The opinion of the court was delivered by: MASTERSON
MASTERSON, District Judge.
A. NATURE OF ACTION AND JURISDICTION.
1. This is an action brought in three counts by plaintiff, Harold E. Kohn, trustee for the Pension Plan of Harold E. Kohn, P.A., attorneys-at-law, against defendants, American Metal Climax, Inc., (AMAX) and Roan Selection Trust, Ltd., (RST). It is brought both as a derivative action on behalf of RST and as a class action on behalf of all shareholders of RST, except AMAX, and principally seeks to enjoin AMAX from acquiring some of the assets of RST remaining after the acquisition of control of RST by the Government of Zambia.
3. Count II charges AMAX with the above-mentioned fraud and with a breach of fiduciary duty owed to RST and its non-AMAX shareholders.
4. Count III is brought only as a derivative action on behalf of RST. It charges that the proposed acquisition of RST by AMAX is violative of Section 7 of the Clayton Act, 15 U.S.C. § 18, and that an alleged interlocking of directorates between AMAX and RST is violative of Section 8 of the Clayton Act, 15 U.S.C. § 19.
5. The Court has subject-matter jurisdiction over Count I under section 27 of the Securities and Exchange Act of 1934, as amended, 15 U.S.C. § 78aa.
6. The Court has subject-matter jurisdiction over Count II under 28 U.S.C. § 1332.
7. The Court has subject-matter jurisdiction over Count III under 15 U.S.C. § 26.
8. Venue is proper in this District under section 27 of the Securities and Exchange Act of 1934, as amended, 15 U.S.C. § 78aa, and under 28 U.S.C. § 1391(c) and (d), § 1401.
9. This Court has personal jurisdiction over the defendants.
10. Plaintiff, Harold E. Kohn, Trustee, for the Pension Plan of Harold E. Kohn, P.A., Attorneys-at-law, holds American depositary receipts representing 2,000 ordinary shares of Roan Selection Trust, Ltd., (RST) which are listed for trading on the New York Stock Exchange. Plaintiff is a citizen of the Commonwealth of Pennsylvania, resides in the Eastern District of Pennsylvania, and purchased such American depositary receipts on January 14, 1970. (Uncontested Fact No. 1).
11. There are approximately 40,000 shareholders of RST in the United States (see Uncontested Fact No. 10) and United States citizens, other than AMAX, own approximately 37.7% of RST. (Uncontested Facts Nos. 5 and 9).
12. Defendant, American Metal Climax, Inc. (AMAX), a listed company on the New York Stock Exchange, is a New York corporation with its principal place of business at 1270 Avenue of the Americas, New York, New York, and is licensed to do business in the Commonwealth of Pennsylvania. (Uncontested Fact No. 2). AMAX is a major producer, fabricator and marketer of metals and minerals. AMAX is the owner of 42.3% of the issued shares of RST. (Uncontested Fact No. 5, in part).
13. Defendant RST is a corporation organized and existing under the laws of the Republic of Zambia, with its principal place of business in Zambia. RST's executive office is located at Kafue House, Cairo Road, Lusaka, Zambia; its central and registered office is located at Mpelembe House, Broadway, Ndola, Zambia. RST, since at least 1955, has reported annually to the Securities and Exchange Commission (SEC) on Form 20-K with its Annual Report to Shareholders annexed. Its principal business is the production, smelting and refining of copper in Zambia. (Uncontested Fact No. 3).
14. The Morgan Guaranty Trust Company of New York (Morgan), the American Depository of RST shares, regularly performs the following functions:
(a) mails annual quarterly reports supplied to it by RST to registered American shareholders of RST (Deposition of Regis E. Moxley, Vice-President of Morgan, p. 6);
(c) mails other reports, announcements, documents and circulars of RST to American shareholders (Moxley Dep., pp. 10-13).
In performing these services, Morgan is paid by RST. The fees paid Morgan by RST for these and other services amounted to over $300,000 for the period July 1, 1968, to June 30, 1969. (Plaintiff's Exhibit, hereinafter "PX", No. 22).
