SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 9)
----------------
Wallace Computer Services, Inc.
(Name of Subject Company)
FRDK, INC.
MOORE CORPORATION LIMITED
(Bidders)
COMMON STOCK, PAR VALUE $1.00 PER SHARE
INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS
(Title of Class of Securities)
932270101
(CUSIP Number of Class of Securities)
JOSEPH M. DUANE, ESQ.
FRDK, INC.
1 FIRST CANADIAN PLACE
TORONTO, ONTARIO, CANADA M5X 1GF
(416) 364-2600
(Name, Address and Telephone Number of Persons Authorized to
Receive Notices and Communications on Behalf of Bidder)
-------------------
COPY TO:
DENNIS J. FRIEDMAN, ESQ.
DAVID M. WILF, ESQ.
DAVID M. SCHWARTZBAUM, ESQ.
CHADBOURNE & PARKE LLP
30 ROCKEFELLER PLAZA
NEW YORK, NY 10112
(212) 408-5100
<PAGE>
FRDK, Inc. and Moore Corporation Limited hereby amend and
supplement their Tender Offer Statement on Schedule 14D-1 (as amended, the
"Statement"), originally filed on August 2, 1995, as amended by Amendment Nos.
1, 2, 3, 4, 5, 6, 7, and 8 with respect to their offer to purchase all
outstanding shares of Common Stock, par value $1.00 per share, of Wallace
Computer Services, Inc., a Delaware corporation (together with the associated
preferred stock purchase rights), as set forth in this Amendment No. 9.
Capitalized terms not defined herein shall have the meanings assigned thereto in
the Statement.
ITEM 10. ADDITIONAL INFORMATION.
On September 19, 1995, the United States District Court for
the District of Delaware (the "Delaware Court") issued an opinion (the
"Opinion") and an order (the "Order") denying the Company's motion to dismiss
the action commenced by Moore and the Purchaser against the Company in the
Delaware Court (the "Moore Action"). The Company had moved to dismiss the Moore
Action on the grounds that (1) the Moore Action is not ripe for adjudication;
and (2) Moore and the Purchaser brought the action in bad faith in an effort to
forum shop. In the Opinion, the Delaware Court concluded that the Moore Action
"is ripe and that Moore cannot be said to have engaged in forum shopping to such
a degree as to warrant depriving Moore of its chosen forum." Accordingly, the
Delaware Court issued the Order denying the Company's motion to dismiss the
Moore Action. A copy of the Opinion and the Order are attached hereto as Exhibit
(g)(9) and the foregoing description is qualified in its entirety by reference
to such exhibit.
On September 20, 1995, Moore and the Purchaser issued a press
release, a copy of which is attached hereto as Exhibit (a)(16) and is
incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(16) Press Release, dated September 20, 1995.
(9)(9) Opinion and Order, each dated September 19, 1995,
issued by the United States District Court for the
District of Delaware.
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete and
correct.
Dated: September 20, 1995
FRDK, Inc.
By: /s/ Joseph M. Duane
Name: Joseph M. Duane
Title: President
MOORE CORPORATION LIMITED
By: /s/ Joseph M. Duane
Name: Joseph M. Duane
Title: Vice President and
General Counsel
<PAGE>
1
EXHIBIT INDEX
(a)(15) Press Release, dated September 20, 1995.
(g)(9) Opinion and Order, each dated September 19, 1995,
issued by the United States District Court for the
District of Delaware.
Hilda Mackow, Vice President of Communications
Moore Corporation Limited
(416) 364-2600
Lissa Perlman
Kekst and Company
(212) 593-2655
DELAWARE COURT DENIES WALLACE COMPUTER SERVICES' MOTION
TO DISMISS MOORE CORPORATION'S LAWSUIT
TORONTO (September 20, 1995) -- Moore Corporation Limited (TSE, ME, NYSE:MCL)
said today that the United States District Court for the District of Delaware
denied Wallace Computer Services' (NYSE:WCS) motion to dismiss Moore
Corporation's lawsuit to set aside the Wallace takeover defenses. The Court
found that a case or controversy existed and that Delaware is a logical forum in
which the case could be heard. Wallace had moved to dismiss Moore's lawsuit on
the grounds that no case or controversy existed and that Moore was attempting to
"forum shop".
