Petition for Writ of Certiorari — Ronson Corp. v. Liquifin AG

MICHAEL RODAK,

a

IN THE

Supreme Cowt of the United States

Ocroser Term, 1974

74-74

Ronson Corporation,

Petitioner,

~

Vv.

Liquirin AKTIENGESELLSCHAFT, Liguicas, S.p.A., Kunn Lors

& Co., D. F. Kine & Co., Inc., Frankuin Nationa Bank,

FRANKLIN New York Corporation, Servizio ITaLia OF

Banca NazionaLE Det Lavoro, Pume Marrveat, Rar-

FAELE Ursini and MIcHELE Sinpona,

Respondents.

.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT _

—

ome

Juuius B. Poprrnca

Attorney for Petitioner

550 Broad Street

Newark, New Jersey 07102

McCarter & EncuisH

Of Counsel N

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TABLE OF CONTENTS

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Reasons for Granting the Writ ..........

A. The Federal Questions Herein Have Not Pre-

viously Been Determined by This Court ............

B. The Federal Questions Herein Should Be Settled

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(1) Repeated Violation of the Williams Act Re-

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(2) Questions of Discovery .......

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TABLE ov CASES

Corenco Corp. v. Schiavone & Sons, Inc., 488 F.2d 207

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PAGE

STATUTES

The Williams Act

15 U.S.C. §§78m(d) and (e) ; 78n(d), (e) and (f) (1970)

2, 3, 5, 6,

7, 8, 10, 11

Ra SR iscidicechessetciinciicienneneignneniniinasieciaiio 2

OTHER AUTHORITIES

H.R. 8951, 93d Cong., Ist Sess. (1973) .....-.-.....-.------------- 6

H.R. 11,265, 93d Cong., Ist Sess. (1973) -...........-.--.-.----- 6

H.R. 11,335, 93d Cong., Ist Sess. (1973) .............--.------- 6

S. 2840, 93d Cong., Ist Sess. (1973) 7

IN THE

Supreme Court of the United States

OcroBerR Term, 1974

Ronson CorpPorRATION,

Petitioner,

Vv.

Liquirin AKTIENGESELLSCHAFT, Liquicas, S.p.A., KuHN LorB

& Co., D. F. Kine & Co., Inc., Frankiin Nationa Bank,

FranKLiIn New York Corporation, Servizio ITALIA OF

Banca NazionaLE Deut Lavoro, Puitip Marrucei, Rar-

FAELE Ursini and MicHELE Sinpona,

Respondents.

>

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

Petitioner Ronson Corporation prays that a writ of cer-

tiorari issue to review the opinion and judgment of the

United States Court of Appeals for the Third Circuit, en-

tered in this proceeding on April 19, 1974.

Opinions Below

The opinion of the Court of Appeals here in issue has

not yet been reported. It appears as Appendix E to this

Petition. An earlier opinion of the Court of Appeals, en-

tered in this case on July 24, 1973, is reported at 483 F.2d

846, and appears as Appendix B hereto.

Jurisdiction

The judgment of the Court of Appeals (Appendix EK,

infra) was dated and entered on April 19, 1974. A timely

petition for rehearing was denied on May 7, 1974 (Appen-

dix F). The jurisdiction of this Court is invoked under 28

U.S.C. $1254(1).

Questions Presented

A European syndicate ostensibly headed by Raffaele

Ursini, a business associate of Michele Sindona, is trying to

take over an American corporation by making a cash tend-

er offer to its stockholders. The Williams Act requires

inter alia, disclosure of the identity of the offeror and the

source of its funds. The questions presented are:

1. Whether such an offeror, having made a series

of disclosures found to be false and misleading, may

nevertheless repeatedly amend and reamend its dis-

closures, continue the tender offer at its pleasure and

retain the fruits of it.

2. Whether a court is justified in truncating discov-

ery as to who is behind the offeror, when disclosure

thereof is the purpose of the Williams Act.

3. Whether a court, particularly after forbidding

discovery into such issues as control of the offeror and

source of funds for the offer, is justified in making the

opponents of the offer carry the burden of proving the

falsity of the offeror’s statements, even as to informa-

tion solely within the knowledge and control of the

offeror.

Statutory Provisions Involved

This case involves that part of the Securities Exchange

Act of 1934 which is commonly known as the Williams Act,

15 U.S.C. §78m(d) and (e); §78n(d), (e), and (f) (1970).

These sections are reprinted as Appendix G.

Statement of the Case

The Williams Act requires anyone seeking to buy blocks

of stock through a cash tender offer to disclose certain

facts, particularly the identity of the persons on whose

behalf the offer is made (i.e. who controls the offeror) and

the source of the funds for the cash tender offer, 15 U.S.C.

§78n(d) and $78m(d)(1)(A) and (B).

Liquifin Aktiengesellschaft (“Liquifin”) made such an

offer on June 4, 1973, for the purchase of a controlling in-

terest in Ronson Corporation, a New Jersey corporation

(“Petitioner”). This offer (among other defects) did not

adequately disclose the identity of those in control of the

offeror nor the source of the funds. Therefore Petitioner

brought an action in the United States District Court for

the District of New Jersey, seeking a preliminary and per-

manent injunction against the offer. Jurisdiction lay under

the Securities Exchange Act of 1934.

There followed a long and involved course of litigation.

Petitioner was able to establish by discovery conducted in

June 1973 that the original offer and an amendment of June

13, 1973, failed to comply with the Williams Act. A pre-

liminary injunction was ordered by the district court on

July 5, 1973.

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Thereafter Liquifin repeatedly amended its offer and

repeatedly applied to the district court to vacate the pre-

liminary injunction. The district court (on August 15, 1973,

September 26, 1973, and December 5, 1973) repeatedly

denied Liquifin’s applications. Liquifin’s appeal to the

Third Circuit on the July 5, 1973 order was sinnilarly denied

(Appendix B).

Meanwhile Petitioner was seeking to conduct discovery

to determine who was behind Liquifin and where the money

for the tender offer was coming from. Liquifin persistently

frustrated discovery: it destroyed crucial documents; it

refused to produce others; it claimed non-existent privi-

leges. On September 26, 1973, October 12, 1973, and Octo-

ber 25, 1975, Liquifin obtained orders from the district

court by which the court in an inexplicable change in atti-

tude toward the litigation sharply limited the persons and

the topics on which discovery was allowed. On December 5,

1973, the court again denied specific, limited requests for

discovery.

Respondents conceded that behind Liquifin (a Liechten-

stein shell corporation) was Liquigas, S.p.A. (“Liquigas”,

an Italian corporation), which wholly owned Liquifin, and

that behind Liquigas was Raffaele’ Ursini (“Ursini”).

However, behind Ursini Respondents erected a stone wall.

Petitioner was not permitted to investigate beyond him

although no explanation was given or offered as to how a

middle-rank business executive could amass a fortune of

$20,000,000 to $30,000,000 to buy a controlling interest in

Liquigas. Petitioner was not allowed discovery of other

major interests in Liquigys, and not allowed to ask Ursini

certain questions, that, if truthfully answered, might have

5

proved that he, in turn, was acting for undisclosed princi-

pals. \

On January 2, 3 and 4, 1974, the district court held a

hearing on the permanent injunction. Liquifin offered no

oral testimony. The court placed on Petitioner ihe burden

of proving that Liquifin’s disclosures were inadequate under

the Williams Act. Petitioner was thus required to prove

who was really behind Liquigas even though those with

knowledge of the facts were beyond the reach of subpoenas,

or protected by the district court’s discovery orders, or

both.

Following the hearing in early January, the district court

vacated its preliminary injunction on January 16, 1974, and

denied permanent relief. The tender offer was allowed to

continue on the basis \of a Restated Offer to Purchase,

which was the fifth amendment to the original form of the

offer.

Petitioner appealed to the Third Cireuit. Pending the

appeal, petitioner also applied for a stay of the tender

offer, which was denied by the district court, by the Third

Cireuit and by Mr. Justice Brennan of this Court. On April

19, 1974, the Third Circuit affirmed the district court in a

per curiam opinion that expresses no reasons for its hold-

ing other than a bare conclusion that the district court’s

rulings disclosed no error.

Certiorari is sought to review ihe order of the Third

Cireuit and to settle questions arising under the Williams

Act that have never heen determined by this Court.

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Reasons for Granting the Writ

The Third Cireuit has decided important questions of

federal law that have not been, but should be, settled by this

Court; and has decided them in a way that conflicts with the

decisions of other circuits on the same matter.

A. The Federal Questions Herein Have Not Previously Been

Determined by This Court

The Williams Act was approved on July 29, 1968, by Pub.

L. No. 90-439, 82 Stat. 454.

The basic questions in this case (the problem of appro-

priate sanctions for repeated disclosure shortcomings, and

the problem of burden of proof in private enforcement of

the Williams Act) have never come before this Court, nor

has this Court ever decided any Williams Act case. Al-

though cases involving tender offers prior to the Williams

Act have been decided by this Court, the specifie provisions

and purposes of the Williams Act have never been reviewed

here.

B. The Federal Questions Herein Should Be Settled by This

Court

Takeover bids have long been a matter of grave public

concern. Lately, the danger of such bids by foreign citizens

has been increasingly realized. Cougress is even now con-

sidering legislation to restrict foreign investment in the

United States.*

*Note the pending “Foreign Investors Limitation Act”, ILR.

8951, 93d Cong., Ist Sess. (1973); identical with H.R. 11,265,

93d Cong., Ist Sess. (1973); and H.R. 11,335, 93d Cong., Ist Sess.

(1973), which warn of “dangers to the domestic control of our

own industry”, and which would restrict persons who are not

Pitta

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7

The Williams Act is the first line of defense against the

corporate raider. However, as applied by the decisions

below, that defense has now been breached. Foreign take-

over bids will actually be favored. Foreign offerors, hav-

ing no history of S8.E.C. filings, operating beyond the reach

of regular court process, and behind the screen of foreign

corporate shells, will be encouraged to buy into American

industry on minimal disclosures, with little to fear beyond

costs of litigation and printing of repeated amendments of

their offer wile wearing down the target company.

An American corporation has a record here, with reports

on file at State and Federal levels. Its officers are here and

can be readily questioned in English. Foreign corporations

have no similar record here. They can apparently disclose

as little as they wish, frustrate discovery by the interposi-

tion of interpreters, claim foreign business secrecy laws,

and destroy evidence outright pursuant to “business prac-

tices” foreign to our shores. They can then in effect defy

anyone to prove the contrary of what is set forth in their

tender offer, and if their disclosures are proved false or

misleading, they need merely amend and carry on.

(1) Repeated Violation of the Williams Act Requires

Sanctions

Other cases (none in this Court) have dealt with offers

where substantial misstatements or omissions were made.

None heretofore has involved a series of misstatements or

citizens of the United States, or who are controlled by nui ¢itizens

of the United States, from acquiring more than 5% of the voting

securities (or 35% of the non-voting securities) of any issuer

registered under the Securities Exchange Act of 1934. And see

§.2840, 93d Cong., Ist Sess. (1973), which would authorize the

Secretary of Commerce to investigate and report on the impact of

foreign investment in the United States.

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omissions, where an offeror was repeatedly found in viola-

tion of the Williams Act. There have been no other cases

where an offeror was regularly allowed to amend or where

the misstatement or omission was knowingly made, and still

the offeror was allowed to proceed.

This is a unique case, with important consequences for

the securities market, domestic industry and the U. S. in-

vesting public. The Third Circuit has held, in effect, that

so long as an offeror publishes a/ /ast a statement that can-

not be proved false, it does not matter how many false

statements were made along the way, nor that the offeror

had sole control of and access to the salient facts.

The Second Circuit, in Corence Corp. v. Schiavone &

Sons, Inc., 488 F.2d 207 (2d Cir. 1973), indicated (as die-

tum) that a permanent injunction, and a cooling-off period,

might be an appropriate sanction for an intentional failure

to disclose pertinent financial information. However in

that case, involving only one amendment, the failure to dis-

close financial data was excusable since it was a ease of

first impression. The offerer was allowed to amend.

The Corenco case, however, pointed the way to a holding

that a willful misstatement, even on only one occasion, will

justify the permanent injunction of a tender offer.

The district court and the Third Cireuit were put off by

Liquifin’s bland assertions of innocence, truth and veracity.

However it should be noted that the Securities and Ex-

change Commission by its order of May 31, 1974, has initi-

ated an investigation of Liquifin’s statements in materials

filed with respect to the tender offer, and also with respect

to its recent proxy contest for control of Ronson. A copy of

this order is annexed as Appendix H.

9

(2) Questions of Discovery

The opponents of a tender offer must be allowed thor-

ough discovery. The offeror is required to disclose its

indentity, the source of its funds, and its plans, but what

it alleges cannot be tested without questioning those who

control the offeror. They alone know who they are, where

their money comes from, and what they plan.

Although the Third Circuit stated that “broad discovery

must be granted in this type of case to compensate for the

lack of available data subject to the subpoena powers of the

court” (emphasis added), unaccountably, the Third Cireuit

ignored its own stricture, finding, in so many words, no

error in the district court's rulings.

Discovery in the present case was severely curtailed. Ex-

cept for a brief flurry of depositions in June 1973, directed

solely to proving the falsity of Liquifin’s earliest disclo-

sures (held false and misleading by the district court on

July 3, 1973), the district court narrowly circumscribed

Petitioner’s right to take depositions. Petitioner was re-

quired to list all persons it wished to depose and to state

what it hoped to develop from each. The district court

denied depositions of most of the persons so listed, and sig-

nificantly limited the areas of inquiry in those few deposi-

tions that were allowed. Thus while Liquifin was freely

permitted to amend its disclosures, Petitioner was denied

the right to test the amendments and probe the issue of

control upstream.*

*For example, Liquigas was requested on June 19, 1973, to

produce the stock certificates purportedly giving Ursini control

of Liquigas. These certificates (4,000 certificates representing some

90,000,000 shares of Liquigas) were simply destroyed by burning

them on June 27, 1973. Petitioner did not learn that these certifi-

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10

As a result, Ronson was effectively denied its day in

court before it got there. Clearly private enforcement of

the Williams Act was crippled. A very bad precedent has

been set and should not stand.

(3) Questions of Proof

The opponents of a tender offer, as plaintiffs under the

Williams Act, have the initial task of challenging the truth

and completeness of information disclosed by the offeror.

However, as previously stated, much of the evidence as to

such disclosures is known only to the offeror. Where the

offeror is an alien corporation, this problem is intensified.

Accordingly the question arises whether, at some point,

the Williams Act does not in effect require the offeror to

cates had been destroyed until December 24, 1973. after the district

court had forbidden any further discovery.

Ursini, whose income in 1967 was but $11,000, refused to answer

where he obtained some $17,000,000 to purchase part of his holding

of Liquigas stock in 1973, other than to concede it was not from

his wife nor from a rich uncle. After his counsel advised Ursini

not to answer further questions as to how he obtained the monies

to purchase Liquigas stock, application was made to the District

Court for an order compelling answers. The District Court denied

the application.

The source vf Ursini’s funds remains a hiystery. Petitioner

Ronson is not the only party unwilling to accept Liquifin’s asser-

tion that Ursini is the one ultimately in control. The S.E.C., in a

letter dated June 4, 1974, and which was marked as a court exhibit

after being referred to by counsel for Liquifin in proxy violation

litigation now pending in the Southern District of New York (and

a copy of which is annexed as Appendix I) advised Mr, Ursini that

the S.E.C. had “serious questions as to whether or not Mr. Sindona

is a ‘participant’. . . in the proxy solicitation of Ronson share-

holders and as to the source of Liquifin’s funds for its tender

offer ended May 10, 1974.” That letter further advises Mr. Ursini

that his counsel, Mudge, Rose, Guthrie & Alexander, rather than

furnish supporting data requested hy the S.E.C. staff as to these

issues, elecied to proceed at peril without obtaining $..C. clear-

ance of the statements made on these subjects.

11

prove the truth of his representations, rather than requir-

ing the adversary to prove the contrary.

The Third Circuit acknowledged that, in a Williams Act

case involving an alien offeror, “in some circumstances

the burden of going forward with the evidence may shift

so as to make it necessary that the principal controlling

individual of a foreign entity making the tender offer

should be called to testify in person before the trial court.”

The Third Cireuit should have, but unfortunately did not,

apply this precept to the present case.

The burden of proof in the present case was imposed

upon Petitioner throughout. Petitioner was required to

prove the insufficiency of the offeror’s disclosures without

being permitted to conduct full discovery.

Private enforcement of the Williams Act has been un-

dermined by tke Third Circuit decision. The required dis-

closures evidently need be only minimal. When an alien

offeror can hedge itself about with protective orders to

prevent anyone from learning the truth about its opera-

tions, and then compel its adversary to prove in what re-

spects the offeror’s disclosures were inadequate, the in-

evitable result will be avoidance of disclosure.

The burden of proof under the Williams Act should re-

flect the legislative mandate for the disclosure of pertinent

information. A result that would encourage disclosure,

rather than reward nondisclosure, should be preferred.

a a a i On nn ee

12

CONCLUSION

For the reasons stated above, it is respectfully submitted

that this petition for a writ of certiorari should be granted.

