Upon learning of these facts, Northern suggested that there no longer appeared to be a need for Cook to meet with Northern in a planned trip to discuss a further business relationship between them since Cook, now back at Bluebird, would not be available for other business ventures. Cook vigorously responded that there might be a stronger reason for talking since Northern had previously expressed an interest in Bluebird with him in charge. Cook also told Northern that he believed Greenberg's shares of stock of Bluebird might be available for purchase.
On June 23, 1979, Bluebird disseminated to its public shareholders a supplement to its tender offer circular. The supplement stated that Cook had returned to Bluebird as Chairman and Chief Executive Officer and extended the tender offer to July 6, 1979. The supplement also disclosed that Swensrud, Vogelstein and Siegal intended to tender all of their shares, an event which would probably result in an oversubscription of the tender offer and a proration of the shares accepted by Bluebird. The tender offer was vastly oversubscribed with a majority of the shares being tendered by insiders. As a result, only 57.2% of the tendered shares were purchased, 60.5% of which were purchased from insiders.
During his planned visit to Northern's facilities in the United Kingdom on July 12-13, 1979, Cook, without the knowledge or authority of Greenberg or the Board of Directors, suggested to Northern representatives that they should consider the possibility of offering to purchase Bluebird for a price of around $ 65,000,000. They told Cook they would consider it and, if interested, contact him later in the month. On July 23, 1979, Nicholas Horsley, Northern's Chairman, called Cook, told him they would be interested in discussing the possibility of acquiring Bluebird, and asked him to inform Greenberg. On July 25, 1979, Cook met with Greenberg and told him Northern was interested in discussing the possibility of an acquisition of Bluebird. The record reveals that this was the first time Greenberg ever heard of Northern. On July 30, 1979, Greenberg told Cook he would be interested in meeting with Northern and discussing the matter. Cook then contacted officials of Northern and told them Greenberg was willing to meet, but price was an issue and he would not get involved in the price negotiations. Arrangements were made for representatives of Northern to meet with Greenberg and others in the middle of August, 1979 to discuss the possibility.
During the first week of August, 1979, the trading volume and the price of Bluebird common stock increased dramatically, indicating there may have been a leak concerning the upcoming discussions between Northern and Bluebird. Therefore, on August 7, 1979, Bluebird issued a press release disclosing that Bluebird was "conducting exploratory talks with an undisclosed purchaser concerning the sale of the Company...."
The planned meeting for the middle of August was advanced, and discussions between representatives of Northern and Bluebird began August 8, 1979 and continued during the month. On August 24, 1979, Bluebird issued a press release announcing that Bluebird and Northern had reached an "agreement in principle," subject to a definite agreement to be negotiated and further subject to shareholder approval, to sell Bluebird to Northern at $ 14.875 per share. The press release also revealed that Greenberg, who then owned approximately fifty-seven percent of the outstanding stock of Bluebird, had given an irrevocable proxy to vote his shares with a majority of the votes cast by the other shareholders of Bluebird, whether for or against the transaction. Following extensive negotiations, a definitive agreement was reached on October 22, 1979.
On December 14, 1979, the shareholders of Bluebird approved the merger. On December 26, 1979, Northern negotiated with Paine Webber for services rendered in the amount of $ 200,000, to be paid upon actual consummation of the merger. On January 4, 1980, the acquisition was consummated, and all shares of Bluebird were converted into a right to receive $ 14.875 per share.
Five separate suits followed Bluebird's announcement of the merger agreement, all of which have been consolidated before this court pursuant to Fed.R.Civ.P. 42. The plaintiffs filed suit against Bluebird, Herbert Cook, Joel Greenberg and Northern Foods, Ltd. Each of these defendants have moved for summary judgment on the merits of plaintiffs' allegations. In addition, Northern seeks dismissal under Fed.R.Civ.P. 12(b)(2) for lack of personal jurisdiction. For the reasons set forth below, I will deny Northern's Rule 12(b)(2) motion for dismissal, but will grant its and the other defendants' Rule 56 motions for summary judgment.
