Petition for Writ of Certiorari — First Boston Corp. v. Chris-Craft Industries, Inc.

IN THE

“Supreme Court of the United

Octoser Term, 1973

MICHAEL RODAK, JR.,GL

airs

No F7Z-154

Howarp Piper, Tuomas F. Pirer

AND

WuuumM T. Piper, JRr.,

Petitioners,

v.

Curis-Crart Inpustrigs, Inc.,

Respondent,

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

Paut G, Pennoyenr, Jr.

Epwarp C. McLean, Jr.

ZacHARY SHIMER

25 Broadway

New York, New York 10004

Counsel for Petitioners

CHADBOURNE, ParkB,

Wurrtesive & WoLrFr

Of Counsel

July 20, 1973

INDEX

PAGE

Oprxions BELow 1

JURISDICTION 2

Questions PRESENTED iil 2

SratuTE INVOLVED a 3

SraveMENT OF THe Case ___-___..._-._ 4

ProcEEDINGS BELow ________________ » 7

Reasons FoR Grantinc THe Writ ____-___________ 11

-. Te eee” eee 15

B. The ‘‘Materiality,’’ ‘‘Reliance,’’ ‘‘Causa-

tion’’ and ‘‘ Proof of Damage’’ Issues _____ 17

C. The ‘‘Scienter’’ Issue 20

D. The Scope of Appellate Review Issue _____ 21

ConcLUSION 23

CiTaTIONs

CasEs:

Affiliated Ute Citizens v. United States, 406 U.S.

128 (1972) 17,18

American Federation of Musicians v. Wittstein,

379 U.S. 171 (1964) 11

Armour & Co. v. General Host Corp., 296 F.Supp.

I tical, 13

Bangor Punta Corp. v. Chris-Craft Industries, Inc.,

337 F.Supp. 1147 (S.D.N.Y. 1971) __---.______ 2

Bath Industries, Inc. v. Blot, 427 F.2d 97 (7 Cir.

(1970) ____ 2 . 13,15

Butler Aviation International, Inc. v. Compre-

hensive Designers, Inc., 425 F.2d 842 (2 Cir.

as RES ALC Ae a 12, 15

Cattlemen’s Investment Co. v. Fears, 343 F.Supp.

1248 (W.D. Okla. 1972) 12,13

RN tr ath

ec REET

ii

PAGE

Chicago Title Insurance Co. v. Great Western

Financial Corp., €9 Cal.2d 305, 444 P.2d 481, 70

Ne Fe, We eit ecnasencns 18

Chris-Craft Industries, Inc. v. Piper Aircraft

Corp., CCH Fed. See. L Rep. { 93,816 (2 Cir.

Mar. 16, 1973), rev’g 337 F. Supp. 1128 (S.D.N.Y.

1971); Chris-Craft Industries, Inc. v. Bangor

Punta Corp., 426 F.2d 569 (2 Cir. 1970) (en

bane), aff’g sub nom. Chris-Craft Industries,

Inc. v. Piper Aircraft Corp., 303 F.Supp. 191

Cees hy GE is tics cone eacecees 1,2

Dyer v. Eastern Trust and Banking Co., 336 F.

Sapp. 890 (D. Me. 1971) ..........-.___-.._. 12, 13

Electronic Specialty Co. v. International Controls

Corp., 409 F.2d 937 (2 Cir. 1969)______-- 12, 13,15

Emmi v. First-Manufacturers National Bank, 336

ria. Ge (. ie. G5) 12, 13

Fabrikant v. Jacobellis, CCH Fed. See. L. Rep.

{ 92,686 (E.D.N.Y. June 3, 1970) _-__--______. 12, 13

GAF Corp. v. Milstein, 453 F.2d 709 (2 Cir. 1971),

cert denied, 406 U.S. 910 (1972) __--___-____-_ 13

General Host Corp. v. Triumph American, Inc.,

CCH Fed. Sec. L. Rep. { 93,946 (S.D.N.Y. Apr.

Be IED ssicsiinccacinncesceaaiohars teantabicndsescsactindeenedutedad aca ecicue 2

Gerstle v. Gamble-Skogmo, Inc., CCH Fed. See. L.

Rep. {| 93,983 (2 Cir. May 9, 1973) ____________ 20

Grow Chemical Corp. v. Uran, 316 F.Supp. 891

i Ee ae nce Pere abem 12

Gulf & Western Industries, Inc. v. The Great

Atlantic & Pacific Tea Co., 356 F.Supp. 1066

tk A _-_ eeannns eae me sterttanan ernie Snenentnien 20

Gulf & Western Industries, Inc. v. The Great

Atlantic & Pacific Tea Co., 476 F.2d 687 (2 Cir.

_ NINE des ieccciahanansaastecsnse airs tisdacisciantanalalensaiaglaeeamnlacaeoraan 12

H. K. Porter Co. v. Nicholson File Co., 353 F.Supp.

Be I ID sh cenconsnenabedae 12

lii

PAGE

Harrison v. Prather, 435 F.2d 1168 (5 Cir. 1970) ___ 18

Keogh v. Chicago & Northwestern Ry., 260 U.S.

et ae dibaadia cn ame 19

Kern County Land Co. v. Occidental Petroleum

Corp., ----U.S.____, 93 S. Ct. 1736 (1973) _____ 14

Kohn v. American Metal Climax, Inc., 458 F.2d

250 (3 Cir.), cert denied, 409 U.S. 874 (1972) __ 20

Lanza v. Drexel & Co., CCH Fed. See. L. Rep.

{ 93,959 (2 Cir. April 26,1973) ___.._ 20

Lewis v. Bloede, 202 Fed. 7 (4 Cir. RS 18

Mader v. Armel, 461 F.2d 1123 (6 Cir. S| 22

Metro-Goldwyn-Mayer, Inc. v. Transamerica Corp.,

303 F.Supp. 1344 (S.D.N.Y. 1969) 13

Mills vy. Electric Auto-Lite Co., 396 U.S. 375

SE aha dnt iat ee 10, 15, 17, 18, 19

Mosinee Paper Corp. v. Rondeau, 354 F.Supp. 686

Grae WU OE cee 12

Mutual Shares Corp. v. Genesco, Inc., 384 F.2d

Wer Re Se 15

Neuman v. Electronic Specialty Co., CCH Fed.

Sec. L. Rep. ] 92,591 (N.D. Ill. Dee. 31, 1969) _ 12, 13

Richardson v. MacArthur, 451 F.2d 35 (10 Cir.

