decided: February 19, 1982; As Amended March 22, 1982.
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA (D.C. Civil Nos. 79-3157, 79-3446, 79-3563, 79-3688, 79-4034)
Before Gibbons and Higginbotham, Circuit Judges, and McCUNE, District Judge.*fn*
"Buy low, sell high" is good advice for any investor, but, unfortunately, this oft-repeated adage does not advise the investor as to what day or month the stock will be at its highest peak. This is an action by disappointed shareholders of Bluebird, Incorporated, who sold stock to their company at $10.00 per share in July, 1979, only to see their company agree to merge with another company, at $15.00 per share, in August, 1979. After the completion of discovery, the district court, in an exhaustive opinion, granted summary judgment in favor of all of the corporate and individual defendants. Staffin v. Greenberg, 509 F. Supp. 825 (E.D.Pa.1981). The plaintiffs appealed, and we will affirm.
There are no material facts in dispute, and we state them, as required by Rule 56, F.R.Civ.P., in the light most favorable to the plaintiffs. We have given the plaintiffs the benefit of every inference that a reasonable fact-finder could draw from the record evidence, and many of the facts that follow are actually inferences that the plaintiffs have properly insisted we draw in reviewing the district court's grant of summary judgment.
Bluebird, Incorporated, is one of the largest producers of hams and ham products in the United States. Its headquarters are in Philadelphia, Pennsylvania, and in 1979 its sales were approximately $573,000,000.00. From 1968 to March of 1979, defendant Herbert Cook and his family controlled between sixteen and twenty percent of Bluebird's stock, which was sufficient to give the family effective control of the company. Cook was Bluebird's Chairman of the Board and Chief Executive Officer.
Joel W. Greenberg, a commodities trader from Chicago, began to purchase Bluebird stock in 1973. He continued his purchases through 1977, and in that year he first requested representation on Bluebird's Board of Directors. Cook did not like or trust Greenberg, and he rebuffed each of Greenberg's requests for Board representation.
Greenberg continued his open market purchases, and on February 15, 1979, he advised Bluebird that future purchases could have the effect of delisting the stock from the New York Stock Exchange, on which Bluebird common stock was traded. At that time Greenberg filed with the S.E.C. a Schedule 13D statement*fn1 which revealed his intention to continue his purchases. On March 9, 1979, Greenberg filed an amendment to his Schedule 13D statement by which he advised Bluebird that he intended to file a notification with the Federal Trade Commission and the Antitrust Division of the Department of Justice pursuant to the pre-merger notification provisions of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, Pub.L. 94-435, Title II, § 201, 90 Stat. 1390, 15 U.S.C. § 18a.
Certain members of Bluebird's Board of Directors were extremely upset by Greenberg's activities, and decided, in response to Greenberg's March 7 Schedule 13D supplement, to seek a "white knight," that is, a friendly merger partner who would save the company from control by Greenberg. The feeling among the directors, especially Cook, was that Greenberg was simply a "marauder," a speculator in commodities who did not have the company's best interests at heart.
One of the potential "white knights" that Board members considered was defendant Northern Foods, Ltd., a British food products company. Northern and Bluebird had discussed Northern's acquiring Bluebird as early as May, 1978. The investment banking firm of Paine, Webber, Jackson & Curtis assisted in those early discussions, and Northern agreed to pay Paine, Webber a fee if the merger were concluded. Nicholas Horsley, Northern's chairman, met with Cook in August, 1978 and was impressed by Cook and Bluebird. Northern, which was considering a number of candidates for acquisition in Europe and the United States, kept Bluebird in mind as a good merger possibility. After the decision to seek a "white knight" was made by Bluebird in early March, 1979, Jacob Siegal of Bluebird called Northern to see if Northern were interested in being a candidate for knighthood. Northern was indeed still interested in talking with Bluebird, but Northern's management was unwilling to advance their planned visit to the United States, then scheduled for May, 1979.
Events occurred quickly after March 7. Cook talked with John L. Vogelstein, a member of the Board, who suggested that if Greenberg offered "a deal that we can't turn down" that he, Vogelstein, might sell to Greenberg. Cook, fearing that a "white knight" might not be found in time, called Greenberg to arrange a meeting. At that meeting on March 12, 1979, Cook told Greenberg that he did not want to work for him. He also told Greenberg that Greenberg should either stop his purchases or either Cook or Greenberg should buy the other's shares. Greenberg chose to buy Cook's shares. On March 27, 1979, Cook and Greenberg signed an agreement under which Greenberg bought all but one hundred of Cook's shares, for $12.50 per share. Neither the shareholders nor the Board of Directors were told about the sale until after it had occurred. Bluebird issued press releases disclosing the sale immediately after it was concluded.
