No. 91 March Term, 1979, Appeal from an Order of the Superior Court of Pennsylvania at No. 703 April Term, 1977, on February 7, 1979 Reversing the Order of the Court of Common Pleas of Allegheny County of March 29, 1977 at No. G.D. 75-3858
Allen H. Berkman, John P. Edgar, Pittsburgh, for appellant.
Gilbert J. Helwig, Edward Hoopes, Joseph F. McDonough, Pittsburgh, for appellee.
Eagen, C. J., and O'Brien, Roberts, Nix, Larsen and Flaherty, JJ. Larsen, J., files a dissenting opinion in which Flaherty, J., joins.
Appellants, minority stockholders in the Jones & Laughlin Steel Corporation (J & L), sought to challenge the validity of a 1974 merger through which J & L "went private" and deprived them of equitable interest in J & L. The Superior
Court ruled that appellants' sole post-merger remedy is the statutory appraisal proceeding of § 515 of the Business Corporation Law (BCL),*fn1 and reversed the determination of the Court of Common Pleas to the effect that it had jurisdiction in a § 515 proceeding to consider the validity of the merger. 263 Pa. Super. 378, 398 A.2d 186 (1979). We affirm.
A thorough recitation of the facts is given in the opinion of the Superior Court. The following summary will suffice for the present discussion. In 1974, J & L was controlled by the L.T.V. Corporation (LTV). LTV owned 100 percent of Jones & Laughlin Industries, Inc. (JLI), which in turn owned 81 percent of the common stock of J & L. In the fall of 1974, the directors of LTV decided that it was in LTV's best interests to eliminate the minority interest in J & L and acquire all of its outstanding shares.*fn2 LTV accomplished this goal by creating the undercapitalized*fn3 shell Jones & Laughlin Industries, Inc. II (JLI-II) as a wholly-owned
subsidiary of LTV, and merging it with J & L. The common shareholders of J & L received $29 per share in exchange for their stock. A proxy statement concerning the merger was sent to J & L shareholders in October 1974, and following majority approval by J & L's board of directors and stockholders, the merger was consummated on November 22, 1974.*fn4
Two separate groups of J & L shareholders objected to the merger. Prior to the merger's consummation, one group filed a class action in the United States District Court for the Southern District of New York seeking to enjoin the merger from occurring, and claiming violations of §§ 10(b) and 14(a) of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j(b) & 78n(a). The court refused to grant the requested injunction, Tanzer Economic Associates, Inc. v. Haynie, 388 F.Supp. 365 (S.D.N.Y.1974), but later refused to dismiss the complaint seeking damages, 405 F.Supp. 650 (S.D.N.Y. 1976).
The second group, the present appellants, did not act to prevent the merger except to dissent to the merger at the shareholders' meeting, thereby perfecting their rights as dissenting shareholders under § 515 of the BCL. When appellants persisted in their refusal to accept the offered price of $29 per share for their stock, J & L filed a petition in the Court of Common Pleas of Allegheny County seeking an appraisal and forced sale, pursuant to § 515 F, 15 P.S. § 1515 F, of the shares held by the ...