Moore's lawsuit primarily seeks an order compelling the Wallace Board of
Directors to redeem Wallace's "poison pill" or make it inapplicable to
Moore's tender offer and the merger it intends to consummate upon successful
completion of its offer. It also seeks to prevent Wallace from using other
defensive measures to impede the offer, the proposed merger or the proxy
solicitation that Moore is pursuing.
###
Moore Corporation Limited (TSE, ME, NYSE:MCL)is a global leader in delivering
information handling products and services that create efficiency and enhance
competitiveness for customers. Founded in Toronto in 1882, Moore has
approximately 20,000 employees and over 100 manufacturing facilities serving
customers in 59 countries. Sales in 1994 were US$2.4 billion.
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
MOORE CORPORATION LIMITED )
and FRDK, INC., )
)
Plaintiffs, )
)
v. ) Civil Action No. 95-472 MMS
)
WALLACE COMPUTER SERVICES, )
INC., ROBERT J. CRONIN, )
THEODORE DIMITRIOU, FRED F. )
CANNING, WILLIAM N. LANE, III, )
NEELE E. STEARNS, JR., )
R. DARRELL EWERS, RICHARD F. )
DOYLE and WILLIAM E. OLSEN, )
)
)
Defendants. )
ORDER
At Wilmington this 19th day of September, 1995, for the reasons set
forth in the Court's Opinion issued this date,
IT IS ORDERED that defendants' motion to dismiss is denied.
/s/ Murray M. Schwartz
United States District Judge
<PAGE>
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
MOORE CORPORATION LIMITED )
and FRDK, INC., )
)
Plaintiffs, )
)
v. ) Civil Action No. 95-472 MMS
)
WALLACE COMPUTER SERVICES, )
INC., ROBERT J. CRONIN, )
THEODORE DIMITRIOU, FRED F. )
CANNING, WILLIAM N. LANE, III, )
NEELE E. STEARNS, JR., )
R. DARRELL EWERS, RICHARD F. )
DOYLE and WILLIAM E. OLSEN, )
)
)
Defendants. )
Jesse A. Finkelstein, Esq., and Daniel A. Driesbach, Esq., of Richards, Layton &
Finger, Wilmington, Delaware; Of Counsel: Chadbourne & Parke LLP, New York, New
York; attorneys for plaintiffs.
Michael D. Goldman, Esq., Stephen C. Norman, Esq., and Michael A. Pittenger,
Esq., of Potter Anderson & Corroon, Wilmington, Delaware; Of Counsel: Walter C.
Carlson, Esq., Richard B. Kapnick, Esq., Brandon D. Lawniczak, Esq., and Linda
T. Ieleja, Esq., of Sidley & Austin, Chicago, Illinois; attorneys for
defendants.
OPINION
Dated: September 19, 1995
Wilmington, Delaware
<PAGE>
/s/ Murray M. Schwartz
Schwartz, Senior District Judge
I. Introduction
Since the mid-1980's, announcements of tender offers were invariably
followed by either the suitor or target quickly resorting to litigation. The
issues in those cases involved, inter alia, the constitutionality of various
state anti-takeover statutes. See, e.g., Nomad Acquisition Corp. v. Damon Corp.,
701 F. Supp 10 (D. Mass. 1988) (Massachusetts anti-takeover statute); Grand
Metro. PLC v. Pillsbury Co., 704 F. Supp. 538 (D. Del. 1988) (Florida, Louisiana
and Tennessee anti-takeover statutes); BNS Inc. v. Koppers Co., 683 F. Supp. 458
(D. Del 1988) (Delaware anti-takeover statute). Justiciability issues usually
raised under the "ripeness" rubric were easily resolved because the suitor
suffered an easily identifiable harm if an unconstitutional state statute were
to frustrate its conquest. If the statute protected the target unless the target
opted-out, the matter was ripe because the harm was immediate and there was no
need to develop an extensive factual record. See, e.g., Black & Decker Corp. v.
