section 13(d) (1) ; . 10 Point Ii—The Second Cireuit’s Finding of an Agreement Deepens the 13(d) Quagmire 16 Point I1I—Section 13(d) Does Not Require Fil- ing by ‘‘Selling Groups’’, at Least Not Without Additional ~~ camel of Stock ed hie Members ...... 3 2 esas 18 ne ccseshucnvavens ee. a Iv PAGE ‘ppendix : Opinion of the United States Court of Appeals for Pb Se RIE Co bid anneetisonenones la Opinion of the United States District Court for the Southern District of New York .. heat Opinion of the United States District Court for the Southern District of New York—Damages .... 155a Order of the United States Court of Appeals for the Second Circuit Denying Petition for Rehearing En Banc, September 23, 1982 ........... itis ae Section 13(d), Securities Exchange Act of 1934, Be CEUs IID prssiitaneeiecbasocoontudeaen 190a Investment ~ gual Act, Section 3(0)9, 15 U.S.C. §80a-2(9) . meee ay - 194a Section 16(a) of the Securities ely Act, 15 Sh CD ii stetetroccnacmcnnavntnenceon 195a SEC Rule 13d-3, 17 C.F.R. 240.13d-3 ..... orcipivive rea v TABLE OF AUTHORITIES PAGE Cases: Bath Industries, Ine. v. Blot, 427 F.2d 97 (7th Cir. 1970) : 8,5, 16, 18, 19 Corenco Corp. v. Schiavone & Sons, Inc., 488 F.2d 207 (2d Cir. 1973) 16 Donovan v. Miller, 112 A. 926, 137 Md. 555 (Ct. of inl Md. 1921) ions 8 Edgar v. Mite Corp. —— U.S. ——, 102 S.Ct. 2629 (1982) . Se Hy Electronic Speciality Co. v. ‘International Controls Corp., 409 F.2d 937 (2d Cir. 1979) a Se GAF Corp. v. Milstein, 453 F.2d 709 (2d Cir. 1971), cert. denied, 406 U.S. 910 (1972) ........... ......16, 19, 20, 21 Mathias v. Segaloff, 51 A.2d 654, 187 Md. 690 2 Ct. of App. Md, 1947) . . 8 Montclair v. Ramsdell, 107 US. 147 (1883) . Sst Cae Nicholson File Co. v. H.K. Porter Co., 341 F.Supp. 508 (D.R.1. 1972), aff’d on other arounds, 482 F.2d 421 (1st Cir. 1973) .......... eo ; 16 Platt v. Union Pac. R.R., 99 U.S. 48 (1879) ete Rondeau v. Mosinee Paper Corp., 422 U.S. 49 (1975) 4,9 Susquehanna Corp. v. Pan American Sulphur Co., 423 F.2d 1075 (5th Cir. 1970) 0.0000. 16 Tannenhaum v. Zeller, 552 F.2d 402 (2d Cir.), cert. denied sub nom. F’. Eberstadt Co. v. Tannenbaum, 434 U.S. 934 (1977) ooo... 22 1 12 United States v. Menasche, 348 U.S. 528 (1955) ........ . 20 vI PAGE Authorities: Aranow, Einhorn, & Berlstein, Developments in Ten- der Offers for Corporate Control 41 (1971) . 17 Scott on Trusts §194 ee 8 Statutes and Rules: Securities Exchange Act of 1934: EN RIN 5. cc scacvnsecscenccerssunsstainstopistnranheraeaene 6 MMO MIEN oii sc ves spsis accocnevasns catacsssacdivaantiSceecctcats eee MII MENON ssassscisdscipaseneneiecens sucess ak Gee eee 6 Section 16(a) ........... apnea -f eS Investment Company Act of 1940: FN NI cscdsiccdciccccsvecassoptseesriccseiomenceri 2, 8,13 Law Reviews: Young, Section 13(D)—a New Element in the Battles for Control of Corporate Managements: The Implications of GAF Corporation vy. Milstein, 27 The Business Lawyer 1137, 1144 (1972) .............14, 22 Legislative History: S. Rep. No. 550, 90th Cong., 1st Sess. (1967) We 21 H.R. Rep. No. 1711, 90th Cong., 2d Sess. (1968), re- printed in 1968 U.S. Code Congress. & Admin. BIO cits erin tssckncictassaacsoicisdanntaeene nana 21 Hearings on Full Disclosure of Corporate Equity Ownership and in Corporate Takeover Bids, 113 Cama Te, GG COD oesincecsses states cepevscececcnencensernaecen 21 No. —_—“-_-“- IN THE Supreme Court of the United States October Term, 1982 Farrteicn §. Dickinson, JR., Petitioner, against Securities anp Excnance Commission, Arnotp S. WEtLL- MAN, Morton Pupxo, Rustin Poune, Morpecat Rosenre.p, Jay-Gro Fasrics, Inc. Pension Trust, Becton, Dickinson & Co., Respondents. PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT Petitioner, Fairleigh S. Dickinson, Jr., respectfully requests that this Court issue a writ of certiorari to the United States Court of Appeals for the Second Circuit. Opinions Below The opinion of the United States District Court for the Southern District of New York is reported at 475 F.Supp. 783.* The opinion of the United States Court of Appeals for the Second Circuit is reported at 682 F.2d 355. * That opinion dealt only with questions of liability. The District Court rendered a subsequent opinion, contained in the Appendi~, deal- ing with the question of damages which is reported at 497 «Supp. 824. That opinion is not relevant to the issues raised herein. Jurisdiction The judgment of the 'ourt of Appeals for the Second Circuit was entered on June 24, 1982. Petitioner received an extension of time in which to file a petition for rehearing. That petition was denied on September 23, 1982. The jurisdiction of this Court is invoked pursuant to 28 U.S.C. § 1254(1). Statutes and Regulations Involved The basic statute involved is Section 13(d) of the Securities Exchange Act of 1934, 15 U.S.C. §78m(d). Other statutes involved are Section 2(a)(9) of the Invest- ment Company Act, 15 U.S.C. § 80a-2(a)(9), and Section 16(a) of the Securities Exchange Act, 15 U.S.C. § 78p(a). The S.E.C. has promulgated Rule 13d-3, 17 C.F.R. § 240.13d-3, which also bears on the issues raised herein. These statutes and rules are printed in the Appendix hereto. Statement of the Case Section 13(d)(1) of the Securities Exchange Act of 1934, enacted in 1968 as one of the Williams Act amend- ments, P.L. 90-439, requires ‘‘any person who, after acquir- ing directly or indirectly the beneficial ownership of any equity security [of certain designated classes], is directly or indirectly the beneficial owner of more than 5 per centum of such class”’ to file a disclosure statement (Schedule 13D) with the S.E.C. and with the company in question within ten days after such acquisition. 15 U.S.C. § 78m(d) (1). 3 Section 13(d)(3), enacted at the same time, provides: ‘‘When two or more persons act as a partnership, limited partnership, syndicate, or other group for the purpose of acquiring, holding, or disposing of securi- ties of an issuer, such syndicate or group shall be deemed a ‘person’ for the purposes of this subsection.’’ Id. § 78m(d)(3). Thus, a ‘‘group’’ becomes a ‘‘person”’ and, as such, is subject to the filing requirements of Section 13(d)(1) after it acquires beneficial ownership of more than five percent of an issuer’s securities. The Second Circuit, over a vigorous dissent, and in conflict with the decision of the Seventh Circuit in Bath Industries, Inc. v. Blot, 427 F.2d 97 (7th Cir. 1970), as well as all other decisional law in the past fourteen years, has created in this case a new test for determining beneficial ownership of stock, which focuses on subjective criteria such as an investment advisor’s influence over stockholders. Under the new test, a shareholder with less than five percent of the stock who hires an investment banker which owns no stock nevertheless must file under Section 13(d) if the banker has influence over other stockholders, such as mutual funds, when the aggregate stock held by the share- holder in question and the funds exceeds five percent. This new test departs from previously relied upon ob- jective tests such as voting control of or economic interest in stock. The test thus becomes vague and persons who do not know about all the business relations of those with whom they deal, or simply misjudge them, may inadvertently violate the law. As Judge Van Graafeiland stated in dissent: ‘¢‘When reputable and honest businessmen, advised by able and ethical lawyers, are held to have violated 4 a federal statute, the likelihood is that there is some- thing faulty in the statute, the manner in which it is administered, or both. In this case, I believe the fault lies with both.’’ 682 F.2d at 368. Those who are uncertain about what the statute requires under the new Second Circuit test may of course file as a precaution, but such filings will create confusion as to when a real group under the Williams Act has been formed. Indeed, they may well subject persons filing to a lawsuit which claims that an overinclusive filing is a false filing, as the dissent indicated. Significantly, the new test will favor incumbent man- agement, in conflict with the Williams Act policies as con- strued by this Court in Edgar v. Mite Corp., —— U.S. —, 102 S.Ct. 2629 (1982), and Rondeau v. Mosinee Paper Corp., 422 U.S. 49 (1975), and an abundant legislative history. It is not only that management will be alerted by additional filings, but also the need for precautionary filings will hamper dissidents in seeking allies and helpers. In many situations the effect will be to deprive persons outside management of aid from investment bankers and advisors who influence other stockholders, such as mutual funds, but who do not own the stock and who will often not want to join in a filing which management may deem hostile. As Judge Van Graafeiland perceptively noted in his dissent, the filing can lead to a lawsuit which management would bring against the investment advisor and the funds it advises. Under those circumstances, a dissident group will increasingly be told by investment bankers and advisors to turn elsewhere for help. Though Congress did not intend to deprive dissidents of such valuable and often essential services, that will be the result of the Second Circuit’s vague new test. In addition, the new test undercuts the requirement of an agreement before a filing must be made by a group, as established by prior law. Engagement of an influential investment banker or other person is now enough to require filing even though the real owners of the stock have made no decision about the use of their shares. The seller who engages advisors will not know of their other business re- lations or be able to judge their influence over others. A statute with substantial penalties thus comes to bear on persons who may have acted unknowingly. Finally, the Second Circuit, in rejecting the Seventh Circuit’s requirement that the group must acquire addi- tional stock before a filing is necessary, Bath Industries, Inc. v. Blot, supra, has burdened many efforts to sell large blocks of stock, without support in the Williams Act’s language, policy or history. The Facts Petitioner Fairleigh S. Dickinson, Jr. (‘‘Dickinson’’) was the son of the co-founder of Becton, Dickinson & Co. (‘‘Becton’’), and for many years served as the com- pany’s president, chief executive officer and chairman of the board. On April 20, 1977, he was ousted by a manage- ment faction. Dickinson then retained Salomon Brothers (‘*Salomon’’) and F.. Eberstadt & Co. (‘‘Eberstadt’’), two investment bankers, to seek offers for his stock, which totaled about 4.2% of the outstanding common shares. 682 | ¥.2d at 358-59, 475 F.Supp. at 799-800. In January 1978, Sun Company, Inc. (‘‘Sun’’) purchased Dickinson’s shares, 6 as part of its acquisition of 34% of the stock of Becton. Actions were then commenced by the S.E.C., Becton and certain shareholders alleging, inter alia, that Sun’s pur- chases violated Section 14(d) of the Williams Act, and that Dickinson and others had violated Section 13(d) of that Act.* Because the actions raised claims under the federal securities laws, the District Court’s jurisdiction was in- voked pursuant to 28 U.S.C, § 1331. The District Court found, and a divided Second Cireuit affirmed, that a ‘‘group’’ had formed in April 1977, nine months before the sales to Sun, composed of (a) Mr. Dick- inson, (b) the investment banker Eberstadt and one of its subsidiaries, Eberstadt Managers and Distributors, Inc. (‘*M & D’’), which advised two mutual funds that owned Becton stock, (c) Fitzgerald Dunning (‘‘Dunning’’), a Becton director whose family owned Becton stock in three trusts, each of which had an independent trustee, and (d) Daniel W. Lufkin (‘‘Lufkin’’), a well-known investment banker, one of whose partners advised three individuals who owned Becton stock. All persons with direct knowledge denied they had agreed to form a group. It was also undisputed that together these persons and entities did not own outright, or have voting control over, or have any economic interest in five percent of the stock of Becton. These objective criteria are the indicia of beneficial ownership to which the * Allegations of violations by Dickinson of Sections 10(b) and 14(d) of the Securities Exchange Act and of breach of fiduciary duty were dismissed after trial. No remedy was 7 by the trial court inst Dickinson for violating Section 13(d), a ruling which the class plaintiffs appealed. The latter finding, which is reported at 497 F.Supp. 824, was affirmed by unanimous vote of the Second Circuit. Sun and the other defendants settled with plaintiffs after trial. The Section 14(d) issue was not raised on appeal. 7 courts and the S.E.C. had always locked. The Second Circuit majority here fashioned a new subjective test of beneficial ownership, however, which asks whether members of the alleged group have the ‘‘power to commit’’ shares owned by others. See 682 F.2d at 365-66, 475 F.Supp. at 829-30. This in turn is to be determined by the influence advisors have over other shareholders. Thus, in the case of the investment banker Eberstadt, and its subsidiary M & D, the Second Circuit held that, though they had neither voting control nor an economic interest, they had ‘‘ beneficial ownership”’ of stock owned by Chemical Fund and Surveyor Fund, because these two mu- tual funds were advised by M & D. This holding was made despite legal requirements that only the independent directors of those Funds could sell their Becton stock, or join a group with M & D or anyone else. It was undisputed that the directors of the Funds never delegated or were asked to delegate authority to Eberstadt or M & D to join a group, and that no one even discussed with those directors a possible sale of Becton stock untii Sun’s offer in January, 1978, nine months after the Funds’ stock allegedly became part of the group with Mr. Dickinson. The Circuit, how- ever, found that because M & D could influence the Funds’ lirectors, it had beneficial ownership of the Funds’ Becton stock. 