EAA . é 22

SEC v. Bangor Punta Corp., 331 F.Supp. 1154

(S.D.N.Y. 1971) ______ 2

Smith v. Newport National Bank, 326 F.Supp. 874

(D.R.I. 1971) ______ 13

Sonesta International Hotels Corp. v. Wellington

Associates, CCH Fed. Sec. L. Rep. { 94,007

(S.D.N.Y. May 28, ME ieee eee 12

Studebaker Corp. v. Gittlin, 360 F.2d 692 (2 Cir.

fetes AAR Ne ee Ei? SN 20

Susquehanna Corp. v. Pan American Sulphur Co.,

423 F.2d 1075 (5 Cir. 1970) __ 12, 22

errr AE

iv

PAGE

Vendall, Inc. v. Statler Manufacturing Corp., 5

A.D. 2d 882, 171 N.Y.S. 2d 938 (2d Dept. 1958) 18

Washburn v. Madison Square Garden Corp., 340

F.Supp. 504 (S.D.N.Y. 1972) —- ru 12,13

Zoby v. American Fidelity Co., 143 F.Supp. 763

(E.D. Va. 1956) __- 18

STATUTES:

Section 5(c), Securities Act of 1933, 15 U.S.C.

CTinte) q....nntddeis eee ees 7

Section 9, Securities Exchange Act of 1934, 15

8 Yen yor fee 7

Section 10(b), Securities Exchange Act of 1934,

BURG. 5 ee... ccc 7, 20

Section 14, Securities Exchange Act of 1934, 15

a WOOD ccntoncomema 20

Section 14(a), Securities Exchange Act of 1934,

Ss 6 TI ree cic 20

Section 14(e), Securities Exchange Act of 1934,

15 U.S.C. § 78n(e) __-_-____ 2, 3, 4, 7, 8, 10, 12, 13, 15,

16, 18, 19, 20, 21, 22

Section 27, Securities Exchange Act of 1934, 15

U.S.C. 78aa ___- eee 13

28 U.S.C. 1254(1) ~--_- 2

RULEs:

SEC Rule 10b-5 _____ iiieccutiacadiennseamadesuaaiiins 7

SEC Rule 10b-6 ______ 7

SEC Rule 135 ______-______ 7

Rule 52(a) Federal Rules of Civil Procedure ____ 21

MISCELLANEOUS:

H.R. Rep. No. 1711, 90th Cong., 2d Sess.

I saci a pmemiciesebs ncn aaaea cies 12, 14, 20

Hearings on H.R. 14475, 8.510 Before the Sub-

comm. on Comm. and Fin. of the House Comm.

on Interstate and Foreign Commerce, 90th

Cong., 2d Sess. at 22 (1968) 5

IN THE

Supreme Court of the United States

Ocroser TERM, 1973

No.

Howarp Piper, Tuomas F. Pirer

AND

Wu T. Piper, Jr.,

Petitioners,

Vv.

Curis-Crart Inpustnirs, Inc.

Respondent.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

Petitioners Howard Piper, Thomas F. Piper and

William T. Piper, Jr. (‘‘the Pipers’’) respectfully pray

that a writ of certiorari issue to review an order and judg-

ment of the United States Court of Appeals for the Second

Cireuit, which reversed a judgment dismissing a complaint

against them after trial.

Opinions Below

The opinion of the Court of Appeals, not yet officially

reported, is reported at CCH Fed. See. L. Rep. {93,816 at

p. 93,491. It reviewed, on a consolidated appeal, three

2

decisions of the United States District Court for the

Southern District of New York, reported at 331 F.Supp,

1154, 337 F.Supp. 1128 and 337 F.Supp. 1147, respectively,

An earlier decision of the Court of Appeals ex baue, re.

ported at 426 F.2d 569 (2 Cir. 1970), affirmed and remanded

the District Court’s denial of a motion for preliminary ip.

junction, reported at 303 F.Supp. 191 (S.D.N.Y. 1969),

These opinions are reprinted in full in a separate Joint

Appendix submitted herein. This petition relates solely to

the reversal of the District Court’s dismissal of the com-

plaint against the Pipers in the opinion reported at 337 F,

Supp. 1128. The Pipers were not parties to either of the

other two actions heard on the consolidated appeal.

Jurisdiction

The judgment of the Court of Appeals was entered

March 16, 1973 and its denial of the Pipers’ timely petition

for rehearing and suggestion for rehearing ex bane was

entered April 25, 1973. The jurisdiction of this Court is in-

voked under 28 U.S.C. § 1254(1).

Questions Presented

1. This case presents a number of interrelated ques-

tions of law not yet considered by this Court under Section

14(e) of the Securities Exchange Act of 1934, adopted as

part of the ‘‘Williams Act’’ in 1968, including:

a. Does a person making a tender offer have stand-

ing to sue for damages—as distinct from injunctive

relief—for alleged misstatements made by management

of the target corporation in opposing the tender offer

if the tender offeror does not claim to have been misled

by the statements?

b. What is the proper standard under Section 14(e)

for determining the ‘‘materiality’’ of an alleged mis-

statement by management in a suit by the tender of-

3

feror rather than the shareholders of the target corpo-

ration?

e. Can the Court, in a suit for damages by the tender

offeror, conclusively presume reliance. by non-tender-

ing shareholders of the target corporation (holding

almost 20% of the outstanding stock) on an allegedly

material misrepresentation by management?

d. Can the Court conclusively presume a causal

connection between such misrepresentation and failure

of the tender offeror to get control of the target corpo-

ration seven months later?

e. Can management, which opposes a tender offer in

good faith, be held personally liable for damages be-

cause months after their alleged misrepresentations in

connection with a tender offer, another company makes

an offer to the shareholders and ultimately succeeds in

acquiring control of the target corporation through acts

in which management of the target corporation had no

participation?

2. In addition to these questions of law, and on the

facts of this case, did the Court of Appeals err in disre-

garding the findings of the trial court and concluding,

contrary to the record, that the statements made by peti-

tioners were materially misleading, were relied upon by

shareholders and therefore presumably prevented plain-

tiff from purchasing additional shares thus causing injury

to plaintiff, and then directing on remand that petitioners

be held personally liable under Section 14(e)?

Statute Involved

Section 14(e) of the Securities Exchange Act of 1934

(‘the 1934 Act’’), as amended July 29, 1968, 15 U.S.C.

§78n(e), provides:

“It shall be unlawful for any person to make any

untrue statement of a material fact or omit to state

| PERI Rt

4

any material fact necessary in order to make the state-

ments made, in the light of the circumstances 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 re.

quest or invitation for tenders, or any solicitation of

security holders in opposition to or in favor of any such

offer, request, or invitation.’’”*

Statement of the Case

On January 23, 1969 Chris-Craft Industries, Ine.