Dated: August 5, 1974

JuLius BK, Popprnca

Attorney for Petitioner

550 Broad Street

Newark, New Jersey 07102

McCarter & EncuisH

Of Counsel

APPENDICES

13

APPENDIX A

Findings of Fact and Conclusions of Law;

United States District Court, District of New Jersey,

Dated July 3, 1973

UNITED STATES DISTRICT COURT

District or NEw JERSEY

Civil 785-73

—<—-—$§

Ronson Corporation,

Plaintiff,

Vv.

LiquiFin AKTIENGESELLSCHAFT, Liquicas, S.p.A., Kuun Lors

& Co., D. F. Kine & Co., Ixc., Frankuin Nationau Bank,

Frankuin New York Corporation, Servizio Iraia oF

Banca NazionaLe Det Lavoro, Pxitie Marrveei, Rar-

FAELE Ursini and MicHELE Sinpona,

Defendants.

<<

TRENTON, NEW JERSEY

Tuesday, July 3, 1973

BrroreE: THE Honoraste Cuiarkson S. Fisner, USDJ

[No APPEARANCES]

[In chambers. }

The Court: This is an application for a preliminary in-

junction brought by the plaintiff, Ronson Corporation

14

(hereinafter “Ronson”) against a multitude of defendants,

including most importantly Liquifin Aktiengesellschaft,

(hereinafter “Liquifin”) and Liquigas, S.p.A. The other

defendants are depository banks, and the three individuals

whose names kept being mentioned throughout the con-

voluted financial transactions which are described here-

after.

The complaint was precipitated by a filing of a tender

offer with the Commissioner of the Security Exchange

Commission pursuant to Rule 14d-1 of Regulation 14D of

the General Rules of Regulations under the Security Ex-

change Act of 1934.

This was filed May 31, 1973 by Liquigas, S.p.A., and

Liquifin.

Also on this date the public announcement of the tender

offer was made to the general public through financial pub-

lications and newspapers of general circulation.

On June 5, 1973, this Court signed a temporary restrain-

ing order, the argument of which was finally heard on June

25 and June 26, 1973.

On June 5th, 1973, the Court further ordered a schedule

of discovery which was immediately instituted by both

parties up to the day of the hearings.

Following the signing of the temporary restraining

order, the key defendants extended the tender offer to

July 6, 1973, and significantly at the same time and on the

same date, June 13, 1973, filed an amendment entitled

“Amendment Number I” to the Schedule 13D Statement

previously filed with the Security Exchange Commission.

Again, the amendment and the extension were publicized.

Since the filing of the complaint, this Court has of neces-

sity reviewed literally thousands of pages of depositions,

interrogatories and affidavits which both parties to their

EAL DE OL ALI. L0G 7a Ek ROLLIE TILLED DEST LLG IT APIA LA: Pare eae 7

FES EI ee Mag Hite CS —— é

15

credit moved expeditiously. Counsel for both sides are

commended by this Court for the manner in which they

have handled a complex and difficult situation necessitated

by the time elements involved. Therefore, the Court is die-

tating this decision rather than filing a formal opinion.

Ronson asserts numerous misrepresentations and omis-

sions of material facts in Liquifin’s tender offer which, it

is alleged, violates Section nl4e of the Securities and Ex-

change Act of 1934. 15 U.S.C., Section 78n(e). Ronson

claims these misrepresentations and omissions occurred in

the tender offer and the Schedule 13D statements filed

pursuant to Rule 14d-1 of the General Rules and Regula-

tions promulgated under the Securities and Exchange Act

of 1934. 17 C.F.R., See, 240.14d-1. See also Section 13(d)

and 14(d) of the 1934 Act, 15 U.S.C., Section 78m(d) and

78n(d). Ronson contends that these statutes and regula-

tions were violated when defendants (1) failed to disclose

adequately or misrepresented the source of funds used to

pay for the tendered shares; (2) failed to disclose the

control persons of Liquifin and Liquigas; (3) failed to dis-

close foreign governmental interests and legal controls

which would materially affect the defendants’ ability to

consummate the tender offer and effectively manage the

business of the Ronson Corporation; (4) failed to disclose

or misrepresented a host of administrative legal problems

including but not limited to possible antitrust violations,

violations of the Federal Communications Act of 1934, 47

U.S.C., See. 310, the Federal Aviation Act of 1958, 49

U.S.C., See. 1301 et seg., and U. S. Department of Defense

Regulations, D.O.D. Directive 5220.22 and Industrial Se-

curity Manual Section III, para. 21, which concern facility

security clearances now held by Ronson subsidiaries en-

gaged in defense contract work.

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16

Sections 13(d) and 14(d) and (e) are part of the 1968

amendments to the Securities and Exchange Act of 1934.

They were enacted by Congress to deal with the increasing

use of cash tender offers used by individuals and corpora-

tion efforts to gain control of other corporations. These

amendments, commonly known as the Williams Act, were

needed to provide investors, who held equity interests in

publie corporations, material information with respect to

the potential impact of any effort to acquire control of a

company. Congress believed that investors needed suffi-

cient time within which to make an unhurried investment

decision as to whether to dispose of or retain their securi-

ties. Cattlemen’s Investment Company vy. Fears, 343 F.

Supp. 1248, 1251 (W. D. Okl. 1972). By requiring certain

filings and the disclosure of truthful information, Congress

intended to protect stockholders so that in tender offer situ-

ations involving a change in corporate control, stockholders

could properly evaluate the tender offer. Disclosure which

is false or misleading subverts the Congressional purpose.

Often a false or materially misleading filing may be more

detrimental to the informed operation of securities markets

than no filing at all. G.A.F. Corporation vy. Milstein, 453

F.2d 709, 720 (2d Cir. 1971) Cert. denied, 406 U.S. 910

(1972). The Rules and Regulations of the Securities Ex-

change Commission require the filing of detailed informa-

tion in any tender offer situation such as the identity and

background of persons on whose behalf the purchases are

being made; the source and amount of funds to be used and

description of financing arrangements; the purposes of the

purchase, and if one such purpose is to acquire contro! as in

the instant case, a description of plans or proposals relating

to any major changes in the company; and any contracts,

arrangements or understanding with respect to any of the

17

securities to be acquired. Cattlemen’s, supra at 1251. All

filings and information regarding the tender offer must be

truthful, contain all material facts, and be free of material

misrepresentations under these statutes and regulations

heretofore cited.

It is clear that the Congressional purpose behind the

remedial Williams Act was to protect the investing public

and therefore must be construed broadly and liberally to

effectuate the legislative purpose and intent. Cattlemen’s,

supra at 1251.

At this time the Court must determine only whether

plaintiff Ronson has carried its burden of demonstrating

either a combination of probable success on the merits and

the possibility of irreparable injury or that plaintiff has

raised questions going to the merits so serious, substantial,

and difficult as to make them a fair ground for further liti-

gation and deliberation. Plaintiff must also show that the

balance of equities sharply weighs in its favor. Gulf &

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

Tea Company, Inc., No. 73-1223, Slip Op. at 2247-48 (2d Cir.

March 12, 1973) citing Stark v. New York Stock Exchange,

466 F.2d 743, 744 (2d Cir. 1972): General Host Corp. v.

Triumph American, Inc., No. 73 Civ. 1144 (S.D.N.Y. April

2, 1973); Water d& Wall Associates, Inc., Civ. No. 99-73 at

19 (unpublished opinion and order) (D.N.J. April 19, 1973).

Given the need for swift decision on plaintiff's applica-

tion, the Court will grant relief if Ronson has borne these

burdens on at least one of the issues raised. General Host,

supra. The Court is most concerned with plaintiff's allega-

tions that defendants have failed to disclose adequately or

materially misrepresented the persons behind and methods

used to fund the offer; the foreign controls involved in the

offer; and the administrative obstacles to the offer under

federal Law.

Vibe ast iictehcct Mesniatat

|

18

These allegations are based upon Section 14(e) which

tracks the language of Rule 10b-5, 17 C.F.R. Sec. 240 10b-5

(1972), except that Section 14(e) applies to tender offers

and Rule 10b-5 applies to the purchase or sale of securities.

The elements of an action for injunctive relief are essen-

tially the same under Section 14(e) and Rule 10b-5. Under

both, the determinative question is: Was the omission or

misrepresentation of fact material? A material fact is that

which a reasonable investor would consider important in

the making of his decision to tender or not to tender in re-

sponse to Liquifin’s offer. General Host, supra; Gulf &

Western, supra at 2255-56; ef. Affiliated Ute Citizens v.

United States, 406 U.S. 128, 153-54 (1972). A material mis-

representation occurs when there is a substantial likelihood

that the misstatement may have led a stockholder to tender

his stock; whereas in the absence of the misrepresentation

he would not have tendered. Nicholson File Company v.

H. K. Porter Company, 341 F.Supp. 508, 521 (D.R.I. 1972).

In determining whether Ronson is entitled to preliminary

injunctive relief, this Court must balance the equities. To

permit the tender offer to go forward could have serious

detrimental effects on Ronson and possibly its employees.

It is possible that if the defendants are unable to overcome

the administrative obstacles, the corporation, under the

management of defendants, could be forced to divest sub-

sidiaries as a direct result of failure to obtain administra-

tive approval of its voting trust plans. If the tender offer

were consummated and these violations of administrative

law were charged against Ronson, it would be virtually im-

possible for this Court to unravel the situation and restore

the current position of Ronson. Gulf & Western, supra;

Water & Wall, supra.

ax EEL PIN A SA I PLR ROTC A RG A RE | ia

ee ee ee eee

19

The Court is aware that the purpose of the Williams Act

is not to give Ronson’s incumbent management a tool to

fight off unwelcoine tender offers solely to preserve man-

agement’s corporate life nor to frustrate stockholders from

reaching an informed investment decision. Nicholson File,

supra at 520; Butler Aviation Int'l, Inc. v. Comprehensive

Designers, Inc., 425 F.2d 842, 845 (2d Cir. 1970). However,

the accomplishment of these legislative purposes presup-

poses that stockholders and the investing public have been

fully and fairly informed of all the material facts. The

defendants have no right to proceed if their tender is un-

lawful. As stated by the Court of Appeals for the Second

Cireuit: “... [A] requirement of lawfulness is included

by implication in every tender offer.” Gulf & Western,

supra.

Defendants urge that preliminary injunctive relief should

be denied because they have the right to invest in target

corporations for the benefit of their own stockholders at

such time as they deem ripe and profitable. The Court has

considered this factor in defendants’ favor. However,

where the “investment” ostensibly raises strong and serious

doubts as to its legality, the defendants would have no right

to proceed. Moreover, defendants have not made any show-

ing of irreparable harm. They assert that if preliminary

injunctive relief is granted, the investment world, for all

practical purposes, will consider the tender offer termi-

nated. Judge Timbers, in his excellent opinion in Gulf &

Western, supra, demonstrated the fallacy of this argument

by saying if the defendants prevail after a trial on the

merits, they will not be foreclosed from renewing their

tender offer. Indeed, even if they do not prevail, there is

nothing in the Williams Act to prevent resolicitation of

these shares with full and fair disclosure of all material

facts.

—. eT Pe eS

AED WEA +

20

Thus, the balance of equities clearly favors the plaintiff.

Defendants’ alleged failure to disclose material facts with

respect to the “control” persons of Liquigas and the sources

of funds for the tender offer is the thrust of plaintiff’s

claim under Section 14(e) of the 1934 S.E.C. Aet. Defend-

ants’ response to these allegations is that Liquigas is

merely acting through its subsidiaries much like any large

American corporation; that Mr. Ursini is the only person

who may be “deemed in control of” Liquigas; that the funds

arrived in this country through “normal banking” chan-

nels; and that ail material facts have been fully and fairly

disclosed to the Ronson stockholders by defendants.

The offer to purchase (Ex. A attached to complaint) of

May 31, 1973 revealed that Liquifin’s parent, Liquigas,

S.p.A., an Italian corporation would supply the funds for

the purchase from its “general working capital” to Liquifin,

a wholly-owned Liechtenstein subsidiary which conducts no

material business ventures. The tender offer stated that

Liquigas’ managing director, Raffaele Ursini, “may be

deemed to be in control” of Liquigas, and that the depos-

itory for the funds would be the Franklin National Bank of

New York, a wholly-owned subsidiary of the Franklin New

York Corporation. Defendant Michele Sindona owns 21.6

percent of Franklin New York’s stock.

Nearly two weeks later, after this Court had entered the

temporary restraining order, defendants amended their

offer by a notice of extension dated June 13, 1973 (Ex. 3,

Keale’s affidavit). In the amended offer, defendants ad-

mitted that the funds did not originate from the general

working capital of Liquigas but that the working capital

“included” $20,600,000 as a result of the sale by Liquim-

portex Aktiengesellschaft, a wholly-owned Liechtenstein

subsidiary of Liquigas to Capitalfin International Limited,

“wi

bien

21

in May, 1973, of a minority interest in a wholly-owned sub-

sidiary of Liquimportex. The proceeds of the sale were

deposited in the Franklin National Bank to the account of

Liquifin. Raffaele Ursini was still deemed in control of

Liquigas.

Plaintiff contends that an injunction should issue in

view of defendants’ admission that the original tender

offer was not sufficient under Section 14(e). Plaintiff argues

that the amended offer and Rule 14d-1 amendments of June

13, 1973 are admissions of Section 14(e) violations. Plain-

tiff’s prayer for relief on this ground is without merit

because case law has established that the courts should con-

sider any curative steps taken by defendants to remedy

any misinformation provided to the stockholders, Nichol-

son File Company, supra at 521. In facet, the Court of

Appeals for the Second Circuit has suggested that if, in a

tender offer situation, any required filings are not accurate,

there is a “continuing obligation” on the offerors to

promptly amend its filings. JWilstein, supra at 720-21.

Therefore, in order to determine whether defendants have

violated Section 14(e), the Court must evaluate the truth-

fulness and accuracy of all the relevant information pro-

vided to the Ronson stockholders.

Plaintiff claims that defendants’ attempt to characterize

Mr. Ursini as the only person in control of Liquigas is mis-

leading. Ronson believes that the following are “control

persons” within the applicable Securities laws: (1) Monte-

eatini Edison, §.p.A., an Italian company owning approxi-

mately 25 percent of the outstanding stock of Liquigas;

(2) Servizio Italia of Banca Nazionale del Lavoro, an

Italian statutory fiduciary company holding approximately

36 percent of the common stock of Liquigas for the benefit

of Ursini; (3) Societa Generale Immobiliare, an Italian

= PUP 2 a et

PR Ne ONT ee eee ——

Se ees Cee

i ad a AS

22

company which holds Liquigas’ guarantees of approxi-

mately $80 million of Manifattura Ceramica Pozzi, S.p.A.

debts to Immobiliare; and (4) defendant Michele Sindona,

the sole owner of Fasco Internaticnal Holding S.A., a

Swiss holding company which owns a 21.6 percent interest

in defendant Franklin New York Corporation as well as

approximately 40 percent of Immobiliare. Ronson also

names at least ten other entities which it considers to be

possible control persons.

The disputed point of law is whether under the appli-

cable federal securities statutes, rules and regulations, there

can be more than cne “control person” of the offeror, Liqui-

fin. Both sides concede that there is no previous case di-

rectly on point. The parties have attempted to persuade

the Court of the validity of their respective positions

through a battle by “expert” affidavits.

Defendant contends that control is an exclusionary con-

cept; that is, there can be only one person or corporate

entity which has the power, directly or indirectly, to actu-

ally direct the management and policies of a corporation.

See 17 C.F.R. See. 240.12b-2(f). On the other hand, plaintiff

argues that a person may be a “controlling person” by vir-

tue of stock ownership, agency, agreement or through some

other means and that there could be controlling groups of

a corporation, each member of the group being a separate

control person. See, ¢.g., 78 U.S.C. See. 770.

While both definitions have merit, under the peculiar eir-

cumstances of this case and considering the Congressional

purpo:e behind the Williams Act, the Court is more inclined

to accept plaintiff's view that more than one person could

be in control of a corporation. In this case, even if Ursini

is the sole control person of Liquigas, there are material

facts that, if omitted as has been the case here, would create

23

a misleading description of Ursini’s control. Also, many of

these facts developed through discovery relate to the source

of funds question because, in the Court’s view, these facts

would affect a stockholder’s choice to tender his shares

especially in light of the involvement of foreign entities un-

familiar with the problems of managing a large American

corporation such as Ronson. At every stage of discovery,

more and more facts developed the control relationships

and intricate maneuvering of funds through international

shell corporations resulting in a labyrinthinie maze which

is barely comprehensible to this Court.

As best as can be discerned from this dazzling array of

financially interrelated entities the key facts discovered to

date is best summarized by referring to Plaintiff’s Exhibit

1-e.

Certainly a material fact would be the $80 million guar-

anty by Liquigas of the debts of Pozzi to Immobiliare as

described previously. The evidence also reveals that Liqui-

gas is in the midst of negotiating for the acquisition of

Pozzi. In view of these facts surrounding the guarantees,

plaintiff could very well prove at trial that Immobiliare

could be deemed in control of Liquigas. Similarly, Mr. Sin-

dona might well be a person in a position to control the

policies of Liquigas through his control of Immobiliare by

way of the Fasco International Holding S.A.

Another stunning display of international high financial

wizardry is the series of sales of the stock of Liquipar, a

Brazilian holding company, in Mareh and April of 1973.