682 F.2d at 366. Thus, according to the Second Cireuit majority, when Mr. Dickinson engaged Eberstadt as an investment banker to help sell his stock, he formed a group because of the influence which the banker’s invest- ment advisor subsidiary was deemed to have over the Funds. The Second Circuit’s new test means that Mr. Dickinson and the other alleged group members were required to pre- dict nine months before the issue of selling the Funds’ Becton stock arose that, when confronted with an offer, the Funds’ independent directors would follow M & D’s advice, Mr. Dickinson and the others no longer could rely, in determining whether those they dealt with had ‘beneficial ownership’’ of enough stock to require a filing, on objective standards such as voting control, economic interest, or, in the case of mutual funds, the statutory presumption con- tained in Section 2(a)(9) of the Investment Company Act that directors who are labeled independent truly are so. Dr. Dunning, another alleged group member, was held by the Second Circuit to have the ‘power to commit’’ stock held by three trusts, of which he was a co-trustee of only one. Each trust had two trustees, and an independent lawyer was a co-trustee of all three. Again, the Second Circuit ignored the objective criteria of ownership such as voting control and the law of trusts generally and in par- ticular that of Maryland, the situs of the trusts, which requires that co-trustees must act jointly before any dis- position of trust property may occur, Scott on Trusts, § 194; Mathias v. Segaloff, 51 A.2d 654, 187 Md, 690 (Ct, of App. Md. 1947); Donovan v. Miller, 112 A, 926, 137 Md. 555 (Ct. of App. Md, 1921). Instead, the Cireuit held that because Dr. Dunning could influence the other trustees, he could commit the trusts’ stock, despite uncontradicted testimony by the other trustees that they were independent, and the undisputed evidence that no one, including Dr. Dunning, contacted any of the other trustees until Sun’s offer in January, 1978, some nine months after the trusts’ stock was attributed to the group.* *The Second Circuit appeared to rely heavily on the mere fact that the co-trustees tactaded Dr. Dunning’s brothers and their family attorney, without any evidence that any of them had ever delegated any authority to Dr, Dunning with respect to any matter whatsoever. 682 F.2d at 367. Daniel Lufkin, the last group member, was held to be the ‘*beneficial owner’’ of stock owned by three individuals who had acquired their Becton stock at the same time as Mr. Lufkin, as consideration for the sale of a company to Bee- ton. The individuals had all legal indicia of ownership, but because they looked to Mr. Lufkin’s partner for advice on whether to sell to Sun, Mr. Lufkin was deemed to be the beneficial owner of all their stock. As with the Funds and the trusts, those persons dealing with Mr. Lufkin and Mr. Lufkin himself, under the Second Circuit’s new test, were required to predict in April, 1977 what influence Mr. Luf- kin’s partner would have over the three individuals in Jan- uary, 1978. Reasons for Granting the Writ As the 8.E.C, acknowledged in its appellate brief to the Second Circuit, this case raises ‘‘many important ques- tions’’ concerning the meaning and application of Section 13(d) of the Exchange Act, which have very real and sig- nificant practical implications for shareholders and others in the securities industry, including persons and firms en- gaged in takeovers, mergers and acquisitions. 8.E.C. App. Br., p. 6. The new test, which divided the Second Circuit and con- flicts with the Seventh Circuit test, undercuts significant congressional policies, recognized by this Court in Edgar v. Mite Corp., supra, and Rondeau vy. Mosinee Paper Corp., supra, to maintain neutrality between management and dis- sidents. It burdens dissidents significantly and threatens to deprive them in many cases of critical help from invest- ment bankers and investment advisors. It leads to unneces- sary and potentially confusing 13(d) filings. It is unfair, 10 since serious consequences can be visited on persons who lack knowledge of, or misjudge, the business relationships of those with whom they work in efforts to sell stock. Finally, it burdens block sales by requiring Williams Act filings even though no stock is acquired, and it does so with- out support in either the language o, policy of that statute, The new test will have major impact on the economy and on the regulation of takeovers, mergers and acquisi- tions, as the S.B.C. has acknowledged. There are splits between the circuits and within the Second Circuit, The decision below, if allowed to stand, will have pernicious effects, will be unfair and will undereut important congres- sional policies that have been recognized by this Court. For all these reasons, the writ should be granted, POINT I! The Ambiguous Concept of a “Power to Commit” Shares Undercuts Congressional Policy and Provides an Inadequate Basis to Determine “Beneficial Owner- ship” Within the Meaning of Section 13(d) (1). The first fundamental problem with the new concept introduced by the Second Circuit is that it is virtually im- possible for someone dealing with an individual or institu- tion which advises some other shareholder to determine whether the relationship is such that it will be deemed to incorporate the ‘‘power to commit’’ shares, The new test is based on a subjective, after the fact evaluation of invest- ment influence which furnishes no guidance to shareholders and others who must make their 13(d) filing decisions at the outset of, and not after, particular discussions or a 11 particular course of action. Even from the perspective of hindsight, the subjectivity and ambiguity of the ‘‘power to commit’’ concept leave the determination of ‘beneficial ownership’’ to decisions by each individual trial court and can produce no broad principles of general applicability. Section 13(d) is a statute which must be looked to for guidance in deciding whether to file a Schedule 13D with the 8S.E.C. Vagueness in its application means that filings may well subject properly intentioned filing parties to sanctions for submitting incorrect information and may also misinform the public. How indeed in the usual cor- porate struggle can one reliably say which investment advisors or family members have sufficient influence over others to make them ‘‘beneficial owners’’ within the new test? The difficulties and uncertainties generated by the new ‘*nower to commit’? concept become particularly acute, as this case illustrates, when shareholders retain the services of investment bankers. Eberstadt, the investment banking firm whose role was critical to the instant decision, is but one of many major houses with the dual capacity of invest- ment banker and advisor to mutual funds. A partial list includes Prudential-Bache Securities Inc., Dean Witter Reynolds Organization, Inc., Lehman Brothers, Kuhn, Loeb, Ine., Merrill Lynch & Co., Ine., Oppenheimer & Co., Ine., Paine Webber, Inc. and Smith Barney Harris Upham & Co., Ine. In 1981, the combined revenues from invest- ment banking of just these houses was nearly $1 billion; their advisory fees were many millions of dollars. The number of shareholders they advise in both capacities is enormous, 12 How, pursuant to the Second Circuit majority’s opinion, is a shareholder, entity or institution which contacts an investment banker that also advises mutual funds to deter- mine the degree of influence the banker has over the funds? In the case at bar, it was undisputed that in April 1977, Mr. Dickinson through counsel did investigate the rela- tionship of Eberstadt and M & D to the Funds and, as the lower court found, concluded that Eberstadt and M & D did not control the Funds’ decision whether to sell or join a 13(d) group. 475 F.Supp. at 801. One of the ironies of this case is that the lawyer who conducted the investigation, Martin Lipton, a senior part- ner of the New York City firm of Wachtell Lipton Rosen & Katz, based his conclusion in large part on the Second Circuit’s decision in Tannenbaum v. Zeller, 552 F.2d 402 (2d Cir.), cert. denied sub nom. F. Eberstadt Co. v. Tan- nenbaum, 434 U.S. 934 (1977), which emphasized the inde- pendence of the Chemical Fund board of directors from M&D: ‘This was a well-qualified board and its determina- tions did not merely rubber-stamp the recommenda- tions of M & D. We conclude that the independent directors were not dominated or unduly influenced by the investment adviser.’’ 552 F.2d at 427. The Tannenbaum vy. Zeller decision was handed down in March 1977, just one month before Mr. Lipton investigated the same issue. In April, seven of the eleven board members of Chemical Fund were the same as during the time period focused on in the Tannenbaum case. The majority opinion in the instant case never explained why Mr. Lipton and Mr. Dickinson should have ignored the Circuit’s own prior decision, as well as the other ob- jective indicia of the respective Fund directors’ inde- 13 pendence, including the directors’ voting contro] of the stock and the statutory presumption of their independence set forth in Section 2(a)(9) of the Investment Company Act. Nor did it say how they should have predicted that nine months later the Fund directors would rely on M & D in deciding whether to sell the Funds’ Becton stock. It is not a satisfactory answer to the difficulties and uncertainties generated by the Second Circuit’s new defini- tion of ‘‘heneficial ownership’’ to say that a 13(d) filing should simply be made as a matter of course. In practice, the Circuit’s opinion will generate more frequent and over- inclusive 13(d) filings to minimize the risk of litigation and sanctions for not filing. Such filings may confuse the pub- lic; they may also bring lawsuits by management which claim that the overinclusive filing is false, as Judge Van Graafeiland suggested below. Indeed, in the instant case, a filing by Dickinson and M & D might well have been deemed false by the Funds’ directors, who could then have sued. The second fundamental problem with the Second Cir- cuit’s opinion is that the frequent and overinclusive filings, which will result from the new test of ‘‘beneficial owner- ship’’, give an enormous advantage to incumbent manage- ment in dealing with any shareholder dissension. Such an advantage is directly contrary to express and repeated statements of congressional intent not to tip the balance in corporate struggles in favor of either management or dissidents. Recognizing the congressional intent, this Court held recently that the Williams Act must be neutral between management and dissidents: ‘Congress became convinced ‘that takeover bids should not be discouraged because they serve a useful purpose in providing a check on entrenched but ineffi- 14 cient management.’ Senate Report at 3. It also became apparent that entrenched management was often successful in defeating takeover attempts. As the legislation evolved, therefore, Congress disclaimed any ‘intention to provide a weapon for management to discourage takeover bids... .’ Rondeau v. Mosinee Paper Corp., supra, at 58, and expressly embraced a policy of neutrality.’’ Edgar v. Mite Corp., supra, 102 S.Ct. at 2636. Under the new test, management will receive many more early warnings which they can use to attack potential dissidents.* In addition, as pointed out above, investment bankers in the future will be reluctant to put themselves in the position of Eberstadt and M & D, who became the targets of a lawsuit. Funds advised by them or their affiliates can now easily be brought into a lawsuit as defend- ants, as they were here, with potentially unsettling effects on the advisors’ relations to the funds. Management has a powerful new weapon to frighten such advisors away from dissidents. Indeed, the mere prospect of a 13(d) filing which can incur the wrath of management may well remove the incentive to act from bankers and advisors already inclined by numerous economic incentives to ally themselves more with management than with dissidents.** i Early notice to incumbent management often results in manage- ment’s institution of a lawsuit to prevent a takeover, as Judge Van Graafeiland stated. 682 F.2d at 369, 370. Other favored tactics of management include issuing shares to ~ ony, re persons, arranging other mergers and purchasing stock . See, Young, Section 13(D)—A New Element in the Battles for Control of Corporate Managements: The Implications of GAF Corporation v. Milstein, 27 The Business Lawyer 1137, 1138 and n.11 (1972). ** The District Court found the Funds not liable, but held against their advisors. That position was sustained on — against a plea that, since Dickinson was no more liable than the Funds, the solechiey decision against him was inconsistent. The Second Circuit did not discuss that point in its opinion. 15 The difficulties in applying the ‘‘power to commit’’ concept extend beyond the investment banking context, as this case also illustrates. Pursuant to the Second Circuit majority opinion, whenever one shareholder contacts another to discuss shareholder concerns, such as Lufkin’s one conversation with Dickinson, that first shareholder must inquire into and analyze the latter’s relationship with yet other shareholders in an attempt to determine whether at some future time a court might find that the second shareholder had influence over the investment decisions of others. And in making such inquiries and analysis, accord- ing to the Second Circuit, the first shareholder again cannot rely on previously available objective criteria, such as voting control and economic interest, or established prin- ciples of trust law and of partnerships. Moreover, the nature of the 13(d) filings that can be made by shareholders in situations similar to that of Dick- inson in April 1977, will, of necessity, be so vague and speculative that the filings will not promote the avowed purpose of Section 13(d) to provide necessary and import- ant information to the investing public. The filings will reveal only a tenuous association by shareholders (such as Dickinson and Chemical Fund) who have each retained the individual right to sell. Such filings will only fuel speculation about whether sales will actually occur, and will be disruptive of the market in the relevant security. As the Fifth Circuit said in a similar context: ‘“‘The securities market is delicately arranged and needs only slight impetus to upset it.’’ 16 Susquehanna Corp. v. Pan American Sulphur Co., 423 F.2d 1075, 1085 (5th Cir. 1970).* Until this decision, the courts had uniformly held that objective criteria such as voting control or some other form of economic interest were required to prove ‘‘ beneficial own- ership’’ under Section 13(d). Bath Industries, Inc. v. Blot, supra, 427 F.2d at 112; GAF Corp. v. Milstein, 453 F.2d 709, 716 (2d Cir. 1971), cert. denied, 406 U.S. 910 (1972).