(“*CCI’’), plaintiff below, announced a eash tender offer

at $65 per share for up to 300,000 shares of common stock

of Piper Aircraft Corporation (‘‘ Piper Aireraft’’). By that

date, CCI had already secretly accumulated over 200,000

shares through open market purchases, beginning late in De-

cember 1968, and a negotiated transaction with a mutual

fund at $65 per share consummated on January 22, 1969 (Jt.

App. H-10).** At the time of the offer, Piper Aircratt com-

mon stock was selling for about $52.50 on the New York

Stock Exchange (ibid.).

In its published tender offer, which was to remain open

until February 3, 1969, CCI stated that the purchase was

being made ‘‘for investment with a view to control’ of

Piper Aircraft but that CCI ‘‘does not presently have any

specific plan or proposal . . . to acquire control’’ of Piper

Aircraft (EV. 716; EV. 710).

* After the events complained of in this action, Congress, by

Public Law 91-567 adopted December 22, 1970, added the + owing

sentence to Section 14(e) : “The Commission shall, for the ) "jess

of this subsection, by rules and regulations define, and jt "+

means reasonably designed to prevent, such acts and practices a> a

fraudulent, deceptive, or manipulative.”

#* The opinions below are reproduced in the separate Joint Appe

dix filed herein and referred to as “Jt. App.” References to“... A

are to the pages of the Appendix filed in the Court of Appeals. Refes-

ences to “EV....” are to the pages of the volumes containing exhibits

filed in the Court of Appeals.

5

Upon receiving notice of CCI’s offer, the management

of Piper Aircraft, whose Board of Directors consisted of

eight members of which the Pipers comprised only three

(214A), immediately sought advice from several outside

advisors (Jt. App. H-10).

Thereafter the Board of Directors of Piper Aircraft

adopted a resolution opposing the CCI tender offer as ‘‘not

in the best interests’’ of the shareholders of Piper Aircraft

(Jt. App. H-11). This opinion of Piper Aircraft’s Board

was then communicated to the Piper Aircraft shareholders

in a letter sent over the signature of W. T. Piper, Jr., one

of the petitioners herein, who was President of Piper Air-

eraft at the time (242A; Jt. App. H-11). As was normal

in situations of this kind, Piper Aircraft also began con-

tacting other companies in an effort to find a company that

might be a better alternative than CCI (Jt. App. H-39).*

Among the companies contacted was Grumman Aircraft

Engineering Corporation (‘‘Grumman’’), a company with

which Piper Aireraft was familiar and with which it had had

previous satisfactory business relationships (2056A-2057A).

Negotiations between Grumman and Piper Aircraft

ensued and as a result, on January 29, while CCI’s tender

offer was outstanding, Grumman and Piper Aircraft

announced that Grumman ‘‘had agreed to purchase 300,000

shares of Piper Aircraft Corporation’s authorized but

unissued common stock at $65 per share,’’ that the agree-

ment was subject to the approval of the respective Boards

of Directors and that it was also subject to various other

* As Manuel F. Cohen testified in 1968 while he was Chairman

of the SEC: “There has been enough experience in the past 2 years

for any sophisticated takeover bidder to know that, unless manage-

ment joins him, management will seek another partner and that other

partner probably will make a slightly better offer.” Hearings on H.R.

4475, 8.510 Before the Subcomm. on Comm. and Fin. of the House

mi - Interstate and Foreign Commerce, 90th Cong., 2d Sess.,

w 22 (1968),

6

conditions (266A-267A). The announcement was mailed to

shareholders on the day it was released (Jt. App. H-12),

One of the numerous terms in the agreement, which

was not specifically referred to in the announcement, was

that the agreement could be terminated by either party

should further negotiations looking to a merger of the two

companies prove unfruitful. If the agreement were ter-

minated, Piper Aireraft agreed either to find another buyer

or to return the consideration paid by Grumman plus

nominal interest of 34290 from the date of closing (261A-

262A).

Both the District Court (Jt. App. G-12) and the Court of

Appeals (Jt. App. H-39) found that the agreement with

Grumman was not a ‘‘sham”’ as CCI contended and that the

repurchase provision was a ‘‘rational and logical part of

the agreement”’ (ibid.).

One result of the Grumman announcement was that the

price of Piper Aircraft shares declined while CCI's tender

offer was still outstanding (Jt. App. H-114, n. 3). At the

close of CCI’s offer on February 3, CCI received 304,606

shares of Piper Aircraft, giving it a total of 547,106 shares,

or about 33% of the outstanding shares (Jt. App. H-12).

Thereafter, CCI decided to seek control of Piper Aircraft

by making an exchange offer to shareholders, offering a

package of CCI securities for shares of Piper Aireraft

stock. The value of the securities package offered by CCI

in its exchange offer was estimated to be between $70 and

$74 per share of Piper Aircraft stock (Jt. App. H-12-13).

This was about 10% more than CCI had offered in its cash

tender offer.

The Grumman agreement was terminated on March 19,

1969 after the New York Stock Exchange refused to list the

shares for reasons not pertinent here (Jt. App. H-12). Al

though the management of Piper Aireraft continued to

search for a better alternative than CCI, nothing that either

7

Piper Aircraft or the Pipers did thereafter had any effect

on CCI’s efforts to acquire control of Piper Aircraft. The

events in January just recited were the sole basis upon

which the Court of Appeals found the Pipers liable to CCI

for damages beeause CCI failed to acquire control of Piper

Aireraft seven months later by a ‘‘narrow margin’’ (Jt.

App. H-63).*

Both the District Court (Jt. App. G-7) and the Court

of Appeals (Jt. App. H-18) found that CCT lost its op-

portunity to acquire control of Piper Aircraft in September

1969, more than seven months after Piper Aireraft’s letters

and press release. That was:when Bangor Punta Corpora-

tion (**BPC’’), through open market cash purchases, ac-

quired sufficient shares of Piper Aircraft stock to give it

over 30%¢ of the outstanding shares.

Proceedings Below

On May 22, 1969 CCI commenced this action in the

United States District Court for the Southern District of

New York alleging violations of Section 5(¢) of the Seeuri-

ties Act of 1933, 15 U.S.C. § 77e(¢), and Rule 135 promul-

gated thereunder, as well as Sections 9, 10(b) and 14(e) of

the Securities Exchange Act of 1934, 15 U.S.C. §§ 783,

78j(b) and 78n(e), and Rules 10b-5 and 10b-6 promulgated

under that Act.

On July 22, 1969 CCI moved to enjoin BPC from pro-

ceeding with an exchange offer to all shareholders of Piper

Aireraft. The motion was denied in August 1969 (Jt. App.