Liquifin began to invest in Liquipar, so that by 1973, Liqui-

fin owned almost 83 percent of Liquipar. Even though

Liquifin claimed in the offer that it never engaged in any

business, it invested in Liquipar which makes that repre-

sentation inaccurate. The offeror, Liquifin, then sold its

24

Liquipar shares to Liquimportex for approximately $1.2

million. Then Liquimportex sold 49 percent of the Liquipar

shares to Capitalfin for $20 million, the same $20 million

now on deposit to pay for the tendered shares. None of

these facts were fully revealed to the stockholders. While

defendants claim that the cash is available “free and clear”

and thus there is no need to let the stockholders know how

it got there, the Ronson stockholders have a right to know

the specific steps involved in obtaining the “source of the

funds” used to pay for the tendered shares.

Other serious questions of disclosure arise in the Monte-

eatini Edison-EN1I-Italian bank link and possible controls

of Liquifin’s stock involved, and the Servizio-Banea del

Lavoro-Capitalfin link. In this Court’s mind some of these

mysteries must be delved into for the benefit of the Ronson

stockholders so that they might make an intelligent invest-

ment decision.

While defendants assert that their policy is to let the

shareholders “know everything,” they have obviously failed

to follow this policy as more and more facts develop the

control relationships and funding involved in this tender

offer. It is apparent that plaintiff has met its burden of

proof under Section 14(e) and is entitled to preliminary

injunctive relief on the previous grounds asserted.

Plaintiff has also urged strenuously that the impact of

foreign tax law upon foreign corporations’ interests and

individuals could very well seriously affect the operations

of Ronson Corporation, most seriously the tax situation

and the possible penalties for noncompliance.

In view of the foregoing and in the interest of time, this

Court need not go into that aspect in any great deal, but it

should be inquired deeply into on the application for a per-

manent injunction. The same applies to the allegations

25

raised as to the impact of the applications by the new diree-

torship for licenses under the Civil Aeronautics Aet and the

Federal Communications Act. In fact, it is not beyond the

realm of possibility that defense contracts may be lost and

subsidiaries forced to close down as a result of a possible

refusal of iicensing due to the foreign interests involved.

This Court need not decide nor at this point is it any of

this Court’s business to determine whether or not certain

voting trust applications are valid or invalid. That is a

determination properly delegated by Congress to the indi-

vidual administrative agencies. However, the fact that

these applications were characterized in their offer by de-

fendants as routine matters, in the Court’s view, is certainly

misleading to the Ronson stockholders. It appears that

these matters raise very substantial questions of adminis-

trative law.

Ronson’s fifth claim in its complaint charges that eom-

pletion of the tender offer by Liquifin will violate Section 1

of the Sherman Act, 15 U.S.C. See. 1, Section 7 of the Clay-

ton Act, 15 U.S.C. See. 18, and Section 5 of the Federal

Trade Commission Act, 15 U.S.C. See. 45.

Again, in view of what has previously been held here, this

Court need not determine these questions but feels that the

parties are entitled to the Court’s view of the evidence and

pleadings as they now stand.

In its pleadings, Ronson listed all of its products and

those of Liquigas in an attempt to demonstrate similiar

lines of commerce.

However, no facts have been submitted on the record to

characterize these products as “lines of commerce” within

the meaning of Section 7 of the Clayton Act. United States

v. Brown Shoe Co., 370 U.S. 294, 325-26 (1962). No evidence

has been presented as to Ronson’s share, the concentration

26

or the existence of entry barriers in any relevant market.

The evidence shows only that Liquigas “intends” to do some

“business” in the Western Hemisphere.

In view of the absence on this record of any specific evi-

dence defining relevant markets, indicating the precise posi-

tion in such markets held by both the offeror and the target

corporation, or delineating the degree of concentration in

such markets by all competitors so as to enable this Court

to assess the actual or probable anticompetitive effects of

the proposed acquisition, plaintiff is not entitled to injunc-

tive relief based upon these conclusory allegations of mar-

ket foreclosure and anti-competitiveness. See Lunken-

heimer v. Condec Corp., 268 F. Supp. 667, 671 (S.D.N.Y.

1967). There are few, if any, specific facts regarding the

lines of commerce, the relevant geographic areas, the rele-

vant market characteristics, or the market positions of

Ronson or Liquigas to support a finding of probable success

on the merits of any anticompetitiveness, vertical or hori-

zontal market foreclosure, or reciprocal dealing claims.

Perhaps at a later stage of these proceedings, plaintiff may

be better prepared to substantiate its antitrust claims, but

at this juncture, it is not entitled to preliminary injunctive

relief on these grounds.

This Court must dispose of one more factor in this de-

cision.

Defendant Franklin National Bank, depository of the

tendered shares, moves for a severance and transfer to the

Eastern District of New York or a dismissal. Franklin’s

principal place of business is in the Eastern District of New

York.

Franklin New York Corporation moves to dismiss alleg-

ing that it is named as a defendant only because of its rela-

tionship to Franklin Bank, and plaintiff asserts no inde-

pendent claim against it.

27

Franklin bottems its motion upon 12 U.S.C., See. 94,

which provides in substance that a national bank may be

sued in a federal court only in the district in which the bank

is established.

Plaintiff contends that the bank has waived its immunity

under 12 U.S.C. Sec. 94 by complying with a direction of

this Court to produce documents and acceding to a time-

table for depositions.

Plaintiff also argues that the Franklin Corporation

should be retained in this action because it was charged in

the complaint with participation in an alleged conspiracy

against all of the defendants.

The participation to which plaintiff alludes is apparently

based on the fact that defendant Sindona owns a consider-

able stock interest in Franklin New York, and Franklin

New York wholly owns and controls the Franklin Bank.

It is undisputed that 12 U.S.C. See. 94 generally immu-

nizes national banks from suit outside their home districts

where, as here, immunity is timely asserted and not waived.

Mercantile Nat'l. Bank v. Langdeau, 371 U.S. 555, 561-2

(1962); Michigan Nat'l Bank vy. Robertson, 372 U.S. 591

(1963) ; Helco, Inc. v. First Natl. City Bank, 470 F.2d 883

(3rd Cir. 1972) ; U.S. Nat'l Bank v. Hill, 434 F.2d 1019 (9th

Cir. 1970) ; Bruns, Nordeman & Co. v. American Nat'l Bank

& Trust Co., 394 F.2d 300 (2d Cir. 1968).

Franklin is “established” in the Eastern District of New

York because that is the location of its principal place of

business. U.S. Nat'l Bank v. Hill, supra; Buffum v. Chase

Nat'l Bank of City of New York, 192 F.2d 58 (7th Cir.

1951), cert. denied, 342 U.S. 944 (1951). Scheduling deposi-

tions and complying with this Court’s Order to produce the

letters of transmittal to avoid being held in contempt did

not constitute a waiver under 12 U.S.C. Sec. 94, and this

SEEPS OETI EN BILLS. POLLY FLL LOSS TLE LONI TO WE eT: en SOIL LOANS RE ee

28

Court so held during the hearing on June 26, 1973 (tran-

script at 66).

These facts notwithstanding, the federal circuit courts

are split as to the applicability of 12 U.S.C. See. 94 venue

immunity to securities suits. The Second and Ninth Cir-

cuits conclude that Sec. 94’s immunity supersedes the venue

provisions of the Securities Acts of 1933, 15 U.S.C. See. 77a

et seq., and 1934, 15 U.S.C. Sec. 78a et seq., Bruns, Norde-

man & Co., supra; U.S. Nat’i Bank, supra, the former Cir-

cuit making its holding with “regret”, 394 F.2d at 301, and

the latter saying that while the alternative might be desir-

able, any change in policy must be made by Congress, 434

F.2d at 1020-21. The Third Cireuit holds contra, that 15

U.S.C. “See. 78aa impliedly repeals (12 U.S.C.) See. 94 for

cases involving Securities Exchange Act violations by na-

tional banks.” Levin v. Great Western Sugar Co., 274 F.

Supp. 974, 978 (D.N.J. 1967), aff'd. 406 F.2d 1112 (3rd Cir.

1969), cert. denied, 396 U.S. 848 (1969). See also, Carpen-

ter v. Hall, 352 F.Supp. 806 (S.D. Tex., 1972). See. 78aa is

the 1934 Act’s liberal venue provision. Hence, venue is

properly laid in the District of New Jersey as to defendant

Franklin.

Franklin New York’s motion for dismissal for lack of a

cause of action sr for improper venue should be and is

denied. Plaintiff alleged that Franklin New York partici-

pated in the conspiracy to violate the antitrust laws and the

securities acts and performed ministerial functions in fur-

therance of the overall conspiracy. See Complaint, para-

graphs 8,9 and 15. These allegations are sufficient to avoid

dismissal and to lay venue in the District of New Jersey.

Levin v. Great Western Sugar Co., Supra, at 978; Knuth v.

Erie-Crawford Dairy Coop. Ass’n, 395 F.2d 420, 423 (3rd

Cir. 1968).

a os

29

In Levin, supra, Judge Coolahan stated that:

“... any allegation of a securities act violation is suffi-

cient for venue purposes even as to a defendant who did

not commit an act within the district if that defendant is

in league with a defendant who did act within the dis-

trict.” 274 F.Supp. at 978.

Franklin New York is clearly “in league” with defendant

Sindona (who acted within the district by participating in

the tender offer), since defendant Sindona owns 21.6 per-

cent of Franklin of New York and, taking plaintiff’s allega-

tions as true for the purpose of this motion, controls Frank-

lin of New York as well. This Court has jurisdiction over

Franklin of New York and venue is adequately laid here.

The Franklin Bank and Franklin of New York finally

contend that they need not be joined as defendants in order

to afford plaintiff injunctive protection and relief because

they are so bound by the provisions cf F.R., Federal Civil

Procedure Rule 65(d) anyway. They may be technically

correct because rule 65(d) binds:

“.,. parties to the action, their officers, agents, servants,

employees, and attorneys, and . .. those persons in active

concert or participation with them who receive actual

notice of the order by personal service or otherwise.”

{Emphasis supplied].

Both the bank and Franklin of New York assert in their

brief that they are agents of the other defendants because

they hold the tendered shares, and they admit that they are

bound by this Court’s Orders of June 5, 1973 and June 7,

1973 for the same reason. The Franklin Bank and Franklin

New York also assert, without specifying facts in support

of their assertion, that retaining them as parties defendant

BV AIT OSE OMT I ON CAL OR DION 009 HP Ie Lm ht en ta oa Ca hia

30

is damaging them without helping plaintiff. These unde-

veloped arguments neither impress the Court nor provided

a compelling basis for dismissal. This Court has discretion

to keep parties in this suit who might otherwise be bound

by Rule 65(d) ; and at this stage of the proceedings, keeping

Franklin New York in as a party defendant seems to be the

wiser course.

Franklin’s motion for severance and transfer to the East-

ern District of New York is herehy denied.

All of the foregoing constitutes the Court’s findings of

fact and conclusions of law pursuant to Rule 52(a) Federal

Rules of Civil Procedure.

An Order granting preliminary injunction will be sub-

mitted instanter. Costs will be abide the outcome of the

application for permanent injunction.

31

Appendix B

Per Curiam Opinion, United States Court of Appeals

for the Third Circuit, Filed July 24, 1973

(483 F.2d 846)

UNITED STATES COURT OF APPEALS

Txrirp Circuit

Argued July 20, 1973 Decided July 24, 1973

Nos. 73-1587, 73-1606

>

Ronson Corporation

v.

LiquiFin AKTIENGESELLSCHAFT,

Appellants in No. 73-1587, et al.

—_

Appeal of Franxuin Nationa, Bank and FRANKLIN

New York Corporation in No. 73-1606

Appeals from order of the United States District Court

for the District of New Jersey, Clarkson S. Fisher, J.,

enjoining defendants from soliciting tender of any shares

of a corporation’s common stock pursuant to offer to pur-

chase, from acquiring or attempting to acquire in any

manner any shares of such corporation, and from veting

any shares previously acquired. The Court of Appeals held

that conclusions that plaintiff had met its burden of proof

under statute prohibiting any fraudulent, deceptive, or

™

nr

POOP IAL EAE OIL SR Gh IY NI pr pw © OP mS Cn RC ROME YEE SE CNGRERE CRIN RRO 1 WUE EIEIO W Eee ney pe

OOS Oe BET o rv ree

bras PTL EO OM »

32

manipulative acts or practices in connection with any

tender offer and was entitled to preliminary injunction

did not constitute reversible error; and that defendants

should apply to district court, rather than Court of Appeals,

for any reconsideration of preliminary injunction in light

of supplemental information which was not available to

district court prior to its order.

Order affirmed, and case remanded with directions.

See also, 3 Cir., 483 F.2d 852.

Carpenter, Bennett & Morrissey, Newark, N. J., Mudge,

Rose, Guthrie & Alexander, New York City, for Liquifin

Aktiengesellschaft, Liquigas S.p.A., D. F. King & Co., Inc.,

Servizio Italia of Banca Nazionale del Lavoro, Philip

Marfuggi, Raffaele Ursini, and Michele Sindona, appellants

in No. 73-1587.

Garrett E. Brown, Jr., Stryker, Tams & Dill, Newark,

N. J., Cravath, Swaine & Moore, New York City, for Kuhn,

Loeb & Co., Inc., appellant in No. 73-1587.

Hannoch, Weisman, Stern & Besser, Newark, N. J., Kaye,

Scholer, Fierman, Hays & Handler, New York City, for

Franklin National Bank and Franklin New York Corp.,

appellants in No. 73-1606.

Schapira, Steiner & Walder, Newark, N. J., Holtzmann,

Wise & Shepard, New York City, Wald, Harkrader & Ross,

Washington, D. C., for Ronson Corp., appellee in Nos.

73-1587 and 73-1606.

Before Van Dusen and Weis, Circuit Judges.

IO Lom

——

ees TPO, * ra

GET SPDT BCT TD We YALE ET et Dperton Hie eka

33

OPINION OF THE CouURT

Per CurRIAM:

These appeals challenge a preliminary injunction issued

by the district court on July 5, 1973, enjoining and re-

straining the defendants, and those acting on their behalf

or in concert with them, from (a) soliciting the tender of

any shares of Ronson common stock pursuant to the OrreR

ro Purcuase of Liquifin Aktiengesellschaft (Liquifin), “as

heretofore or hereafter modified or extended,” (b) ac-

quiring or attempting to acquire in any manner any shares

of Ronson, and (c) voting any shares of Ronson previously

acquired, ete." This order was supported by a 2642 page

opinion, containing findings of fact and conclusions of law,

1The first paragraph of the decree provisions of the July 5,

1973, order provides:

“OrperEp that defendants and each of them, their agents,

servants, employees, and all persons acting on their behalf

or in concert with them, are during the pendency of this

action and until a trial on the merits shall have been had

enjoined and restrained from (a) soliciting the tender of any

shares of Ronson common stock to Liquifin pursuant to

Liquifin’s ‘Offer to Purchase’, as heretofore or hereafter modi-

fied or extended; (b) acquiring or attempting to acquire in

any manner any shares of Ronson; and (c) voting any shares

of Ronson previously acquired, or otherwise utilizing any

share of such stock or shares of Ronson stock previously

acquired, as a means of controlling or affecting the manage-

ment of Ronson;... .”

On the same day, the district court, by separate order, denied

defendants’ application for a stay pending appeal, except insofar

as the above-mentioned order granted a stay as to certain of its

prc visions for a ten-day period.

A panel of this court, consisting of Judges Gibbons and Hunter,

denied 9 Motion For Stay of the July 5 preliminary injunction

by order of July 12, which order prescribed an expedited briefing

schedule and argument of the appeal (No. 73-1587) on July 20,

with provision t..t the Motion For Stay also be argued on July 20.

suenepenece NCE pee Nae

34

dictated by the district judge on July 3, 1973, and filed

July 5, 1973.* Liquifin is a Liechtenstein company and is

a wholly owned subsidiary of Liquigas S.p.A. (Liquigas),

which is a large Italian industrial company.

The complaint was filed as the result of a tender offer*

by Liquifin to buy Ronson common stock at $8.50 per share,

publicly announced through newspapers, including financial

publications, and filed with the SEC on May 31, 1973.

The district court entered a temporary restraining order

and directed expedited discovery on June 5. The back-

ground of the tender offer and the various companies

? Appellee’s brief at page 4 states that the preliminary injunction

was “orally granted” on July 3.

5 Section 14(e) of the Securities Exchange Act of 1934, as added

by the Williams Act (P.L. 90-439, as amended by P.L. 91-567), 15

US.C. § 78n(e), provides:

“(e) It shall be unlawful for any person to make any untrue

statement of a material fact or omit to state any material fact

necessary in order to make the statements 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 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 Commission shall, for the purposes of this

subsection, by rules and regulations define, and prescribe means

reasonably designed to prevent, such acts and practices as are

fraudulent, deceptive, or manipulative.”

See also 15 U.S.C. §78n(d); SEC Rule 14(d)(1). The Supreme

Court has stated that the securities acts should not be construed

technically and restrictively but “flexibly to effectuate [their]

remedial purpose.” SEC v. Capital Gains Research Bureau, 375

U.S. 180, 195, 84 S.Ct. 275, 11 L.Ed.2d 237 (1963). The desire of

Congress to provide adequate disclosure to investors where cash

tender offers are made is summarized and documented in Dyer v.

