out there very often follows massive and protracted litigation. So it was in Bok v. Ackerman, C.A. 69-305, and the related above-captioned civil actions which arose in the wake of dissatisfaction with major corporate dealings between the Curtis Publishing Company (hereinafter referred to as "Curtis"), Perfect Film and Chemical Corporation (hereinafter referred to as "Perfect"), and other companies. Before the Court is a motion by the parties for approval of a compromise settlement which will call a halt to the litigation. Miriam Wolf (the "Objector") opposes this motion and asks the Court to grant a thirty day discovery period for the preparation of factual data to support objections to the settlement.
Begun on February 10, 1969, the consolidated actions have been carried on with most intense advocacy by each party - advocacy which at times almost seemed to rise to zealot proportions. None of the parties seemed willing to make even minor concessions until after their points had been pressed most aggressively, until after voluminous briefs had been filed and often far too lengthy oral arguments had been made. The cases have generated hundreds of opposing docket entries: motions, answers, and briefs. There have been several courtroom hearings and arguments, and numerous conferences in chambers.
The original complaint in Bok v. Ackerman sounded in six counts and sought derivatively to enforce inter alia the following claimed rights on behalf of Curtis. Under Counts I, II, and III, the shareholder plaintiff sought on Curtis' behalf to rescind: an agreement for the sale of Curtis' circulation and subscription companies to Perfect, the so-called foreclosure agreement, an agreement for the sale of three magazine properties to Downe Communications, Inc., (hereinafter referred to as "Downe"), and agreements by which Curtis was to purchase stock and absorb operating expenses of the Saturday Evening Post Company (hereinafter referred to as "Sepco"). Plaintiff also asked for an accounting for all profits arising from the operation of the transferred companies and assets. Count IV alleged that Curtis had been caused without consideration to transfer surplus assets in the Curtis Pension Plan and Trust to Perfect and sought to undo this transaction. Finally, Count V alleged fraudulent stock transactions in violation of the Securities Exchange Act of 1934, and Count VI called for the appointment of a receiver to take custody of the Curtis accounts and records, to conserve assets, and to conduct a fair election of a new Board of Directors.
On November 26, 1969, the principals to the litigation put their signatures to a twenty-one page agreement designed to resolve all outstanding questions between and among them. By ORDER of December 19, 1969, I set a hearing in open court for January 21, 1970, to give those who might oppose the proposed compromise settlement an opportunity to make known their positions.
OBJECTIONS TO THE SETTLEMENT
One stockholder only, Miriam Wolf, through her counsel came forward to oppose the settlement. Additionally, I received three brief letters and a telegram (see docket entries 91, 92, 93 and 95) which in terms often cryptic and conclusionary express disapproval of segments of the proposed settlement. David Nowak submits a "defense of Cary W. Bok to be used * * * or omitted completely from the suit." Jerome Singer is dissatisfied that though "Curtis is now back in the publishing business," "the nucleus of what could have been used for a good start is in the hands of Perfect." And Victor Kurtz suggests: "Let Perfect Film keep Status Magazine and take this fact into consideration in the Compromise Settlement." Richard Rov's telegram, sent from New York City four days after the January 21, 1970, public hearing, states only that he feels that "the settlement is not in the best interest of the stockholder."
Miriam Wolf filed a statement of objections setting forth the following seven objections to the proposed settlement:
(1) The terms of the proposed settlement are said to be unfair to Curtis and its stockholders and to unduly favor the defendants and plaintiff, Cary Bok; (2) the settlement allegedly improperly dismisses claims against Cary Bok in the Wolf and Tait actions and claims against other defendants in the Wolf action without any contributions by them for the benefit of Curtis and its stockholders; (3) the settlement allegedly improperly provides that releases will be given by plaintiffs Wolf and Tait; (4) Cary Bok is accused of agreeing to the settlement, not to benefit Curtis, but to gain him his release as well as releases for his co-trustees and associates; (5) Curtis is alleged not to have been adequately compensated for the sale of Downe stock to Perfect; (6) the provision as to Martin Ackerman's cooperation in prosecuting a suit by Sepco against Frederic Gregg, Jr., is said to be inadequate; and (7) Curtis is alleged to be uncompensated for damages resulting from Perfect improperly causing Time, Inc., to cease purchasing printing services from Curtis. In an affidavit filed with the Court on January 23, 1970, objector Wolf requested time to conduct discovery, to seek testimony and documentation concerning objections (2), (4), (5), and (7) above.