American Standard Inc., 679 F. Supp. 1183 (D. Del. 1988) (challenge to
Delaware's opt-out statute ripe); see also BNS, 683 F. Supp. 458 (same). If, on
the other hand, the target company had to opt-in to the protection of the
alleged unconstitutional statute, and had not done so at the time of the tender
offer, the matter was not ripe because there was no harm. See, e.g., Nomad
Acquisition, 701 F. Supp 10 (declaration that Massachusetts control shares
provision is unconstitutional not ripe since target had not yet opted-in); Grand
Metro., 704 F. Supp. 538 (declaration that Florida, Louisiana and Tennessee
anti-takeover statutes are unconstitutional not ripe since target had not yet
opted-in).
<PAGE>
The mid-1990's have brought a subtle change to the legal landscape.
With the constitutionality of the Delaware anti-takeover statute being resolved,
the focus is now upon whether the target board of directors has breached its
fiduciary duties by retaining the protection of the statute. This shift from
strictly legal constitutional challenges to a state anti-takeover statute to
fiduciary duty challenges relating to stripping the target of statutory
protection has complicated the ripeness inquiry. For the most part, a strictly
legal constitutional challenge did not require the development of an extensive
factual record; conversely, a breach of fiduciary duty challenge requires that a
record be made and possibly an evidentiary hearing held. Further, the potential
for an advisory opinion on the fact-specific inquiry of breach of fiduciary duty
is immense. Finally, while not part of the ripeness inquiry, there looms the
issue of whether a court should ever issue a mandatory injunction to a target
board with respect to anti-takeover statutes and anti-takeover devices at a time
when there is no reasonable assurance the tender offer will succeed. That
question requires the development of a record as to whether the existence of
anti-takeover protections and defenses inhibit the tender of shares, as
distinguished from inhibiting the suitor. Accordingly, that question is reserved
for another day. Attention is now turned to the specifics of this tender offer.
Plaintiffs Moore Corporation Limited ("Moore") and its wholly-owned
subsidiary FRDK, Inc. ("FRDK") filed a complaint against defendant Wallace
Computer Services, Inc. and its directors (collectively, "Wallace" or "Wallace
Board"), for injunctive and declaratory relief. Moore seeks to prevent the
application of Wallace's anti-takeover
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<PAGE>
devices and other defensive measures designed to impede FRDK's hostile tender
offer and declaratory relief that the proposed transaction complies with all
applicable laws, including securities and antitrust laws. Moore and FRDK, both
Wallace shareholders, allege Wallace has used defensive and evasive measures to
block the offer, thereby violating the Wallace Board's fiduciary duties owed to
its shareholders. Wallace moved to dismiss the action on the grounds that (1)
the action is not ripe; and (2) plaintiffs have brought the action in bad faith
in an effort to forum shop. Jurisdiction is based on diversity of citizenship,
28 U.S.C. Section 1332. For the reasons set forth below, defendants' motion to
dismiss will be denied.
II. Facts
Plaintiff Moore is an Ontario corporation engaged in the business of
delivering information handling products and services, with its principal place
of business in Toronto, Ontario. Docket Item ("D.I.") 1, Paragraph 7. Plaintiff
FRDK is a New York corporation with its principal place of business in Toronto,
Ontario. Id. Paragraph 8. It is a wholly-owned subsidiary of Moore and was
incorporated for the purpose of making a tender offer for all outstanding
Wallace stock in connection with a proxy solicitation and merger. Id. Paragraph
8. Defendant Wallace is a Delaware corporation engaged predominantly in the
computer services and supply industry, with its principal place of business in
Illinois. Id. Paragraph 9.