Eastern Trust and Banking Company, 336 F.Supp. 890, 907-908

(D. Maine 1971), as well as the cases cited in the district court

opinion (see 9a ff.).

cca)

ys.

PIERO AALTRD ASR EIR

PPDE ORES BON, 2 Ce eet pre SEGALL Bai LO OLLI OLLIE SENN AY ON TE PE NIE ansehen, =“

35

and individuals involved are described in the district court

opinion and need not be repeated here. The district court

stated, at pages 12a-13a, 15a-l6a, 18a-19a and 20a-2la of

its opinion :*

“The Court is most concerned with plaintiff’s aliegations

that defendants have failed to disclose adequately

or materially misrepresented the persons behind and

methods used to fund the offer; the foreign controls

involved in the offer; and the administrative obstacles

to the offer under federal law.

“These allegations are based upon Section 14(e)

which tracks the language of Rule 10b-5, 17 C.F.R.,

Sec. 240 10b-5 (1972), except that Section 14(e) applies

to tender offers and Rule 10b-5 applies to the purchase

or sale of securities. The elements of an action for

injunctive relief are essentially the same under Section

14(e) and Rule 10b-5. Under both the determinative

question is: Was the omission or misrepresentation

of fact material? A material fact is that which a rea-

sonable investor would consider important in the

making of his decision to tender or not to tender in

response to Liquifin’s offer. [Citing cases.] A material

misrepresentation occurs when there is a substantial

likelihood that the misstatement may have led a stock-

holder to tender his stock; whereas in the absence of

* After pointing out that the key facts are best summarized in

the chart marked Plaintiff's Exhibit 1(¢) and giving examples of

undisclosed information illustrated by the interlocking business

entity relationships shown on that chart, the court concluded at

23a:

EEE LEE MP ROPE IER IS

“In this Court’s mind some of these mysteries must be delved

into for the benefit of the Ronson stockholders so that they

might make an intelligent investment decision.” (23a)

36

the misrepresentation he would not have tendered.

[Citing case.] [12a-13a]

“... defendants have not made any showing of irrep-

arable harm. They assert that if preliminary injunc-

tive relief is granted, the investment world, for all

practical purposes, will consider the tender offer ter-

minated. Judge Timbers, in his excellent opinion in

Gulf & Western, supra, demonstrated the fallacy of

this argument by saying if the defendants prevail

after a trial on the merits, they will not be foreclosed

from renewing their tender offer. Indeed, even if they

do not prevail, there is nothing in the Williams Act

to prevent resolicitation of these shares with full and

fair disclosure of all material facts.

“Thus, the balance of equities clearly favors the

plaintiff. [15a-16a]

“Plaintiff claims that defendants’ attempt to char-

acterize Mr. Ursini as the only person in control of

Liquigas is misleading. Ronson believes that the fol-

lowing are ‘control persons’ within the applicable Se-

curities laws: (1) Montecatini Edison, S.p.A., an

Italian company owning approximately 25 percent of

the outstanding stock of Liquigas; (2) Servizio Italia

of Banca Nazionale del Lavoro, an Italian statutory

fiduciary company holding approximately 36 percent

of the common stock of Liquigas for the benefit of

Ursini; (3) Societa Generale Immobiliare, an Italian

company which holds Liquigas’ guarantees of approxi-

mately $80° million of Manifattura Ceramica Pozzi,

5 We have assumed that the amount “$80 million” on line 22 of

21la should read “$60 million.”

37

S.p.A. debts to Immobiliare ; and (4) defendant Michele

Sindona, the sole owner of Fasco International Holding

S.A., a Swiss holding company which owns a 21.6

percent interest in defendant Franklin New York

Corporation as well as approximately 40 percent of

Immobiliare. [18a-19a]

“... under the peculiar circumstances of this case

and considering the Congressional purpose behind the

Williams Act, the Court is more inclined to accept

plaintiff’s view that more than one person could be

in control of a corporation. In this case, even if

Ursini is the sole control person of Liquigas, there

are material facts that, if omitted as has been the

case here, would create a misleading description of

Ursini’s control. Also, many of these facts developed

through discovery relate to the source of funds ques-

tion because, in the Court’s view, these facts would

affect a stockholder’s cho’ce to tender his shares es-

pecially in light of the invo!vement of forcign entities

unfamiliar with the problems of managing a large

American corporation such as Ronson. At every stage

of discovery, more and more facts developed the con-

trol relationships and intricate maneuvering of funds

through international shell corporations resulting in

a labyrinthinic maze which is barely comprehensible to

this Court.” [20a-2la]

After consideration of the record, we conclude that there

was no reversible error in the conclusions by the dis-

trict court that plaintiff “has met its burden of proof un-

der Section 14(e) and is entitled to preliminary injunc-

PO SELLE MSIE SI A? SSL Eat Mt 5 ONE EEE ELLE ILL INN LP” CELE BE ELE iia AOR FAA int ite ed Fat We SOM e mn. Liem

38

tive relief” (23a). Defendants-appellants have not demon-

strated that there has been an abuse of discretion by the

district court in granting its July 5, 1973, preliminary in-

junction on the record before it. See Brown vy. Chote, 411

U.S. 452, 93 S.Ct. 1732, 1735, 36 L.Ed.2d 420 (1973) ; United

States Steel Corp. v. Fraternal Ass’n of Steelhauiers, 431

F.2d 1046, 1048 (3d Cir. 1970). In the latter case, Judge

Aldisert pointed out:

“,.. this appeal involves only a review of a pre-

liminary determination by the district court, dictated

by the trial judge’s finding the appellees established

a reasonable probability of success at final hearing

coupled with a demonstration of irreparable harm

absent preliminary relief... .

“This limited review is necessitated because the

grant or denial of a preliminary injunction is almost

always based on an abbreviated set of facts, requiring

a delicate balancing of the probabilities of ultimate

success at final hearing with the consequences of im-

mediate irreparable injury which could possibly flow

from the denial of preliminary relief. Weighing these

considerations is the responsibility of the district

judge; only a clear abuse of his discretion will justify

appellate reversal.”

See also Gulf & Western Indus., Inc. v. Great A. & P. Tea

Co., Inc., 476 F.2d 687, 692-693 (2d Cir. 1973) ;*° Bath In-

dustries, Inc. v. Blot, 427 F.2d 97, 111 (7th Cir. 1970).

* In this case, the court said, 476 [°.2d at pages 698-699:

“... in balancing the equities, the public interest must

be considered. . . . Since it is impossible as a practicai matter

for the government to seek out and prosecute every important

39

Also, we believe that the court was entitled to point

out that the deficiencies in the disclosures before it could

be explored in the hearing on final injunction. The defen-

dants contend that we should consider an eight-page printed

supplement to its tender offer published on July 13, after

the district court’s July 5 preliminary injunction and after

this court had denied their Motions To Stay by its July 12

order. We have concluded that defendants should apply

to the district court for any reconsideration of the pre-

liminary injunction in the light of this supplemental infor-

mation which was not available to it prior to its order.

It will be up to the district court, with its greater famil-

iarity with the record,’ to determine initially whether the

July 13 Amendment to the Tender Offer makes it feasible

to revise the current preliminary injunction prior to the

prompt final hearing which the district court plans to

conduct. We note that the district court opinion recognizes

that (18a):

“... the court should consider any curative steps taken

by defendants to remedy any misinformation provided

to the stockholders. . . . Therefore, in order to deter-

mine whether defendants have violated Section 14(e),

the Court must evaluate the truthfulness and accuracy

of all the relevant information provided to the Ronson

stockholders.”

violation of laws designed to protect the public in the aggre-

gate, private actions brought by members of the public in their

capacities as investors or competitors, which incidentally bene-

fit the general public interest, perform a vital public service.”

* The district court stated in its opinion that it had reviewed

“thousands of pages of depositions, interrogatories and affidavits”

(7a).

40

Also, the following should be said, in addition to the

foregoing, in view of the prompt return of this case to the

district court:

A. Although the district court was justified in com-

menting that the tender offer presented to federal

authorities “very substantial questions of administra-

tive law,” which the tender offer, as modified prior

to the July 5 injunction, misleadingly treated as if

probably subject to resolution without divestiture of

the helicopter and defense business,® we agree with

defendants that clearances from the several adminis-

* For example, the original tender offer stated, inter alia, at

page 5:

“. . . the Act requires approval by the CAB of the

acquisition by any person of control of an air carrier, including

the Helicopter Subsidiary.

“Accordingly, the Offeror and the Trustee have applied to

the CAB for an order or orders (i) disclaiming jurisdiction

over, or granting an exemption to, the acquisition by the

Offeror and the Trustee of interests in Common Stock of the

Company and (ii) granting an exemption or otherwise approv-

ing acquisition of control of the Helicopter Subsidiary by the

Trustee.

“In connection with the foregoing application to the CAB,

the Offeror and the Trustee have agreed that should the CAB

so require, as a condition of the issuance of an order requested

by the Offeror, or should the Offeror, at its option so direct, the

rustee will dispose of its interest in the Company or the

Helicopter Subsidiary.

“The Offeror’s counsel specializing in aviation law, Messrs.

Bebchick, Sher & Kushnick, has advised the Offeror that in

its opinion (i) the CAB should issue an order either disclaim-

ing jurisdiction over, or exempting, the acquisition by the F

Offeror and the Trustee of the interests to be acquired by them b

in the Common Stock of the Company, (ii) the CAB ultimately

will exempt or otherwise approve any acquisition of control

of the Helicopter Subsidiary involved in the transactions, and

2 MONEE RI

RELENTLESS IEE: BENE ZOE EES eh Ferg en ea FERER DLO GCE Tk, yy en ae rz, gO Fy

a : me Detrevern, ipeeeey URE Soar ge . d *

ara ore AE 1S PYLE LANL NE OLE IOS EL Te ARE iA ys

41

trative agencies involved’ need not be secured prior

to a final tender offer, provided that the approximate

gross amounts, type, profits, etc., of Ronson’s business

affected, which may be permissibly revealed in the

(iii) that the foregoing actions by the CAB would constitute

an implicit determination that the Helicopter Subsidiary will

remain a United States citizen. In such counsel’s opinion, the

CAB might limit the duration of the Trust or require the dis-

position of the Helicopter Subsidiary to another party. If the

CAB did impose the latter requirement, it might be feasible,

in lieu of a sale of the Helicopter Subsidiary, to surrender the

authority to operate an air taxi service as a common carrier,

since such counsel is of the view that the transfer of the stock

of the Helicopter Subsidiary to the Trustee and vesting the

Trustee with effective control over the Helicopter Subsidiary

would satisfy the Federal Aviation Administration as respects

matters under its jurisdiction.”

By order of July 19, 1973, at Docket Nos. 25,583 and 25,603, the

Civil Aeronautics Board stated at page 5:

“... we are not prepared to find, absent further development

of the underlying facts relating to the issue, that the voting

trust agreement by its own terms insulates the acquisition of

control of Ronson Helicopters from the Board’s jurisdiction

under section 408(a)(5) of the Act. We conclude, therefore,

that a disclaimer of jurisdiction would not be warranted.

“Under the terms of the proviso to section 408(a) (5), the

Board may exempt the acquisition of a non-certificated air

carrier from the requirements of Board approval ‘to the extent

and for such periods as may be in the public interest.’ Appli-

cants’ request involves complex issues of fact, law, and Board

policy relating to such matters as the qualification of Ronson

Helicopters, following its acquisition, to engage as a citizen of

the United States in air transportation, the Board’s policy re-

garding foreign ownership or control of a US. air carrier, and

the adequacy of the trust agreement herein to insulate the air

carrier, Ronson Helicopters, from the ownership and control of

Liquigas/Liquifin. Under all the circumstances, we are not per-

suaded that, on the basis of the application in Docket 25583

and other documents before us, a sufficient showing of public

interest has been made to warrant the grant of an exemption

PR CLL LOL LP ICL L LIT AEN A) LBP CPA ig PPO EET? . e 2

42

light of the security needs of the defense business

as determined by the district court, are disclosed.

B. The following statement of Judge Mansfield in

Sonesta International Hotels Corporation v. Welling-

ton Associates, 483 F.2d 247 (2d Cir., 1973), is appli-

cable to the record before the district court on July 5

“Where the foregoing standard has been met pre-

liminary injunctive relief is a particularly useful

remedy for prevention of probable violations of the

disclosure requirements of the Act, for the reason that

prior to consummation of the offer the court still has

a variety of methods available to it for correction of

the misstatements or omissions. [Citing case.] But

once the tender offer has been consummated it be-

comes difficult, and sometimes virtually impossible, for

a court to ‘unscramble the eggs.’ [Citing cases.] On

the other hand, preliminary relief does not, in assuring

that the offer will be lawfully made, sacrifice the legit-

under section 408(a)(5) in respect to the transaction herein.

Therefore, applicants’ request for exemption will be denied.”

[Footnotes omitted. ]}

The first two paragraphs of the ordering terms read (p. 7) :

. It Is Ordered That:

“]. Applicants’ requests for disclaimer of jurisdiction and

exemption pursuant to the proviso of section 108(a) (5) in re-

spect to the acquisition and control relationships in Docket

25583, be and they hereby are denied ;

“2. Applicants’ requests for disclaimer of jurisdiction cver

or approval of the interlocking relationships in Docket 25603,

and for approval of the acquisition and control relationships in

Docket 25583, be and they hereby are set for hearing before

an Administrative Law J _ of the Board at a time and place

to be hereafter designated; .. .

°49 USC. § 1378(a) (5) makes it unlawful for any person to

acquire control of an air carrier “in any manner whatsoever” with-

out the approval of the CAB.

43

imate desires of shareholders to accept the offer. If

the offeror is subsequently vindicated after a trial

on the merits, the offer may be renewed. Thus, in the

normal situation, when it appears likely that the offer

may contain materially misleading statements or omis-

sions as made, the interest of the shareholders and

of the public in full disclosure of relevant cireum-

stances renders preliminary injunctive relief an ap-

propriate method of. remedying the deficiencies in

disclosure before the offer is consummated.

“The probability of success on the merits in any

application for injunctive relief turns greatly upon

whether the plaintiff has shown that the tender offer

under attack has misstated or ‘omitted material facts.

The materiality of facts allegedly misstated or omitted

depends, in turn, upon whether a reasonable investor

might have considered them to be important in deciding

whether to accept the tender offer.”

As to materiality of the facts, see also SEC v. Texas Gulf

Sulphur Co., 401 F.2d 833, 849 (2d Cir. 1968), quoted in

Sonesta, supra, 483 F.2d at p. 250.

Our affirmance is without prejudice to any application

defendants may make to the district court for vacation

or modification of its preliminary injunction in the light

of the above-mentioned July 13 Notice of Amendment and

any additional disclosures defendants may make, in the

light of the present situation,’ with respect to their OrrEeR

TO Purcuase 2,200,000 shares of the common stock of

Ronson Corporation.

For the foregoing reasons, the July 5, 1973, district court

order will be affirmed and the case will be remanded to

2° See, for example, the July 19 CAB order mentioned above.

44

the district court for further proceedings not inconsistent

with this opinion." The mandate or certified judgment in

lieu of mandate shall issue forthwith.

11 An opinion will be filed at No. 73-1606 dealing with certain

contentions raised by the appellants in that appeal which are not

applicable to the appellants at No. 73-1587. ©

8

45

Appendix B-1

Judgment, United States Court of Appeals for the

Third Circuit, Filed July 24, 1973

UNITED STATES COURT OF APPEALS

For tHe Tuirp Circuir

Nos. 73-1587 and 73-1606

——<>—

Ronson Corporation,

vs.

Liguirin AKTIENGESELLsCHAlT, Liquicas S.p.A., Kunn, Logs

& Co., D. F. Kine & Co., Ixc., “Raxkuix Nationat Bank,

Franktin New York Corporation, Servizio ITaLia oF

Banca NazionaLe Det Lavoro, Puitie Marrveai, Rar-

FAELE Ursini and MicHEeLr Sinvona,

Liquifin Aktiengesellschaft, Liquigas S.p.A., Kuhn,

Loeb & Co., Inc., D. F. King & Co., Ine., Servizio

Italia of Banca Nazionale del Lavoro, Philip

Marfuggi, Raffaele Ursini, and Michele Sindona,

Appellants in No. 73-1587

Franklin National Bank and

Franklin New York Corporation,

Appellants in No. 73-1606

_—

(D. C. Civil Action No. 785-73)

ON APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW JERSEY

46

Present:

Van Dusen and WEIs,

Circuit Judges.

JUDGMENT

This cause came on to be heard on the record from the

United States District Court for the .................... District of

New Jersey and was argued by counsel.

On consideration whereof, it is now here ordered and

adjudged by this Court that the order of the said District

Court, filed July 5, 1973, be, and the same is hereby af-

firmed, and the cause remanded to the said District Court

for further proceedings not inconsistent with the opinion

of this Court. Costs taxed against appellants.

ATTEST:

(Signature [llegible)

Clerk

July 24, 1973

47

Appendix C

Opinion, United States District Court, District of

New Jersey, Dated August 15, 1973

——»—

Ronson Corporation,

Plaintiff,

vs.