A-1 et seq.). The denial of the injunction was affirmed by

the Court of Appeals for the Second Cireuit in an en banc

decision in April 1970 (Jt. App. B-1 et seq.), but the Court

of Appeals disagreed with the District Court’s analysis of

* Although the Court of Appeals decision refers to the Pipers

throughout as “the Piper family,” these three defendants and their

wives owned only about 150,000 shares of the 501,090 owned by all

members of “the Piper family” together (EV. 146, 170).

8

the applicable law and remanded the action to the District

Court for proceedings not inconsistent with its opinion,

In Mareh 1971 CCI’s action was tried before Judge

Milton Pollack of the Southern District of New York sitting

without a jury.* After trial, Judge Pollack coneluded that

the statements made by Piper Aireraft in opposing CCI's

tender offer in January 1969 were not misleading and

caused no injury to CCI. The Court of Appeals reversed,

holding that the statements were materially misleading and

(2 to 1) that the Pipers were jointly and severally liable

with the other defendants for damages to CCI under Section

14(e).

The Court of Appeals remanded the ease with explicit

directions to award damages based on ‘‘the reduction in

the appraisal value of CCI’s Piper [Aircraft] holdings

attributable to BPC’s taking a majority position and redue-

ing CCI to a minority position, and thus being able to

compel a merger at any time’’ (Jt. App. H-69).

In dissent as to the Pipers’ liability, Judge Walter

Mansfield agreed with the District Court’s conclusion that

the Pipers were not liable to CCI since CCI failed to show

that it was damaged by the statements in January 1969.

The statements were made in opposition to CCI’s limited

eash tender offer, on which it reeeived more shares than

it solicited. He further agreed with the District Court

that the statements did not injure CCI in the subsequent

contest for control of Piper Aireraft between CCI and BPC

(Jt. App. H-112-116).

The statements found by the Court of Appeals to vio-

late Section 14(e) were expressions of opinion by the

Piper Aircraft Board of Directors. In their view the CCI

* Judge Pollack also tried two other related actions at the same

time. One by BPC against CCI and one by the SEC against BPC.

Neither Piper Aircraft nor the Pipers were parties to either of those

actions.

9

eash tender offer of January 1969 was ‘*inadequate and not

in the best interests of Piper’s shareholders”? (Jt. App.

H-37). The Court of Appeals found that calling the offer

‘inadequate’? was materially misleading because the

tender offer price of $65 per share was considerably higher

than the current market price for Piper Aircraft stock

(then about $52 per share) (Jt. App. H-38). The District

Court had concluded (i) that the word ‘*inadequate’’ did

not refer solely to price and (ii) even assuming it referred

only to price, the statement ‘‘would be more fatuous than

misleading’’ beeause **[a]ny Piper shareholder with a tele-

phone or a newspaper at hand eould compare the current

market for Piper shares with Chris-Craft’s offer”’ (Jt. App.

G-11).

The Pipers were also found liable for the press release

issued by Piper Aireraft announcing the agreement with

Grumman. Liability flowed, according to the Court of

Appeals, beeause the release did not say that Grumman

could - " the stock back to Piper Aircraft if the negotia-

tions we:e terminated (Jt. App. H-39). The trial court

found the omission in the press release inconsequential,

concluding that Grumman’s right to resell was not a

‘“‘sham*’ but a rational part of the agreement (Jt. App.

G-12). The Court of Appeals agreed that the resale pro-

vision was ‘‘rational and logical’? and ‘‘not a sham’ but

nevertheless coneluded that the omission of a reference to

it in the press release was materially misleading (Jt.

App. H-39).

The trial court, which had the opportunity to observe

the witnesses, rejected as ‘“‘unfounded”’ CCI’s contentions

that Piper Aircraft’s resistance to its tender offer caused

any injury to CCT (Jt. App. G-14). The Court of Appeals,

while piously diselaiming that it was finding the District

Court clearly erroneous, nevertheless reversed. It con-

cluded that the statements reflected ‘culpability,’ held

that the Pipers violated ‘‘a high fiduciary duty of honesty

3

1

a RN

Spee

Siegen test antes

ee KY

10

and fair dealing,’’ had ‘‘obviously disregarded”’ a ‘‘specia]

responsibility to be meticulous and precise in their repre.

sentations to shareholders’’ and had ‘‘recklessly disre.

garded [their] obligation to shareholders in failing to

disclose with substantial accuracy’’ all the terms of the

Grumman agreement (Jt. App. H-38, H-40). By using in-

vective the Court of Appeals totally disregarded the ‘‘ unless

clearly erroneous’’ test applicable on review, although pro-

fessing to have no disagreement with the District Court’s

findings of fact (Jt. App. H-37).

In its January tender offer CCI solicited ‘‘up to 300,000

shares.’’ As Judge Mansfield pointed out, ‘‘the district

court found that [CCI] was not seeking more.’’ (Jt. App.

H-113). In fact, 304,606 shares were tendered to it (Jt.

App. H-12), and as Judge Mansfield noted in his dissent,

CCI ‘‘did not have sufficient funds to purchase any signif-

cant amount [of shares] in excess of 300,000’’ (Jt. App.

H-113).

The Court of Appeals majority nevertheless indulged in

a series of presumptions, all contrary to the facts of record,

and found it a ‘‘reasonable presumption that CCI was

unlawfully denied the opportunity to purchase additional

shares’’ (Jt. App. H-62). The dissenting judge, relying

on this Court’s decision in Mills v. Electric Auto-Lite Co.,

396 U.S. 375, 389 (1970) that ‘‘damages should be recover-

able only to the extent that they can be shown,”’ rejected

the majority’s presumptions and concluded that CCI had

failed to show any loss because it ‘‘got more shares than

it agreed to buy’’ (Jt. App. H-113).

None of the other violations of Section 14(e) found by

the Court of Appeals involved the Pipers. They took place

after BPC decided to acquire control of Piper Aircraft for

itself in May 1969. The Pipers were nevertheless held

jointly and severally liable for all damages to CCI because

the majority presumptively concluded—without any support

in the record—that the January statements ‘‘most likely had

a continuing adverse effect on CCI’s attempts to acquire

ll

Piper [Aircraft] shares’”’ (Jt. App. H-62). The dissenting

judge found this conclusion a ‘‘fanciful assumption”?

amounting to ‘‘rank speculation’’ (Jt. App. H-115).

The majority rejected the District Court’s conclusion

that CCI *‘had failed to prove its claim for damages” (Jt.

App. H-6). It held, instead, that “‘considering the narrow

margin of victory’? by BPC, the January statements

“denied to CCI a fair opportunity to win the contest for

control’’ (Jt. App. H-63). The Pipers were therefore held

jointly and severally liable with BPC because they ‘‘con-

tributed to the success of BPC’s takeover attempt,’’ even

though the statements were made long before BPC entered

the contest (Jt. App. H-69).

