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April 21, 1975

Richard A. ASH, on behalf of himself and on behalf of Bethlehem Steel Corporation, Plaintiff,
Crowdus BAKER et al., Defendants, and Bethlehem Steel Corporation, Nominal Defendant

Cahn, District Judge.

The opinion of the court was delivered by: CAHN


CAHN, District Judge.

 Plaintiff, Richard A. Ash, in a derivative action filed March 27, 1975, seeks to enjoin the holding of the annual meeting of Bethlehem Steel Corporation (Bethlehem) scheduled for April 29, 1975. The individual defendants are the directors of Bethlehem. Bethlehem, itself, is designated as a nominal defendant.

 The basis of plaintiff's contention is that the proxy solicitation material distributed to Bethlehem's shareholders was materially misleading and in violation of the Securities Exchange Act of 1934 *fn1" and Regulation 14A and Rule 14a-9 thereunder. Specifically, plaintiff claims that the proxy solicitation material fails to disclose the existence, substance and present status of certain prior litigation brought by Ash, the same plaintiff in this case, against Bethlehem and its officers and directors.

 The prior litigation resulted in a denial of a preliminary injunction, *fn2" affirmation of said denial on appeal, *fn3" grant of a motion for summary judgment in favor of Bethlehem and its officers and directors, reversal of summary judgment on appeal, *fn4" and grant of certiorari by the Supreme Court. *fn5" Argument was held before the Supreme Court on March 18, 1975. The matter is now sub judice in the Supreme Court. In the prior litigation, Ash contends that the officers and directors of Bethlehem used corporate funds for political advertising *fn6" in the 1972 Presidential Campaign and otherwise expended corporate funds in violation of the Federal Corrupt Practices Act, 18 U.S.C. § 610. In the prior litigation, Ash, in addition to other relief, seeks damages of $500,000 on behalf of Bethlehem against the individual defendants.

 In the case at bar, Ash contends that the existence, substance and present status of this prior litigation should have been disclosed to the shareholders in the proxy solicitation material. Plaintiff, in addition to his claim that an injunction should issue to restrain the holding of Bethlehem's annual meeting, contends that all proxies obtained for said meeting be nullified and an award of money damages be entered against the individual defendants for costs incurred in rescheduling the annual meeting plus an award of counsel fees and costs to his attorney.

 A motion for a preliminary injunction was filed on March 31, 1975, by the plaintiff. Thereafter, a pre-trial conference was held on April 4, 1975, and a full hearing was held on April 17, 1975. At the hearing, counsel for the corporation defendant and the individual defendants contended that this Court lacked in personam jurisdiction over those individual defendants who were not personally served. However, it was stipulated between counsel that the hearing on the injunction would proceed as a trial on the merits in accordance with F.R.Civ.P. 65(a)(2). If the injunction is denied, it is to be deemed a final order. If it is granted, the question of damages is to be heard subsequently and after personal service is made on all of the individual defendants.

 The Court, after considering the verified complaint, a written stipulation of facts and certain documentary evidence produced at the hearing, and having heard oral argument, makes the following findings of fact:


 1. Plaintiff is an individual residing in Philadelphia, Pennsylvania.

 2. Bethlehem Steel Corporation (Bethlehem) is a Delaware corporation with a principal office located at Bethlehem, Pennsylvania.

 3. Bethlehem is the second largest steel producer in the United States, with 1974 net sales of about $5,381,000,000. It maintains a number of plants and offices for the conduct of its business at various locations throughout the United States.

 4. Defendants, Crowdus Baker, Bernard D. Broeker, Stewart S. Cort, Lewis W. Foy, Charles W. Ganzel, Thomas S. Gates, George P. Jenkins, Charles B. McCoy, Albert M. Reed, C. William Ritterhoff, Richard M. Smith, C. Thompson Stott, Frederic W. West, Jr., and Joseph S. Wright are individuals residing in the United States who comprise the Board of Directors of Bethlehem. Foy is Chairman, West is President, Smith and Ritterhoff are Executive Vice Presidents, Stott and Ganzel are Senior Vice Presidents, and Reed is Vice President and Comptroller.

 5. Bethlehem Common Stock is listed and traded on the New York Stock Exchange. On January 31, 1974, 43,665,676 shares of Bethlehem Common Stock were outstanding and in the hands of the public. On December 31, 1974, there were about 188,000 stockholders of record of Bethlehem Common Stock.

 6. The only stock entitled to be voted at the Annual Meeting of Bethlehem are shares of Bethlehem Common Stock.

 7. The Annual Meeting of Bethlehem (the "Annual Meeting") will be held on April 29, 1975, at 11:00 a.m. in the Hotel duPont, Eleventh and Market Streets, Wilmington, Delaware, for certain purposes including the election of Directors.

 8. Plaintiff has made no demand on the directors of Bethlehem to seek redress for Bethlehem directly for the matter out of which plaintiff's suit is alleged to arise.

 9. Plaintiff has made no request for concerted action to plaintiff's fellow stockholders.

 10. In connection with the Annual Meeting, there was prepared and distributed by United States mail to the stockholders of Bethlehem a Notice of Annual Meeting of Stockholders and Proxy Statement, along with two forms of Proxy. Copies of these proxy solicitation documents have been received into evidence.

 11. The Proxy Statement solicited the recipient stockholder, inter alia, to vote for the election of the individual defendants as directors through the signing and returning of the Form of Proxy.

 12. The expenses incurred by Bethlehem to date, related to the defense of the case of Richard A. Ash v. Steward S. Cort et al., 350 F. Supp. 227 (E.D.Pa.1972) ("Ash v. Cort"), exceed $75,000.

 13. From September 27, 1972, to date:

 (a) The proxy material and annual reports published by Bethlehem have not mentioned Ash v. Cort.

 (b) Filings by Bethlehem with the Securities & Exchange Commission have not referred to Ash v. Cort.

 (c) No written communications between Bethlehem and the Securities & Exchange Commission have referred to Ash v. Cort.

 (d) No resolutions of the board of directors or minutes of the board of directors have referred to Ash v. Cort.

 (e) No resolutions of the board of directors have referred to the decision to raise the question of whether Title 18 U.S.C. § 610 is unconstitutional. 14. The estimated costs of reprinting the proxy material and resoliciting Bethlehem stockholders are $92,500, comprised of the following estimated expenses: (1) Reprinting proxy statement $12,000 (2) Reprinting proxy card 3,000 (3) Envelopes, outgoing and return 3,000 (4) Computer printing of proxy cards -- overtime basis 3,000 (5) Part time help for inserting material in outgoing mail envelopes 2,500 (6) Outgoing postage 20,000 (7) Return postage 16,000 (8) Delivery of proxy material to brokers 3,000 (9) Broker solicitation fees and postage 30,000 $92,500


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