LiquiFIn AKTIENGESELLSCHAFT, et al.,

Defendants.

—>—

West Long Branch, New Jersey

August 15, 1973

BEFORE:

THE HonoraBe Cuarkson S. Fisuer,

U.S.D.J.

(No Appearances.)

The Court: Following the grant of a preliminary injunc-

tion blocking the defendants’ tender offer to stockholders

on July 5, 1973, defendants took an appeal to the Third

Circuit Court of Appeals and the Order of this Court was

affirmed. Ronson Corporation v. Liquifin A.G., —— F. 2d

—— (Slip Opinion at 12, 3d Cir. July 24, 1973) (per

curiam),

The operative facts concerning this tender offer have

been discussed in the opinion of this Court and the opinion

of the Court of Appeals, therefore it would be idle to re-

state them at this time.

48

Defendants now move for a modification or vacation of

the preliminary injunction; their motion is based upon an

8-page printed supplement to the tender offer published on

July 13, 1973, and a 16-page amendment which has been

proposed to this Court but as yet not been made public by

direction of this Court. The Court of Appeals specifically

noted that its ruling was not based upon the July 13, 1973

amendment to the tender offer and that this Court must

“determine initially” whether or not the July 13, 1973

amendment would be sufficient grounds “to revise” the pre-

liminary injunction. (Slip Opinion at 8).

The Court of Appeals further stated that the defendants

could also apply for vacation or modification of the prelimi-

~-<nary.injunction based upon “any additional disclosures.”

(Slip Opinion at 12). The question presented to this Court

on the motion pending is now whether or not the July 13,

1973 and the August 1, 1973 amendments have remedied the

tender offer sufficiently to induce this Court to modify or

vacate the preliminary injunction.

For the following reasons this Court finds no grounds for

disturbing the preliminary injunction as previously en-

tered. Clearly the July 13, 1973 amendment to the tender

offer does not remedy the weaknesses of the previous ten-

der offers because it does not clearly divulge sufficient

material facts. While some factual statements are included

the July 13, 1973 amendment may be characterized as a

multitude of opinions and conclusions of the draftsman

seeking to meet the problems raised by the previous tender

offers. The August 1, 1973 proposed amendment goes fur-

ther in attempting to reveal facts to the Ronson stockhold-

ers, particularly in the area of difficult administrative legal

problems, but it does not solve the factual problems and the

other areas of the tender offer which led this Court to enter

the preliminary injunction on July 5, 1973.

Re ee a . .

Cmte Pah TLL EL OO ITN LLIN DIMES EE LED TT ATES Te ei Reset Rete pases CSL LULES REN ME RRO ReNNe eE Te | ga

49

While the August 1, 1973 proposed amendment states that

the previous offers and amendments contain “important

information which should be read,” it implies that these

previous statements should be examined. The difficulty

with that is these previous filings contain misleading facts

and omissions which form the basis for the entry of the

preliminary injunction, and, which, perhaps when examined,

could create a confusing view of the important and material

facts for any stockholder attempting to decide whether or

not to offer his shares for sale.

From the previous literature presented to the Ronson

stockholders which may best be charitably described as in-

complete, the stockholders would have to sort out and de-

termine which statements were operative, a result certainly

not intended by Congress in the Williams Act.

However, the most troublesome issue raised by these

amendments is the extent to which this Court must attempt

to evaluate the “truthfulness and accuracy of all the rele-

vant information provided to the Ronson stockholders.”

The Court of Appeals in its opinion (Slip Opinion at 8-9)

utilized this language from the opinion of this Court, and

the parties disagree as to the meaning and emphasis this

factor should have in resolving the litigation here. It

should be obvious that the Williams Act requires truthful

and accurate disclosure of all material facts ir any tender

offer situation. It is a requirement that is necessurily im-

plied into the statute.

Ti becomes the function of any district court to referee

the disputes arising from a tender offer which is properly

before the court, but in so doing the Court must not be blind

to all the circumstances and peculiarities of each tender

offer “game” as it unfolds.

PEARL LO RAREA ILE FAP, PPTAV IPG KPO SPRL OS AT PALO we it ti oe Oe

50

From the outset the defendants have disclosed only what

facts in their opinion was necessary or were forced to

divulge by the indications of this Court and the Court of

Appeals. Obviously this is not a policy favored by the man-

date of the Williams Act.

The record, as it now stands, contains at least four at-

tempts by defendants to meet the standards of truthful

disclosure under the Williams Act. Each time the defend-

ants claimed to have satisfied these standards; yet the rec-

ord continues to demonstrate either the omission of mate.

rial facts or a characterization of information which tend

to make these facts which are revealed unclear.

On the basis of the authorities before it, especially So-

nesta International Hotels Corp. v. Wellington Associates,

No. 1055 (2d Cir. July 3, 1973), the Court of Appeals in this

case could have fashioned a remedy which would have con-

tinued the preliminary injunction unless the defendants

revealed certain facts which the Court of Appeals would

view as complete and lawful disclosure by the offeror. See

Sonesta, supra, Slip Opinion at 20. This the Third Circuit

Court of Appeals did not do. Without being presumptuous,

it seems to this Court that one reason, inter alia, it did not

is that the evaluation of truthful disclosures is the function

best suited for the district court, especially where a record

is voluminous and complex.

In view of the entire record, including the methodology

used by the defendants in attempting to comply with the

legal standards of disclosure, this Court can not, at this

point, determine the completeness and accuracy of all the

information provided to the Ronson stockholders. If this

case merely involved the revelation of a few undisputed

specific facts clearly developed on the record as in Sonesta,

supra, the difficulties here could be resolved swiftly by a

kaa . 7 ew & SF ¥ OPENID Sok * ERMEE RIOR OPE PE OT SH at a ae Oe J ah

51

decision of the Court of Appeals or by this Court. This

case is not that simple and defendants’ motion to modify

or vacate must be denied.

The defendants would have been well advised to have

made a complete disclosure at the outset so as to avoid

protracted and unnecessary litigation, but it has not and

the matter must proceed, at least in my view, to a full and

complete hearing on a motion for a permanent injunction.

This ruling, of course, in no way inhibits defendants from

taking curative steps, but in view of the entire record it

would seem that the only way to get to the accuracy and

completeness behind the tender offer is a full hearing.

Accordingly, defendants’ motion to vacate or modify the

preliminary injunction based upon the J uly 13, 1973 amend-

ment and the proposed amendment dated August 1, 1973, is

denied. However, in fairness to the defendants, the tender

offer under its present status will be continued until August

22, 1973, to apply for a stay to the Court of Appeals.

An Order will be submitted at once.

hee Aes EDEL LIE ESI OLON ES I LL MP LORI IEE af SDE PE LP Oe Pi gly Spee IG. ve: POMS eS a Oe am pe DERI org mY >

LTTE

52

Appendix D

Opinion, United States District Court, District of

New Jersey Dated January 11, 1974

NOT FOR PUBLICATION

UNITED STATES DISTRICT COURT

District or New Jersey

Civil Action No. 785-73

<>

Ronson Corpvsation,

Plaintiff,

vs.

LiquiriIn AKTIENGESELLSCHAFT, Liquicas S.p.A., Kunn, Lors

& Co., D. F. Kine & Co., Ixc., Frankuis Nationa, Bank,

FrRankKLIN New York Corporation, Servizio Irauia or

Banca NazionaLe Det Lavoro, Puitip Marrucai, Rar-

FAELE Ussisi and MicHeLe Sixpona,

Defendants.

>

APPEARANCES:

McCarter & Encuisu, Esquires,

By: Raymond Falls, Esq., and

David P. Hyde, Esq. (N.Y.Bar)

For the Plaintiff

ETT ILE LIE ELLIE NOTE TICLE IEE Cee se RE En Ye earner

———— OT OF IES BP

53

Carpenter, Bennetr & Morrissey, Esqs.,

By: John Keale, Esq., and

Donald J. Zoeller, Esq. (N.Y.Bar)

For the Defendant Liquifin etc.

Hannock, Weisman, Stern & Besser, Esqs.,

By: Milton Kunen, Esq. (N.Y.Bar)

For the Defendant Franklin National Bank etc.

Stryker, Tams & Dit, Esgs.,

By: Robert S. Rifkind, Esquire (N.Y.Bar)

For the Defendant Kuhn, Loeb and Company.

Fisuer, District Judge

In this lengthy and complex litigation plaintiff now

seeks a permanent injunction under Section 14(e) of the

Securities Exchange Act of 1934,’ against the defendants

who are attempting to acquire control of the plaintiff,

Ronson Corporation, by means of a cash tender offer. The

defendants seek to remove the preliminary injunction

against them entered by this Court on July 5, 1973 so

that their tender offer may proceed.

In view of the status of this case, where now the parties

are before the Court on a final hearing for permanent

injunctive relief, a brief review of the procedural history

* Section 14(e) was added to the Securities Exchange Act of

1934 by the Williams Act, P.L. 90-439, as amended by P.L. 91-567,

15 U.S.C. See. 78n(e). See, Ronson Corporation v. Iiquifin Aktien-

gesellschaft, 483 F.2d 846, 847 n. 3 (3d Cir. 1973) ; S.Rep.No. 510,

90th Cong., 2d Sess. (1968) quoted in 2 U.S. Code Cong. & Adm.

News 2811, 2821 (1968); H.K. Porter Co., Inc. v. Nicholson File

Co., 353 F.Supp. 153, 163 (D.R.I. 1972), aff’d, 482 F.2d 421 (1st

Cir. 1973).

54

is necessary. The complaint was filed as the result of

a tender offer by defendant Liquifin Aktiengesellschaft

(“Liquifin”), a Liechtenstein company and a wholly-owned -

subsidiary of a large Italian industrial company, defendant

Liquigas 8.p.A. (“Liquigas”) to buy Ronson common stock

at $8.50 per share.* This tender offer was publicly an-

nounced in newspapers and financial publications and filed

with the Securities and Exchange Commission (“SEC”) on

May 31, 1973. On June 5, 1973 this Court entered a tempo-

rary restraining order and directed expedited discovery.

After a hearing, a preliminary injunction was entered

on July 5, 1973 which was subsequently affirmed by the

Court of Appeals for this Cireuit. Ronson Corporation v.

Liquifin Aktiengesellschaft, 483 F.2d 846 (3d Cir. 1973)

and Ronson Corporation vy. Liquifin Aktiengesellschaft, 483

F.2d 852 (3d Cir. 1973).

Upon the return of the case to this forum, the defendants

moved to modify or vacate the preliminary injunction on

the basis of amendments to the tender offer. Their motion,

based upon the amendments of July 13 and the unpub-

lished amendments of August 1, was denied on August 15,

1973. On September 26, 1973 this Court denied a similar

motion of defendants based upon a restated tender offer

? The price per share which the offeror will pay for tendered

shares of Ronson common stock has been reduced to $8.18. The

number of shares which the offeror is willing to purchase has been

increased from 2,200,000 to 2,288,000. These adjustments were

made by the offeror after plaintiff Ronson announced its intention

on December 19, 1973 to declare a four percent stock dividend pay-

able on February 15, 1974 and a cash dividend of six cents per

share payable on January 24, 1974 to the shareholders of record

on January 10, 1974. On Uevember 28, 1973 this Court entered

an order which permitted the offeror to file an amendment to the

Schedule 13D statement previously filed with the Securities and Ex-

ag aa That amendment described these adjustments

to the offer.

re. a :

3d

dated September 11, 1973 (hereinafter referred to as the

“Restatement”). However, this denial was without preju-

dice to renew at the final hearing for permanent injunctive

relief. Defendants’ renewal of this motion is now before

the Court.

I

In an effort to resolve promptly and fairly only the

claims for injunctive relief, this Court reviewed plaintiff’s

requests for discovery, and by orders of September 26,

1973, October 12, 1973, October 25, 1973 and December 5,

1973, directed the course of discovery. As stated previ-

ously, these orders were entered pursuant to F.R.Civ.P. 26

which provides a remedy to protect any party from finan-

cial embarrassment, undue burden, or expense. Both par-

ties during this litigation have submitted confidential

commercial information to the Court in camera

Plaintiff contends that the unavailability of these docu-

ments has adversely affected its discevery rights. These

arguments are without merit. It cannot be questioned that

Rule 26 provides the authority to enter such orders. Under

the Williams Act, the Court becomes the trier of fact to

determine whether injunctive relief should be entered. If

the informaticn provided in camera fails to resolve ade-

quately the important factual disputes, the party offering

these documents runs the risk of having that issue of fact

determined in favor of the opposing party or perhaps

a ruling that it has failed to sustain a burden of proof

placed upon it by the law. Also, if the Court determines

that this information does not fall within any legally ree-

* These documents will be sealed with directions that only this

Court or any Judge or Justice of a federal appellate court may

break the seal to inspect the documents.

Oe mre ne ge ree Ne SURRY, LOM DLAI COORE NCL IIR, “we OO ELON Ge ATS

Se

56

ognized privilege, or would not financially embarrass a

party but, instead, would aid a party in conducting dis-

covery, the Court could make that information available.‘

Throughout these proceedings it has been obvious that

the foreign defendants are subject to this nation’s securities

laws. If they chose not to furnish certain information,

they could be faced with a choice between revealing such

information or having the lawful restraints of this Court

continued against them.’ Finally, after thorough review

of al] the in camera materials, I am satisfied that sufficient

need has been demonstrated by the parties to keep these

documents under seal and that none of the parties have

been prejudiced by the orders of the Court.°

One other matter deserves brief comment at this point.

Defendants have complained that the plaintiff target cora-

pany has utilized this litigation to preserve the corporate

life of its incumbent management, and has, with this pur-

pose in mind, taken every opportunity to further delay

these proceedings. See, e.g., Transcript of Motion of No-

vember 21, 1973 at 11, 13-14, 18.

These arguments have not aided the Court to resolve

the complex issues presented here. It is clear that Ronson,

* See, e.g., Deposition of La Russa and Bianchi of November 14,

1973 at 297. It is also interesting to note that one of plaintiff’s

experts on Italian Law, Giandomenico Magrone, was reluctant to

diseuss his client relationship with Fiat, a large Italian car manu-

facturer. Transcript of Hearing on January 4, 1974 at 158.

° Cf. Fontaine v. Securities and Exchange Commission, 259 F.

Supp. 880, 889-891 (D.P.R. 1966) ; see also Deposition of La Russa

and Bianchi of November 14, 1973 at 296-297; Transcript of Motion

of November 21, 1973 at 29-30.

* Plaintiff's documents concern U.S. Department of Defense con-

tracts involving national security matters and other commercial

information about Ronson’s heliocopter subsidiary. Defendants’

documents contain confidential commercial information.

57

as the target corporation, has standing to sue the defen-

dants for injunctive relief. Gulf d Western Indus., Inc. v.

Great A. dé P. Tea Co., 1 ne., 476 F.2d 687, 696 n.14 (2d Cir.

1973). However, the legislative history of Section 14(e)

reveals that Congress was hardly motivated by concern

for incumbent management of the target company or in-

tended the use of the statute to frustrate tender offers.

The overriding purpose of this Section is the protection

of the investing stockholders of the publie so that they

may have the benefit of full and fair disclosure of all

material facts to make an informed investment decision.

While counsel have zealously engaged in protecting their

clients’ rights in this high stakes struggle for corporate

control of Ronson, this Court has not forgotten that Sec-

tion 14(e) may not be diverted from its important purpose

of protecting the public investor to be utilized solely for

the benefit of incumbent management or control groups

“jockeying” for corporate power. Nicholson File Company

v. H.K. Porter Co., 341 F.Supp. 508, 520 (D.R.I. 1972),

aff'd, 482 F.2d 421, 423-425 (1st Cir. 1973) ; see also Butler

Aviation Int'l, Inc. v. Comprehensive Designers, Inc., 425

F.2d 842, 844-845 (2d Cir. 1970).

To determine if permanent injunctive relief should be

granted or if the preliminary injunction should be vacated,’

* The Court at this time does not rule upon any of plaintiff's

claims for damages. It is important now only to resolve the claims

for injunctive relief. Transcript of Motion of November 21, 1973

at 4-7, 18. Whether any damages can be or should be awarded to

further the Congressional purposes of Section 14(e) may be deter-

mined at a later stage of these proceedings. For a discussion of

the damages issue, see, ¢.g., Chris-€ ‘raft Industries, Inc. v. Piper

Aircraft Corp., 480 F.2d 341 (2d Cir. 1973), cert. denied, 42 U.S.

L.W. 3227 (Oct. 9, 1973) (Nos. 73-152, 73-153, 73-154); H. K.°

Porter Company, Inc. v. Nicholson File Company, 482 F.2d 421,

(Ist Cir. 1972). In these cases the offerors sought damages against

the target companies for the statements made by the target com-

panies to their own stockholders in violation of Section 14(e).