Moreover, the Pipers were found personally liable and

Piper Aircraft was absolved of liability because, concluded

the majority without any evidence to support it, the Pipers

‘acted not on behalf of the corporation in commiting their

illegal acts, but in their own individual interests’? (Jt. App.

H-68, n. 31). In this regard the majority ignored the un-

disputed fact—indeed, their own findings—that the state-

ments were those of the Piper Aircraft Board of Directors

(Jt. App. H-11) and rejected the District Court’s finding

that the January statements were made by Piper Aircraft’s

management (Jt. App. G-11).*

Reasons for Granting the Writ

This case presents, as the Court of Appeals found,

“important questions, some of first impression, involving

the antifraud provisions of the federal securities laws in

their application to a contest for acquisition of a controlling

stock interest in a target corporation.’’** More specifi-

_ *CCI’s complaint named five of the eight men on the Board of

Directors of Piper Aircraft. Service of process, however, was ef-

fected only on the three Pipers, petitioners herein.

** This Court has in the past granted certiorari in cases such as this

where the question was “an important one of first impression.” See,

¢.g., American Federation of Musicians v. Wittstein, 379 U.S. 171,

175 (1964).

‘

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12

cally, it is vitally important to businessmen as well as to

courts dealing with tender offers to get guidance from this

Court as to ‘‘the scope of liability and relief under Section

14(e) of the Securities Exchange Act of 1934’ (Jt. App,

H-6).

‘‘The cash tender offer has become an increasingly

favored method of acquiring control of publicly held corpo.

rations.’’ H.R. Rep. No. 1711, 90th Cong. 2d Sess. 2 (1968),

Virtually every week newspapers report on contested tender

offers. Courts have been struggling in the last several

years in attempts to find the proper interpretation of the

provisions of the Williams Act. Some cases have sought

to define who has standing under it.* Other cases have

sought to define its terminology.** The Court of Appeals

* See, ¢.g., Gulf & Western Industries, Inc. v. The Great Atlantic

& Pacific Tea Co., 476 F.2d 687, 695-96 n. 14 (2 Cir. 1973) ; Butler

Aviation International, Inc. v. Comprehensive Designers, Inc., 425

F.2d 842, 843 n. 1 (2 Cir. 1970) ; Electronic Specialty Co. v. Inter-

national Controls Corp., 409 F.2d 937, 944-46 (2 Cir. 1969); H.K.

Porter Co. v. Nicholson File Co., 353 F.Supp. 153, 162-64 (DRI.

1972) ; Cattlemen’s Investment Co. v. Fears, 343 F.Supp. 1248, 1232

(W.D. Okla. 1972) ; Washburn v. Madison Square Garden Corp., 340

F.Supp. 504, 508-09 (S.D.N.Y. 1972) ; Emmi v. First-Manufacturers

National Bank, 336 F.Supp. 629, 636 (D. Me. 1971) ; Dyer v. Easter

Trust and Banking Co., 336 F.Supp. 890, 914 (D. Me. 1971) ; Grow

Chemical Corp. v. Uran., 316 F.Supp. 891, 892 (S.D.N.Y. 1970):

Fabrikant v. Jacobellis, CCH Fed. Sec. L. Rep. §/ 92,686, at 99,017-18

(E.D.N.Y. June 3, 1970) ; Neuman v. Electronic Specialty Co., CCH

Fed. Sec. L. Rep. § 92,591, at 98,703, 98,705 (N.D. Ill. Dec. 31, 1969).

** The following cases have discussed other aspects of § 14(e):

Gulf & Western Industries, Inc. v. The Great Atlantic & Pacific Tea

Co., 476 F.2d 687, 695-97 (2 Cir. 1973); Butler Aviation Interna

tional, Inc. v. Comprehensive Designers, Inc., 425 F.2d 842, 843-4

(2 Cir. 1970) ; Susquehanna Corp. v. Pan American Sulphur Co., 423

F.2d 1075, 1085-86 (5 Cir. 1970); Electronic Specialty Co. v.

International Controls Corp., 409 F.2d 937, 940-41, 949-52 (2 Cir.

1969) ; Sonesta International Hotels Corp. v. Wellington Associates,

CCH Fed. Sec. L. Rep. § 94,007 (S.D.N.Y. May 28, 1973) ; General

Host Corp. v. Triumph American, Inc., CCH Fed. Sec. L. Rep.

§ 93,946 (S.D.N.Y. Apr. 2, 1973) ; Mosinee Paper Corp. v. Rondeau,

354 F.Supp. 686, 696-97 (W.D. Wis. 1973); H.K. Porter Co.

v. Nicholson File Co., 353 F.Supp. 153, 162-65 (D.R.I. 1972);

13

in this case has gone further than any previous court in

applying the Williams Act to the unsuccessful offeror.

As Judge Friendly observed in Electronic Specialty Co.

v. International Controls Corp., 409 F.2d 937, 948 (2 Cir.

1969): ‘‘Probably there will no more be a perfect tender

offer than a perfect trial.’”’ The result of the decision of

the Court of Appeals will be to open the federal courts to

a flood of litigation by unsuccessful contestants for corpo-

rate control, each claiming that in some way their oppo-

nents violated Section 14(e). Exclusive jurisdiction under

Section 14(e) is conferred on the federal courts by Section

27 of the 1934 Act (15 U.S.C. 78aa). The Court of Appeals,

by engrafting the common law tort concept of ‘‘interfer-

ence with a prospective advantage’’ onto Section 14(e) (Jt.

App. H-30), invites suits that have heretofore involved

traditional state law tort claims. They will now be entitled

to be heard in the federal courts under the guise of a secu-

rities law violation.

In addition, the decision below will have a profound

negative effect on the management of every publicly held

corporation that is the target of a limited tender offer.

Indeed, the decision effectively tips the balance in favor of

the offeror and against management, contrary to the ex-

Washburn v. Madison Square Garden C orp., 340 F.Supp. 504, 508-09

(S.D.N.Y. 1972); Dyer v. Eastern Trust and Banking Co., 336

F.Supp. 890, 907-09, 913-14 (D.Me. 1971); Emmi vy. First-Manu-

facturers National Bank, 336 F -Supp. 629, 636-137 (D. Me. 197 a);

Smith v. Newport National Bank, 326 F.Supp. 874, 878 (D.R.I.

1971) ; Fabrikant v. Jacobellis, CCH Fed. Sec. L. Rep. { 92,686, at

99.017-18 (E.D.N.Y. June 3, 1970) ; Newman v. Electronic Specialty

Co., CCH Fed. Sec. L: Rep. § 92,591, at 98,705-06 (N.D. Ill. Dec. 3i,

1969) ; Metro-Goldwyn-Mayer, Inc. v. Transamerica Corp., 303 F.

