The opinion of the court was delivered by: MASTERSON
On April 8, 1970 plaintiff, a trustee of American Depositary Receipts representing 2000 shares of Roan Selection Trust, Ltd., (RST), a Zambian corporation, filed a complaint against defendants, American Metal Climax Company (AMAX) and Roan Selection Trust, Ltd., seeking to enjoin the proposed amalgamation of the defendant companies on the grounds that the disclosure provisions of the Securities Exchange Act had been violated, that the amalgamation was violative of the antitrust laws, was unfair to non-AMAX shareholders of RST, and was effectuated by the fraud and breach of fiduciary duty on the part of certain directors of RST. From May 11th to 18th a hearing was held on plaintiff's motion for a preliminary injunction. On June 8th we filed an Opinion, 313 F. Supp. 1251, making Findings of Fact and Conclusions of Law, denying without prejudice plaintiff's request for a preliminary injunction on the grounds that it was premature in that (1) before the amalgamation could be effectuated it would have to be approved by the shareholders who, prior to the vote, were to be sent an explanatory statement which was intended to fully explain the proposed amalgamation, and (2) if and when the shareholders voted in favor of the plan, it would then have to be submitted to the High Court of Zambia for its approval. In late June, just prior to the time when the explanatory materials were to be sent, plaintiff made a motion to enjoin their distribution on the ground that they were violative of the Securities Exchange Act. On July 2nd we held a hearing on plaintiff's motion and, at that hearing, enjoined the distribution of the explanatory materials. The defendants' appeal from this action was dismissed on the ground that, since no written order had been executed by the District Court, the Court of Appeals had no jurisdiction. On July 8th we entered a written order enjoining the distribution of the materials unless certain conditions were met by defendants. These conditions were met and we allowed the materials to be sent without prejudice to the plaintiff's claims that the materials were violative of the Securities Exchange Act. On August 5th, just prior to the time when the proposed amalgamation was to be put before the shareholders for a vote, plaintiff again made a motion to enjoin the defendants from taking any further steps to effectuate the amalgamation. We denied plaintiff's motion on that same day only insofar as it sought to enjoin the amalgamation from being put before the shareholders for a vote. On the balance of plaintiff's motion we held a hearing on August 12th. On August 6th the shareholders voted to approve the reduction of capital, the first step necessary to effectuate the amalgamation. On August 12th we preliminarily enjoined the amalgamation, making Findings of Fact and Conclusions of Law that the plaintiff had demonstrated a strong probability that he would, upon final hearing, be granted relief. We set the case down for a final hearing for September 8th. On August 13th the defendants appealed our August 12th Order. On that day, the Court of Appeals stayed the effect of our Order upon certain conditions, one of them being that the defendant AMAX would deposit with the Court ten million dollars as security for any injury plaintiff might suffer from the granting of the stay. On August 14th the High Court of Zambia approved the reduction of capital. Also on August 14, 1970, plaintiff made a motion to the Court of Appeals for a re-hearing of the August 13th appeal and for an amendment to the Court of Appeals Order of August 13th. On August 31st the Court of Appeals amended and supplemented its August 13th Order in certain respects and further ordered that this court proceed forthwith with the trial and disposition of the case, notwithstanding the pendency of an appeal from our preliminary injunction, and that we reach final judgment prior to October 29, 1970. On August 25, 1970 plaintiff made a motion for leave to file an amended and supplemental complaint and for summary judgment. During this time we continued generally the final hearing scheduled for September 8th. On September 14th we granted plaintiff's motion for leave to file an amended and supplemental complaint and on that day the complaint was filed adding, inter alia, new party defendants. On September 21st the defendants moved for summary judgment. On September 25th we heard oral argument on the cross motions for summary judgment and on September 30th both motions were denied. On October 5th the trial of this case commenced and a jury was called. On that day, after the calling of the jury, the parties entered into a stipulation waiving their rights to a jury trial. At that time the case against the new defendants added on September 14th was severed and it was agreed that the case should proceed solely against the defendant companies, the trial being continued to October 13th. On October 8, 1970, plaintiff moved in the Court of Appeals for a further amendment of the Court of Appeals Order of August 31st. The Court of Appeals amended its August 31st Order to extend the time for our final disposition of the case from October 29, 1970 to November 27, 1970. The trial commenced as scheduled and continued to November 3, 1970. At the conclusion of the trial, we ordered that briefs and proposed Findings of Fact and Conclusions of Law be submitted on November 11th and that replies to those briefs and Findings of Fact be submitted on November 13th. On November 16th we heard oral argument.
After careful consideration of the entire record in this case, we enter the following
FINDINGS OF FACT, OPINION, CONCLUSIONS OF LAW, AND ORDER
A. NATURE OF ACTION AND JURISDICTION.
1. This action was originally brought in three counts by plaintiff, Harold E. Kohn, trustee for the Pension of Harold E. Kohn, P.A., attorneys-at-law, against defendants AMAX and RST. It was 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.