On July 30, 1995, FRDK announced its intention to commence a tender
offer for all outstanding shares of Wallace common stock (together with the
associated preferred stock purchase rights that were issued in connection with
Wallace's poison pill) at a price of $56 per share, making the value of the
proposed transaction approximately $1.3 billion. Id. Paragraph 20. Moore
intended, as soon as practicable after the consummation of the tender offer, to
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<PAGE>
cause Wallace to merge with FRDK, and then to deliver proxy solicitation
materials to the Wallace shareholders in order to nominate three individuals to
serve as and replace the members of the Wallace Board. Id. Paragraphs 21, 22.
FRDK's offer is an all-cash offer, which FRDK describes as
non-coercive in nature, that would provide Wallace shareholders a premium of 27%
over market price of Wallace stock value as of the date of the announcement of
the offer, and would not pose any threat to the interests of Wallace's
shareholders or to Wallace's corporate policy. Id. Paragraphs 24, 25. The offer
was conditioned upon, inter alia:
(a) the valid tender of a majority of all outstanding shares of
Wallace's common stock on a fully-diluted basis on the date of purchase;
(b) the redemption, invalidation or inapplicability of the rights
allowed under the Preferred Stockholder Rights Plan (the "poison pill");
(c) Wallace Board approval of the acquisition of shares pursuant to
the offer and proposed merger under Section 203 of the Delaware Business
Combination Statute ("Section 203");
(d) the proposed merger having been approved pursuant to Article Ninth
of Wallace's Restated Certificate of Incorporation ("Article Ninth"), or the
inapplicability of such article to the offer and proposed merger; and
(e) the availability of sufficient financing to consummate the offer
and proposed merger.(1) Id. Paragraph 20.
-----------------------------------------
(1)
At a hearing on September 13, 1995, the Court was advised that
financing had been obtained.
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<PAGE>
Moore alleges that the offer, proposed merger, and proxy solicitation
cannot be completed unless Wallace agrees to remove or make inapplicable its
anti-takeover devices. Id. Paragraph 27. The removal of such devices, including
the poison pill,(2) Article Ninth,(3) and the protection of Section 203,(4)
forms the gravamen of Moore's prayer for injunctive relief. The Wallace Board is
entitled under its poison pill to redeem the rights or make the poison pill
inapplicable to the offer and proposed merger by an amendment to the rights
agreement. Id. Paragraph 30. The Board is also empowered under Article Ninth to
avoid the shareholder vote requirement by approving the transaction by a
majority vote of the Board. Id. Paragraph 36. Finally, the Board has the right
to opt out of Section 203's protection under Delaware law. Id. Paragraph 31. The
Wallace Board has taken no steps to remove the anti-takeover devices. D.I. 28,
p. 10.
-----------------------------------------
(2)
The poison pill was adopted on March 14, 1990, and caused the Wallace
Board to declare a dividend of one preferred stock purchase right per share of
common stock, payable to each shareholder of record as of March 28, 1990. Each
right entitles the holder to purchase from Wallace one two-hundredth of a share
of designated stock at a price of $115. Additionally, following the occurrence
of certain events, including the acquisition of 20% or more of Wallace's common
stock, each holder of a right is entitled to exercise that right by purchasing
common stock of Wallace at half-price. D.I. 1, Paragraph 29.
(3)
Article Ninth, entitled "Certain Business Combinations," is designed
to impede coercive and inadequate tender offers. It prohibits certain business
combinations by any "interested shareholder" (defined to include any person who
directly or indirectly owns 20% or more of the outstanding voting power of
Wallace, or an affiliate or assignee thereof), unless the affirmative vote of at
least 80% of the combined voting power of the then outstanding shares of Wallace
stock is obtained. D.I. 1, Paragraphs 34, 35.
(4)
Section 203 applies to any Delaware corporation that has not opted out
of the statute's coverage. It provides that any person acquiring 15% or more of
a company's voting stock (thereby becoming an "interested shareholder") may not
engage in any business combination, including a merger, for three years after
becoming such, unless that person obtains or has obtained certain approvals by
the Board of Directors, or the affirmative vote of at least two-thirds of the
outstanding voting stock not owned by the interested shareholder. See 8 Del. C.