Supp. 1344, 1353 (S.D.N.Y. 1969); Armour & Co. v. General

Host Corp., 296 F.Supp. 470 (S.D.N.Y. 1969). In addition, other

cases have discussed other sections of the Williams Act. See, e.9.,

GAF Corp. v. Milstein, 453 F.2d 709 (2 Cir. 1971), cert. denied, 406

U.S. 910 (1972) (§ 13(d)) ; Bath Industries, Inc. y. Blot, 427 F.2d

97 (7 Cir. 1970) (§ 13(d)); Cattlemen's Investment Co. vy. Fears,

343 F.Supp. 1248, 1251-52 (W.D. Okla. 1972) (§ 14(d)).

:

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14

press intent of Congress.* ‘‘Incumbent management,”’ as

Mr. Justice White recently noted, has a number of tactics

available ‘‘in its arsenal of anti-tender . . . weapons,”

among them ‘‘to exhort shareholders not to tender.’’ Hern

County Land Co. v. Occidental Petroleum Corp., —--. US.

___., 93 S. Ct. 1736, 1746 n. 29 (1973). Calling a tender

offer ‘‘inadequate’’ seems a mild exhortation at. best, yet

the Pipers have been found personally liable for damages

claimed to be in the millions by CCI for doing so, even

though in fact more shares were tendered than were soliec-

ited.** The effect of this decision, if left standing, will be

to compel management to remain silent in the face of a

tender offer by a company honestly believed to be unsuitable,

rather than run the risk of being subjected to catastrophic

personal liability (CCI here seeks over $40 million in dam-

ages) if years later a court should find some exhortation to

have been misleading. If such is to be the law, we submit

that it should be so declared by this Court.

Review should be granted at this time, notwithstanding

the remand, since the Court of Appeals has preempted the-—~

customary right of the trial court to determine the scope of

relief in the first instance. Completely disregarding the

trial court’s finding that CCI did not ‘‘establish a nexus

between the violations it charges and the damages it claims”

Jt. App. G-23), two of the judges mandated that a damage

award be entered against the Pipers (Jt. App. H-68-69).***

* “The bill avoids tipping the balance of regulation either in favor

of management or in favor of the person making the takeover bid.”

H.R. Rep. No. 1711, 90th Cong., 2d Sess. 4 (1968).

** The Court of Appeals majority said this fact showed the “fair-

ness of the offer . . . despite the misrepresentations” (Jt. App.

H-62). The dissent said it showed “[n]o loss was suffered” by CCI

(Jt. App. H-113). We submit it shows that the “misrepresentations”

were not “material.”

*** Tt is scarcely persuasive to say, as the Court of Appeals majority

did, that it was required to determine the scope of relief because the

trial court had not done so, when the trial court had no reason to do so

because it found for defendants on liability (Jt. App. H-67).

15

By so doing the majority decision—it was on this very point

that Judge Mansfield dissented (Jt. App. H-112-113)—

totally disregards this Court’s clear holding in Mills v.

Electric Auto-Lite Co., 396 U.S. 375, 389 (1970) that ‘‘dam-

ages should be recoverable only to the extent that they

ean be shown.’’ Thus, the Court of Appeals has so far

departed from the accepted and usual course of judicial

proceedings as to call for an exercise of this Court’s power

of supervision.*

A. The “Standing” Issue

Awarding money damages to an unsuccessful tender

offeror works no benefit to the stockholders of the target

corporation, though granting the offeror the right to seek

injunctive relief against management might.**

To the Court of Appeals majority, the standing issue

turned on the closeness of the contest between CCI and BPC.

Judge Timbers found that CCI had standing here ‘‘ because

of the wrongdoing of its opponent and the margin of victory

is only 79%’? (Jt. App. H-32). Judge Gurfein said that

‘‘[s]inee the seven per-cent illegally acquired by BPC

caused it to win the contest, the loser has standing’’ (Jt.

* Bangor Punta Corporation and The First Boston Corporation,

defendants below, are also petitioning this Court for certiorari. Rather

than duplicate the grounds in their petitions, some of which are equally

applicable to the Pipers, we respectfully refer the Court to those

petitions.

**CCI never sought to enjoin the January statements during its

tender offer, and we do not here challenge those cases which suggest

that standing to seek injunctive relief would exist. E.g., Butler

Aviation International, Inc. v. C omprehensive Designers, Inc., 425

F.2d 842 (2 Cir. 1970); Electronic Specialty Co. v. International

Controls Corp., 409 F.2d 937 (2 Cir. 1969) ; Bath Industries, Inc. v.

Blot, 427 F.2d 97 (7 Cir. 1970). Granting standing to seek injunc-

tive relief, but not money damages, has been held proper under Rule

10b-5. Mutual Shares Corp. v. Genesco, Inc., 384 F.2d 540, 547

(2 Cir. 1967). We submit that the legislative history of Section 14(e)

mandates a similar result.

oe BOS) ——

16

App. H-95).* Such a criterion makes each case sui generis

on the standing issue, depending on the results of the eon.

test. In this case, moreover, it means that CCT's standing

to sue the Pipers for the January statements turns on the

outcome of the contest between CCL and BPC, whieh

began in May, four months after the statements were made,

Had BPC not sought control of Piper Aireraft or had it

failed, CCI would not have had standing to sue the Pipers

under the majority's theory. The results of CCL’s cash

tender offer were not even close—CCI obtained more shares

than it solicited and, as Judge Manstield noted, as many as

it could afford to buy (Jt. App. H-113).

Judge Mansfield’s dissenting opinion would apparently

give all tender offerors standing to sue under Seetion

14(e), leaving damages to be determined by principles of re-

liance and causation (Jt. App. H-107-110). This approach,

while it would dispose of the issue for all future cases, over-

looks the non-compensatory, punitive nature of the award.

Giving tender offerors standing to sue for damages when

they do not claim to have been misled will ‘‘assess many

millions of dollars of damages in the form of a bail-out" of

the unsuccessful offeror (Jt. App. G-86). Lawsuits by los-

ers of control fights will be brought in the hope that a eourt

(here not the trial court but the Court of Appeals) will

eventually save them by finding that something in an op-

ponent 's statements during the tender offer was misleading.

We submit Section 14(e) was never intended as a tool for

such a result and it should not be so construed.

The result reached by the majority below is particularly

egregious with respect to the Pipers. They were held lia-

ble to CCI beeause, the majority said, shareholders pre-

* Judge Gurfein also said that “a defeated contender who won a

booby prize of say, one per-cent of the stock, would have standing

simply because he entered the lists and lost.” In context, there would

appear to have been a typographical error in the omission of the word

“not” between “would” and “have” (Jt. App. H-95).