II. NORTHERN FOODS, LTD.
A. Personal Jurisdiction
Northern Foods, Ltd. first asks for dismissal of the complaint on the ground that this court lacks personal jurisdiction over it. This court's personal jurisdiction over Northern is based upon section 27 of the Securities Exchange Act of 1934, 15 U.S.C. § 78aa (1977). Rule 4(e) of the Federal Rules of Civil Procedure states the following: "Whenever a statute of the United States ... provides for service of a summons ... upon a party not an inhabitant of or found within the state in which the district court is held, service may be made under the circumstances and in the manner prescribed by the statute..." Section 27 of the Exchange Act authorizes international service of process in suits brought to enforce the Act. Securities and Exchange Commission v. Myers, 285 F. Supp. 743, 748 (D.Md.1968). Section 27 states the following:
Any suit or action to enforce any liability or duty created by this chapter or rules and regulations thereunder, or to enjoin any violation of such chapter or rules and regulations, may be brought in any such district or in the district wherein the defendant is found or is an inhabitant or transacts business, and process in such cases may be served in any other district of which the defendant is an inhabitant or wherever the defendant may be found.
15 U.S.C. § 78aa (1977) (emphasis added).
Northern argues that assertion of personal jurisdiction over it under section 27 would violate due process of law guaranteed by the Fifth Amendment to the United States Constitution because it is alleged that Northern lacks sufficient contacts or ties with the United States "to make it reasonable and just according to our traditional conception of fair play and substantial justice" to subject Northern to this court's jurisdiction. International Shoe Co. v. Washington, 326 U.S. 310, 320, 66 S. Ct. 154, 160, 90 L. Ed. 95 (1945).
Northern concedes that when a federal court exercises jurisdiction pursuant to a federal statute it is the United States and not the particular state in which the court is located that is exercising jurisdiction and, therefore, all that is necessary to satisfy Due Process is that the defendant have minimum contacts with the United States. Fitzsimmons v. Barton, 589 F.2d 330, 332-34 (7th Cir. 1979); Driver v. Helms, 577 F.2d 147, 156-57 (1st Cir. 1978), cert. denied, 439 U.S. 1114, 99 S. Ct. 1016, 59 L. Ed. 2d 72 (1979); Mariash v. Morrill, 496 F.2d 1138, 1142-43 (2d Cir. 1974); Nelson v. Quimby Island Reclamation District, 491 F. Supp. 1364, 1377-79 (N.D.Cal.1980); Drexel Burnham Lambert, Inc. v. Fidelity Bond & Mortgage Co., C.A.No.79-4461, slip op. at 4-7 (E.D.Pa., filed October 1, 1980). Since Northern's activities are not so continuous and systematic that it may be said to be already "present" in the United States, Northern's "minimum contacts" must be purposeful, Hanson v. Denckla, 357 U.S. 235, 253, 78 S. Ct. 1228, 1239, 2 L. Ed. 2d 1283 (1958), and directly related to the plaintiffs' suit or cause of action. Wells Fargo & Co. v. Wells Fargo Express Co., 556 F.2d 406, 413 (9th Cir. 1977); VanNaarden v. Grassi, 488 F. Supp. 720, 723 (E.D.Pa.1980).
When considering a motion to dismiss for lack of personal jurisdiction, a court must read the pleadings in the light most favorable to the plaintiff. Empire Abrasive Equipment Corp. v. H. H. Watson, Inc., 567 F.2d 554, 557 (3d Cir. 1977); VanNaarden v. Grassi, 488 F. Supp. 720, 722 (E.D.Pa.1980). In their Consolidated Amended Complaint ("Complaint"), which I ordered plaintiffs to file after the completion of discovery, plaintiffs alleged that Northern conspired with and "aided and abetted the other defendants in the commission of the illegal acts alleged in this complaint, by, inter alia, knowingly and substantially assisting for its own personal benefit and gain in the effectuation of the wrongful acts alleged which Northern knew were wrongful." Complaint para. 5.
