The opinion of the court was delivered by: CAHN
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 prior litigation resulted in a denial of a preliminary injunction,
affirmation of said denial on appeal,
grant of a motion for summary judgment in favor of Bethlehem and its officers and directors, reversal of summary judgment on appeal,
and grant of certiorari by the Supreme Court.
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
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 ...