Section. 203.
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<PAGE>
In February, 1995, Moore attempted to initiate discussions with
Wallace regarding a possible business combination, but Wallace informed Moore
that it was not interested. D.I. 1, Paragraph 38. All efforts to discuss the
matter with Wallace after that point were unsuccessful, although in July, 1995,
the Presidents of Moore and Wallace agreed to schedule a lunch meeting for
August 8, 1995. Id. Paragraph 38; d.I. 31, Exh. F at section 2. Moore alleges
Wallace took specific steps to create additional obstacles to a merger. D.I. 1,
Paragraph 39. First, Wallace adopted a by-law amendment in June, 1995, providing
that any business to be raised by a stockholder at an annual meeting must be
presented sixty days before the meeting. Id. Additionally, Wallace approved a
"golden parachute" employment contract with defendant Robert J. Cronin,
Wallace's President and Chief Executive Officer, providing Cronin a
multi-million dollar severance package in the event of a change in his job
duties. Id.
Moore announced its intention to commence the tender offer in a press
release on Sunday, July 30, 1995.(5) Id. Paragraph 20. This complaint was filed
the following day, Monday, July 31, 1995, at 8:30 a.m. On August 2, 1995, FRDK
filed a Schedule 14D-1 with the Securities and Exchange Commission ("SEC"),
detailing the provisions of the tender offer. D.I. 28, p. 19. On August 14, the
Wallace Board unanimously concluded, on the advice of Goldman Sachs, its
financial advisor, that $56 per share was inadequate and the tender offer was
not in the best interests of Wallace shareholders. D.I. 22, p. 7. On August 15,
1995, Wallace formally rejected FRDK's offer. D. I. 28, p. 2. On that same day,
Wallace filed suit against Moore in the Southern District of New York, alleging
the proposed acquisition
-----------------------------------------
(5)
However, as discussed infra at part III(A), the formal commencement
date of the tender offer was August 2, 1995.
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<PAGE>
would violate Section 7 of the Clayton Act, and that Moore provided false and
misleading statements to the media in connection with the tender offer and
Schedule l4D-1. D.I. 22, p. 8. See Wallace Computer Services, Inc. v. Moore
Corp., 95 Civ. 6379 (CSH) (S.D.N.Y. filed Aug. 15, 1995).
Moore requests preliminary and permanent injunctive relief, to (l)
enjoin Wa1lace from taking any steps to frustrate or impede the ability of the
shareholders to consider the tender offer; (2) compel Wallace to redeem or make
inapplicable the rights associated with the poison pill; (3) compel Wallace to
approve the offer and proposed merger for the purposes of Section 203; (4)
compel Wallace to approve the proposed merger for the purposes of Article Ninth;
and declaratory relief to the effect that the offer and proposed merger comply
with all applicable laws, including securities and antitrust laws. D.I. 1,
Paragraph 47.
Wallace moved to dismiss the complaint on the grounds that (1) the
action is not ripe for adjudication; and (2) plaintiff engaged in forum shopping
in order to avoid Second Circuit precedent favorable to Wallace, which grants
antitrust standing to targets of hostile tender offers. D.I. 22, pp. 2, 13-l4.
See Consolidated Gold Fields, PLC v. Minorco, S.A., 871 F.2d 252 (2d Cir.),
cert. dismissed, 492 U.S. 939 (1989).
III. Analysis
A. Case or Controversy
This Court must determine whether an action filed in the absence of a
pending tender offer presents a ripe case or controversy. Article III, Section 2
of the United States Constitution requires, as a prerequisite to federal court
jurisdiction, the existence of an actual "case" or "controversy." U.S. CONST.
Art. III, Section 2. To satisfy this "case or controversy"
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<PAGE>
requirement, the action must present a legal controversy that (1) is real and
not hypothetical, (2) affects an individual in a concrete manner so as to
provide the factual predicate for reasoned adjudication, and (3) sharpens the
issue for judicial resolution. International Brotherhood of Boilermakers v.