TE OY AA L LGA DSIRE EA BLS Et IOP AONE SOR SEI BEd pe Re nppcaen

TT Sepa Ale

58

the issue is whether the defendants, in the Restatement

of the tender offer, have failed to disclose adequately or

materially misrepresented the persons behind and the meth-

ods used to fund the offer, the effect of foreign laws on

the offer, and the administrative obstacles under federal

law to the offer.* ™

Under Section 14(e), as in any civil suit, the burden

falls upon the plaintiff to demonstrate by a preponderance

_ of the evidence that it is entitled to permanent injunctive

EOE nim ppoye

relief.” Neither the offeror nor the target company may

omit or misrepresent a material fact to the stockholders

of the target company.” The obligation for full and ac-

curate disclosure of all material facts in the offer is “placed

squarely” on the offeror and may not be shifted “to the

shoulders of others”; otherwise the purposes of the

Williams Act.might be avoided by permitting the offeror

to look to the target corporation to correct the deficiencies

in the offer. Sonesta International Hotels Corp. v. Welling-

ton Associates, 483 F.2d 247, 255 (2d Cir. 1973). Sonesta,

however, does not shift any burden of proof in this liti-

* Plaintiff does not press for permanent injunctive relief based

upon violations of federal anti-trust statutes as alleged in the com-

plaint. Transcript of Motion of November 21, 1973 at 12, 21.

* See, Chris-Craft, supra at 362, 364; cf. Gulf & Western Indus.,

Inc. v. Great A. & P. Tea Co., Inc., 476, F.2d 687, 689 (2d Cir.

1973).

10 “*A ‘material fact is that which a reasonable investor would

consider important in the making of his decision to tender

or not to tender in response to Liquifin’s offer. (Citing

cases.) A material misrepresentation occurs when there is

a substantial likelihood that the misstatement may have led

a stockholder, to tender his stock; whereas in the absence of

the "aaa he would not have tendered. (Citing

cases. ,9”

Ronson, supra 483 F.2d at 848 quoting the opinion of this Court;

see also Sonesta International Hotels Corp. v. Wellington Asso-

ciates, 483 F.2d 247, 25lesp n. 3 (2d Cir. 1973).

UVES SOLO DBA LOMO’ IAT OT ee Le wer Ey yeas,

OO IOD IEP ES LITE VOLT OCLC LS NEL II EE I

59

gation to the defendants. There the Court of Appeals

merely indicated that the target compary need not, in

its communications to its stockholders, point out specific

faults in the disclosures of the offeror. Sonesta, supra at

254-255. Under Section 14(e) the plaintiff target company,

Ronson, has the burden at trial of establishing that any

alleged omissions or misrepresentations in the offer are

material and that any of the tendering stockholders would

probably not have tendered their shares if the alleged

violations had not occurred. Gulf & Western, supra at 696.

On the other hand, the offeror clearly has the right

to amend its offer to cure any defects," and then rely

upon those amendments to satisfy the requirements of

Section 14(e). Ronson, supra, 483 F.2d at 850, 852; Nichol-

son File Company, supra, 341 F.Supp. at 521. In this

action defendants have amended their offer on several

occasions. They now assert that the previous deficiencies

in the offer have been corrected by the Restatement so

that the injunction against them may be removed.

I

The most important of plaintiff's allegations is that

the defendants have failed to disclose adequately or mate-

rially misrepresented the methods used to fund and the

persons behind the tender offer.

The Restatement describes how the twenty million dollars

for the purchase of Ronson common stock was advanced

to the account of the offeror, Liquifin. Restatement, para-

™ Under Section 13(d) of the Securities Exchange Act of 1934,

15 U.S.C. See. 78 m (d), it has been suggested that the offeror has

a “continuing obligation” to remedy any errors. G.A.F. Corpora-

tion v. Milstein, 453 F.2d 799, 720-721 (3a Cir. 1971), cert. denied,

406 U.S. 910 (1972).

FOS FE MOORS OR hy PR pm re TOS EOE ETS ET OP Foe B- Be ELE IRI RLOVIIO OL E EPG OF

—

60

graph 7(d) at 14-16. Briefly, at the direction of Liquigas,

Liquimportex Aktiengesellschaft (“Liquimportex”) another

wholly-owned subsidiary of Liquigas, sold a forty-nine per-

cent interest in Liquipar S.A. (“Liquipar”), a subsidiary

holding company for the Brazilian operations of Liquigas.’*

This minority interest in Liquipar was sold for cash to

Capitalfin International Limited (“Capitalfin”), a Ba-

hamian company, in May, 1973. The funds on deposit

in defendant Franklin National Bank were acquired in

this sale. The Restatement also describes the Liquigas-

Liquipar Brazilian operations, and even explains that their

capitalization came from Turner Anstalt, a Liechtenstein

trust created by Holding Gaslig S.A., a wholly-owned Swiss

subsidiary of Liquigas. Testimony at trial, extensive .dep-

ositions and production of documents demonstrate that

the funds for this tender offer were in fact provided

through the Liquimportex to Capitalfin sale of Liquipar

stock.**

The only indication that perhaps the funds for the tender

offer were raised by another method is the theory that

these funds are related to or commingled with a fifty

million dollar unsecured loan by several major interna-

tional banks to Liquigas Jersey (Holding) Limited, a

wholly-owned Liquigas subsidiary. This loan for additional

capital for Liquigas’ South American operations was final-

ized in August, 1973. Defendant Marfuggi admitted in

his deposition on October 1, 1973 that negotiations for

this loan had commenced prior to the tender offer. Plain-

12 At page 10 of the Restatement, Liquipar has been identified

incorrectly as a Liechtenstein corporation. Apparently Liquipar

is a Brazilian company, and should be properly identified in the

tender offer.

18 See, e.g., Transcript of hearing on January 3, 1973 at 235-240

(Defendanis’ summary of the record relating to this transaction).

reek Ror heen

61

tiff speculates that perhaps the funds on deposit did not

originate from an arm’s length sale with Capitalfin, but

by a sale dependent upon the concurrent financing arrange-

ments of the loan, especially since Capitalfin participated

in both the loan and the sale of Liquipar stock.

The record, however, does not support this theory. The

loan occurred well after Capitalfin purchased the interest

in Liquapar and after the twenty million dollars to pay

for the tendered shares were deposited in defendant Frank-

lin National Bank. The depositions of Ursini, Marfuggi

and Bianchi, as well as the documents produced,” all

indicate that this loan was completely unrelated to the

sale of Liquipar stock to Capitalfin.

Because this loan is not related to the source of funds

for the tender offer, Section 14(e) is not violated if the

defendants omit a description of this transaction in the

offer. It is unnecessary to discuss in the offer an unrelated,

ordinary business transaction between the offeror’s parent,

a large international company, and one of its subsidiaries.

While plaintiff may have raised several “fascinating”

business questions about the transactions which generated

the funds to pay for Ronson shares, it has failed to prove

that the Restatement misrepresents or omits material facts

concerning these transactions. The business considerations

which motivated the defendants to raise the funds for the

offer in this particular manner may be matters for specula-

tion and theory, but there is not sufficient evidence on the

record to conclude that these transactions took place other

* The parties, except for the defendants Franklin National Bank

and Franklin New York Corporation, entered into a stipulation

(hereinafter referred to as “Stipulation of Record”) to inelude

certain items in the record for the hearing on a permanent in-

junction.

LORRY Ue crease egg aa “: AL ER ADELE TOE ULI IEE a EIA BORE ange:

BEDI AE ES AY REE, — AE Sane B: RE:

POP OLIN IT sali en ee

62

than as described in the Restatement.’* Having failed to

meet its burden of proof, plaintiff is not entitled to perma-

nent injunctive relief on its claims relating to the source

of funds issue.

Because the offeror, Liquifin, is a wholly-owned sub-

sidiary of Liquigas, it is important under the Williams Act

for the Ronson stockholu: rs to know who controls Liquigas,

a large Italian company with two hundred fifty million out-

standing shares of fully voting stock.” The Restatement

identifies defendant Raffaele Ursini, the managing director

of Liquigas and a member of its board of directors, as “the

person in control of Liquigas”. Restatement at 11. Plaintiff

contends that Ursini is not in control, or alternatively, that

the description of his control in the Restatement is mis-

leading.

The record in this case inevitably leads to the conclusion

that only defendant Ursini controls Liquigas. As the man-

aging director of Liquigas and most of its subsidiaries,

Ursini makes the important business decisions for the

Liquigas group nearly every day. He is the largest Liqui-

1° Defendants contend that transactions such as the Liquipar

minority interest stock sale can be explained as simply a bargain

struck between a seller and a willing buyer. Transcript of Hearing

on January 3, 1974 at 189-200, esp. 195.

© Liquigas has issued fifty million shares of preferred stock with

voting rights limited to extraordinary stockholders’ meetings. These

details are explained in the Restatement, paragraph 7(a) at page

10, note 5. Because of the limited voting rights, ownership of these

preferred shares couid hardly provide an effective means to control

Liquigas. The owners of more than five percent of these shares

appear to be Montecatini Edison (18.95%), Credito Italiano

(8.50%) and Banca C. Steinhauslin (7.74%). Liquigas has also

issued debentures which are convertible into preferred shares after

1979. Marfuggi Deposition June 12, 1973 at 183; Marfuggi Deposi-

tion October 1, 1973 at 35; Item 8, Doc. No. 2 on page 11 of the

Stipulation of Record. There is no need to discuss these debentures

in the Restatement.

63

gas stockholder with control over ninety million shares of

common stock or thirty-six percent of the outstanding com-

mon shares of Liquigas. The Restatement fully discloses

that these shares are recorded as owned by Servizio Italia

del Banea Nazionale del Lavoro (“Servizio Italia”), an

Italian fiduciary company which holds these shares for the

benefit of Ursini in a capacity similar to an American bro-

kerage firm holding stock in a “street name account”.”

Servizio Italia is a subsidiary of Banca Nazionale del La-

voro, Italy’s largest bank.

_ The written agreement of March 21, 1973 between Ser-

vizio Italia and Ursini as well as the certificate of Servizio

Italia corroborate the disclosures in the Restatement.*

These documents establish the fiduciary relationship

whereby Servizio is to hold the shares for Ursini, vote them

according to his instructions and have them registered in

his name whenever he so directs. The record also estab-

** Defendant Ursini’s ninety million shares were represented by

4,866 separate certificates in May, 1973. Apparently inquiries were

made whether a smaller number of certificates could replace the

4,866 certificates. Unverified answers to interrogatories of Liquigas,

Item 6 on page 24 of the Stipulation of Record filed on January 2,

1974. The verified answers to these interrogatories of Luigi Finazzi

were submitted during the course of the hearing. Sce also Doeu-

ments produced by Defendants on December 3, 1973, Doe. Nos.

11-16, Item 12 on page 24 of the Stipulation of Record.

The office of edministrative services of Liquigas evidently handled

the request in the ordinary course of business. On June 27, 1973

the old certificates were burned and replaced by thirteen new cer-

tificates. Doe. No. 16, supra and Exhibit DL-1 in Evidence ; Tran-

script of Hearing on January 2, 1974 at 47-48. From these circum-

stances plaintiff contends hypothetically that Ursini is “covering

up” the persons from whom he obtained the shares by destroying

the endorsements which would appear on the old certificates and

thus preventing disclosure of the identity of the person “secretly”

in control of his shares and Liquigas.

** Deposition of Ursini in June 1973, item 13 on page 6 of the

Stipulation of Record, Exhibits M-141 and M-142; Transcript of

Hearing on January 3, 1974 at 225-227 (Defendants’ summary).

CRE EO emer RD fy

64

lishes that these shares are free from any liens” and that

Servizio has in the past and will continue in the future to

vote these shares in accordance with Ursini’s instructions

which he has always given.”

The Restatement also reveals that while Ursini has

agreed to sell fifteen million of these shares to a third party,

he will retain the voting rights to these shares and the right

of first refusal should the purchaser propose to sell them.”

Nevertheless plaintiff urges that “suspicious” facts in the

record “counterindicate” that defendant Ursini does not

control his stock nor Liquigas. Ronson has named several

persons and entities that it claims could be in control of

Liquigas.* Plaintiff also claims that because Ursini has

not affirmatively proved how he paid for each of his ninety

million Liquigas shares, the money to obtain this stock

must have come from a “secret” person who continues to

dominate Ursini and Liquigas.”*

However, the record as a whole has not established Ron-

son’s suspicions and theories as provable facts. The pre-

ponderance of the evidence clearly demonstrates that defen-

dant Ursini controls Liquigas. In fact, this tender offer, a

very important business transaction to any corporation

** Deposition of Ursini in June, 1973, item 13 on page 6 of the

Stipulation of Record, Exhibit M-142. The parties dispute the

translation of the Italian terms into English as “freely withdraw-

able deposit” or “free from any lien”. Deposition of Ursini in

November 1973, item 17 on page 6 of the Stipulation of Record,

at 445-451.

*° Transcript of Hearing on January 3, 1974 at 224-225 (Defen-

dants’ summary).

* Restatement at 11. The identity of the purchaser has been

revealed to the Court in camera by the affidavit of defendant Ursini

dated November 5, 1973.

* Transcript of Hearing of January 3, 1974 at 173-174.

28 Id. at 178-179.

DE NL PORES bt S- PPE LOGS ILS OLR OSHS Bp Net 4 SATE ANI Oe Ae ey eR ces te SST OT, ps

65

such as Liquigas, has been dominated in every crucial

aspect by Ursini. Even Ronson’s counsel has admitted

that there is “no doubt” that Ursini “is the key man” in this

tender offer and that the other witnesses consider him as

“the guy who knows” about most of the key issues.” It

may be interesting that Ursini has risen from a salaried

employee of Liquigas to its chief executive and largest

stockholder. In view of his role in this offer and other sig-

nificant transactions of Liquigas, it is not that important

how he attained this control position but only whether he

does in fact control Liquigas as the offer states.** Even if

some “secret” person aided him in obtaining ninety million

shares of Liquigas, the evidence shows that Ursini now

controls these shares and Liquigas.

Other entities were mentioned during the proceedings

for preliminary injunctive relief as possible control persons

of Liquigas. One such company is Montecatini Edison

S.p.A. (“Montedison”), which owns twenty-two percent of

Liquigas’ common stock. Owning less shares than Ursini,

it would he difficult for Montedison to control Liquigas. The

record indicates that Montedison has not attempted to influ-

ence the operations of Liquigas nor has it attempted to

seek any representation on the Liquigas Board of Direc-

tors.” The Restatement explains these facts as well as

the ownership of Montedison’s stock. Restatement at 12.

** Transcript of Motion of November 21, 1973 at 15-16. Defen-

dant Ursini has been deposed on two separate occasions for a total

of six days. Id., at 17; Items 13 and 17 on page 6 of the Stipulation

of Record.

* Deposition of La Russa and Bianchi of November 14, 1973,

Items 15 and 16 on page 6 of the Stipulation of Record, at 300-301.

** Deposition of Marfuggi on June 12, 1973, Item 7 on page 6

of the Stipulation of Record, at 173-174; Deposition of Ursini on

November 16, 1973, Item 17 on page 6 of the Stipulation of Record,

at 571.

SBR EBS SRG NALL ILL DEE BO A ANA IO OP Ra IE ag,

\

66

While approximately eighty percent of Montedison’s stock

is owned by private enterprises and the general public,

Ente Nazionale Idrocarburi (“ENI”) and Istituto per la

Recostruzione (“IRI”), both Italian governmental authori-

ties, own approximately fifteen and five percent respec-

tively. This ownership is acknowledged. Restatement at

12.

The Restatement also reveals that the Italian Govern-

ment controls ENI, IRI and Banca Nazionale del Lavoro,

the owner of eighty percent of Servizio Italia, the fiduciary

holder of Ursini’s Liquigas shares. Neither ENI, IRI nor

the Italian Government owns any Liquigas stock. Restate-

ment at 12. The Restatement explains that ENI, Monte-

dison and Banca Nazionale del Lavoro are three of four

groups owning Capitalfin, the purchaser of the Liquipar

stock from which the funds for the tender offer originated.

The Restatement declares that Capitalfin does not own any

Liquigas stock, nor does Liquigas own any Capitalfin stock.

These intricate relationships have been fully revealed

to the Ronson stockholders. The record does not provide

any factual basis from which to conclude that any of these

entities control Liquigas. Thus, the Restatement does not

violate Section 14(e) with respect to these disclosures.

Another claim of Ronson is that Societa General Immo-

biliare \(“Immobiliare”) could be in control of Liquigas

because Liquigas has guaranteed payment of nearly sixty

million dollars of Manifattura Cermamica Pozzi S.p.A

(“Pozzi”) debts to Immobiliare. The theory of this claim

is that Pozzi will not be able to meet these obligations and

when Liquigas is called upon and unable to perform its

guaranties, Immobiliare will become the largest creditor

of Liquigas and in a position to control it.

The Williams Act requires only that the person in con-

trol of the offeror at the time of the offer be identified.

67

During the preliminary stages of this suit, it was necessary

for further inquiry into the Pozzi transactions because if,

as a result of these substantial guarantees, Immobiliare

would be able in the near future to control Liquigas, that

would be a material fact to a stockholder deciding whether

to tender his Ronson shares to a wholly owned subsidiary

of Liquigas.”

The defendants have described the basic facts concerning

the guarantee of Pozzi debts to Immobiliare. These guar-

antees are related to Liquigas’ purchase of Pozzi’s petro-

chemical business. Restatement at 12. The record supports

the description in the Restatement of these transactions.”

Ronson argues that certain “interesting unanswered

questions” about the Pozzi transactions justify permanent

injunctive relief. Yet after trial these theoretical questions

remain speculative and unproven. At first plaintiff seemed

to complain that Liquigas had “mortgaged away” its future

by’guaranteeing such large debts of a company like Pozzi,

and then plaintiff attacked the transactions as too “good”

for Liquigas when certain stockholders suits were filed in

Italy.