** This lent clarity in an area where it is sorely needed. This Court should, therefore, grant certiorari to restore that clarity, and to remove the newly created burdens on dissi- dent activity. POINT II The Second Circuit’s Finding of an Agreement Deepens the 13(d) Quagmire. The Second Cirenit majority also rendered amorphous the notion of a 13(d)(3) ‘‘group’’ and the concept of ‘‘agreement’’ which the courts had unanimously held to be essential to such a ‘‘group’’. See, e.g., Corenco Corp. v. * See also, Electronic Speciality Co. v. International Controls Corp., 409 F.2d 937, 948 (2d Cir. 1969) ; Nicholson File Co. v. H.K, Porter Co., 341 F.Supp. 508, 519 (D.R.I. 1972), aff'd on other grounds, 482 F.2d 421 (1st Cir, 1973). ** The S.E.C. has promulgated Rule 13d-3, effective after the events . this case, which includes the following tests of “beneficial owner- ship”. “(1) beg power which includes the power to vote, or to direct the voting of, such security; and/or (2) Investment power which includes the power to dispose, or to direct the disposition of, such securities,” The Court will note that even though the S.E.C. is a party to this action its own new rule is more concrete and objective than the rule which the Second Circuit majority has created. 17 Schiavone & Sons, Inc., 488 F.2d 207, 217 (2d Cir. 1973) (‘‘absent an agreement ... a ‘group’ would not exist’’); Aranow, Einhorn & Berlstein, Developments in Tender Offers for Corporate Control 41 (1977) (‘‘Before 13(d) (3) may apply, there must be an actual agreement of the par- ties to act together.’’) (Emphasis in original.) Again, the panel majority vastly reduced the ability of shareholders and others to regulate the consequences of their actions and to know in advance what compliance +h the federal securi- ties laws requires them to do. It is undisputed that Dickinson had no personal know)- edge of the degree of influence Eberstadt and M & D were held to have over the Funds’ directors. Martin Lipton, a distinguished securities lawyer, had investigated that rela- tionship and had advised Dickinson’s lawyer that the Fund directors were independent. 475 F.Supp. at 801. It is undisputed also that Dickinson himself had no contacts with the Fund directors. He could, therefore, not have made an agreement with them. Yet the Second Circuit in- ferentially found the requisite ‘‘agreement’’ from Dickin- son’s engagement of Eberstadt as an investment banker. The Second Circuit thus further compounded the un- certainties and difficulties confronted by those seeking to comply with Section 13(d). ‘‘Beneficial ownership’’ and ‘‘agreement”’ are distinct and very different concepts. Ac- cording to the Sccond Circuit in this case, ‘‘agreements’’ may be found to exist even though the alleged parties to those ‘‘agreements’’ thought there were none and were 18 advised by counsel after extensive investigation that there were none, Added to the amorphous new concept of ‘‘bene- ficial ownership’’ the problems of complying with Section 13(d) will become nightmarish. The only beneficiaries of the resulting chaos will be incumbent management, in viola- tion of the neutral policy aims of the Williams Act. Ldgar v. Mite Corp., supra." POINT III Section 13(d) Does Not Require Filing by “Selling Groups”, at Least Not Without Additional Acquisi- tions of Stock by Group Members. This case is the first one in which a court has actually invoked Section 13(d) against an alleged selling group. Here, the alleged group’s purpose was to sell its stock; it was undisputed that they had no intention of acquiring additional shares and that they did not acquire additional shares. The application of 13(d) filing requirements to such a group is based upon an incorrect reading of the statutory language which conflicts with the Seventh Cir- cuit’s interpretation of the statute in Bath Industries, Inc. v. Blot, supra, distorts the congressional purpose behind the Williams Act and compounds further the uncertainties * The same uncertainties and difficulties inhere in the inferential finding of “agreement” with respect to the two other members of the all group. It is undisputed that Dickinson had no contact with the independent trustee of the Dunning family trusts, or with Dun- ning’s brothers (his other co-trustees), or with the stockholders ad- vised by Lufkin or with Lufkin’s partner, and had no knowledge of these various noo og a “Agreement” was found, as had been “beneficial ownership”, largely because the investment bankers ex- = = that those entities and persons would sell their stock. ‘19 and ambiguities confronted by individuals, entities and institutions attempting to comply with the federal securi- ties laws. Section 13(d) states that a ‘‘person’’ must make a filing only ‘‘after acquiring’’ enough stock to own five percent of a particular class, Section 13(d)(3) defines ‘‘person’’ to include groups with combined holdings of five percent or more, the purpose of which is acquiring, holding or disposing of stock. Read together, the two sections require a filing by: ‘*Any person [or two or more persons acting as a group for the purpose of acquiring, holding, or dis- posing of securities] who, after acquiring directly or indirectly the beneficial ownership of any equity se- curity of a class which is registered pursuant to section 12... is directly or indirectly the beneficial owner of more than 5 per centum of such class... .’’ (Hmpha- sis added.) The Second Circuit, in its earlier decision in GAF' Corp. v. Milstein, supra, rejected the argument that the statutory language requires groups to acquire or intend to acquire additional stock before they must file, a requirement which the Seventh Circuit in Bath Industries, Inc. v. Blot, supra, 427 F.2d at 109-10, had said was necessary. To overcome the statutory language, the GAF court created a theory of ‘‘constructive acquisition’’, i.e, a group, upon its for- mation, constructively acquires ‘‘beneficial ownership’’ of the stock of each of the group members. 453 F.2d at 715-16. But the statute requires a filing when the group itself acquires stock. GAF treats formation of the group and acquisition of stock as the same event, while the statutory language states that these are two separate events. GAF reads the words ‘‘after acquiring’’ out of the statute en- tirely, contrary to basic principles of statutory construc- tion. United States v. Menasche, 348 U.S. 628, 538-39 (1955) ; Montclair v. Ramsdell, 107 U.S. 147, 152 (1883) ; Platt v. Union Pac. R.R., 99 U.S. 48, 58 (1879). GAF also creates an unwarranted differentiation between Section 13(d)’s application to groups, where no actual acquisitions of stock are deemed necessary to invoke the statute, and its application to individuals who own more than five per- cent of a stock and who must actually acquire stock to trig- ger the 13(d) filing requirement. The Second Circuit’s fictional concept of acquisitions is not what Congress contemplated when it passed Section 13(d). Congress intended the statute to apply to actual acquisitions of stock. Three of the five categories of infor- mation specified by the statute for inclusion in a required filing specifically refer to ‘‘purchases’’; the other two are irrelevant to this issue.* The term ‘‘purchase’’ plainly connotes, and pinpoints as the statute’s focus, the actual acquiring of stock in exchange for money or some equiva- lent. Section 13(d)(6)(B)’s exemption from the filing requirement for acquisitions which do not exceed two per- cent of a class of securities further indicates that the statute is designed to apply to real, and not constructive, acquisitions of stock. In addition, the legislative history establishes that the focus of congressional concern in enacting the Williams * The ific references to “purchases” are set forth in aie (1) (A), (B) and (C). Subsections (D) and (E) of §13(d)(1 rrelevant to the issue herein discussed 21 Act was the actual acquisition of stock in a cash tender offer or through open market or privately negotiated pur- chases of securities. The following excerpt from the Senate Report is illustrative of the legislative history establishing that central concern: ‘‘There are, however, some areas still remaining where full disclosure is necessary for investor protection but not required by present law. One such area is the pur- chase of substantial or controlling blocks of the securi- ties of publicly held companies. 8.510 would amend the Securities Exchange Act of 1934 by requiring the disclosure of pertinent information and would afford other protections to stockholders (1) when a person or group of persons seeks to acquire a substantial block of equity securities of a corporation by a cash tender offer or through open market or privately ne- gotiated purchases and (2) when a corporation repur- chases its own equity securities,’’ S. Rep. No. 550, 90th Cong., Ist Sess. 1 (1967). (Emphasis added.) See also H.R. Rep. No. 1711, 90th Cong., 2d Sess. 1 (1968), reprinted in 1968 U.S. Code Congress & Admin. News 2811; Hearings on Full Disclosure of Corporate Equity Ownership and in Corporate Takeover Bids, 113 Cong. Rec. 854 (1967) (remarks of Senator Williams). The paragraph of the Senate and House Reports relied on by the Second Circuit in GAF, supra, in support of its ‘constructive acquisition’’ theory, is inconsistent with the content, tenor and thrust of all of the other legislative history as well as with the statutory language. Congress knew how to write a provision which would impose a filing requirement that would be triggered by ‘beneficial ownership’’ alone regardless of whether stock was acquired. Congress wrote such a provision when it enacted Section 16(a) of the Exchange Act which requires a filing by ‘*fe]very person who is directly or indirectly the bene- ficial owner of more than 10 per centum of any class of any equity security... .’’ Section 13(d) differs significantly from Section 16(a) by its inclusion of the additional requirement that filings be made by groups or individuals only ‘‘after acquiring’’ stock. The Second Circuit improperly ignored this im- portant distinction between Section 13(d) and Section 16(a). See Young, supra at 1144, The Second Circuit’s failure to require actual acquisi- tions of stock before triggering the filing requirement of Section 13(d) compounds the considerable uncertainties and ambiguities engendered by the Circuit’s new test for ‘*beneficial ownership’’ and the prerequisites of a ‘‘group’’. In rejecting the requirement of actual stock acquisition, the Second Circuit has rejected yet another objective stand- ard which could give clear guidance as to when filing is necessary. In addition, the new test will tend to burden block sales of stock because of the difficulty in recruiting investment bankers, investment advisors and others who do not want to incur the wrath of management. The un- certainty and problems thus created are, of course, height- ened by the existing conflict between circuits sitting in the nation’s two largest cities. Conclusion For the foregoing reasons, this petition for a writ of certiorari should be granted. Dated: New York, New York December 22, 1982 Respectfully submitted, Suevpon H, Eisen Attorney for Petitioner One Rockefeller Plaza New York, New York 10020 (212) 586-2211 Of Counsel: Orans, Evsen & Lupert Lesure A, Lupert Sytvia WERTHEIMER One Rockereller Plaza New York, New York 10020 APPENDIX Opinion of the United States Court of Appeals for the Second Circuit UNITED STATES COURT OF APPEALS Seconp Circuir Nos. 39, 40, Dockets 80-6213, 80-6357. rl <> Bee - | Arnotp 8, Wetiman, et al., Plaintiff s-Appellees, v. Farmeicu §. Dicxryson, JR., Defendant-A ppellant. Oo Argued Dee. 9, 1981. Decided June 24, 1982 Before Lumparp, Moorrt and Van Graareranp, Circuit Judges. Leonarp P. Moorsz, Circuit Judge: This appeal arises from seven separate actions brought against defendant-appellant, Fairleigh S. Dickinson, Jr., and eleven other defendants, for alleged violations of the federal securities laws, New Jersey state law, and the rules of the New York Stock Exchange. These seven actions include an enforcement action brought by the Securities and Exchange Commission (‘‘SEC’’), a private action filed by Becton, Dickinson & Company (‘‘Becton’’) and certain 2a Opinion of the United States Court of Appeals for the Second Circuit of its officers, and five class actions brought on behalf of certain Becton shareholders. All seven actions stem from the acquisition by Sun Company, Inc. of approximately 34% of the outstanding stock of Becton, a New Jersey corpora- tion engaged in the manufacture of health care products and medical testing and research equipment. The actions were consolidated for a bench trial before the Honorable Robert L. Carter, District Judge of the Southern District of New York. By agreement of the parties, the consolidated trial was bifurcated on the issues of liability and damages. On the issue of liability, Judge Carter held, inter alia, that Dickinson, in an effort to induce a third-party takeover or partial takeover of Becton, had violated Section 13(d) of the Securities Exchange Act of 1934, 15 U.S.C. § 78m(d) (1976),’ when he joined a group to sell more than 5% of the company’s common stock without making the requisite filings with the SEC, Becton, and the exchange on which the 1. Section 13(d) of the Securities Exchange Act of 1934, 15 U.S.C. §78m(d) (1976), provides: “(1) Any person who, after acquiring directly or indirectly the beneficial ownership of any equity security of a class which is registered pursuant to section 78/ of this title, or any equity security of an insurance company which would have been required to be so registered except for the exemption contained in section 781(g)(2)(G) of this title, or any equity security issued by a closed-end investment company registered under the Investment Company Act of 1940, is directly or indirectly the beneficial owner of more than 5 per centum of such class shall, within ten days after such acquisition, send to the issuer of the security at its principal executive office, by registered or certified mail, send to each exchange where the security is traded, and file with the Commission, a statement containing such of the following infor- mation, as the Commission may by rules and regulations, pre- scribe as necessary or appropriate in the public interest or for the protection of investors—” 3a Opinion of the United States Court of Appeals for the Second Circuit securities were traded.? Wellman v. Dickinson, 475 F.Supp. 783, 837 (S.D.N.Y.1979). Before the trial on damages com- menced, the SEC withdrew its request for relief from Dick- inson other than a judicial declaration that Dickinson had violated Section 13(d). Accordingly, by order entered on February 19, 1980, Judge Carter adhered to the court’s findings concerning Dickinson’s liability and, with the SEC’s consent, terminated with prejudice its enforcement action against Dickinson.’ On July 31, 1980, Judge Carter issued a final opinion addressing, inter alia, the class plaintiffs’ claims for dam- ages or disgorgement of profits against Dickinson and other members of the group found to have violated Section 13(d). Wellman v. Dickinson, 497 F.Supp. 824, 834-36 (S.D.N.Y.1980). Judge Carter held that these plaintiffs had no right to monetary relief against Dickinson for a number of reasons, including their failure to demonstrate that the Section 13(d) violations directly caused any injury to the class. Thus, the district court entcred a final judg- ment on September 29, 1980, denying the class plaintiffs’ claims for disgorgement and other monetary relief against Dickinson for his violation of Section 13(d). 2. Judge Carter dismissed all other claims against Dickinson, in- cluding those for alleged breaches of fiduciary duty and allenged viola- tions of Section 10(b), 14(d), and 14(e) of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j(b), 78n(d), 78n(e) (1976). Well- man v. Dickinson, 475 F.Supp. 783, 837 (S.D.N.Y. 1979). 3. The order entered on February 19, 1980 provided in pertinent part: “The prior findings and order of this Court shall remain in effect as to Dickinson and [the SEC’s enforcement action] as to Dick- inson is otherwise terminated with prejudice,” 4a Opinion of the United States Court of Appeals for the Second Circuit Dickinson appeals from this final judgment and all prior orders in this case finding that he violated Section 13(d) of the Securities Exchange Act of 1934. Dickinson contends that plaintiffs have failed to prove either that the purported members of the Section 13(d) group had beneficial owner- ship of sufficient Becton stock to form a group with him, or that he had entered an agreement with anyone to dispose of Becton stock either directly or indirectly through agents. The class plaintiffs cross-appeal from those portions of the September 29, 1980 judgment denying their claims for dis- gorgement and other monetary relief against Dickinson and from the dismissal of their claims for breach of fiduciary duty against Dickinson. On appeal, the class plaintiffs re- new their argument that Dickinson breached his fiduciary duty to the shareholders of Becton, and that he must dis- gorge a portion of the profits he obtained as a result of his actions in violation of Section 13(d) and in breach of his fiduciary duty. We reject the claims raised by both parties, and hold that Judge Carter did not err in finding that Dickinson vio- lated Section 13(d) of the Securities Exchange Act of 1934 and in denying the claims of the class plaintiffs for dam- ages or disgorgement from Dickinson. For the reasons set forth below, we affirm the district court’s judgment and orders in all respects. Facts Since the facts underlying this appeal are described in detail in the two opinions of the district court, Wellman v. Dickinson, 497 F.Supp. 824 (S.D.N.Y.1989); Wellman »v. Opinion of the United States Court of Appeals for the Second Circuit Dickinson, 475 F.Supp. 783 (S.D.N.Y.1979), we shall only summarize them briefly. As Judge Carter observed: ‘‘The background and gov- erning facts in this complex drama embrace personality conflicts, animosity, distrust, and corporate politics, as well as a display of ingenuity and sophistication by brokers, in- vestment bankers and corporate counsel’’, Wellman v. Dickinson, supra, 475 F.Supp. at 797-98. One of the principal personalities was Fairleigh 8. Dick- inson, Jr., the son of a founder of Becton and a major stock- holder of the company. He individually held 802,138 shares of Becton stock (4.2% of the outstanding shares). In addi- tion, Dickinson held 140,794 shares (.64%) as a co-trustee and at least 198,922 shares (1%) as a member of the Dickin- son family. Dickinson personally managed Becton for over twenty- five years. In 1974, Dickinson relinquished his management responsibilities and became Chairman of the Board. In late 1976, however, differences between the new manage- ment and Dickinson emerged. On April 20, 1977, after a bitter internal power struggle over the course of several months, the new management team prevailed, and the board of directors voted to remove Dickinson as its chairman.‘ The day following his removal as chairman, Dickinson met with representatives of Salomon Brothers (‘‘Salo- mon’’),° a New York limited partnership engaged in the 4. In September, 1977, Dickinson was terminated as a Becton employee, and in December, 1977, he was dropped from the list of directors to be elected at the Becton annual meeting in February. 5. Dickinson was a —— friend of William Salomon, a senior partner of Salomon Brothers. Opinion of the United States Court of Appeals for the Second Circuit investment banking and brokerage business, to obtain ad- vice on how to regain control of Becton. In attendance were Jerome Lipper, who was Dickinson’s attorney, Kenneth Lipper, brother of Jerome Lipper and a partner of Salo- mon, Richard Rosenthal and John Gutfreund of Salomon, Martin Lipton, who was Salomon’s attorney, and two di- rectors of Becton who were sympathetic to Dickinson, These men discussed several possible strategies. Dickinson ultimately agreed to a plan to vote with outside directors as a means of bringing pressure on Becton’s management and selling a block of the company’s shares, including his own, to a corporation interested in taking over Becton. Dickin- son hired Salomon to assist him in locating a corporation that would be interested in purchasing his substantial hold- ings in Becton and those of his friends as the springboard for a complete or partial takeover of the company. Dickin- son’s friends included Dr, J. H. Fitzgerald Dunning, a di- rector of Becton, who personally owned 3,200 shares and served as one of two co-trustees for one of three family trusts which held 344,849 shares (1.8%). Each of his two brothers served as a co-trustee for one of the other two trusts, and Dunning’s personal lawyer served as the other trustee for all three trusts. Shortly thereafter, Salomon was also contacted by Dan W. Lufkin who was concerned about his investment in Bee- ton stock in light of Dickinson’s removal from the com- pany’s chairmanship. Lufkin was a member of a partner- ship together with Edward L. Searff which owned 93,000 shares of Becton stock, The partnership and three other 7a Opinion of the United States Court of Appeals for the Second Circuit individuals, Richard Drake, Charles Willock, and Robert Smith, were the principals of a kidney dialysis company acquired by Becton in 1977. Asa result of that transaction, the partnership received 93,000 shares of Becton stock, Wil- lock received 46,248 shares, and the two other men each received 140,148 shares (total 2.2%). After the acquisition of the dialysis company, Drake, Willock, and Smith con- tinued to rely heavily on Lufkin’s partnership for invest- ment advice, Dickinson subsequently contacted Robert Zeller, chief executive officer of Ff. Eberstadt & Company, Ine. (‘ Mber- stadt’’), a Delaware corporation engaged in investment banking, institutional stock brokerage, and the management of pension funds and advisory accounts. Eberstadt had acted for many years as Becton’s investment banker. Zel- ler had also advised Dickinson on the handling of some of his personal affairs. Moreover, an Eberstadt subsidiary, F. Eberstadt & Company Managers & Distributors Ince. (‘‘Eberstadt M & D’’),° served as investment advisor to two mutual funds (the ‘‘Funds’’), the Chemical Fund and the Surveyor Fund, which along with a number of Eberstadt- managed discretionary brokerage accounts held 496,075 shares of Becton stock (2.6%). Dickinson informed Zeller that he was asking Salomon to involve Eberstadt in the effort to encourage a corporation to undertake a complete or partial takeover of Becton. Initially, Dickinson and Salomon and Zeller entered into merely an oral understand- 6. At the time of the relevant events, F, Eberstadt & Co. Man- agers & Distributors, Inc. was 75% owned by Eberstadt and 25% owned by the estate of Ferdinand Eberstadt. It subsequently became a wholly-owned Eberstadt company. 8a Opinion of the United States Court of Appeals for the Second Circuit ing. However, after Becton’s counsel threatened to sue if Dickinson continued to seek a buyer for a large percentage of Becton stock, Martin Lipton, Salomon’s attorney, ad- vised Salomon to obtain written indemnification from Dick- inson. By letter dated October 12, 1977, Dickinson con- firmed his engagement of Salomon and agreed to indemnify the firm against all claims arising out of its representation of Dickinson in securing a buyer for his stock. Beginning in the spring of 1977, Salomon and Eberstadt worked earnestly to interest a major corporation in acquir- ing a minority interest or in effecting a complete takeover of Becton. During the next eight months, Salomon and Eberstadt arranged meetings with several major corpora- tions, including Avon, American Home Products Corp., and Squibb Corp., in an effort to induce these companies to ac- quire shares in Becton. Dickinson himself participated in these activities until late December, when he was hospital- ized for approximately one month. The presentations by Salomon and Eberstadt to the cor- porations potentially interested in purchasing Becton stock were virtually identical. A representative from one of the two brokerage houses would inform the corporation that Salomon and Eberstadt were representing Dickinson. They would then describe Dickinson’s animosity toward Becton’s management and his desire to dispose of his stock in the company. They would also disclose that other stockholders shared Dickinson’s ill feelings and were interested in selling their shares. In each case, the corporation was advised that Dickinson’s stock and a block of stock that the brokerage houses represented were available if the corporation was 9a Opinion of the United States Court of Appeals for the Second Circuit interested in a takeover of Becton. This block of shares included those beneficially owned by the Eberstadt-managed funds and by Dickinson’s friends, Dunning and Lufkin. The representative would then outline a takeover plan, plac- ing special emphasis on the number and availability of the shares controlled by Dickinson, the Funds, Dunning, and Lufkin’s partnership. They asserted that Dickinson and his family held approximately 1,200,000 shares and that the remaining three members of the group held approximately 1,300,000 shares. Although a portion of these shares were held in trust, the representative assured the potential pur- chaser that the approximately 2,500,000 shares (13%) were readily available.’ Moreover, the corporation was usually told that the group’s shares of Becton stock would provide a sufficient base from which to launch a more extensive ac- quisition program for additional shares and a complete takeover of the company. The labors of the two brokerage houses eventually bore fruit when Sun Company, Inc. (‘‘Sun’’), a Pennsylvania corporation whose principal business involves oil and gas, entered the picture. On November 28, 1977, Kenneth Lip- per of Salomon approached Horace Kephart, a senior vice president of Sun in charge of the company’s corporate de- velopment and diversification program, and suggested that Sun might want to consider Becton as a possible acquisition. 7. The district court indicated that 2.5 million shares represented approximately 16-17% of the total outstanding shares of Becton com- mon stock, Wellman v. Dickinson, supra, 475 F.Supp. at 802. Since the total number of outstanding shares of common stock was 19 mil- lion, 2.5 million shares represent approximately 13% of the total shares. 10a Opinion of the United States Court of Appeals for the Second Circuit Lipper informed Kephart that 15% of Becton’s stock was available and that this initial block included 1,200,000 shares owned by Dickinson, 300-400,000 shares owned by Dunning, 400,000 shares owned by Lufkin, and 500,000 shares owned by the Chemical Fund, one of the Eberstadt-managed mu- tual funds. Lipper also advised Kephart that Sun would be able to acquire quickly an additional 10-20% of Becton stock. Kephart was aware of the rift between Dickinson and Becton’s management and learned of Becton’s public announcement in June of its desire to remain independent. At a meeting of Sun’s senior executives held in early December, Kephart mentioned Becton as a possible acquisi- tion opportunity. A study of Becton and the health care industry in general was undertaken to determine the de- sirability of an investment in the company. After review- ing the results of this in-house study, Sun’s senior execu- tives decided that the possibility of acquiring Becton should be explored more fully. Accordingly, a number of meetings were held between Dickinson’s and Sun’s representatives in late December 1977 and early January 1978 to discuss alter- native strategies for acquiring Becton. Kephart was given a list of available holdings, including those of Dickinson, Dunning, and Lufkin. Kephart was already aware that a large percentage of Becton’s shares was held by institu- tions, and he was assured that the 500,000 shares of Becton stock held by the Funds and the Eberstadt-managed dis- cretionary accounts were readily available to Sun. Four possible strategies were considered: (1) to seek shares sequentially, first from individuals, then from institutions; (2) to seek shares simultaneously from these two groups; lla Opinion of the United States Court of Appeals for the Second Circuit (3) to tender immediately ;* and (4) to contact management directly. The consensus was that simultaneous purchases from large individual and institutional shareholders, under- taken with as much secrecy as possible, would be the best strategy. Sun would purchase the block held by Dickinson, Dunning, Lufkin and the Funds, and then would conduct a limited solicitation of Becton’s institutional holders to reach its target of acquiring 34% of the outstanding shares.’ This strategy would enable the acquisition to be carried out quickly and would permit Sun to acquire physical posses- sion of the shares in the shortest possible time. Presentations made to Sun’s board of directors on Jan- uary 5 indicated that a 15% block of the Becton’s shares held by four non-management persons were available and additional shares representing 10-20% of the outstanding stock could be readily acquired. Sun executives understood that the block of shares in question belonged to Dickinson, the Funds, Dunning, and Lufkin. On January 11, recom- mendations concerning an acquisition strategy were pre- sented to Sun’s senior officials. On January 13, Sun’s Executive Committee approved the strategy of limited solicitation of large individual and institutional shareholders and authorized the purchase of approximately 34% of Becton’s outstanding shares, pro- 8. In the face of hostile management, a conventional tender offer was not considered attractive and was eliminated immediately. It was felt that this strategy would lead to competitive bidding which would make the acquisition more expensive and would result in time con- suming legal maneuvering. 9. At this level of stock ownership, Sun would be able to utilize equity accounting and would have sufficient holdings to have a sig- nificant voice in Becton’s future direction. 12a Opinion of the United States Court of Appeals for the Second Circuit vided that the total expenditure not exceed $350 million. The transaction was contingent, however, upon Sun’s ob- taining at least 25% (subsequently lowered to 20%) of the outstanding shares of Becton stock. Sun further agreed to a $700,000 fee to be divided equally between Eberstadt and Salomon, plus indemnification for all their out-of-pocket ex- penses, including attorneys’ fees, due and payable upon the acquisition of 20% of the shares. The offer proposed a two tier price structure—a higher price of $45 per share with no recourse and a lower figure of $40 per share with a right to receive the highest price paid to any subsequent solicitee. To complete the first step in effecting the acquisition, on January 14, 1978, Lipper and Zeller went to Dickinson’s hospital room and formally presented Sun’s proposal to him. Lipper’s brother, Jerome Lipper, was also present. Dickinson was told that the matter must be kept confidential and that Sun was the purchaser. After the price options were outlined, Dickinson indicated that he was ready to accept the $45 price but only on the condition that the pro- posal would be presented to Dunning as well. After guar- anteeing Dunning’s discretion, Dickinson called Dunning in Baltimore and informed him that Salomon and Eberstadt had presented him with an attractive proposal for the sale of his Becton stock and that he was conditioning his accept- ance on the extension of the same offer to Dunning. Dick- inson arranged for Dunning to meet with Zeller and Lipper in Baltimore on the following day. Kenneth Lipper then made the same offer given to Dickinson to Dickinson’s daughter, Ann Dickinson Turner, who was visiting her 13a Opinion of the United States Court of Appeals for the Second Circuit father in the hospital. At the request of Jerome Lipper, Turner subsequently delivered her shares and those sold by her father to Sun in New York. On January 15, Kenneth Lipper and Zeller met with Dunning in Baltimore and extended to him the same offer that they presented to Dickinson. Dunning responded fav- orably to the proposal and promised to advise them after he conferred with his two brothers and their co-trustee. Sun later purchased about 110,000 shares from each of the three Dunning trusts, for a total of 329,849 shares (1.7%). On January 16, Kenneth Lipper and another representa- tive of Salomon, met with Lufkin and made him the same offer extended to both Dickinson and Dunning. Although the identity of the purchaser was not disclosed, he was told that Dickinson favored the transaction and that the pur- chaser was an appropriate company. Lufkin soon learned, however, that Sun was the purchaser. Lufkin indicated that he preferred the $45 price and was confident that he could commit the 93,000 shares of Becton stock that he and his partner, Edward L. Scarff, received after Becton ac- quired the partnership’s interest in a kidney dialysis com- pany. Morover, Lufkin stated that while he ‘‘could not speak for’’ Richard Drake, Charles Willock, and Robert Smith, the other three principals of the dialysis company who received Becton stock as a result of the takeover, he expected that they would tender their shares. Lufkin im- mediately telephoned Scarff, who promptly agreed that the partnership shares should be sold at the $45 price. In addition, Scarff promised to contact Richard Drake, Charles Willock, and Robert Smith, and inform them that they had l4a Opinion of the United States Court of Appeals for the Second Circuit the opportunity to sell their Becton stock at $45 per share to Sun. On January 17, Searff collected the shares of the three other individuals, receiving their signatures on pur- chase agreement contracts and on their voting proxies. Scarff then flew to New York to deliver these shares, those of the partnership, and the executed contracts to Sun. Eberstadt M & D was also offered the same proposal ex- tended to Dickinson, Dunning, and Lufkin. On January 16, a representative of Kberstadt M & D recommended the $45 price to the director of the Funds and of the Kberstadt- managed discretionary accounts. Both groups of directors accepted this offer. With the favorable response from Dickinson, Dunning, Lufkin, and the Funds, the time was ripe for Sun to com- mence the second stage of its plan for acquiring 34% of the outstanding stock of Becton. At 4:00 P.M. on January 16, the Sun solicitation team met in the trading room at Salo- mon’s New York offices and began telephone solicitations of additional tenders from institutional investors holding large blocks of Becton stock. The team worked in pairs of one caller and one lawyer, who monitored the ealler’s side of the conversation. The caller solicited offers to sell Bee- ton stock to an anonymous purchaser from at least 20 in- dividuals representing 30 institutions, offering the same two tier price structure as was extended to Dickinson, Dun- ning, Lufkin, and Eberstadt M & D. Each solicitee was told . that a non-disclosed purchaser was looking for 20% of Bee- ton’s stock; that no transaction would be final unless 20% of the shares were acquired; that the $40 option could be ac- cepted without fear of losing the opportunity to obtain a l5a Opinion of the United States Court of Appeals for the Second Circuit higher price in the event shares were later bought at a higher figure ; and that the purchases necessary to reach the desired 20% goal were rapidly being made and that a hur- ried response was therefore essential. Each solicitee was asked to respond within one hour or less, although some were allowed to wait until the next day. Sun was identified as the purchaser to a few institutions, but in most cases, the purchaser’s specific identity was not revealed, By 5:35 P.M., Kephart of Sun was advised that verbal commitments reached 20%, and Kephart was given authori- zation to seal the bargain with the institutions that had agreed to tender their shares. The closing price on the New York Stock Exchange for Becton shares on January 16 was $32% per share. Thus, Sun paid a premium of $124% per share over market price to those stockholders which accepted the $45 option. Before the end of the evening, Sun officials had realized their objective of obtaining at least 34% of Becton’s outstanding shares. On January 17 and 18, couriers were dispatched throughout the country to pay for the stock, to obtain signatures or collect pre- pared purchase agreements, to take physical possession of the stock certificates, and to have solicitees sign powers of attorney to allow Sun to vote their proxies. On January 17, Salomon representatives contacted offi- cials of the New York Stock Exchange and convinced them to halt trading in Becton stock on the ground that an un- identified client would be filing a statement pursuant to Section 13(d) filing two days later, on January 19. Dickin- son and Turner, his daughter, also filed separate Section 13(d) statements on January 19. On January 24, the day 16a Opinion of the United States Court of Appeals for the Second Circuit after the trading ban on Becton stock was finally lifted, the Dunning trusts filed Schedule 13(d) statements. Sun’s lightning strike triggered litigation starting on January 23, 1978. In his first opinion, Judge Carter ruled that Sun had made a tender offer without the requisite filings in violation of Section 14(d), 15 U.S.C. § 78n(d) (1976). Sun agreed to divest itself of its stake in Becton by issuing debentures of 10-25 years maturity which will be exchanged or redeemed for Sun’s Becton shares. This agreement, along with the settlement of various class action claims, was approved by Judge Carter on July 31, 1980, and upheld by this court in an unpublished order, Wellman v. Dickinson, 647 F.2d 163 (2d Cir. 1981). Sun’s liability under Section 14(d) is not at issue in this appeal. Discussion Section 13(d) of the Securities Exchange Act of 1934 requires a group that has acquired, directly or indirectly, beneficial ownership of more than 5% of a class of a regis- tered equity security, to file a statement with the SEC,'° disclosing, inter alia, the identity of its members and the purpose of its acquisition. The central question on appeal is whether the district court erred in finding that Dickinson joined a group holding beneficial ownership of approxi- mately 13% of the outstanding shares of Becton, and in finding that the members of this group agreed to dispose of the Becton stock under their control but failed to disclose this fact pursuant to Section 13(d). A group, under See- 10. This statement must also be transmitted to the issuer of the security and to each exchange where the security is traded. 17a Opinion of the United States Court of Appeals for the Second Circuit tion 13(d)(3), 15 U.S.C. § 78m(d)(3) (1976), is defined as an aggregation of persons or entities who ‘‘act ... for the purpose of acquiring, holding or disposing of securities. ..’ The statute contains no requirement, however, that the members be committed to acquisition, holding, or dis- position on any specific set of terms. Instead, the touch- stone of a group within the meaning of Section 13(d) is that the members combined in furtherance of a common objective. Bath Industries, Inc. v. Blot, 427 ¥'.2d 97, 111 (7th Cir. 1970). See also Corenco Corp. v. Schiavone & Sons, Inc., 488 F.2d 207, 217 (2d Cir. 1973) ; Texasgulf Inc., v. Canada Development Corp., 366 F.Supp. 374, 403 (S.D. Tex.1973). Of course, the concerted action of the group’s members need not be expressly memorialized in writing. Securities and Exchange Commission v. Savoy Indus., Inc., 587 F.2d 1149, 1163 (D.C.Cir.1978), cert. denied, 440 U.S. 913, 99 S.Ct. 1227, 59 L.Ed.2d 462 (1979). Dickinson contends that plaintiffs have not demon- strated that he entered into a formal or informal agree- ment with any other person to dispose of his Becton stock, or that the purported members of the Section 13(d) group had beneficial ownership of sufficient Becton stock to form a Section 13(d) group with him. In evaluating Dickinson’s contentions, we must sift through the record to determine whether there is sufficient direct or circumstantial evidence to support the inference of a formal or informal understanding between Dickinson and others holding beneficial ownership of more than 5% of Becton stock for the purpose of disposing of the shares under their control. See id. The evidence in this case 18a Opinion of the United States Court of Appeals for the Second Circuit supports the district court’s determination that as part of an effort to effectuate a shift in the corporate control of Becton, Dickinson and others holding beneficial owner- ship of approximately 13% of the company’s outstanding stock, reached an understanding to act in concert in dispos- ing of their shares, but failed to disclose this fact as re- quired by Section 13(d). Ample evidence supports the district court’s finding that Dickinson, EMberstadt, Eberstadt M & D, Lufkin, and Dunning ‘‘were all part of a group formed to dispose of their shares to aid a third party acquisition of a con- trolling interest in [Becton].’’ Wellman v. Dickinson, supra, 475 F.Supp. at 880. In reaching its conclusion that an express or implied understanding existed between the group members, the district court relied to a great extent on the representations made by Dickinson and his repre- sentatives from Salomon and Eberstadt to potential pur- chasers concerning the availability of the shares controlled by Dickinson, Dunning, Lufkin, Mberstadt, and Eberstadt M&D. One vivid example of testimony concerning the assur- ances made by Dickinson’s representatives to potential purchasers is that of William LaPorte, chairman of the board of directors of American Home Products Corpora- tion, one of the companies approached with the Becton takeover proposal, LaPorte testified at trial that Kenneth Lipper of Salomon called to inform him that Dickinson was seeking a company interested in merging with Becton and that 16-17% of the outstanding shares were readily available for sale. Specifically, Lipper indicated, accord- 19a Opinion of the United States Court of Appeals for the Second Circuit ing to LaPorte, that Eberstadt controlled 500,000 shares of Becton and that the shares controlled by Dickinson and Dunning were available and would ‘‘go with [the] deal’’. John Whitehead, an investment banker for Monsanto Company, another corporation offered the Becton takeover proposal, also testified that Dickinson and his representa- tives provided assurances concerning the availability of outstanding shares of Becton. Whitehead testified at trial that he was asked ‘‘whether Monsanto was interested in buying around 3,000,000 shares [of Becton]’’ and that the 3,000,000 figure was composed in part of 1,200,000 shares controlled by Dickinson and his family and 1,300,000 shares controlled by Dickinson’s friends and associates. More- over, Whitehead testified that Dunning was named as a principal owner of the latter group of shares. Dickinson contends that the representations made by him and his representatives to potential purchasers are not probative of an understanding among the group members because the statements were simply ‘‘predictions’’ as to which Becton shareholders would sell. We reject Dickin- son’s claim and conclude that, in light of all the facts, the district court could reasonably infer from the evidence that assurances, not mere predictions, were made by the group. See Securities and Exchange Commission v. Park- lane Hosiery Co., Inc., 558 F.2d 1083, 1086 (2d Cir. 1977). Additional direct and circumstantial evidence supports the district court’s finding of an agreement between Dickin- son, Eberstadt, Eberstadt M & D, Dunning, and Lufkin. The record clearly demonstrates that Dickinson aggregated his family’s holdings of 1,200,000-1,300,000 shares of Becton 20a Opinion of the United States Court of Appeals for the Second Circuit stock and contacted Eberstadt and Salomon for the pur- pose of finding a corporation acceptable to him that would be interested in buying his substantial Becton holdings. Dickinson solicited Eberstadt to assist in his search for a buyer, aware that the Eberstadt-controlled discretionary accounts held 52,175 of Becton stock (.27%) and that the Funds managed by Eberstadt M & D held 443,200 shares (2.33%).