17

sumptively did not tender to CCI at $65 per share because

that price was called inadequate. Both the trial court and

the Court of Appeals found, however, that subsequently

shareholders were offered more per share by both CCI and

BPC (Jt. App. G-11; Jt. App. H-13, H-17). Thus, an hon-

est opinion borne out by subsequent events that a $65 offer

was inadequate has been converted by the Court of Appeals

into a **materially misleading’’ statement, knowingly made

(Jt. App. H-38).

B. The ‘Materiality,” “Reliance,” “Causation”

and “Proof of Damage” Issues

In holding that the Piper Aircraft statements were ma-

terially misleading, were presumed to have been relied on

by Piper Aireraft stockholders and presumably caused in-

jury to CCI, the Court below applied principles in conflict

with this Court's decisions in Mills v. Electric Auto-Lite

Co., 896 US. 3875 (1970) and Affiliated Ute Citizens vy.

United States, 406 U.S. 128 (1972).

Neither Wills nor Affiliated Ute involved a plaintiff, like

CCI, who concededly did not rely on misstatements, who did

not prove that he was injured by them, but who nevertheless

claimed to be entitled to damages because a third party al-

legedly relied on them. In these circumstances, the District

Court said, CCI should not be entitled to have the court

“disregard traditional requirements that causal connec-

tion be shown between the claimed violation and the in-

jury’? (Jt. App. G-20). The Court of Appeals agreed with

the Distriet Court “that CCI failed to show with reasonable

certainty that it would have obtained a controlling position

in Piper [ Aireraft] had it not been for the violations of the

securities laws’? by the defendants (Jt. App. H-56).*

*There is an inherent inconsistency between the acknowledge-

ment that CCT failed to show that it would have obtained control and

the award to CCI of damages based on the fact that it only obtained a

minority position. The judgment for defendants should have been

ee a gs et a LOE TSO —

Peper

18

Nevertheless, since ‘‘BPC itself obtained control through

its violations of the securities laws’’ (ibid.), the Court of

Appeals held not only that **CCI need not show that it

relied upon the deception’? but that reliance by the Piper

Aireraft stockholders had to be **presumed’’ under Mills

and Affiliated Ute (Jt. App. H-56-59).

We submit that no such ‘‘presumption’’ should be

indulged in where a limited tender offer is involved and

the tender offeror receives more shares than he solicited,

If ‘‘reliance’’ is to be presumed from the **materiality”

of the alleged misstatement, surely a court, in applying the

‘‘reasonable investor’? test of Affiliated Ute, should be

required to look at what the investors in this case actually

did. Here, they tendered more shares than CCI wanted.

Any stockholder who is ‘‘presumed”’ to have relied on

the January statements by not tendering his shares to CCI

for $65 could only have benefitted by remaining eligible for

the subsequent higher offers. Nevertheless, although the

District Court found that the January statements reflected

management’s ‘‘efforts to procure a better alternative for

Piper [Aircraft] shareholders,’’ which ‘‘efforts were made

and were, in terms of price to tendering shareholders, sue-

cessful,’’ (Jt. App. G-12), the Court of Appeals ignored this

finding. Rather than considering the shareholders, for

whose protection Section 14(e) was enacted, the Court of

Appeals presumed that ‘‘CCI was unlawfully denied the

affirmed on this finding alone, just as the common law tort actions for

interference with a prospective advantage referred to by Judge Tim-

bers (Jt. App. H-30) would have been dismissed for failure to prove

that, absent the “interference,” plaintiff would have obtained his goal.

E.g., Lewis vy. Bloede, 202 Fed, 7, 17 (4 Cir, 1912); Harrison vy.

Prather, 435 F.2d 1168, 1172 (5 Cir. 1970); Zoby vy. lmerican

Fidelity Co., 143 F.Supp. 763, 769 (2.D.Va. 1956) ; Pendall, Inc. V.

Statler Manufacturing Corp., § AD.2d 882, 171 N.Y.S.2d 938 (2d

Dept. 1958) ; Chicago Title Insurance Co. v. Great Western Financial

Corp., 69 Cal.2d 305, 319, 444 P.2d 481, 490, 70 Cal. Rptr. 849,

901-02 (1968).

19

opportunity to purchase additional shares’? (Jt. App.

H-62).

The presumption that but for the misstatements CCI

might have obtained even more shares is simply too specu-

lative a basis on which to conclude that the alleged mis-

statements were ‘‘material’’ and that therefore both

‘relianee’’ by Piper Aircraft shareholders and injury to

CCI could be ‘*presumed,’’

Judge Mansfield’s dissent viewed the matter as a prob-

lem of proof of damages. Noting this Court’s determina-

tion in Wills that, despite the finding of reliance, ‘‘damages

should be recoverable only to the extent that they can be

shown’? (896 U.S. at 375), he concluded ‘‘CCI did not

suffer any damages’’ as a result of the January communica-

tions (Jt. App. H-116). The majority apparently disagreed

and mandated a damage award. Judge Timbers’ only an-

swer to Judge Mansfield’s position, however, was the vague

speculation—with no support in the reeord—that the Janu-

ary statements ‘‘most likely had a continuing adverse

effect’? on CCI during its subsequent battle with BPC (Jt.

App. H-62).. This unsupported conjecture is insufficient.

([DJamages,’? as Mr. Justice Brandeis said, ‘‘must be

proved by facts from which their existence is logically and

legally inferable’’ and ‘‘cannot be supplied by conjecture.”’

Keogh v. Chicago & Northwestern Ry. 260 U.S. 156, 165

(1922),

In short, clearer definitions are needed from this Court

of the proper relationship of the elements of **materiality,’’

“relianee,’* ‘causal connection’ and ‘proof of damage’’

wider Section 14(e) in the context of tender offers. The

best evidence of this need is the dispute between the judges

of the Court below. What is to be a ‘rebuttable presump-

tion,** what a ‘*conelusive presumption’? and what no pre-

sumption at all but a matter of real proof? (Jt. App. H-109),

°

| Fai

20

C. The “Scienter” Issue

Seetion 14(e) is a penal statute prohibiting *trauda-

lent, deceptive, or manipulative acts or practices.”” The

three separate opinions in the Court of Appeals on the

‘seienter’’ issue reflect significant ditferences between the

judges as to what standard of evil intent applies.” In.