After a review of the evidence this Court concludes that

the disclosures concerning the Liquigas-Pozzi transactions

do not violate Section i4(e). The important facts are re-

vealed, and the Ronson stockholders have been alerted that

perhaps at some point in the future Immobiliare may influ-

ence or even control Liquigas if these debts of Pozzi can

not be guaranteed by Liquigas.”’

** Ronson Corp. v. Liquifin Aktiengesellschaft, Civ. No. 785-73,

at 17-18 (D.N.J. July 3, 1973) (Findings of Fact and Conclusions

of Law).

* See,eg., Transcript of Hearing on January 3, 1974 at 228-235

(Defendants’ summary).

* Also disclosed is the fact that payments for Liquigas’ obliga-

tions are not due for three years. They are payable over an addi-

tional seven year period. Restatement at 13.

RR Ee OAT REIETIE SS EO SE EIEGE OGL LIOLN LS OLS LT SCS ES IE STITT I SPs ROO AS Senay aS TB yg

68

Finally, Ronson also asserts that defendant Michele Sin-

dona controls Liquigas because he is the “secret” beneficial

owner of Ursini’s Liquigas shares. Sindona became in-

volved in this tender offer as a personal and business friend

of Ursini. Ursini consulted with Sindona for guidance in

making the tender offer in this country. Sindona intro-

duced Ursini to counsel and investment bankers as well as

providing his offices for meetings concerning the offer. All

of these dealings are candidly revealed to the Ronson stock-

holders. Restatement at 13.

Sindona is also involved in this tender offer through his

various business interests. He owns approximately one

third of the stock of Immobiliare through his wholly-owned

subsidiary, Fasco. Through Fasco he owns 21.6% of the

stock of defendant Franklin New York Corporation which

wholly owns defendant Franklin National Bank, the de-

pository bank for the fuads in this tender offer. Sindona

claims that he has no direct or indirect stock interest in,

nor is he a director or officer of, Liquigas. Sindona will not

receive any compensation from Liquigas for his assistance

in the offer. All of this information is provided to Ronson

stockholders. Restatement at 13-14.

Ronson’s claims against Sindona do not rely upon the

factual proofs in the record, but instead, depend upon hypo-

thetical inferences allegedly so convincing in logic that they

overwhelm the evidence which clearly shows that Ursini

controls Liquigas.”” Ronson relies upon Ursini’s exercise

* Apparently Ronson is claiming elsewhere that one Vincenzo

Cozzaniea instead of Sindona “secretly” controls Liquigas. Ronson

v. Ligusfin Aktiengesellschaft, 73 Civ. 4026 (S.D.N.Y.), Exhibit

DL-3 in Evidence; Transcript of Hearing on January 3, 1974 at

181-183, 210. It should also be noted that two other exhibits were

admitted into evidence over plaintiff’s ovjection. Transcript of

Hearing on January 3, 1974 at 211-212. Since these exhibits have

not been properly authenticated they have not been relied upon in

any way by the Court.

POLIS AMT LS IO RETO OR IR ST gat me POSTE RP LER OO A I WTR OC ee Segue Bese ELEN POL eR RICA Boman mene emt =

69

of a “call” in early 1973 over part of one hundred twenty-

five million Liquigas shares which were held beneficially by

an Italian entity known as Coil Finanzieria. By exercising

this “call”, Ursini obtained his ninety million shares of

Liquigas stock. Ronson suggests that Coil Financiere, the

alleged Swiss parent of Coil Finanzieria, was indirectly

controlled by Sindona through his interest in an entity de-

scribed only as “Finabank”. Ronson then concludes that

Sindouwa must be the “secret” person in control of Liquigas

since he supplied Ursini with the funds for Ursini’s exercise

of the “call”.

The record does not support Ronson’s theories. First,

Sindona has sworn by affidavit that he never had any inter-

est, direct or indirect, in Coil Financiere, and more impor-

tantly, that he never had any interest, direct or indirect, in

any of the ninety million shares registered in the name of

Servizio Italia nor any other shares of Liquigas. Sindona

also denies that he provided Ursini with the funds to buy

Liquigas shares.” Second, it would not be logical or pru-

dent for a person such as Sindona to part with thirty-two

million dollars for control of Liquigas shares through a

“front” man such as Ursini without a written agreement

and/or a proper recording of his interest or lien on the

stock ledger and certificates.” Indeed plaintiff’s own expert

31 Sindona’s affidavit of December 12, 1973, Item 40 on page 5 of

the Stipulation of Record. Ronson probably could have examined

Sindona about the Coil entities when deposing him in June, 1973

because a few days later, when deposing Ursini, counsel for Ronson

inquired about Coil Financiere, a Swiss company. Deposition of

Ursini, June 22, 1973, Item 13 on page 6 of the Stipulation of

Record at 96-106; see also, Transcript of Hearing on January 3,

1974 at 222-224 (Defendants’ summary).

2 Discovery has not produced any writing which suggests Sin-

dona has agreed that Ursini shall act as his “front” man in con-

trolling Liquigas. The stock certificates of Ursini and the stock

_ wrote

70

conceded that he would not advise a client of his to rely

upon only an oral understanding to protect such a valuable

interest in the stock against third parties.” Finally, if Sin-

dona were the “secret” person in control, it would be illogi-

cal that he take part in the offer by introducing counsel and

conducting meetings in his offices. Such actions could

hardly be effective to protect any alleged “secret” control

of Liquigas.

Having reviewed all the evidence and the Restatement,

the plaiatiff has failed to establish that Sindona is a control

person of Liquigas. The evidence supports the conclusion

that Ursini, not Sindona, contro!s Liquigas. Ronson’s hy-

potheses do not logically suggest that Sindona is in control

and certainly do not overcome the evidence supporting

Ursini’s claim of control. Accordingly, it is the opinion of

this Court that plaintiff has failed to establish a violation

of Section 14(e) with respect to its allegations that Sindona

or any persons or entities other than Ursini control Liqui-

gas.

It

An important claim by Ronson is that the defendants

have failed to disclose adequately or have misrepresented

the foreign law or legal controls which may apply to the

defendants in the event the tender offer is successfully con-

summated. The law applicable to such a claim is found in

Judge Pierce’s excellent opinion in General Host Corpora-

ledger of Liquigas do not reveal any lien or interest in Ursini’s

shares. See note 17, infra. Plaintiff's expert has had several oppor-

tunities to inspect the Liquigas stock ledgers since he purchased

shares of Liquigas ir the summer of 1973. Transcript of Hearing

on January 2, 1974 at 34-36.

* Transcript of Hearing on January 2, 1974 at 145-152, esp.

146, 151.

PPD OLE GL LE LOLOL ALP ELA” Ry ee 0 -_ PLIES LLOEGR LIES OTD TSO TOR OU eS ee tt SDP PORE OE oS

71

tion v. Triumph American, Inc., 359 F.Supp. 749, 758 (S.D.

N.Y. 1973) where the court stated that foreign legal controls

... particularly when they differ in extent and kind

from controls the U.S. investor has come to expect

from the U.S. Government in relation to domestic cor-

porations, are matters which should be ealled to the

attention of shareholders in a tender offer.

In this case the defendants have disclosed the foreign law

problems. Restatement at 17-18. The Restatement de-

scribes each contested point of foreign law and the opinions

of counsel for the defendants and counsel for Ronson. The

parties have attempted to persuade this Court of the merit

of their respective opinions on the application of Italian

and Swiss law by a “battle of legal experts”.

It should be obvious that this Court need not decide

points of italian or Swiss law; but only whether these for-

eign legal questions have been fully and fairly called to the

attention of the Ronson stockholders. After reviewing the

Restatement and the evidence, it is the opinion of this Court

that the defendants have complied with the Williams Act

with respect to these questions of foreign law.

For example, Ronson contends that the defendants, under .

Italian corporate law, may not invest in Liquifin and Ron-

son without prior approval from the Italian Ministry of

Foreign Trade. Restatement at 17. The Restatement

cleurly describes that in the opinion of Ronson’s counsel,

such approvals “would be difficult to obtain”. The Restate-

ment then explains that the opinion of Liquigas’ counsel is

to the contrary. In their view, such prior approvals are

unnecessary because “these investments were from sources

outside of Italy” and only apply to Italian residents.

Another contention of Ronson is that the effect of a

United States withholding tax together with an Italian in-

PLETE GOERS LY PLAGE 6 PLM, LEGS EE LOOT AE NEGRI EOI EOER EES. | VE FLL OIE LOL AOS I SITY

72

come tax would cause the defendants to hold Ronson divi-

dends “to a minimum” in order to minimize taxes. In the

Restatement, the defendants admit that no consideration

has been given to any change in Ronson’s dividend policy,

but that if they are “in a position to control such policy

... all appropriate factors” will be considered, including

the fiduciary obligations to minority stockholders of Ron-

son. Restatement at 18.

In the next paragraph, the dispute over the effect of

Italian and ‘Swiss tax law on the sale by Liquimportex of

the forty-nine percent interest in Liquipar to Capitalfin is

discussed. Again the Restatement points out that Ronson’s

counsel believes that substantial foreign taxes must be im-

~ posed on this trausaction while Liquigas’ counsel believes

that these taxes do not apply. However, the Restatement

clearly states that “any taxes which may be found to be due

and owing will be paid.” Restatement at 18. Presumably,

although it is not so stated, this declaration about this par-

ticular tax problem could apply to the other tax matters as

well, ,

In view of these full reveletions of the legal opinions of

counsel for both sides and the factual bases for these opin-

ions on disputed points of foreign law, it cannot be said

that the Ronson stockholders have been denied informa-

tion required by the Williams Act. Also, the Restatement

‘discloses, as best it can at this time, the offeror’s intentions

to deal with these legal problems should the tender offer be

consummated. Therefore, the Court concludes that the de-

fedants have not violated Section 14(e) in the Restatement

with respect to applicabie fureign legal controls.”

** Plaintiff has also raised the spectre of certain Italian stock-

holder suits in the Italian courts. These foreign suits which, at

this time, apparently have not proceeded beyond filing of com-

73

IV

Another claim of Ronson is that the defendants have

failed to disclose adequately the substantial questions of

federal administrative law which apply to this tender offer.

In the preliminary stages of this litigation, the tender offer

misleadingly treated the problems arising under the Fed-

eral Aviation Act and the Federal Communications Act as

if they were probably subject to resolution without divesti-

ture of Ronson’s heliocopter and defense subsidiaries. Ron-

son, supra, 483 F.2d at 850. When reviewing this claim, the

Court of Appeals stated:

... we agree with defendanis that clearances from the

several administrative agencies involved need not be

secured prior to a final tender offer .. . 483 F.2d 850-

851.

Plaintiff now argues that when the Court of Appeals

used the term “tender offer” it meant only that a final

solicitation of shares could occur prior to the completion

of the administrative proceedings. Plaintiff argues that

the Court of Appeals did not authorize consummation of

the offer before final resolution of the administrative legal

questions. Plaintiff’s view is supported by the suggestion

in that opinion that courts should be careful to avoid con-

summation of a tender offer if it would become difficult to

“unscramble” the corporate “eggs”.

Although the opinion of the Court of App<als could pos-

sible be construed as plaintiff suggests, this Court does not

plaints, seem remote and insignificant to the materia! facts of this

tender offer and need not be discussed in the offer. in fact, defen-

danis uffercd come evidence to show that several of these suits have

already been withdrawn. Transcript of Uearing on January 3,

1974 at 152-157, 201.

ie

74

interpret the term “tender offer” so narrowly. In the very

next paragraph, the Court of Appeals applied the language

of Sonesta, supra to this case by stating

“preliminary relief does not, in assuring that the offer

will be lawfully made, sacrifice the legitimate desires

of shareholders to accept the offer. If the offeror is

subsequently vindicated after a trial on the merits, the

offer may be renewed. Thus, in the normal situation,

when it appears likely that the offer may contain ma-

terially misleading statements or omissions as made,

the interest of the shareholders and of the public in

full disclosure of relevant circumstances renders pre-

liminary injunctive relief an appropriate method of

remedying the deficiencies in disclosure before the

offer is consummated.” (Emphasis supplied.) 483 F.

2d at 851.

When these two paragraphs arg read together, it seems

fairly evident that the Court of Appeals did not intend for

this Court to await the final administrative decisions be-

fore determining whether to continue or remove the re-

straints on this offer. If the offeror is vindicated after a

trial on the merits or the deficiencies in the offer are cor-

rected,* the tender offer may proceed to consummation

provided that removal of a preliminary injunction in a

particular case would further the Congressional purposes

of the V/illiams Act.**

at 6-7.

*° Corenco Corp. v. Schiavone & Sons, Inc., —— F.2d ——, CCH

Fed. See. 1..Rep. Paragraph 94,196 at 94,840, 94,844, (2d Cir.

October 26, 1973) suggests in dicta that even if the deficiencies in

the tender offer are corrected, permanent injunctive relief may

still be an appropriate remedy to insure future compliance with

the Williams Act. Such a drastic remedy should be utilized only

aceeeeetionte

*° Sonesta, supra at 255. Ronson, Opinion of August 15, 1973

te

LR REY APSE BOIL LEG ELLEN OCC a BNE Hee ee FOLE EERE OLITI SLES THE BSP eNOS N i Same eb NGC a seem _e

75

In this case the federai administrative legal problems are

discussed. Restatement at 3. The Restatement fully sets

forth the facts and intentions of the offeror concerning its

proposal to comply with the Federal Aviation Act by means

of a trust agreement with the First National Bank of

Washington, D.C. as the trustee. The Restatement dis-

closes the status of the proceedings before the CAB regard-

ing Ronson Heiiccopters, Inc. and the total sales and net

losses of this subsidiary from the final quarter of 1965

through the first five months of 1973. The Restatement

also declares that the outcome of the administrative bodies

are not predictable, and that if the trust arrangement is

not approved, certain Ronson subsidiaries may be disposed

of at the “best terms available”. Restatement at 5 n.1, 6 n.2,

A

Similarly, the Restatement informs the stockholders of

the potential effects on Ronson if the FCC does not grant

the approvals needed to continue operation of the various

Ronson radios. Restatement at 8.

The Restatement candidly discusses facility security

clearances which are necessary to the Ronson hydraulics

subsidiaries in their business with the United States De-

partment of Defense. Also provided is the sales and pre-

tax income of the hydraulics subsidiaries as indicated by

the Court of Appeals. ltouson, supra, 483 F.2d at 851;

Restatement at 10. The offeror warns that if the necessary

facility security clearances cannot be obtained from the

Defense De~2rtment, the defense business “would have to

be termine ‘or the Hydraulics Subsidiaries might have to

be sold”.

where the offeror willfully attempted to withhold information

from the target company’s stockholders. However, the district

court has the equitable power to expressly limit the duration of a

permanent injunction until the defendant offerors make full dis-

closures. Jd., at 94, 845.

76

After a full review of all the evidence and the Restate-

ment, the disclosures concerning the federal administrative

legal problems do not violate Section 14(e). The intentions

of the offeror and the facts behind those intentions have

been revealed. Of course the defendants have a “continuing

obligation” to insure that the Ronson stockholders are

aware of the important administrative developments, if

any, since September, 1973.

V

Certain other defendants also seek relief. Defendants

Franklin New York Corporation and Franklin National

Bank move to dismiss the complaint for failure to state

a claim upon which relief can be granted and to dismiss

the complaint on the merits. Previously these defendants

moved to dismiss the action for lack of venue under the

National Bank Act, 12 U.S.C. Section 94. That motion as

well as the motion at the preliminary stage to dismiss the

complaint for failure to state a cause of action was denied

by this Court and affirmed by the Court of Appeals. Ron-

son Corporation v. Liquifin Aktiengesellschaft, 483 F.2d

852, 855 (3d Cir. 1973).

These defendants raise compelling arguments in their

brief for dismissal based upon deficiencies in the pleadings.

However, having examined the proofs in support of plain-

tiff’s claims for permanent injunctive relief, there is no

evidence of any wrongdoing by either Franklin New York

Corporation or Franklin National Bank that would justify

permanent injunctive relief against them.” Franklin Na-

tional Bank has acted merely as a depository for the funds

to pay for the tendered Ronson shares. As for the interest

" Sce Transcript of Hearing on January 3%, 1974 at 218.

Se ek oe

77

of defendant Sindona in these defendants, even if Sindona

were subject to permanent injunctive relief, plaintiff has

not demonstrated that either of these defendants should be

enjoined solely because Sindona is a shareholder indirectly

in Franklin New York Corporation. There is no evidence

that these defendants have conspired with Sindona for any

unlawful purpose. Consequently, there are no grounds for

permanent injunctive reliet against defendants Franklin ©

National Bank and Franklin New York Corporation.

These defendants also move that plaintiff’s claims for

damages be dismissed at this time. As previously indi-

cated, the Court at this stage is only concerned with the

claims for injunctive relief and not with any claims for

damages.* Accordingly, the motion of these defendants to

dismiss the claims for damages will be denied without prej-

udice to renew at a later stage of these proceedings.