™ It is conclusively established that Eberstadt agreed to join Dickinson’s effort to interest a corporate purchaser in a takeover or partial takeover of Becton. Executives of Eberstadt were apprised that the brokerage house’s fee of $350,000 was contingent on its successful delivery of 20% of the Becton stock to Sun. In an effort to reach this goal, representations concerning the number of group shares attributable to Eberstadt and Eberstadt M & D repeatedly included the discretionary account shares. Moreover, ac- tions taken in connection with Sun negotiations indicate that prior to the receipt of Sun’s offer, a determination had already been made to sell the shares held by the discretion- ary accounts as part of the total shares of the group. With respect to Eberstadt M & D, substantial evidence supports the district court’s finding that it also committed itself to the endeavor of effectuating a shilt in the corporate control of Becton. Robert Zeller served as both chief execu- tive officer of Eberstadt and vice-chairman of Eberstadt M & D. Moreover, Eberstadt owned 75% of Eberstadt M & D. Dickinson contends that this finding is erroneous 11. The Chemical Fund owned 413,200 shares (2.17%) and the Surveyor Fund owned 30,000 shares (.16% ). 21a Opinion of the United States Court of Appeals for the Second Circuit because the court refused to credit the testimony of exeeu- tives of Sun who stated that Zeller of Eberstadt had dis- claimed authority to direct the disposition of shares held by the Funds and that the executives had believed these disclaimers. The court properly discredited this testimony in light of the fact that the notes of these executives taken during their meetings with Dickinson’s representatives re- flect the executives’ understanding that the Funds’ shares managed by Eberstadt M & D were available for purchase. Moreover, the individuals who met with Zeller and Lipper, despite Zeller’s silence or disclaimer, departed from the meeting convinced that the shares held by the Funds were available with those of Dickinson, Dunning, and Lufkin. ‘*Indeed, Lipper would tell the prospective acquisition clients that Chemical Fund was the bellweather of the insti- tutions holding large blocks of [Becton] stock and that it would sell for the right price, implying that the others would follow suit. Zeller would agree to this statement.’’ Wellman v. Dickinson, supra, 475 F.Supp. at 828. The evidence also supports the inference drawn by the district court that from the beginning, Dunning was a mem- ber of the undisclosed group formed to dispose of its shares of Becton. Dickinson kept Dunning abreast of any progress made in the search for a corporation interested in taking over Becton. Moreover, Dunning’s name was mentioned as one of the prospective sellers of Becton stock to nearly every company solicited by Dickinson’s representatives. In addition, when Lipper and Zeller formally presented Sun’s offer to Dickinson in his hospital room on January 14, Dickinson said that he would be interested only if the same 22a Opinion of the United States Court of Appeals for the Second Circuit offer were extended to Dunning. Dickinson contacted Dun- ning from his hospital room and arranged for Zeller and Lipper to meet with Dunning on the following day. Finally, the evidence as to Lufkin’s participation with Dickinson supports the conclusion that Lufkin was a full participant in the search for a purchaser to (ake over Bee- ton. On November 10, 1977, Lufkin met with Dickinson, Kenneth Lipper of Salomon, and Jerome Lipper. Lufkin, according to Dickinson, informed them that ‘‘he repre- sented a stock holding in [Becton] that grew out of the acquisition by [Becton] of a company on the West Coast”’, and that he was concerned over the recent internal difficul- ties at Becton. Lufkin stated that he was ‘very much in [Dickinson’s] corner’’. Thereafter, Dickinson’s representa- tives always included the approximately 400,000 shares held by the Lufkin partnership and Drake, Willock, and Smith among those who could be counted on as willing sellers. In addition, like Dickinson, his daughter, Dunning, and Kberstadt, the Lufkin partnership and the three other individuals received their offers prior to the extension of formal offers to other solicitees, and Lufkin appears to have been told the identity of the purchaser, Dickinson, Dunning, Eberstadt, Eberstadt M & D, and Lufkin were linked by a desire to profit from a shift in the corporate control of Becton. The evidence clearly supports the district court’s finding that in an effort to achieve their common objective, Dickinson, Eberstadt, Dunning, Eber- stadt M & D and Lufkin formed a group to dispose of the Becton shares under their control, 28a Opinion of the United States Court of Appeals for the Second Circuit Dickinson also contends that the district court erred in finding that Eberstadt, Eberstadt M & D, Dunning and Luf- kin held beneficial ownership of sufficient Becton stock to form a Section 13(d) group with him because they possessed ‘the power to commit | Becton] shares to the group purpose of effectuating a shift in corporate control’, Wellman v. Dickinson, supra, 475 F.Supp. at 829 (emphasis supplied). Dickinson contends that control over present voting power should be the sole determinant of beneficial ownership and that the power to dispose of stock is not a relevant con- sideration, We reject Dickinson’s argument, Although voting con- trol is alone sufficient to support a finding of beneficial ownership, it need not be the only indicium, See Rule 13d- 8,17 C.F.R, 240,13d-3 (1981)."* A rule that beneficial owner- ship can be established only by proof of voting control would exclude from the coverage of Section 13(d) a range of conduct that Congress clearly intended should be cov- ered, Section 13(d) was designed to alert investors in securities markets to potential changes in corporate control and to provide them with an opportunity to evaluate the effect of these potential changes. GAF Corp, v. Milstein, 12. Rule 13d-3, 17 C.F.R. 240,13d-3 (1981), includes within the term beneficial owner any person “who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (1) Voting power which includes the power to vote, or to direct the voting of, such security; and/or, (2) Investment power which includes the power to dispose, or to direct the disposi- tion of, such securities.” The SEC adopted Rule 13d-3 in February, 1977 but postponed its effective date until April 30, 1978, subsequent to the events involved in this case. Although Rule 13d-3 is not con- trolling, it serves as further evidence that the Commission had not intended beneficial ownership to be defined solely as present voting power. 24a Opinion of the United States Court of Appeals for the Second Circuit 453 F.2d 709, 717 (2d Cir, 1971), cert. denied, 406 U.S, 910, 92 S.Ct. 1610, 31 L.Md.2d 821 (1972). The power to dispose of a block of securities represents a means for effecting changes in corporate control in addition to the possession of voting control. Moreover, Congress intended beneficial ownership to mean more than voting control when it specifi- eally included within the definition of ‘‘person[s]’’ subjeet to Section 13(d), a ‘‘group”’ acting in concert for the ‘pur- pose of... disposing of securities of an issuer’’, 15 U.S.C, § 78m(d)(3) (1976), In addition, the narrow construction of the term ‘beneficial ownership’? requested by Dickinson conflicts with the legislative history of Section 13(d)(3), Both the Senate and [louse Reports state: ‘This provision would prevent a group of persons who seek to pool their voting or olher interests in the securities of an issuer from evading the provisions of the statute because no one individual owns more than ... 15] percent of a class of securities at the time they agreed to aet in concert ,... This provision is designed to obtain full disclosure of the identity of any person or group obtaining the benefits of ownership by reason of any contract, understanding, relationship, agree- ment or other arrangement.’’ S.Rep.No, 550, 90th Cong., 1st Sess. 8 (1967); TLR.Rep.No. 1711, 90th Cong., 2d Sees, 8-9 (1968), reprinted in [1968] U.S. Code Cong. & Admin.News 2811, 2818 (emphasis sup- plied). The evidence clearly supports the district court’s find- ings thet the members of the group possessed the power to commit sufficient shares of Becton stock to satisfy the 5% holding requirement of Section 13(d). 25u Opinion of the Unitud States Court of Appeals for the Sccond Circuit With respect to the discretionary accounts managed by Eberstadt M & D, the facts support the conclusion that Eberstadt controlled the disposition of the Becton shares held in these accounts. Although Zeller, chief executive officer of Eberstadt and vice chairman of Eberstadt M & D, did not personally handle the discretionary accounts, his subordinate, Schiefferdecker, managed these accounts. Schiefferdecker was informed of the nature of Zeller’s activities on behalf of Dickinson and the fact that Eber- stadt’s fee for the Sun transaction was contingent on its successful delivery of 20% of Becton’s stock to Sun, More- over, at trial counsel for Dickinson never objected to the propriety of counting these shares toward the 5% holding requirement of Section 13(d), Similarly, Eberstadt was always in a position to direct the disposition of the 443,200 shares of Becton stock held by the Funds. As the district court stated, ‘It would be blinking reality to find that Zeller, as chief executive of Kberstadt of which [Eberstadt] M & D was a subsidiary, was unable to make a binding commitment of [the Funds’] shares as a part of the Dickinson, Lipper, Zeller package. . 2? Wellman v, Dickinson, supra, 475 F.Supp. at 830. The testimony of John Martin, an unaffiliated director of the Chemical Fund demonstrates that the directors of the Funds followed Eberstadt M & D’s recommendations as a matter of course. Martin stated, ‘‘T relied heavily on the M & D organization. They are professionals, They have the highest integrity. I have never had reason to doubt their judgment. They do a thorough job of analysis and research, They do not enter into recommendations lightly. 26a Opinion of the United States Court of Appeals for the Second Circuit Under the circumstances, I have the highest regard for Mr. Nilsen [vice president of Eberstadt and Eberstadt M & D, vice president for investments of the Chemical Fund, and an inside director of the Surveyor Fund] and his judgment, and I rely heavily on his considered judgment, analysis and assurance on which to base my decision, which was really a concurrence of his judgment’’. Jd. at 814. Moreover, the pr.cedures followed in the Sun transac- tion support the inference that Eberstadt M & D and thus, in turn, Eberstadt, controlled the sales decision of the Funds. Although all the outside directors of the Funds were polled, Zeller had instructed his subordinates at Eber- stadt not to disclose the identity of either the purchaser or the portfolio security offered for sale wien polling the directors. These orders were followed. In addition, Eber- stadt M & D failed to disclose that a director of Eberstadt had been working with Dickinson to sell his steck as part of a takeover of Becton. Accordingly, we are convinced that the directors routinely followed Eberstadt M & D’s recommendation in directing the disposition of the Becton stock, which permitted Eberstadt M & D to control the shares held by the Funds from the outset.’ The record also supports the findings of the district court that Lufkin had the power to commit the 93,000 shares that he held with his partner, Scarff, and the 326,545 shares held by Drake, Willock, and Smith, the three Becton share- 13. Although, as we have indicated in footnote 12, Rule 13d-3, 17 C.F.R. 240.13d-3 (1981), became effective subsequent to the rele- vant events involved in this case, we find it incisive that this Rule includes within the term beneficial owner any person “who . . . has or shares . . . [i]nvestment power which includes the power to dispose, or to direct the disposition of such securities.” 2ia Opinion of the United States Court of Appeals for the Second Circuit holders who relied heavily on Lufkin’s partnership for investment advice."