precise labels abound. The label used by the Court of

Appeals to describe the January statements was a failure

‘*to be meticulous and preeise’* (dt. App. H-38s). That is

a far ery from ‘fraudulent, deceptive, or manipulative”

and, we submit, an improper standard on which to impose

personal liability on incumbent management for resisting

what they honestly believed was an undesirable corporate

takeover. ‘*{1]n contests for control the management has

a role to play as sueh and not merely insofar as the man-

agers are stockholders."* Studebaker Corp. v. Crittlin, 360

F.2d 692, 695 (2 Cir, 1966). How ean investors expeet

incumbent management to advise them at all if words sueh

as ‘inadequate’? are to be the basis for imposition of

staggering personal liability?** The deeision below as to

the Pipers emasculates the role Congress intended incun-

* The Circuits have been split for years on the same issue under

Section 10(b) and Rule 10b-5. See the extensive discussion in Judge

Adams’ opinion in Kohn vy. American Metal Climax, Ine., 438 Fad

255, 281-288 (3 Cir.), cert. denied 409 U.S. 874 (1972). The See-

ond Circuit itself is currently not unanimous as to seienter under

Section 10(b), see Lanza ve Drexel & Co. CCH Fed. See. L. Rep.

€ 03,950 (2 Cir. April 20, 1973), and has recently compounded the

contusion by applying a different” standard under Section 14 (a)

Gerstle v. Gamble-Skoamo, Inc., CCH Fed. See. L. Rep. © 93,988, at

93,940-42 (2 Cir. May 9 1973).

** In adopting Section 14, Congress noted that cash tender offers

are “usually at a price above the current market price.” TLR. Rep.

No. 1711, %th Cong,, 2d Sess. 2 (1908). Yet the Pipers have been

held personally liable for failure to point out this notorious fact, In

deed, calling a cash tender offer inadequate is one method frequent)

used to oppose such offers. As Judge Dutty held in Gulf & Wester

Industries. Ine v. The Great Atlantic & Pacifie Tea Co., 350 F.Supp,

1066, 1071 (S.D.N.Y. 1973), “the adequacy or inadequacy of price

is subjective.”

21

bent management to play in these contests and should be

corrected by this Court,

D. The Scope of Appellate Review Issue

In reversing the judgments for defendants entered by

the trial court, the Court of Appeals did not apply the

“elearly erroneous" test of Rule d2(a) F.R.C.P., beeause it

said that its ‘tdisagreement with the distriet court on

whether defendants have violated Section 14(e) does not go

to its findings of fact, as to which the ‘unless clearly errone-

ous’ test applies, but to its application of the legal stand-

ards...."" (dt. App. H-37). In reality, the Court of Appeals

reversed the following findings of the trial court pertinent

to the Pipers:

1. The finding that the word ‘tinadequate”’ in the

danuary letters referred to factors other than price

(Jt. App. G-11-12). The Court of Appeals, while not

holding the trial judge clearly erroneous, disagreed

and said **the reference was to price’’ (Jt. App. H-3s).

2. The finding that CCI failed to prove that it was

injured by the January statements (Jt. App. G-11-14,

G-30-37). The Court of Appeals (2 to 1) indulged in a

wholesale series of presumptions and, contrary to the

record, concluded that CCL was entitled to damages

(Jt. App. H-61-62).

"

3. The finding that the resistance to CCI's tender

offer in January 1969 was by the management of Piper

Aireratt (Jt. App. G-11-12). The Court of Appeals

refused to permit the Distriet Court to consider the

question and instead determined on its own that the

Pipers were acting ‘tnot on behalf of the corporation’

but ‘in their own individual interests"* (Jt. App. H-6s,

n. 31).

4. The undisputed fact that CCT made its tender

offer in January 1969 expressly stating that it ‘*does

EPO P AF se

22

not have any specific plan or proposal . . . to acquire

control of Piper’’ Aireraft (EV. 716; EV. 710). The

majority of the Court of Appeals panel, however, based

their decision on their own finding that ‘‘CCI had de.

cided by the time of the cash tender offer that its ob-

jective was to win control of Piper [Aircraft] (Jt.

App. H-61).*

These determinations by the Court of Appeals were not

merely of ‘‘ultimate fact.’’ Credibility issues based on oral

testimony were involved.** Taken as a whole the Court of

Appeals opinion reflects the majority’s substitution of its

own factual findings for those of the trial judge who saw

and heard the witnesses. Other cireuits have not been so

eavalier. They have consistently applied the ‘clearly er-

roneous”’ test when reviewing Distriet Court decisions in

this area of the law. See, e.g., Susquehanna Corp. v. Pan

American Sulphur Co., 423 F.2d 1075, 1084, 1086 (5 Cir.

1970); Richardson v. MacArthur, 451 F.2d 35, 41 (10 Cir.

1971); Mader v. Armel, 461 F.2d 1123, 1126 (6 Cir. 1972),

Indeed, the Court of Appeals, in affirming the District

Court’s dismissal of BPC’s action against CCI whieh was

part of the consolidated appeal below, repeatedly applied

the ‘‘clearly erroneous’’ test to the findings there. See,

e.g., Jt. App. H-73, H-76.

Certiorari should be granted in these circumstances te

review not merely the questions of law under Section 14(e)

discussed above but also their application to the facts of

* Indeed, if CCI did intend to achieve control on its cash tender

offer, its offer was patently misleading and far more “culpable” than

calling the limited offer it made “inadequate.”

** For example, the Court of Appeals majority fully accepted the

testimony of CCI’s witness Gordon (Jt. App. H-61-62) which the

trial court found “not worthy of belief” (Jt. App. G-13) and which

the dissenting Court of Appeals judge thoroughly discredited (Jt.

App. H-113-115).

23

this ease. This need is particularly acute in light of the

trial court ’s judgment for defendants after a full trial, which

amajority of the Court of Appeals panel reversed in blatant

derogation of the ‘‘clearly erroneous’? rule and without

giving the trial court the right to determine the remedies

on remand.

CONCLUSION

For these reasons, a writ of certiorari should issue to

review the judgment and opinion of the Second Circuit.

Respectfully submitted,

Pavt G. Pennoyer, Jr.

Epwarp C. McLean, Jr.

ZacHary SHIMER

25 Broadway

New York, New York 10004

Counsel for Petitioners

CHADBOURNE, Parke,

Wurresiwe & Wotrr

Of Counsel

July 20, 1973

fd

Se

Certificate of Service

I hereby certify that three copies of the foregoing Peti-

tion for a Writ of Certiorari were served by hand this 20th

day of July on Arthur L. Liman, Esq. 345 Park Avenue,

New York, New York 10022, counsel for Respondent. I

further certify that all parties required to be served have

been served.

Dated: July 20, 1973

Pavut G. Pennoyer, JR.

25 Broadway

New York, New York 10004

Counsel for Petitioners

ANGRY OSE ae