The opinion of the court was delivered by: MCGLYNN
Defendant Bluebird, Incorporated ("Bluebird") is a Pennsylvania corporation with its principal place of business at Philadelphia and is one of the largest producers and packers of ham products in the United States. Bluebird was founded by the father of the defendant, Herbert Cook ("Cook"). Bluebird's common shares are registered with the Securities and Exchange Commission ("SEC") and are traded on the New York Stock Exchange and on other securities markets.
Plaintiffs allege that defendants violated various sections of the Securities Exchange Act of 1934 ("Exchange Act"), and Rule 10b-5
promulgated by the SEC by failing to disclose material facts to Bluebird shareholders in connection with a tender offer Bluebird made from June 11 to July 6, 1979 to its shareholders for the purchase of 750,000 shares of Bluebird at the price of $ 10.00 per share.
On February 27, 1980, I certified two classes of plaintiffs, pursuant to Fed.R.Civ.P. 23. Generally, the first class consists of the owners of Bluebird common stock who sold their stock to Bluebird pursuant to the tender offer; the second class is those persons who sold shares of Bluebird common stock in the national securities markets during the period of May 29, 1979 to August 7, 1979. Presently before the court are defendants' joint motion for summary judgment pursuant to Fed.R.Civ.P. 56.
Rule 56(c) provides that summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Summary judgment is available only when there are no material fact issues in the litigation. Adickes v. S. H. Kress and Co., 398 U.S. 144, 157, 90 S. Ct. 1598, 1608, 26 L. Ed. 2d 142 (1970). The court, for purposes of determining a summary judgment motion, must view the record in the light most favorable to the party opposing the motion. Id. With these principles in mind, the following are the undisputed material facts as developed from the depositions, documents and pleadings submitted to the court.
From 1968 through March 27, 1979, Herbert Cook and his family owned or controlled between sixteen and twenty percent of the common stock of Bluebird, which was sufficient to give the Cook family control of the company. Herbert Cook was the Chairman of the Board of Directors and Chief Executive Officer of Bluebird. Defendant Joel W. Greenberg ("Greenberg"), a resident of Chicago, Illinois who regularly traded in the commodities markets, became a shareholder of Bluebird in 1973 by open market purchases of Bluebird stock. By June 26, 1978, Greenberg owned approximately nineteen percent of Bluebird's outstanding stock and advised Bluebird of his intention to acquire up to twenty-five percent of the stock. Cook distrusted Greenberg. He feared that Greenberg would one day own a sufficient amount of shares to gain control of the company. Cook also did not like Greenberg's repeated demand that he be represented on Bluebird's Board of Directors and his suggestion that Bluebird actively trade in the commodities markets.
In May of 1978, representatives from the International Division of the investment banking firm of Paine, Webber, Jackson and Curtis ("Paine Webber") communicated with Bluebird for the purpose of determining whether Bluebird was interested in being acquired by or merged with another company. Paine Webber also contacted Greenberg concerning the sale of his stock and Greenberg indicated that his shares would be available at some premium over market value. Gregory M. McCrane, Managing Director of the International Division of Paine Webber, also spoke with defendant Northern Foods, Ltd. ("Northern"), a British corporation that had recently acquired a meat processing company, Pork Farms, Ltd. of Nottingham, England. Northern communicated to Paine Webber its interest in exploring the acquisition of a food company in the United States. Paine Webber then contacted Cook and Jacob J. Siegal ("Siegal"), the President of Bluebird, to arrange a meeting with representatives from Northern.
Northern's chairman, Nicholas Horsley ("Horsley"), and its finance director, John R. Clayton ("Clayton"), then visited the United States in August of 1978. While in America, they met with Cook and Siegal, the executives of seven other companies and representatives of four investment banks. Horsley was impressed with Bluebird's operations and with its management and concluded that Northern should consider Bluebird as an acquisition candidate.
Meanwhile, Greenberg continued his purchases of Bluebird stock and by February 9, 1979, he had increased his investment to more than thirty percent of the outstanding shares. Fearing Greenberg's imminent takeover of Bluebird, Cook arranged a telephone conference with some of Bluebird's Directors in early March, 1979. During this conference, the Board agreed that Greenberg's plans would be detrimental to their own positions and they, therefore, decided to seek a "White Knight", that is, a friendly company to acquire Bluebird on acceptable terms, which would thwart Greenberg's attempt to gain control of the company by continuing his open market purchases. As time passed, Cook lost hope in the Board of Directors' ability to find a "White Knight" in sufficient time to thwart Greenberg's takeover plans. Convinced that Greenberg would soon win control of Bluebird, Cook met with Greenberg in the middle of March, 1979 and proposed that Greenberg either agree to stop his purchases or, alternatively, that either Greenberg or Cook buy the other's shares. After considering Cook's proposal, Greenberg agreed on March 27, 1979 to buy Cook's shares and then negotiated an agreement whereby Greenberg bought all but one hundred of Cook's shares. As a result, Greenberg's percentage of ownership in Bluebird increased to more than forty-nine percent of the total outstanding shares of the company. As part of the agreement, Cook resigned from his positions as Chairman of the Board and Chief Executive Officer and entered into a two year consultation agreement with Bluebird. Jacob J. Siegal, Bluebird's President at the time of the sale, replaced Cook as Chairman of the Board and Chief Executive Officer.
Shortly after learning of Greenberg's purchase of Cook's shares, two members of the Board of Directors, John L. Vogelstein ("Vogelstein") and Steven B. Swensrud ("Swensrud") also offered to sell their shares to Greenberg. Greenberg rejected the offer but later agreed that Bluebird would be willing to buy their shares. Thereafter, upon advice of counsel and investment bankers, Bluebird proposed to make an offer to buy its own stock at $ 10.00 per share available to all shareholders by way of a tender offer for 750,000 shares. At this time, shares of common stock of Bluebird were selling on the New York Stock Exchange at approximately $ 9.50. It was agreed with Vogelstein and Swensrud that they would tender at least 380,000 shares of stock they controlled and that, in the event Bluebird did not complete the tender offer, Bluebird would still buy those shares for $ 10.00. On May 26, 1979, the tender offer was announced to be effective June 11, 1979.
In late April 1979, Christopher R. Haskins ("Haskins"), Deputy Chairman of Northern, and the Chief Executive Officer of Northern Pork Farms, Ltd., David C. Samworth, visited the United States and met briefly with Siegal, Cook and officials from twelve other companies. They told Cook that Northern would not be interested in acquiring Bluebird without Cook in charge. During this meeting, Cook agreed to act as a consultant for Northern in the United States by visiting Showell Farms, another United States company Northern was considering acquiring. At this time, Northern also discussed with Cook the possibility of Cook becoming affiliated with Northern if the company decided to invest in the United States.
In early June 1979, after visiting Showell Farms, Cook approached Greenberg and asked him to have Bluebird rehire him as Chairman and Chief Executive Officer of Bluebird. Cook wanted his old job back because he "was frustrated, bored and generally fed up with inactivity" (Cook affidavit para. 16). Greenberg agreed to have Cook reappointed to the Board of Directors of Bluebird as its Chairman and Chief Executive Officer.
On June 11, 1979, after Greenberg had agreed to reappoint Cook, Bluebird disseminated to its shareholders its tender offer circular offering to acquire 750,000 of its own shares of common stock at $ 10.00 per share. The tender offer originally was to expire on June 28, 1979. On June 20, 1979, after Cook had been formally reappointed Chairman and Chief Executive Officer of Bluebird, Cook called representatives of Northern to advise them of this development. 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.
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 ...