15. At all times material to this action, RST had 13 directors, six of whom were and are directors of AMAX; of the six common directors, three are present and two are former officers of AMAX; the other seven directors of RST, including the Chairman, Executive Vice-Chairman and the President of RST, are neither directors nor officers of AMAX. (Uncontested Fact No. 5, in part).
C. NATIONALIZATION OF RST.
16. In the spring of 1968, the Zambian Government announced a limitation of dividends that may be paid outside the country to 50% of net profit. This is commonly referred to as the Mulinguishi Declaration. (Uncontested Fact No. 7).
17. On August 11, 1969, the President of Zambia announced ("Matero Declaration") the desire of the Zambian Government to acquire controlling equity interests in the operating copper properties in Zambia. Thereafter, RST was invited by the Government to negotiate the sale of 51% interest in the copper producing, smelting and refining businesses conducted in Zambia by certain of its operating subsidiaries. Under the circumstances, the Board of RST entered into negotiations with the Government. (Uncontested Fact No. 8, in part).
18. Negotiations with the Zambian Government were conducted on behalf of RST by Messrs. Vuillequez and R. H. Page, RST's Executive Vice-Chairman and Chief Financial Officer, respectively. AMAX did not take part in the negotiations between RST and the Government of Zambia, but was kept advised of the progress of such negotiations by RST, supplied technical assistance to RST in the drafting of proposals, advised RST of its views as to certain of the issues, and made known to RST, prior to execution of the agreement, its opinion that the agreement was as favorable to RST as could be expected under the circumstances. (Uncontested Fact No. 12).
19. On November 17, 1969, the RST board met and unanimously approved an agreement in principle to be entered into between the Government, the Industrial Development Corporation of Zambia, Ltd. (INDECO) (a Government corporation) and RST. The Board also unanimously approved a statement to be issued by Sir Ronald Prain, Chairman of the Board of RST, dated November 17, 1969. At the meeting, Vuillequez recorded his appreciation of the RST negotiating team for the cooperation of AMAX during the negotiations with the Government. Also at that meeting, the following statement was made by F. Taylor Ostrander and R. J. Wright, both alternate directors of RST and employees of AMAX, on behalf of AMAX:
As with any negotiation, we are sure there have been ups and downs, there are matters of satisfaction and of disappointment.
Now we have before us a negotiated package deal, of greater complexity, that has received the approval of the President [of Zambia] and the ratification of his cabinet. The major details of this package deal were approved in principle by the AMAX Board on November 6, subject to satisfactory agreement on externalization.
On the whole, we feel that shareholders have come out of the matter not too badly.
The minutes of the AMAX board contain no reference to any approval of the agreement reached between RST and Zambia. Mr. Ian MacGregor, who is Chief Executive Officer of AMAX and a director of RST, testified at his deposition, on page 37, that the AMAX board was not asked to pass on this matter. (Uncontested Fact No. 13).
20. On November 17, 1969, Prain issued a statement, which was sent to RST stockholders, that RST and the Government of Zambia had agreed on the principal terms by which the Government would acquire a majority interest in the mining interests of RST. (Uncontested Fact No. 14, in part). The salient provisions are (PX-2):
(a) that the aforesaid operations would be merged into the company to be known as Roan Consolidated Mining, Ltd. (RCM) in which INDECO would own 51 percent, RST approximately 37 percent, and the remainder by other companies known as the Anglo-American Group because of its minority interest in certain of the RST companies;
(b) that in payment for such operation, INDECO would issue negotiable bonds guaranteed by the Zambian Government in the amount of $151,000,000 of which RST would receive 75 percent;
(c) that RST will manage the operations of RCM and act as sales agent for a minimum period of 10 years, for which RST will receive one and one-half percent of RCM's gross sales revenue plus two percent of RCM's profits after mineral taxes but before income taxes;
(d) that RCM will pay quarterly dividends not subject to dividend limitation and which will equal the net income of RCM after provision for reserve for exploration and development in an amount approved by the entire board of RCM;
(e) that all of the assets of RST except those sold to the Zambian Government will be transferred to a new corporation outside of Zambia and that such assets consist principally of cash of approximately $40,000,000, a 30 percent interest in Botswana RST Ltd. (BRST), interests in Baluba Mines Limited and certain other exploration companies, the Ametalco group of companies,