Kelly, 815 F.2d 912, 915 (3d Cir. 1987). The "case or controversy" requirement
must be satisfied for all types of requested relief, including declaratory
relief. Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 671 (1950).
Declaratory judgment actions present difficult problems for courts
seeking to reconcile the tension between the "case or controversy" requirement
of Article III and declaratory judgments rendered pursuant to the Declaratory
Judgment Act, 22 U.S.C. Section 2201(a)(1988).(6) The United States Supreme
Court, recognizing this tension, has attempted to define the parameters of an
actual case or controversy for the purposes of the Declaratory Judgment Act:
The controversy must be definite and concrete, touching the
legal relations of parties having adverse legal interest . .
. and must be a real and substantial controversy admitting
of specific relief through a decree of a conclusive
character, as distinguished from an opinion advising what
the law would be upon a hypothetical state of facts.
Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 241 (1937). In order to determine
the difference between a hypothetical question and an actual controversy in an
action for
-----------------------------------------
(6)
The Declaratory Judgment Act, 22 U.S.C. Section 2201 provides:
In the case of actual controversy within its
jurisdiction . . . any court of the United States, upon
the filing of an appropriate pleading, may declare the
rights and other legal relations of any interested
party seeking such declaration, whether or not further
relief is or could be sought.
22 U.S.C. Section 2201(a)(1988).
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<PAGE>
declaratory judgment, the "question is whether the facts alleged, under all the
circumstances, show that there is a substantial controversy, between parties
having adverse legal interests, of sufficient immediacy and reality to warrant
the issuance of a declaratory judgment." Maryland Casualty Co. v. Pacific Coal &
Oil Co., 312 U.S. 270, 273 (1941). The rationale behind these principles is the
avoidance of rendering an advisory opinion, a danger which presents itself in a
case involving speculative or hypothetical injury. See, e.g., International
Longshoremen's & Warehousemen's Union, Local 37 v. Boyd, 347 U.S. 222, 223-24
(1954) ("Determination of the scope and constitutionality of legislation in
advance of its immediate adverse effect in the context of a concrete case
involves too remote and abstract an inquiry for the proper exercise of the
judicial function.").
The Court of Appeals for the Third Circuit has formulated a three part
test which informs the ripeness inquiry. In order for a case or controversy to
exist for the purposes of a declaratory judgment, three requirements must be
satisfied: (1) adversity of interest of the parties, (2) conclusivity of the
judicial judgment, and (3) the practical help, or utility, of that judgment.
Step-Saver Data Systems, Inc. v. Wyse Technology, 912 F.2d 643, 647 (3d Cir.
1990); see also Freehold Cogeneration Assoc. v. Board of Regulatory Comm'rs of
N.J., 44 F.3d 1178, 1188 (3d Cir. 1995), petition for cert. filed, 63 U.S.L.W.
3874 (U.S. June 13, 1995); Presbytery of N.J. of Orthodox Presbyterian Church v.
Florio, 40 F.3d 1454, 1463 (3d Cir. 1994); Armstrong World Indus. Inc. v. Adams,
961 F.2d 405, 411 (3d Cir. 1992). The ripeness of Moore's action for declaratory
relief will therefore be determined under this tripartite analysis.
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<PAGE>
(1) Adversity of Interest
Adversity, for the purposes of an actual case or controversy, exists
where the parties are so situated that they have adverse legal interests.
Step-Saver, 912 F.2d at 648. Where the plaintiff's action is based on a
contingency, it is unlikely that the parties' interests will be sufficiently
adverse to satisfy the adversity requirement. Armstrong, 961 F.2d at 411-12.
Courts have recognized, however, and Moore urges, that a plaintiff need not have
already suffered harm to establish adversity of interest between the parties.
