# Petition for Writ of Certiorari — Ronson Corp. v. Liquifin AG > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385608_0320%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1974 - **Citation:** 419 U.S. 870 ## Text 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 A EINE LEE EE EE CE DT a a ETAL, STI > etn ae tee EERE IM CORNER re OO LG EOL RL MCLE BUG INS PARE BRL Erg eR TABLE OF CONTENTS IN ssi thctner asters eticsseibeecdsnhebscdsapessapnsinsnnssmae Jurisdiction ...... PU III in socesicie-cnckantenrcelisannnsntscaiacontiensatenann Statutory Provisions Involved 2.0.0... cceceecececeeceeseeee HPO OE CONG Ct nai nccitescceeceennseccane 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 fae, Ae silibeuhddhdddakipsniieesiaudaubtehonss (1) Repeated Violation of the Williams Act Re- quires Sanctions sinclahaasshbetiaas (2) Questions of Discovery ....... (3) Questions of Proof... ......cc.ccseeccccccsceeceeeeesss TABLE ov CASES Corenco Corp. v. Schiavone & Sons, Inc., 488 F.2d 207 OPIUM cscs aniascenntinnintnesnicedndnapascnsmsnpaotenaituninasassence li 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. FE NIIAEHN, = A i a ee eRe te Le te LEE GEIS TIS VEL AN DIL SR rte te A i eee ee ee + 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. SPIO EER! CEERI IO. 2 TTR TTI PONT BICLY AME OSE, MRRP REN OE 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 PCR COD BoP. GAL TR ote 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. RATE SEES SPN En | eaitnal wall pI a bios oR fe? Su rogers tein Lan mre K Ve EES MaRS Mf dnsaak A EER NTS ea KE eet REY BS: 8 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- he i an ey re sani ll S58 to Beira Pere in 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 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- ~- 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—__ 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(a) and 14(d) of the Securi- ties Exchange Act of 1934 and Rules 10b-5, 14a-9 and 14d-1 thereunder finds it necessary and appropriate and hereby Orvers, pursuant to the provisions of Section 21(a) of the Securities Exchange Act of 1934 that a private investi- gation be made to determine whether the aforesaid per- sons have engaged or are about to engage in any acts or practices of similar purport or object and to obtain infor- a j ORY ie aie eS EAE Se SAL Oe KG rE FT EE PE OIL LOIRE EO NIL me 96 mation to serve as a basis for determining whether to pro- pose rules and regulations under the federal securities laws and whether to recommend legislation concerning any mat- ters to which such laws relate, and Ir IS FURTHER ORDERED, pursuant to the provisions of Section 21(b) of the Securities Exchange Act of 1934 that for the purposes of such investigation, Richard S. Kraut, John G. Carleton, Michael F. Perlis, Stephen Hershkowitz and Ingrid Nelson, and each of them is designated an officer of this Commission and empowered to administer oaths and affirmations, subpoena witnesses, compel their atten- dance, take evidence and require the production of any books, papers, correspondence, memoranda or other records deemed relevant and material to the inquiry and to per- form all other duties in connection therewith as prescribed by law. By the Commission. /s/ Georce A. Fitzsimmons George A. Fitzsimmons Secretary 97 APPENDIX I Letter, Dated June 4, 1974, Securities and Exchange Commission te Reffeele Ursini SECURITIES AND EXCHANGE COMMISSION Wasuinoton, D.C. 20549 (Emblem) Division OF CorRPORATION FINANCE June 4, 1974 Mr. Raffaele Ursini Managing Director and President Liquifin A.G. P. O. Box 34771 Vaduz, Liechtenstein Re: Ronson-Liquifin Proxy Contest Dear Mr. Ursini: With respect to the proxy material filed in May, 1974 by Liquifin A.G. (“Liquifin”) pertaining to the proxy contest with the present management of Ronson Corporation (File No. 1-1031), certain facts concerning the relationship of Mr. Michele Sindona to Liquifin, and the financing of Liqui- fin’s tender offer have come to the attention of the staff. These facts raise serious questions as to whether or not Mr. Sindona is a “participant” as defined by Rule 14a-11(b) of the Securities Exchange Act of 1934 (the “Act”) in the proxy solicitation of Ronson shareholders and as to the source of Liquifin’s funds for its tender offer ended May 10, 1974. US It is noted that counsel for Liquifin has expressed their opinion that Mr. Sindona is not 2 participant either indi- vidually or in concert with others in the solicitation. Fur- ther, they have stated that the facts surrounding the finane- ing, as set forth in Appendix A to their proxy statement, are true and complete. As discussed with your counsel Mr. Gillispie of the law firm Mudge, Rose, Guthrie & Alexand:r, the staff did not review or clear the proxy material designated as Appendix A to your proxy material nor the statements made as to Mr. Ssindona’s relationship with Liquifin. The above named counsel indicated that in lieu of furnishing supporting data required by the staff in order to process the material, they would proceed at their own peril without such review and clearance. In consideration of the staff’s position on the matters set forth above, the issuers are aware that under the cireum- stances they are proceeding at their own risk. As you and your counsel are aware, the use of a proxy obtained in violation of the proxy rules may be prohibited by a court of competent jurisdiction. Sincerely, /s/ ©. A. Davies C. A. Davies Assistant Director ce: Mudge, Rose, Guthrie & Alexander 20 Broad Street New York, N. Y. PED SE Re ee Ca EN oe We Le i lee Lk - 4 Hay are te Feerggce ra age eres s A nrc ttre RUE --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385608_0320%3A1. Public record. Not legal advice.