The evidence also fails to justify any further injunctive

relief against defendants D. F. King & Company, Servizio

Italia, Kuhn, Loeb & Company ;* and Philip Marfuggi.

The evidence in this case demonstrates that plaintiff

Ronson Corporation has failed to prove that it is entitled

to permanent injunctive relief under Section i4(e). The

preponderance of the evidence shows that the Restatement

of the tender offer fully informs the Ronson stockholders of

the material facts without omission or misrepresentation.

- The Restatement adequately discloses the persons behind

and the methods used to fund the offer, the effect of foreign

laws on the offer, and the federal administrative legal prob-

lems involved in the offer. Consequently, not only should

plaintiff’s prayer for permanent injunctive relief be denied,

%* See note 7 infra.

** For a discussion of an underwriter’s liability in tender offers

see Chris-Craft, supra at 370, 403.

_—

BP aver Tye eras

78

but the preliminary restraints now in effect against the

offer should be dissolved.

Of course when these restraints are removed by order of

this Court, the defendants must show that they have cor-

rected the minor discrepancies in the Restatement as it is

now written. The passages referring to these Court pro-

ceedings and the administrative proceedings must be re-

vised to reflect the significant developments since Septem-

ber, 1973. The figures relating to the amount of shares to

be purchased and the price per share must be adjusted

throughout the Restatement in accordance with amendment

to the 13D Schedule filed with the SEC. The proper identi-

fication of the Liquipar Company must be included as well

as the correction of footnote 8 of the Restatement which

improperly refers to “preferred” shares of Pozzi.

Accordingly, plaintiff’s application for permanent in-

junctive relief must be denied, and defendants’ motion to

vacate the preliminary injunction must be granted. Coun-

sel, with notice, shall submit an order immediately.

The foregoing opiaion shall constitute this Court’s find-

ings of fact and conclusions of law under F.R.Civ.P. 52(a).

Dated: January 11, 1974.

79

Appendix E

Opinion, United States Court of Appeals, for the

Third Circuit, Filed April 19, 1974

UNITED STATES COURT OF APPEALS

For tHe Tuirp Circuit

No. 74-1085

Ronson Corporation,

Appellant,

v.

Liquirin AKTIL. ceEsELiscuart, Livvicas §.p.A., Kuan, Lore

& Co., D. F. Kine & Co., Isc., Frankuix Nationat Bayk,

Frankuix New York Corporation, Servizio ITALIA OF

Banca NazionaLe Dev Lavoro, Puitip Marrucei, Rar-

FAELE Ursini and MicHELE Sinvona,

Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW JERSEY

(D.C. Civil No. 785-73)

Argued April 3, 1974

Before:

Katopner, Van Dusen and Wes,

Circuit Judges.

Of Counsel:

Robert S. Rifkind and

Paul C. Saunders

One Chase Manhattan

Plaza

New York, New York

10005

Of Counsel:

Milton Kunen

Mark C. Zauderer, of

Kaye, Scholer, Fierman,

Hays & Handler

425 Park Avenue

New York, New York

80

Raymond Falls, Esquire

Cahill, Gordon & Reindel

80 Pine Street

New York, New York 10005

McCarter & English

550 Broad Street

Newark, New Jersey

Attorneys for Appellant

Donald J. Zoeller, Esquire

Mudge, Rose, Guthrie &

Alexander

20 Broad Street

New York, New York 10005

Carpenter, Bennett &

Morrissey

744 Broad Street

Newark, New Jersey 07102

Stryker, Tams & Dill

33 Washington Street

Newark, New Jersey 07102

Cravath Swaine & Moore

One Chase Manhattan Plaza

New York, New York 10005

Hannoch, Weisman, Stern &

Besser

744 Broad Street

Newark, New Jersey

~

Attorneys for Appellees

wt dhe ms me 8s

i cial er ee

81

OPINION oF THE CouRT

(Filed April 19, 1974)

Per Curiam:

After careful review of this case, we conclude that the

judgment of the district court should be affirmed. In so

doing we wish to emphasize the limited nature of the roles

that the district court and this court are called upon to

pursue in a matter of this nature.

Briefly stated, the plaintiff has contended that the de-

fendants have failed to make adequate disclosure of certain

factual data as required by the terms of the Williams Act,

15 U.S.C. §78m, n. After a number of amendments to the

tender offer were made during the course of the proceed-

ings in the district court, the trial judge concluded that the

defendants had adequately met the objections asserted by

the plaintiff.

The law requires disclosure of certain basic facts to the

shareholders to enable them to make an informed decision

to sell or hold their stock. Obviously, that choice is a matter

of individual judgment. In no way should our action be

taken as approval or disapproval of the tender offer, or of

the wisdom of acceptance or rejection by the shareholders.

Such functions are not entrusted to the coarts.

We recognize that in a case of this nature involving as it

does the extremely complex relationships between numerous

foreign corporations and individuals, there may be prac-

tical problems connected with the production of important

information. Generally the burden of proof is on the plain-

tiff. However, in some circumstances the burden of going

forward with the evidence may shift so as to make it neces-

sary that the principal controlling individual of a foreign

entity making the tender offer should be called to testify in

person before the trial court. Similarly, broad discovery

must be granted in this type of case to compensate for the

lack of available data subject to the subpoena powers of the

court. Our review of the district court’s rulings in meeting

those situations here does not disclose error.

The judgment of the district court will be affirmed.’ The

mandate or certified judgment in lieu of mandate shall issue

forthwith.

* The moticn by appellees for enforcement of the February 15,

1974 Order of this Court and the motion appellant to supple-

ment the record filed March 15, 1974 and related papers later filed

are denied as moot, in view of the agreement of counsel, stated

during oral argument, that the dispute underlying such motions

would be resolved by counsel.

Appendix F

Order Sur Petition for Rehearing, United States

Court of Appeals for the Third Circuit,

Filed May 7, 1974

UNITED STATES COURT OF APPEALS

For tHe Tuirp Circuir

No. 74-1085

—

Ronson Corporation,

Appellant,

v.

Liquirin AKTIENGESELLSCHAFT, Liquicas, S.p.A., Kunn, Logs

& Co., D. F. Kixe & Co., Ixc., Fraxxurx Nationa Bank,

FRanKLIN New York Corporation, Servizio ITauia or

Banca NazionaLe Dev Lavoro, Purmip Marrvueai, Rar-

FAELE Ursini and Micur.e Srxpona,

Appellees.

—$—>—__

Sur Petition ror ReHearmnc

Present: Serrz, Chief Judge, Kavopyer, Vax Duvusex,

Avpisert, Apams, Gippons, Rosenn, Hunter and

Wels, Circuit Judges.

The petition for rehearing filed by Appellant in che

above entitled case having been submitted to the judges

84

who participated in the decision of this court and to all

the other available circuit judges of the cirenit in regular

active service, and no judge who concurred in the decision

having asked for rehearing, and a majority of the circuit

judges of the circuit in regular active service not having

voted for rehearing by the court in bane, the petition for

rehearing is denied.

By the Court,

(Signature illegible)

Judge

Dated: May 7, 1974

PEO CES EEO Rw a BET va me war

—~ ew SOO re een mong rite epi nat

85

Appendix G

The Williams Act, 15 U.S.C. §78m(d) and (e);

78n(d), (e) and (f) (1970)

SECURITIES—CORPORATE EQUITY

OWNERSHIP—DISCLOSURE

Pustic Law 90-439; 82 Srar. 454

[S. 510]

An Act providing for full disclosure of corporate

equity ownership of securities under the

Securities Exchange Act of 1934.

Be it eacted by the Senate and House of Representatives

of tie United States of America in Congress assembled,

Ths:

Section 12(i) of the Securities Exchange Act of 1934”

is amended by striking out “sections 12, 13, 14(a), 14(e),

and 16” and inserting in lieu thereof “sections 12, 13, 14(a),

14(c), 14(d), 14(f), and 16”.

See. 2. Section 13 of the Securities Exchange Act of

1934” is amended by adding at the end thereof the following

new subsections:

“(d) (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 12 of

15 US.C.A. § 781(i).

15 US.C.A. § 78m.

86

this title or any equity security issued by a closed-end in-

vestment company registered under the Investment Com-

pany Act of 1940, is directly or indirectly the beneficial

owner or more than 10 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 regis

tered or certified mail, send to each exchange where the

security is traded, and file with the Commission, a state-

ment containing such of the following information, and

such additional information, as the Commission may by

rules and regulations prescribe as necessary or appropri-

ate in the public interest or for the protection of invest-

ors—

“(A) the background and identity of all 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

consideration used or to be used in making the pur-

chases, and if any part of the purchase price or pro-

posed purchase price is represented or is to be repre-

sented by funds or other consideration borrowed or

otherwise ubtained for the purpose of acquiring, hold-

ing, or trading such security, a description of the trans-

action 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 3

(a) (6) of this title, if the person filing such state-

ment so requests, the name of the bank shall not be

made available to the public;

“(C) if the purpose of the purchases or prospective

purchases is to acquire control of the business of the

j

+n = PLE TREN TAH 0s eer terre ae

87

issuer of the securities, any plans or proposals which

such persons may have to liquidate such issuer, to sell

its asset to or merge it with any other persons, or to

make auy other major change in its business or corpo-

rate structure;

“(D) the number of shares of such security which

are beneficially owned, and the number of shares con-

cerning which there is a right to acquire, directly or

indireetly, by (i) such person, and (ii) by each asso-

ciate of such person, giving the name and address of

each such associate; and

“(E) information as to any contracts, arrangements,

or understandings 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 profit, or the giving or withhold-

ing of proxies, naming the persons with whom such con-

tracts, arrangements, or understandings have been

entered intu, and giving the details thereof.

“(2) If any material change occurs in the facts set forth

in the statements to the issuer and the exchunge, and in the

statement filed with the Commission, an amendment shall

he transmitted 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 neces-

sary or appropriate in the public interest or for the protec-

tion of investors.

“(3) When two or more persone act as a partnership,

limited partnership, syndicate, or other group for the pur-

pose of acquiring, holding, or disposing of securities of an

VED EE O08 eK EEE ee

88

issuer, such syndicate or group shall be deemed a ‘person’

for the purposes of this subsection.

“(4) In determining, for puiposes of this subsection, any

percentage of a class of any security, such class shall be

deemed to consist of the amount of the outstanding securi-

ties 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 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 registra-

tion statement under the Securities Act of 1933;

“(B) any acquisition of the beneficial ownership of

a security which, together with all other acquisitions

by the same person of securities of the same class dur-

ing 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, shail 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.

“(e) (1) It shall be unlawful for an issuer which has a

class of equity securities registered pursuant to section 12

of this title, or which is a closed-end investment company

registered under the Investment Company Act of 1940, to

89

purchase any equity security issued by it if such purchase

is in contravention of such rules and regulations as the

Commission, in the public interest or for the protection of

investors, may adopt (A) to define acts and practices which

are fraudulent, deceptive, or manipulative, and (B) to pre-

scribe means reasonably designed to prevent such acts and

practices. Such rules and regulations may require such

issuer to provide holders of equity securities of such class

with such information relating to the reasons for such pur-

chase, the source of funds, the number of shares to be pur-

chased, the price to be paid for such securities, the method

of purchase, and such additional information, as_ the

Commission deems necessary or appropriate in the public

interest or for the protection of investors, or which the

Commission deems to be material to a determination

whether such security should be sold.

“(2) For the purpose of this subsection, a purchase by

or for the issuer or any person controlling, controlled by, or

under common control with the issuer, or a purchase sub-

ject to control of the issuer or any such person, shall be

deemed to be a purchase by the issuer.”

See. 3. Section 14 of the Securities Exchange Act of

1934" is amended by adding at the end thereof the follow-

ing new subsections:

“(d) (1) It shall be unlawful for any person, directly or

indirectly, by use of the mails or by any means or instru-

mentality of interstate commerce or of any facility of a

national securities exchange 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

415 USCA. § 78n.

— eR Ra TL EET POE ROME

90

a Ses

section 12 of this title, or any equity security issued by a

closed-end investment company registered under the In-

vestment Company Act of 1940, if, after consummation

thereof, such person would, directly or indirectly, be the

beneficial owner of more than 10 per centum of such class,

unless at the time copies of the offer or request or invita-

tion are first published or sent or given to security holders

such person has filed with the Commission a statement con-

taining such of the information specified in section 13(d)

of this title, and such additional information as the Com-

mission may by rules and regulations prescribe as neces-

sary or appropriate in the public interest or for the pro-

tection 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 statement and shall contain such of the information

contained in such statement as the Commission may by

rules and regulations prescribe. Copies of any additional

material soliciting or requesting such tender offers subse-

quent to the initial solicitation or request shall contain such

information as the Commission may by rules and regula-

tions prescribe as necessary or appropriate in the public

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 Commis-

sion, 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 partnership, syndicate, or other group for the pur-

pose of acquiring, holding, or disposing of securities of an

er

ERE ODETTE OO OILY

v1

issuer, such syndicate or group shall be deemed a ‘person’

for purposes of this subsection.

“(3) In determining, foi purposes of this subsection, any

percentage of a class of any security, such class shall be

deemed to consist of the amount of the outstanding securi-

ties of such class, exclusive of any securities of such elass

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 accord-

ance 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 appropriate 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 se-

curities taken up shall be taken up as nearly as may be pro

NEEL IAL YORI OMIM LN! PLE BLL PNT

LANL OI

92

rata, disregarding fractions, according to the number of

securities deposited by each depositor. The provision of

this subsection shal! also apply te securities deposited

within ten days‘after notice of an increase in the considera-

tion 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 increasmg the consideration offered to holders

of such securities, such person shall pay the increased con-

sideration 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 not such se-

curities have been taken up by such person before the

variation of the tender offer or request or invitation.

“(8) The provisions of this subsection shall not apply to

any offer for, or requeSt or invitation for tenders of, any

security—

“(A) proposed to be made by means of a registra-

tion statement under the Securities Act of 1933;

“(B) if the acquisition of such security, together

with all other acquisitions by the same person of se-

curities of the same class during the preceding twelve

months, would not exceed 2 per centum of that class;

“(C) by the issuer of such security; or

“(D) 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.

—— SLM ORE REPAID SLOW LEER LN BEE YET, LAL: OY LEI iE INI AR ID LEON alte R IRE NO I IEC GAAP ENR SON Le TIE: LLL Miser pte AB

93

“(e) It shall be unlawful for any person te make any

untrue statement of a material fact or omit to state any

material fact necessary in order to make the statements

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 request or invitation for tenders,

or any solicitation of security holders in opposition to or

in favor of any such offer, request, or invitation.

“(f) If, pursuant to any arrangement or understanding

with the person or persons acquiring securities in a trans-

action subject to subsection (d) of this section or subsection

(d) of section 13 of this title, any persons are to be elected

or designated as directors of the issuer, otherwise than at

a meeting of security holders, and the persons so elected or

designated will constitute a majority of the directors of the

issuer, then, prior to the time any such person takes office

as a director, and in accordance with rules and regulations

prescribed by the Commission, the issuer shall file with the

Commission, and transmit to all holders of record of se-

curities of the issuer who would be entitled to vote at a

meeting for election of directors, information substantially

equivalent to the information which would be required by

subsection (a) or (c) of this section to be transmitted if

such person or persons were nominees for election as direc-

tors at a meeting of such security holders.”

Approved July 29, 1968.

OLSEN ey REAL gt TE EA RR, OEE RT BERT PRONE

OLAS HE EE EOIN PLE I IE IIOL ILL OY ELLA SCORLLS 8 IEE TE RIOTS SS NG Be MORRO Oa

94

Appendix H

Securities and Exchange Commission Order Dated

May 31, 1974, Directing Private Investigation and

Designating Officers to Take Testimony

UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

May 31 1974

—<——-

Iw THE MATTER OF

Ronson CorPoraTION

File No. HO-715

—

L.

The Commission’s public files disclose that:

A. Ronson Corporation (“Ronson”) is a New Jersey

corporation whose shares of common stock are registered

with the Commission pursuant to Section 12 of the Securi-

ties Exchange Act of 1934 (“Exchange Act”) and are listed

on the New York Stock Exchange, a national securities

exchange.

B. Liquifin, A.G., an entity organized under the laws of

Liechtenstein, is a wholly-owned subsidiary of Liquigas,

S.p.A., an Italian corporation with its principal offices in

Milan, Italy. Liquifin, A.G. filed a Schedule 13D with the

Commission in connection with a tender offer for Ronson

95

cominon stock pursuant to Section 14(d) of the Exchange

Act.

C. Liquifin, A.G. filed preliminary proxy material with

the Commission with respect to a proposed meeting of

Ronson shareholders scheduled for June 13, 1974.

Il.

The members of its staff have reported information to

the Commission which tends to show that:

A. Liquifin, A.G. may have made false and misleading

statements in a Schedule 13D and amendments thereto

filed with the Commission with respect to Ronston stock.

B. Liquifin, A.G. may have filed proxy material con-

taining false and misleading statements with respect to the

proposed meeting of Ronson shareholders scheduled for

June 13, 1974.

C. Liquifin, A.G. and other persons may have made false

and misleading statements to the public in connection with

its tender offer for Ronson common stock.

Il.

The Commission, having considered the staff report,

deeming such acts and practices, if true, to be in possible

violation of Sections 10(b), 14

This text is long and has been trimmed here. Open the source document for the complete record.