See Pacific Gas & Elec. Co. v. State Energy Resource Conservation & Dev. Comm'n,
461 U.S. 190, 201 (1983) ("One does not have to await the consummation of
threatened injury to obtain preventative relief.")(citation omitted). In some
cases, where a plaintiff can demonstrate that present harm will flow from the
threat of future actions, plaintiff has met his burden of establishing
adversity. See Armstrong, 961 F.2d at 412. Plaintiff must, in those cases,
demonstrate that the probability of that future event occurring is "of
sufficient immediacy and reality to warrant the issuance of a declaratory
judgment." Salvation Army v. Department of Community Affairs, 919 F.2d 183, 192
(3d Cir. 1990) (quoting Steffel v. Thompson, 415 U.S. 452, 460 (1974)); see also
Polaroid Corp. v. Berkey Photo, Inc., 425 F. Supp. 605, 609 (D. Del. 1976)
(requiring imminent harm to satisfy adversity requirement for declaratory
judgment).
In order for Moore to satisfy the adversity requirement of the
ripeness test, Moore must demonstrate either (1) present adversity of legal
interests between the parties; or (2) immediacy and reality of future harm.
Courts have found sufficient immediacy and reality of harm where a tender
offeror has commenced a tender offer and subsequently seeks to challenge the
constitutionality of a statute governing the transaction. See, e.g., Black &
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<PAGE>
Decker Corp. v. American Standard Inc., 679 F. Supp. 1183, 1189-90 (D. Del.
1988) (tender offeror's challenge to constitutionality of Section 203 of the
Delaware Business Combination Statute brought after tender offer commenced found
ripe); see also BNS Inc. v. Koppers Co., 683 F. Supp. 458, 462, n.5 (D. Del.
1988) (same). However, if the tender offer has not yet commenced, courts are
unwilling to find that the alleged harm is sufficiently immediate and real. See
Armstrong, 961 F.2d at 414 (noting that federal courts have uniformly required
that a tender offer be commenced before they will review the constitutionality
of anti-takeover legislation); see also SWT Acquisition Corp. v. TW Services,
Inc., 700 F. Supp. 1323, 1329 (D. Del. 1988) ("I am of the opinion that an
essential prerequisite is the commencement of a tender offer which goes to the
heart of the merits of the challenge to the constitutionality of Section
203(a)(3).").
(a) Commencement Date of Tender Offer
The rules promulgated pursuant to Section l4 of the Securities
Exchange Act of 1934, 15 U.S.C. Section 78a et seq., provide that where a public
announcement of the tender offer is made, the tender offer is formally commenced
on that date unless the tender offeror files its Schedule 14D-1 with the SEC
within five business days of that announcement. See 17 C.F.R. Section 240.14d-2.
In the latter case, the formal commencement date is the date of the filing.(7)
Id. Moore issued its press release announcing the tender offer on July 30, 1995.
-----------------------------------------
(7)
Rule 14d-2, "Date of Commencement of a Tender Offer," provides, in
pertinent part, that a tender offer shall commence for the purposes of Section
14(d) of the Act . . . on the date when the first of the following events
occurs:
(a) (5) The tender offer is first published or sent or given to
security holders by the bidder by any means not otherwise
referred to in paragraphs (a)(l) through (a)(4) of this rule.
(continued...)
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<PAGE>
On August 2, 1995, well within the five day period of Rule 14d-2(b), Moore filed
its Schedule 14D-l with the SEC. Thus, the formal commencement date of the
tender offer was August 2, 1995.