At the hearing, counsel for Miriam Wolf pressed his claim that the proposed settlement unduly benefitted Cary Bok, as discussed in objections (2), (3), and (4) above. Mr. Jacobs tentatively suggested that a settlement between Curtis and Perfect might well have been worked out without releasing Cary Bok:
"MR. JACOBS: Well, if Curtis wants to settle its claims with Perfect and with Ackerman and the other defendants leaving aside Mr. Bok I am sure that Perfect Film and Chemical - I can't say I am sure, but I would think that Perfect Film and Chemical would have been very happy to settle the case. I don't know the fact that Mr. Bok has to be released from all claims against him was a condition to settling the case for the benefit of Curtis. Maybe this is something that was added on for the benefit of Mr. Bok and not for the benefit of anybody else involved in the settlement." (N.T., pp. 41 and 42.)
Counsel for Perfect, Harold E. Kohn, stated that "It was I, not the attorneys for Curtis or for Mr. Bok, who asked to have Mr. Bok and all the other directors released as part of this settlement. * * * Perfect wanted to be sure that this litigation was completely, finally and all-inclusively settled. * * * I state as a fact it took several days of negotiations before the Curtis people finally agreed to give that up. It was not their idea." (N.T., p. 45.) Mr. Kohn has filed an affidavit to this effect (docket entry 85), which states, inter alia: "I consistently informed counsel for Curtis that Perfect would not enter into any settlement agreement unless Perfect was assured that all litigation * * * would be terminated. To this end, I insisted, on behalf of Perfect, that Curtis must give releases to its former officers and directors. * * * The representatives of Curtis stated they were unwilling to agree to this request, and Curtis has agreed only after it became clear that there could be no agreement with Perfect in the absence of such releases." (Emphasis added.) Counsel for Perfect then, and not Cary Bok or others, was responsible for that provision of the proposed settlement which released Cary Bok. Indeed, Mr. Kohn's affidavit makes it clear that the release of Cary Bok was a condition precedent to any settlement. And this was because as Mr. Kohn stated at the hearing on January 21, 1970: "I told them Perfect wanted to be sure that this litigation was completely, finally and all-inclusively settled or we were not interested in a settlement because we didn't want cross-claims from somebody else, to be added as an additional defendant, to have the litigation continue in such a way that we would still be party to continuing litigation even though we thought the suit was settled." (N.T., p. 45.)
Miriam Wolf's objection that Curtis was not adequately compensated for the sale of Downe stock to Perfect deserves comment. The sworn affidavit of Kenneth B. Artz, Treasurer of Curtis, demonstrates that Curtis did not sell the Downe stock to Perfect. Rather, as the affidavit states, Perfect sold the Downe stock "for the account of Curtis" and "Curtis received the full benefit of the proceeds." The affidavit of Philip P. Kalodner, shareholder, director, former chief executive of Curtis, and plaintiff and/or intervenor in several of the related Curtis cases, states his conviction "beyond any reasonable doubt that Curtis did in fact receive approximately the then market value, after deduction for expenses, for the stock of Downe." Kalodner believes that the substance of the allegation here made by Miriam Wolf appears in his earlier complaint in a related action. An examination of the books and records of Curtis has convinced Kalodner that the sale of the Downe stock "was not itself actionable."
Miriam Wolf's allegation about Perfect causing Time, Inc., to cease purchasing printing services from Curtis is likewise contradicted by the affidavits of Artz and Kalodner. The Kalodner affidavit states that Curtis was required to cease providing printing services to Time, Inc., because Curtis could no longer operate its printing facilities at a profit and that the decision to discontinue activities at the printing plant was taken as a matter of business judgment.
Diligence and the right to discovery.
Is Miriam Wolf entitled to a thirty day discovery period at this point in the proceedings?
At the hearing I stated my understanding of objector's position as follows:
"THE COURT: So, your position is that you are not prepared at this point to put on evidence in opposition to the motion for approval of a compromise settlement, but that you would ask for a period of 30 days in which you would be able to present the evidence to support your allegation."
"THE COURT: * * * your client who owns 100 shares objects to the approval of the proposed compromise settlement, and * * * you would need 30 days in which to present to me the evidentiary data which you think will support your allegations that the settlement is not in the best interests of the stockholders.