* Lufkin testified that when he was formally presented with Sun’s offer, he felt confident he would be able to commit the Becton shares held by the partnership and that the three other shareholders would tender their Becton stock as well. Lufkin contacted Scarff, indicating that he was in favor of accepting Sun’s proposal. Searff promptly relayed the offer to the three other share- holders, who immediately accepted. Finally, the inference drawn by the district court that Dunning had effective control over the disposition of the 344,849 shares of Becton stock held by the three Dunning trusts is properly supported by the record. Although Dun- ning served as one of the two co-trustees for one of the three trusts, each of his two brothers served as a co-trustee for one of the other two trusts. Dunning’s personal lawyer served as the other trustee for all three trusts. Moreover, numerous references in the record to those shares as ‘‘Dunning’s shares’’ reveal that even the persons most familiar with the facts believed that Dunning had the authority to dispose of the trusts’ shares. The final issue which we consider is the claim raised by class plaintiffs that Dickinson should be required to disgorge the over-the-market premium he received from the sale of his stock to Sun.” Class plaintiffs argue that 14. Lufkin’s control of Drake’s, Willock’s, and Smith’s shares does not, however, make them members of the Section 13(d) group. 15. Class plaintiffs are stockholders who, as of the close of busi- ness on January 16, 1978, owned shares of Becton common stock not sold to Sun, and debenture holders who owned 44%% convertible debentures due in 1988. The class consists of approximately 13,000 Becton shareholders who hold 12,706,845 shares and 889 debenture holders who, if their bonds were converted to stock, would hold 225,840 shares. 28a Opinion of the United States Court of Appeals for the Second Circuit Dickinson violated his fiduciary obligation to Becton share- holders by his failure to advise the company’s manage- ment that he was searching for a corporation to purchase his Becton holdings, and by his acceptance of a premium for his shares from Sun without offering other shareholders an opportunity to participate. Accordingly, the class plaintiffs continue, Dickinson should not be permitted to retain any profits realized from the transaction. Similarly, class plaintiffs contend that they were deprived of the opportunity to share in the premium which Dickinson obtained as a result of his conduct in violation of Section 13(d), and that this provides an independent basis for ordering the remedy of disgorgment. We conclude that the district court properly rejected both of class plaintiffs’ grounds for damages. Although Dickinson violated Section 13(d), there is no evidence that Dickinson had breached any statutory or common law obligation he owed Becton’s stockholders. At the time he sold his stock to Sun, Dickinson was a director of Becton. This position, however, placed him under no fiduciary duty to reveal to the company’s manage- ment his intention to use his Becton holdings to effectuate a third-party takeover of the company, see Rochez Bros., Inc. v. Rhoades, 527 F.2d 880, 889 (3d Cir. 1975), or to refrain from promoting a takeover by a third-party. Dickinson also had no fiduciary obligation to other Becton stockholders to refuse the premium offered by Sun or to advise them that he was receiving a premium. Accordingly, Dickinson did not breach any fiduciary obligation owed to the class plaintiffs. See Haberman v. Murchison, 331 29a Opinion of the United States Court of Appeals for the Second Circuit F.Supp. 180 (S.D.N.Y.1971), aff’d, 468 F.2d 1305 (2d Cir. 1972). With respect to class plaintiffs’ claim that Dickinson should be required to disgorge the over-the-market pre- mium he received from the Sun purchases because of his failure to file a Section 13(d) statement, we find that plain- tiffs have not demonstrated that their alleged injury was directly caused by the Section 13(d) violation or that there Was any injury in fact. To recover damages for violation of the Securities Exchange Act, ‘‘the loss complained of must proceed directly and proximately from the violation claimed and not be attributable to some supervening eause’’, Marbury Mangament, Inc. v. Kohn, 629 F.2d 705, 719 (2d Cir.) (emphasis in original), cert. denied sub. nom., Wood Walker & Co. v. Marbury Management, Inc., 449 U.S. 1011, 101 S.Ct. 566, 66 L.Ed.2d 469 (1980). Although Dickinson profited from the sale of his Becton shares, his profit was not derived from his failure to file a Section 13(d) statement. Moreover, Dickinson’s failure to file such a statement did not cause Sun to purchase his shares. Instead, Sun was interested in purchasing Dickinson’s shares for the reason that such a transaction enabled it to acquire a large block of Becton stock expeditiously by deal- ing with a limited number of individuals and institutions. Similarly, Dickinson’s failure to file a Section 13(d) state- ment did not prevent class plaintiffs from being afforded the opportunity to share in the premium offered by Sun. Since class plaintiffs have not demonstrated that their alleged injury was directly caused by the Section 13(d) violation, the district court properly denied their claims for damages against Dickinson. Affirmed. 30a Opinion of the United States Court of Appeals for the Second Circuit Van GraareiLanp, Circuit Judge, concurring in part and dissenting in part: When reputable and honest businessmen, advised by able and ethical lawyers, are held to have violated a federal statute, the likelihood is that there is something faulty in the statute, the manner in which it is administered, or both. In this case, I believe the fault lies with both. Under the Williams Act, Congress and the SEC have attempted to regulate both purchases and sales of stock with the same set of rules and with an inadequate definition of terms. The result has been less than admirable. Section 13(d)(1) of the Williams Act, 15 U.S.C. §78(m)(d)(1), provides that a person who acquires directly or indirectly the beneficial ownership of securities in a class, and thus becomes directly or indirectly the bene- ficial owner of more than 5% of such class, must file a Schedule 13D statement within ten days of the acquisition. It does not define the term ‘‘beneficial owner’’. Section 13(d)(3) provides that, when two or more persons act as a group for the purpose of ‘‘acquiring, holding, or dispos- ing’’ of such securities, the group shall be deemed to be a ‘‘person’’. The group, says Congress, is deemed to have become the beneficial owner of the securities at the time they agree to act in concert. S.Rep.No. 550, 90th Cong., 1st Sess. (1967); H.R.Rep.No. 1711, 90th Cong., 2d Sess. (1968), reprinted in 1968 U.S.Code Cong. & Ad.News 2811, 2818. 3la Opinion of the United States Court of Appeals for the Second Circuit The Commission has codified this expressed congres- sional intent at 17 C.F.R. § 240.13d-5(b) (1): When two or more persons agree to act together for the purpose of acquiring, holding, voting or disposing of equity securities of an issuer, the group formed thereby shall be deemed to have acquired beneficial ownership, for purposes of sections 13(d) and 13(g) of the Act, as of the date of such agreement, of all equity securities of that issuer beneficially owned by any such persons. The Commission's definition of beneficial ownership, which postdates the events at issue herein, incorporates ‘*the power to dispose, or to direct the disposition of,’’ a security. 17 C.F.R. ¢ 240.13d-3(a)(2). However, neither Congress nor the Commission has enlightened us as to how, in the absence of controlling contractual provisions, this in- cident of beneficial ownership is ‘‘deemed’’ to be exercisable by a group. The record in the instant case does not disclose whether the alleged group was to act by majority vote, unanimous vote, or in some other manner. If there was an agreement for the formation of the group, such as we have held to be necessary, Corenco Corp. v. Schiavone & Sons, Inc., 488 F.2d 207, 217 (2d Cir. 1973), we are left completely in the dark as to its pertinent provisions. My own reading of the record does not satisfy me that Dickinson, Eberstadt, Dunning, and Lufkin had the powers of disposition over stock owned by others which the district court found to exist. For example, the district court’s finding that Eberstadt had the power to make a “binding commitment’ to sell the Fund shares is, in my opinion, 32a Opinion of the United States Court of Appeals for the Second Circuit clearly erroneous. That finding treats the Fund directors as automatons, which they were not, and disregards Eber- stadt’s specific disavowal of the power to assure a sale. In short, if Eberstadt had been sued because it found itself unable to carry out its ‘‘binding commitment’’, | would have been delighted to be the lawyer handling its defense. Iam also troubled by the absence of evidence concerning: 1. The alleged power of Dickinson and Dunning to control the disposition of stock held in trust where there were co-trustees whose assent was required, see 90 C.J.S. Trusts § 298, at 449; 2. Dickinson’s alleged control over the disposition of stock owned by other members of his family, see Texasgulf, Inc. v. Canada Development Corp., 366 F. Supp. 374, 403 (S.D.'Tex. 1973) ; 3. Dunning’s alleged power to dispose of stock held in two trusts of which he was not even a trustee; 4. Lufkin’s alleged control over the investment de- cisions of a parinership’s managing partner and the sale of stock owned by three shareholders whom Luf- kin had never even met. Despite this flimsy showing of individual power and con- trol, the district court concluded that all the group members became beneficial owners of the stock involved. According to the district court, a group was formed, as an entity separate and distinct from its members, many months before the sale of Becton stock to The Sun Co. 33a Opinion of the United States Court of Appeals for the Second Circuit Within ten days after its formation, the group or its in- dividual members had to file 13D Schedules. 17 C.F.R. §§ 240.13d-1(a), 240.13d-1(f). These Schedules had to be truthful. GAF Corp. v. Milstein, 453 F.2d 709, 720 (2d Cir. 1971), cert. denied, 406 U.S. 1910, 92 S.Ct. 1610, 31 L.Ed.2d 821 (1972). Both overstatement and understatement had to be avoided. Electronic Specialty Co. v. International Controls Corp., 409 F.2d 937, 948 (2d Cir. 1969). Lack of candor might have resulted in civil or criminal liability on the part of group members. 17 C.F.R. § 240.13d-101; see United States v. Newman, 664 F.2d 12, 16 (2d Cir. 1981). More significantly, a misstep in the preparation of a Sched- ule might have opened the door to the favorite delaying tactic of entrenched management, an application for a temporary injunction. See, ¢.g., Electronic Specialty Co. v. International Controls Corp., supra, 409 F.2d at 947; Transcon Lines v. A. G. Becker, Inc., 470 F.Supp. 356 (S.D.N.Y.1979) ; Nicholson File Co. v. HI. K. Porter Co., 341 F.Supp. 508, 520 (D.R.I. 1972). The filing requirement was designed to identify the group ‘‘obtaining the benefits of ownersbip ... by reason of any contract, understanding, relationship, agreement or other arrangement.’’ S.Rep.No. 550, supra, at 8. Unlike my colleagues, I am at a loss to know how, in April 1977, the group members could have disclosed the group’s method of acquiring ownership (17 C.F.R. § 240.13d-101, Item 3) so that the disclosure would not have been simply an invitation to litigation. I wonder, for example, how the shareholders of Chemical Fund would have reacted to a pronouncement by Mr. Lufkin that, as a group member, he had become one 34a Opinion of the United States Court of Appeals for the Second Circuit of the beneficial owners of the Fund’s 413,200 shares of Becton stock. Texasgulf, Inc. v. Canada Development Corp., supra, 366 F.Supp. at 403. I wonder what would have happened had Dr. Dunning stated that, although neither he nor Mr. Lufkin was acquainted with Robert Smith, Dr. Dunning nonetheless had become a beneficial owner of Mr. Smith’s Becton stock. I wonder if Becton management would have sat idle in the face of a group claim that it was the beneficial owner of stock held in trust by trustees having no association whatever with the group. I think management’s reaction would have been one of amazement and would have prompted it to head happily for the nearest court of equity. The Williams Act was not designed to the tip balance of regulation in favor of management. Rondeau v. Mosinee Paper Corp., 422 U.S. 49, 58-59, 95 S.Ct. 2069, 2075-76, 45 L.Ed.2d 12 (1975). Neither was it designed to provide the SEC with an amorphous regulatory power, the boundaries of which preclude definition by the most skilled of attorneys. The SEC’s bland statement in its brief that, even though Eberstadt represented the Fund as well as Mr. Dickinson, there was no ‘‘need’’ to hold the Fund liable, is a prime example of such unfathomable regulation. With all due respect to my learned colleagues, I cannot join them in affirming a decision that unjustifiably has besmirched an honorable name. I would reverse the district court’s holding that appellant Dickinson violated section 13(d) of the Securities Exchange Act. I agree with my colleagues that the balance of the district court’s judgment should be affirmed, 35a Opinion of the United States District Court for the Southern District of New York UNITED STATES DISTRICT COURT S. D. New York Nos. 78 Civ. 284, 78 Civ. 291, 78 Civ. 345, 78 Civ. 539, 78 Civ. 1025, 78 Civ. 1055 and 78 Civ. 1156 (RLC). July 9, 1979. OO Becton, Dickinson anp Company, et al., Plaintiffs, v. Sun Company, Inc., et al., Defendants. Morton Pvupxo, Plaintiff, v. Far.eicnu S. Dickinson, Jr., et al., Defendants. Securities anp Excuance Commission, Plaintiff, v. Sun Company, Inc., et al., Defendants. Rustin Powne, Plaintiff, v Sun Company, Inc., et al., Defendants. 36a Opinion of the United States District Court for the Southern District of New York OPINION Rosexr L, Canren, District Judge. I Status of the Proceedings This litigation stems from the acquisition by Sun Com- pany, Ine. (‘‘Sun’’), a Pennsylvania corporation whose principal business is oil and gas, of roughly 34% of the stock of Becton, Dickinson & Company (‘‘BD’’), a New Jersey corporation which manufactures health care prod- ucts and medical testing and research equipment. Sun’s brilliantly designed, lightning strike took place in January, 1978, and gave rise to seven separate actions which were consolidated for trial. In 78 Civ. 1055, the Securities and Exchange Commission (‘‘Commission’’) brings an enforce- ment action against Sun, L.H.1.W., Ine. (an acronym for Lets Hope It Works), the corporation Sun formed to re- ceive the BD shares; Salomon Brothers (‘‘Salomon’’), a New York limited partnership engaged in the investment banking and brokerage business; I’, Eberstadt & Co., Inc., (‘*Eberstadt’’), a Delaware corporation engaged in invest- ment banking, institutional stock brokerage and the man- agement of pension funds and advisory accounts and which, along with Salomon, handled the Sun acquisition; F’, Eber- stadt & Co. Managers & Distributors, Inc. (‘‘M & D’’), a Delaware company 75% owned by Eberstadt and 25% owned by the estate of Ferdinand Eberstadt,’ which man- 1. Sometime after the events which concern us, M & D became a wholly-owned Eberstadt company. 