Based on the record before me, I am persuaded that Northern has sufficient deliberate contacts with the United States that are related to the present cause of action so that this court may exercise personal jurisdiction without violating the due process clause of the Fifth Amendment. These contacts consisted of the following. On May 12, 1978, Nicholas Horsley, Chairman of the Board of Northern spoke via telephone with Gregory M. McCrane, Director of the International Division of Paine Webber in New York, about Northern acquiring Bluebird. On August 1, 1978, representatives of Northern met with Mr. McCrane and other officers of Paine Webber in New York City. On August 2, 1978, Horsley and John R. Clayton, Northern's finance director, traveled to Philadelphia to discuss the prospects of acquiring Bluebird with Cook and Siegal. On August 4, 1978, Horsley traveled to Chicago to inspect a Bluebird meat plant. Northern hired Cook as a consultant in May 1979 to advise it of the investment opportunities in the United States. On June 15, 1979, Cook and Horsley spoke about Northern's establishing a continuing business relationship with Cook. On July 23, 1979, Northern asked for Cook's help in acquiring Bluebird. On August 23, 1979, Bluebird and Northern finally reached agreement in principle that Northern would acquire Bluebird for $ 14.875 per share. On October 22, 1979, Northern and Bluebird executed an Agreement and Plan of Merger, by which Northern consented to jurisdiction of the federal courts located in Pennsylvania for all controversies arising from the merger.
The above facts are sufficient to justify this court's exercise of personal jurisdiction over Northern. See Alco Standard Corp. v. Benalal, 345 F. Supp. 14, 24-25 (E.D.Pa.1972); Kohn v. American Metal Climax, Inc., 313 F. Supp. 1251, 1259-60 (E.D.Pa.1970). Accordingly, Northern's motion to dismiss for lack of in personam jurisdiction must be denied.
Northern next asks this court for summary judgment pursuant to Fed.R.Civ.P. 56. For the reasons set forth below, summary judgment will be granted in Northern's favor.
B. Northern's Duty of Disclosure
Northern is named only in Count II of plaintiffs' complaint. This count alleges that all of the defendants violated section 10(b) of the Securities Exchange Act and Rule 10b-5 promulgated thereunder by failing to disclose a variety of alleged material facts in connection with Bluebird's tender offer for its own shares. It is well established, however, that before any liability may arise for nondisclosure under these provisions some relationship must exist between the plaintiff and defendant which imposes a duty upon the defendant to disclose material information to the plaintiff in connection with his purchases or sale of a security. Chiarella v. United States, 445 U.S. 222, 100 S. Ct. 1108, 63 L. Ed. 2d 348 (1980). The mere possession and nondisclosure of material facts does not confer liability under these rules. In Chiarella the Court held that liability under section 10(b) and Rule 10b-5 for failure to disclose material information can be imposed only when the party having the information has a duty to disclose it to the plaintiff "because of a fiduciary or similar relation of trust and confidence between them." Id. at 228, 100 S. Ct. at 1114 (quoting Restatement (Second) of Torts § 551(2)(a) (1976)).
In Chiarella, the Court also noted with approval a decision of the Court of Appeals for the Second Circuit which held that a potential purchaser of a corporation's stock in a tender offer or similar transaction has no duty to disclose his acquisition plans prior to his purchase of the stock. The Court stated the following:
The Court of Appeals for the Second Circuit previously held, in a manner consistent with our analysis here, that a tender offeror does not violate § 10(b) when it makes preannouncement purchases precisely because there is no relationship between the offeror and the seller:
"We know of no rule of law ... that a purchaser of stock, who was not an "insider' and had no fiduciary relation to a prospective seller, had any obligation to reveal circumstances that might raise a seller's demands and thus abort the sale." General Time Corp. v. Talley Industries, Inc., 403 F.2d 159, 164 (2d Cir. 1968), cert. denied, 393 U.S. 1026, 89 S. Ct. 631, 21 L. Ed. 2d 570 (1969).