Vogelstein and Steven B. Swensrud, also a Bluebird director, owned or controlled 517,000 and 240,000 shares, respectively. They were angry at Cook for selling to Greenberg without notifying them in advance, and when they tried to sell to Greenberg on similar terms, Greenberg refused to buy. Greenberg, however, began to consider the possibility of Bluebird's buying their shares, and that possibility eventually ripened into a tender offer. Upon advice of counsel, Bluebird decided to offer to buy 750,000 of its own shares from its shareholders, at $10.00 per share, to facilitate the liquidation of the holdings of Swensrud and Vogelstein.
Meanwhile, Cook left the company and agreed to perform consulting services for defendant Northern. Cook continued to serve as a consultant for Bluebird. Cook was "Northern's man in America," whose job it was to investigate possible food-related acquisitions for Northern. Northern held a considerable amount of ready cash that it wished to spend on a European or American food products company, and it retained Cook to look for such a company in the United States. Bluebird, however, was no longer under consideration by Northern, because Northern was interested in Bluebird only if Cook were in charge. One of the companies Cook visited was Showell Farms, Inc., of Maryland.
Life as a consultant was a little too slow for Cook. He testified at his deposition that he quickly became
fed up with bumming around. I realized I could never be a scratch golfer and was willing to swallow my pride and come back to work for Bluebird in spite of what I said in the past.
In early June, 1979, Cook met with Greenberg to ask for his job back. At an emotional meeting at the O'Hare Hilton in Chicago, Cook admitted to Greenberg that he had left because of distrust of Greenberg, but explained that the company had been such an important part of his life that he had decided to ask to be hired again as Chief Executive Officer. Greenberg was surprised by the turnabout, but agreed to hire Cook as C.E.O., having concluded that Bluebird would be a stronger company with Cook in charge. The Board of Directors approved Cook's return on June 18.
Bluebird's tender offer began on June 11, 1979. It was originally scheduled to continue through June 28, but on June 23 it was extended to July 6. The tender offer statement, sent to all Bluebird shareholders, as well as the supplement sent on June 23,*fn2 after Cook's return, disclosed that Greenberg had purchased Cook's shares for $12.50 per share and therefore owned a controlling interest. They also disclosed that Cook had resigned and then returned as Chief Executive Officer; that one of the reasons for the tender offer was that Vogelstein and Swensrud wished to divest themselves of their holdings; that Bluebird stock was trading at $9.50 per share on the New York Stock Exchange on May 25, 1979; and that in the event more than 750,000 shares were tendered, shares would be purchased pro rata.*fn3
The tender offer was over-subscribed, as the tender offer statement suggested it probably would be. Only 57% of the tendered shares were purchased, 60.5% of which were purchased from insiders (pro rata).
On June 20, 1979, during the tender offer, Cook called Christopher Haskins at Northern to discuss Cook's coming trip to Europe. The trip had been scheduled during Cook's period of forced idleness, and was to include a report by Cook to Northern on his American scouting efforts, as well as a vacation in Rumania. During the phone call Cook told Haskins of his return to Bluebird; suggested July 12-13 as the time Cook should meet with Northern to report on his consulting activities; and suggested that Northern might also wish to discuss acquiring Bluebird. Haskins's memorandum of the call, addressed to Northern's Policy Committee, read in part:
"Bud Cooke (sic) spoke to (me) ... on Wednesday night. He gave us the rather startling news that he was now back in charge of Bluebird, although not, of course, owning any shares. He had fixed up some deal with Greenberg who, you will recall, owns approximately 50% of the equity, and as a result, is back in charge....
I suggested that this meant that there was no longer any point in Northern and he talking, but he vigorously said there might be a stronger case for talking. He indicated that something might be done about Greenberg's shares, and was very keen to continue to go on with the visit to Nottingham in the week commencing 9th July.
I have a feeling that Bud would like very much to explore a Northern involvement in Bluebird which we could certainly look at, although you must remember that he sold his shares to Greenberg at 12 dollars against a current market price of approximately 8 dollars, so any deal with Greenberg would look very pricey.
I think, also, that Bud sees possibilities of injecting some of our ideas in America into Bluebird-certainly Showell would come into this category and possibly American Foodservices.
I think it would be a good thing to dust our Bluebird file, to examine the feasibility of us taking a substantial stake in Bluebird, and also Bluebird's own ability thereafter to acquire say the two companies mentioned above."
On July 12, Cook met in England with Northern's management, and, without the knowledge of Greenberg or, indeed, anyone else at Bluebird, discussed the possibility of Northern's acquiring Greenberg's controlling interest. Northern called Cook on July 23 and asked him to arrange a meeting with Greenberg. On July 25, Cook met with a very surprised Greenberg to tell him about Northern's interest. Five days later Greenberg told Cook that he was interested in talking with Northern, and Cook arranged a meeting between Greenberg and Northern for mid-August.
In the first week of August trading in Bluebird stock jumped dramatically. Bluebird, fearing that word of the planned merger discussions had leaked to the market, issued a press release on August 7, saying that ...