87a Opinion of the United States District Court for the Southern District of New York ages the two Eberstadt mutual funds involved in this pro- ceeding; Robert Zeller, chief executive officer of Eberstadt and vice chairman of M & D; Fairleigh S. Dickinson, Jr., former chairman of BD and one of its principal stock- holders; J.H. Fitzgerald Dunning, a former director and large stockholder in BD; and Kenneth Lipper, a partner in Salomon. The Commission charges the defendants with violating or aiding and abetting the violation of Sections 10(b), 13(d), 14(d) and 14(e) of the Securities Exchange Act of 1934, as amended (15 U.S.C. §§78j(b),? 78m(d)," 2. 15 U.S.C. § 78j(b) provides: “It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities ex- change— + * * (b) To use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, any manipulative or deceptive device or contrivance 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.” 3. 15 U.S.C. §78m(d) provides: “(1) Any person who, after acquiring directly or indirect! the beneficial ownership of any equity security of a class which is registered pursuant to section 78/ of this title, or any equity security of an insurance company which would have been required to be so registered except for the exemption contained in section 78I(g) (2) (G) of this title, or any =e | — issued by a closed-end investment company registered under the Investment Company Act of 1940, is directly or indirectly the beneficial owner of more than 5 centum of such class shall, within ten days after such acquisition, send to the issuer of the security at its principal executive office, by registered or certified mail, send to each exchange where the security is traded, and file with the Commission, a statement containing such of the following infor- (footnote continued on next page) 38a Opinion of the United States District Court for the Southern District of New York Note 3—Continued mation, and such additional information, as the Commission may by rules and regulations, prescribe as necessary or appropriate in tne public interest or for the protection of investors— (A) the background, and identity, residence, and citizen- ship of, and the nature of such beneficial ownership by, such person and all other persons by whom or on whose behalf the purchases have been or are to be effected ; (B) the source and amount of the funds or other consider- ation used or to be used in making the purchases, and if any ag of the purchase price is represented or is to be represented y funds or other consideration borrowed or otherwise obtained for the purpose of acquiring, holding, or trading such security, a description of the transaction and the names of the parties thereto, except that where a source of funds is a loan made in the ordinary course of business by a bank, as defined in section 78c(a) (6) of this title, if the person filing such statement so requests, the name of the bank shall not be made available to the public ; (C) if the purpose of the purchases or prospective pur- chases is to acquire control of the business of the issuer of the securities, any plans or proposals which such persons may have to liquidate such issuer, to sell its assets to or merge it with any other persons, or to make any other major change in its business or corporate structure ; (D) the number of shares of such security which are bene- ficially owned, and the number of shares concerning which there is a right to acquire, directly or indirectly, by (i) such ca. and (ii) by each associate of such person, giving the kground, identity, residence, and citizenship of each such associate ; and (E) information as to any contracts, arrangements, or un- derstandings with any person with respect to any securities of the issuer, including but not limited to transfer of any of the securities, joint ventures, loan or option arrangements, puts or calls, guaranties of loans, guaranties against loss or guaranties of profits, division of losses or profits, or the giving or with- holding of proxies, naming the persons with whom such con- tracts, arrangements, or understandings have been entered into, and giving the details thereof. (2) If any material change occurs in the facts set forth in the statements to the issuer and the exchange, and in the state- (footnote continued on next page) 89a. Opinion of the United States District Court for the Southern District of New York Note 3—Continued ment filed with the Commission, an amendment shall be trans- mitted to the issuer and the exchange and shall be filed with the Commission, in accordance with such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors. (3) When two or more persons act as a partnership, limited partnership, syndicate, or other group for the purpose of acquir- ing, holding, or disposing of securities of an issuer, such syndicate or group shall be deemed a “person” for the purposes of this subsection, (4) In determining, for purposes of this subsection, any per- centage of a class of any security, such class shall be deemed to consist of the amount of the outstanding securities of such class, exclusive of any securities of such class held by or for the account of the issuer or a subsidiary of the issuer. (5) The Commission, by rule or regulation or by order, may permit any person to file in lieu of the statement required by paragraph (1) of this subsection or the rules and regulations thereunder, a notice stating the name of such person, the number of shares of any equity securities subject to paragraph (1) which are owned by him, the date of their acquisition and such other information as the Commission may specify, if it appears to the Commission that such securities were acquired by such person in the ordinary course of his business and were not acquired for the purpose of and do not have the effect of changing or influenc- ing the control of the issuer nor in connection with or as a participant in any transaction having such purpose or effect. (6) The provisions of this subsection shall not apply to— (A) any acquisition or offer to acquire securities made or proposed to be made by means of a registration statement under the Securities Act of 1933; (B) -_ acquisition of the beneficial ownership of 9 se- curity which, together with all other acquisitions by the same person of securities of the same class during the preceding twelve months, does not exceed 2 per centum of that class; (C) any acquisition of an equity security by the issuer of such security ; (D) any acquisition or proposed acquisition of a security which the Commission, by rules or regulations or by order, shall exempt from the provisions of this subsection as not entered into for the purpose of, and not having the effect of, changing or influencing the control of the issuer or otherwise as not comprehended within the purposes of this subsection.” 40a Opinion of the United States District Court for the Southern District of New York 78n(d)* and 78n(e)°); Rules 10b-5 (17 C.F.R. § 240.10b-5)* 4. 15 U.S.C. § 78n(d) provides: “(1) It shali be unlawful for any person, directly or indi- rectly, by use of the mails or by any means or instrumentality of interstate commerce or of any facility of a national securities ex- change or otherwise, to make a tender offer for, or a request or invitation for tenders of, any class of any equity security which is registered pursuant to section 78/ of this title, or any equity security of an insurance company which would have been re- quired to be so registered except for the exemption contained in section 781(¢)(2)(G) of this title, or any equity security issued by a closed-end investment company registered under the Invest- ment Company Act of 1940, if, after consummation thereof, such person would, directly or indirectly, be the beneficial owner of more than 5 per centum of such class, unless at the times copies of the offer or request or invitation are first published or sent or given to security holders such person has filed with the Com- mission a statement containing such of the information specified in section 78m(d) of this title, and such additional information as the Commission may by rules and regulations prescribe as necessary or appropriate in the public interest or for the protec- tion of investors. All requests or invitations for tenders or advertisements making a tender offer or requesting or inviting tenders of such a security shall be filed as a part of such state- ment and shall contain such of the information contained in such statement as the Commission may by rules and regulations pre- scribe. Copies of any additional material soliciting or requesting such tender offers subsequent to the initial solicitation or request shall contain such information as the Commission may by rules and regulations prescribe as necessary or appropriate in the pub- lic interest or for the protection of investors, and shall be filed with the Commission not later than the time copies of such material are first published or sent or given to security holders. Copies of all statements, in the form in which such material is furnished to security holders and the Commission, shall be sent to the issuer not later than the date such material is first published or sent or given to any security holders. (2) When two or more persons act as a partnership, limited ership, syndicate, or other group for the purpose of acquir- ing, holding, or disposing of securities of an issuer, such syndicate (footnote continued on next page) 5. See note 5 on page 42a. 6. See note 6 on page 42a. 4la Opinion of the United States District Court for the Southern District of New York Note 4—Continued or group shall be deemed a “person” for purposes of this sub- section. (3) In determining, for purposes of this subsection, any per- centage of a class of any security, such class shall be deemed to consist of the amount of the outstanding securities of such class, exclusive of any securities of such class held by or for the account of the issuer or a subsidiary of the issuer. (4) Any solicitation or recommendation to the holders of such a security to accept or reject a tender offer or request or invitation for tenders shall be made in accordance with such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors. (5) Securities deposited pursuant to a tender offer or request or invitation for tenders may be withdrawn by or on behalf of the depositor at any time until the expiration of seven days after the time definitive copies of the offer or request or invitation are first published or sent or given to security holders, and at any time after sixty days from the date of the original tender offer or request or invitation, except as the Commission may otherwise prescribe by rules, regulations, or order as necessary or appro- priate in the public interest or for the protection of investors. (6) Where any person makes a tender offer, or request or invitation for tenders, for less than all the outstanding equity securities of a class, and where a greater number of securities is deposited pursuant thereto within ten days after copies of the offer or request or invitation are first published or sent or given to security holders than such person is bound or willing to take up and pay for, the securities taken up shall be taken up as nearly as may be pro rata, disregarding fractions, according to the number of securities deposited by each depositor. The pro- visions of this subsection shall also apply to securities deposited within ten days after notice of an increase in the consideration offered to security holders, as described in paragraph (7), is first published or sent or given to security holders. (7) Where any person varies the terms of a tender offer or request or invitation for tenders before the expiration thereof by increasing the consideration offered to holders of such securities, such person shall pay the increased consideration to each security holder whose securities are taken up and paid for pursuant to the tender offer or request or invitation for tenders whether or (footnote continued on next page) 42a Opinion of the United States District Court for the Southern District of New York Note 4—Continued not such securities have been taken up by such person before the variation of the tender offer or request or invitation. (8) The provisions of this subsection shali not apply to any offer for, or request or invitation for tenders of, any security— (A) if the acquisition of such security, together with all other acquisitions by the same person of securities of the same class during the preceding twelve months, would not exceed 2 per centum of that class ; (B) by the issuer of such security ; or (C) which the Commission, by rules or regulations or by order, shall exempt from the provisions of this subsection as not entered into for the purpose of, and not having the effect of, changing or influencing the control of the issuer or other- wise as not comprehended within the purposes of this sub- section,” 5. 15 U.S.C. § 78n(e) provides: “It shall be unlawful for any person to make any untrue state- ment of a material fact or omit to state any material fact necessary in order to make the statements made, in the light of the circum- stances under which they are made, not misleading, or to engage in any fraudulent, deceptive, or manipulative acts or practices, in connection with any tender offer or request or invitation for tenders, or any solicitation of security holders in opposition to or in favor of any such offer, request, or invitation. The Commis- sion shall, for the purposes of this subsection, by rules and regu- lations define, and prescribe means reasonably designed to pre- vent, such acts and practices as are fraudulent, deceptive, or manipulative.” 6. 17 C.F.R. § 240,10b-5 provides: “Tt shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interestate commerce, or of the mails or of any facility of any national securities exchange, (a) T [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385010_0180%3A1. Public record. Not legal advice.