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First Jersey National Bank v. Dome Petroleum Limited and Dome Energy Limited

decided: December 19, 1983.


Appeal from the United States District Court for the District of New Jersey.

Seitz, Chief Judge, Sloviter, Circuit Judge and Lord, District Judge.*fn* Lord, District Judge, dissenting.

Author: Seitz


SEITZ, Chief Judge.


In this diversity case, Dome Petroleum Limited and Dome Energy Limited ("Dome") appeal an order granting a partial summary judgment which directs Dome to indemnify The First Jersey National Bank ("First Jersey"). Dome also appeals the district court's order denying its motion for permission to file a counterclaim against First Jersey for breach of a depositary agreement. The district court certified both orders under Fed. R. Civ. P. 54(b). This court has jurisdiction over Dome's appeals under 28 U.S.C. § 1291 (1976).

First Jersey appeals the district court's order denying First Jersey's claim for legal fees and out-of-pocket disbursements incurred in negotiating the depositary agreement and in litigating this action in the district court. The district court denied this motion by an order dated October 20, 1982. It also certified the order under Fed. R. Civ. P. 54(b). On October 21, 1982, First Jersey served a timely notice of its motion for reconsideration. First Jersey filed a notice of appeal from the district court's order with respect to fees and disbursements on October 27, 1982. The district court denied First Jersey's motion for reconsideration on December 8, 1982.

This court has no jurisdiction to hear an appeal if the appellant files its notice of appeal while there is pending a timely motion made pursuant to Fed. R. Civ. P. 59. Griggs v. Provident Consumer Discount Company, 459 U.S. 56, 103 S. Ct. 400, 403, 74 L. Ed. 2d 225 (1982); Dougherty v. Lehman, 711 F.2d 555, 558-60 (3d Cir. 1983). Although Rule 59 does not explicitly mention motions for reconsideration, this court has held that for purposes of Rule 4(a), a motion for reconsideration qualifies as a motion under Rule 59(e) to alter or amend a judgment. Richerson v. Jones, 572 F.2d 89, 93 (3d Cir. 1978). Because First Jersey filed its notice of appeal before the district court disposed of First Jersey's timely motion for reconsideration, this premature notice of appeal was a "nullity." Griggs, 103 S. Ct. at 403. First Jersey did not file a notice of appeal after the district court denied its motion for reconsideration. We will therefore dismiss First Jersey's appeal for want of jurisdiction.


This action for indemnification arises from a complex and unfortunate chain of events. Dome made a public offering to buy between 14 and 22 million shares of Conoco, Inc. ("Conoco"). First Jersey served as the depositary for the tender offer. Under the depositary agreement (the "Agreement"), First Jersey had numerous duties, including the duty to time-stamp incoming letters of transmittal and other documents, and the duty to transfer the tendered shares to Dome and to pay the tenderors in accordance with the terms of Dome's offer to purchase.

Conoco shareholders deluged First Jersey with tenders in response to Dome's offer. On May 26, 1981, the number of Conoco shares tendered was more than twice as great as the maximum number of 22 million shares that Dome offered to purchase. In such circumstances, section 14(d)(6) of the Securities Exchange Act, 15 U.S.C. § 78n(d)(6) (1976), requires a tender offeror to purchase an equal percentage of each tenderor's shares, if those shares were tendered prior to the expiration of the proration period.

May 26 was the last day of the proration period for Dome's offer to purchase, which explicitly provided for proration in the event of oversubscription. As part of First Jersey's contractual duty to deliver the Conoco shares to Dome and to pay the tendering shareholders, First Jersey determined which shares were validly tendered before the proration period expired and calculated the proration factor. On June 10, 1981, First Jersey mailed checks to the approximately 9,000 shareholders who had tendered their Conoco shares before the expiration of the proration period. The amount paid to each shareholder depended on the number of shares that Dome purchased from the shareholder, based on First Jersey's proration calculations.

On the last day of the proration period, First Jersey had stopped stamping the incoming letters of transmittal and other documents to indicate the date and time of receipt. The unstamped tenders included approximately 605,000 shares tendered by the State Street Bank and approximately 116,000 shares tendered by seventeen others. We will refer collectively to these tenderors as the "State Street Group." Because these shares were properly tendered on May 26, First Jersey should have included them in its calculation of the proration factor, transferred a percentage of the State Street Group's shares to Dome, and sent checks to the State Street Group on June 10. First Jersey did none of these things. Instead, the shares that Dome should have purchased from the State Street Group were purchased in a pro rata proportion from 9,000 other tenderors, and the amounts properly due the State Street Group were scattered in 9,000 directions.

Under the incorrect formula that First Jersey employed, Dome purchased at the offering price 40.26% of the shares tendered by each of the 9,000 shareholders, whereas it should have purchased 39.74% of these shares, plus 39.74% of the shares tendered by each member of the State Street Group. While the offering price was $65 per share, the market price at the time of Dome's purchase was $53. Thus, each of the 9,000 tenderors received a benefit of $12 per share for the.52% of their tendered shares that Dome should not have purchased. This benefit totalled approximately $3.5 million.

One or two days before First Jersey mailed the checks to the other timely tenderors, State Street Bank had called First Jersey to protest First Jersey's return of State Street Bank's shares as untimely tenders. Teresa Ernst, an Administrative Assistant in First Jersey's Special Services Department, checked First Jersey's records, and on the following day, she told State Street Bank that she had found no record of their claimed May 26 delivery. The next day, which Ernst identified as the day on which First Jersey mailed the checks, State Street Bank told Ernst that it would send a copy of its Brink's receipt for the delivery of the shares. This receipt arrived the day after the checks went out, and it was then that First Jersey determined that the tender had been timely.

First Jersey immediately notified its insurance carrier and Dome, and these parties and counsel discussed various possible remedies. Counsel contacted the Securities and Exchange Commission to advise them of the problem and the proposed solutions. The SEC's primary concern seems to have been that all timely tenderors be treated equally.

First Jersey decided to pay the State Street Group the difference between the offering price and the market price for a portion of the shares tendered by each member of the Group. This portion was determined by the same incorrect proration factor (40.26%) that First Jersey had applied to all the other timely tenderors. First Jersey mailed checks totalling approximately $3.5 million to the State Street Group and demanded reimbursement from Dome pursuant to the indemnification clause in paragraph 16.1 of the Agreement.

When Dome refused to pay, First Jersey entered into a loan receipt agreement with its insurer, Employer's Insurance of Wausau, which provided that the insurer would loan First Jersey approximately $3.5 million, to be repaid only to the extent that First Jersey is able to recover from a third party (Dome). First Jersey instituted this action for indemnification to recover the amounts paid to the State Street Group.*fn1

On review of a summary judgment, we do as the district court was required to do: we determine whether the record as it stands reveals any disputed issue of material fact, assume the resolution of any such issue in favor of the non-movant, and determine whether the movant is then entitled to judgment as a matter of law. See, e.g., Hollinger v. Wagner Mining Equipment Company, 667 F.2d 402, 405 (3d Cir. 1981).


First Jersey does not dispute that it breached an explicit contractual requirement when it stopped time-stamping tenders received before the proration period expired. For purposes of reviewing the partial summary judgment, we assume that First Jersey's failure to time stamp, or its failure to ascertain before it mailed checks to the 9,000 tenderors that State Street Bank's tender was timely, caused it to calculate the erroneous proration factor and caused the erroneous purchases and payments.*fn2 We will also assume that these mispayments breached First Jersey's duty under the Agreement to deliver shares to Dome and to deliver the purchase price to timely tenderors, pursuant to ...

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