2. Count I was brought under Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j, and Rule 10b-5, 17 C.F.R. § 240.10b-5, promulgated thereunder. In substance, it charges that AMAX conspired with one or more of the directors of RST to perpetrate a fraud on the non-AMAX shareholders of RST and that, pursuant to this conspiracy, they made untrue statements of material fact and omitted to state other material facts necessary to be stated in order to make the statements made not misleading.
3. Count II charged AMAX with the above-mentioned fraud and with a breach of fiduciary duty owed to RST and its non-AMAX shareholders.
4. Count III was 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. On September 14, 1970 we granted plaintiff leave to file an amended and supplemental complaint, which the plaintiff filed that same day. Essentially, the amended and supplemental complaint asserts the same grounds for relief as the original complaint. However, additional defendants, who are either officers and/or directors of or financial advisers to the defendant corporations, were named.
6. The Court has subject-matter jurisdiction over plaintiff's claim that defendants violated the Securities Exchange Act of 1934 under Section 27 of that Act, as amended, 15 U.S.C. § 78aa.
7. The Court has subject-matter jurisdiction over plaintiff's claim of fraud and breach of fiduciary duty by the defendants under 28 U.S.C. § 1332.
8. The Court has subject-matter jurisdiction over plaintiff's antitrust claims under 15 U.S.C. § 26.
9. Venue is proper in this District under section 27 of the Securities Exchange Act of 1934, as amended, 15 U.S.C. § 78aa, and under 28 U.S.C. § 1391 (c) and (d), § 1401.
11. 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 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
12. 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). Motions to intervene as party plaintiffs were granted to approximately 265 shareholders of RST, representing approximately 550,000 shares of RST. In our Order of June 8, 1970, we ordered that this action could be maintained as a class action pursuant to Rule 23(c) (1) of the Federal Rules of Civil Procedure.
13. Defendant 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).
14. At the time suit was instituted, defendant RST was 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 was located at Kafue House, Cairo Road, Lusaka, Zambia; its central and registered office was 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 was the production, smelting and refining of copper in Zambia. (Uncontested Fact No. 3).
15. On January 7, 1970, RST organized RST International, Inc., a wholly-owned Delaware subsidiary, for the purpose of externalizing RST's Zambian assets after the nationalization. RST International, Inc., pursuant to an Order of the United States Court of Appeals for the Third Circuit, dated August 31, 1970, entered their appearance as a party defendant in this action on September 25, 1970.
16. The Morgan Guaranty Trust Company of New York (Morgan), the American depositary 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);
(b) distributes cash dividends of RST to American shareholders (Moxley Dep., p. 8);
(c) mails other reports, announcements, documents and circulars of RST to American shareholders (Moxley, Dep., pp. 10-13).
C. NATIONALIZATION OF RST.
17. 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).
18. 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 obliged 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. (Uncontested Fact No. 8, in part).
19. Between August 11, 1969, and November 17, 1969, RST's efforts were devoted almost entirely to the intense negotiations with the Zambian Government concerning nationalization. RST's chief concern in the negotiations was to secure the agreement of the Zambian Government to allow RST to transfer its domicile and to externalize its assets. "Externalization" here means the freeing of assets from Zambian exchange controls. (Notes of Trial Testimony, Final Hearing, pp. 369-71).
The negotiations were conducted on behalf of RST by Messrs. Jean Vuillequez and R. H. Page, RST's Executive Vice-Chairman and Chief Financial Officer, respectively. AMAX did not formally 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, and advised RST of its views as to certain of the issues, particularly urging that the agreement with the Zambian Government include complete externalization. (PX-151). (Uncontested Fact No. 12, in part). Sullivan & Cromwell, attorneys for both AMAX and RST, took an active part in these negotiations. (DX-50).
20. 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. (Uncontested Fact No. 13, in part). Prior to the execution of the agreement, AMAX had made known to RST its opinion that the agreement was as favorable to RST as could be expected under the circumstances. (Uncontested Fact No. 13, in part).
21. On November 17, 1969, after unanimous approval by the RST Board, Sir Ronald Prain, Chairman of the Board, issued a statement, which was sent to RST stockholders, that RST and Zambia had agreed on the principal terms by which the Government would acquire a majority interest in the mining properties of RST. (Uncontested Fact No. 14, in part; DX-1).
22. On December 22, 1969, a committee of the directors of RST approved the agreement between and among the Republic of Zambia, INDECO and RST. (Uncontested Fact No. 18). The salient provisions of that agreement are:
(a) that the mining operations of RST would be merged into a company to be known as Roan Consolidated Mining, Ltd. (RCM) in which INDECO would own 51 percent, RST 36.75 percent, and the remainder of 12.25 percent by other companies known as the Anglo-American Group ...