Moore concedes that the tender offer was not formally commenced on the
day the public announcement was made. D.I. 28, p. 19. However, Moore argues that
the formal commencement date is not relevant. "In a distinction without great
meaning, defendants argue that for the claims herein to be ripe, plaintiffs
would have had to have waited until the tender offer was formally commenced (by
the filing of the Schedule 14D-1) before proceeding with this action. Such an
approach seeks to exalt form over substance . . . ." Id. at 18. Moore argues
that for all practical purposes, the tender offer was commenced on the day of
the announcement, July 30, 1995. Id. This argument, however, seeks to avoid the
clear application of Rule l4d-2. On August 2, 1995, within the five day period,
Moore filed its Schedule 14D-1 with the SEC. Therefore, the formal date of
commencement of the tender offer is August 2, 1995.(8) Since the complaint was
filed on
-----------------------------------------
(7)
(...continued)
(b) Public Announcement. A public announcement by a bidder through a
press release, newspaper advertisement or public statement which
includes the information in paragraph (c) of this section with
respect to a tender offer in which the consideration consists solely
of cash and/or securities . . . shall be deemed to constitute the
commencement of a tender offer under paragraph (a)(5) of this rule
Except, That such tender offer shall not be deemed to be first
published or sent or given to security holders by the bidder under
paragraph (a)(5) of this rule on the date of such public
announcement if within five business days of such public
announcement, the bidder . . . :
(2) Complies with Rule 14d-3(a) (requiring tender offeror to file a
Schedule 14D-1 with the SEC) . . . .
(8)
Furthermore, the terms of the press release do not indicate a present
commencement of a tender offer. Rather, the press release states, "Moore
Corporation Limited . . . announced
(continued...)
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July 31, 1995, two days before the tender offer was formally commenced, Wallace
argues that the case is not ripe under Third Circuit precedent.
(b) Effect of Subsequent Events on Ripeness
Moore nonetheless argues that this case should be considered ripe
because the events which occurred subsequent to the filing of the complaint
prove that sufficient adversity existed on the date of the filing. D.I. 28, p.
22, n. 9. Moore relies on Kansas City Power and Light Co. v. Kansas Gas and
Elec. Co., 747 F. Supp. 567 (W.D. Mo. 1990), where plaintiffs sought a
declaration that its Schedule 14D-1 and the tender offer comply with applicable
securities laws. Id. at 570. Defendants in KCP & L argued that plaintiff's
action was not ripe, since the action hypothetically assumed that defendants
would challenge the Schedule 14D-1 filing, and that challenge was not certain to
occur. Id. The court found the plaintiff's action to be ripe, since the
defendant ultimately brought the lawsuit that plaintiffs anticipated. Id. at
571; see also Household Int'l, Inc. v. Eljer Indus., C.A. No. 12862, 1993 WL
193213, *2 (Del. Ch. May 5, 1993)(found at D.I. 28 at Tab 4) (fact that
defendants later filed suit arising out of the same general facts, renders it
"quite impossible" to say that there was no ripe dispute at the time the
complaint was filed).
Wallace, not surprisingly, takes the opposite position. Wallace argues
that ripeness is to be determined as of the date the complaint was filed. D.I.
22, p. 11. At the
-----------------------------------------
(8)
(...continued)
today its intention to commence a tender offer for all of the outstanding common
stock of Wallace Computer Services . . . ." D.I. 29, Exh. E at Exh. (a)(1)
thereto (emphasis supplied). Later, the release states, "This week we will
commence an offer to purchase all of the outstanding common stock of Wallace at
$56.00 per share in cash, a total of approximately $1.3 billion . . . . " Id.
(emphasis supplied). This use of the future tense undermines Moore's argument
that the tender offer was commenced on the date the statement was released. The
Court, however, recognizes that an efficient market would react to the public
announcement.
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time the complaint was filed, Wallace argues, no case or controversy existed,
because FRDK had not yet filed its Schedule 14D-1, and Wallace had not even
considered, let alone rejected, FRDK's tender offer. Id. at 5. Wallace relies on
the Third Circuit appellate decision in Luis v. Dennis, 751 F.2d 604 (3d Cir.
1984), where the court found that plaintiff's challenge to a newly-enacted
statute was unripe, and stated: "Viewing the matter, as we must, at the time the
complaint was filed, we believe that the requisite immediacy and reality are
lacking in this case." Id. at 608.
Nonetheless, in Luis, the Third Circuit Court of Appeals did note that
subsequent events reinforced its conclusion that the matter was not ripe. It is
unknown what the Third Circuit Court of Appeals would have held if the
occurrence of subsequent events cried out for immediate adjudication. Similarly,
the Supreme Court has looked at subsequent events to determine this issue. In
Regional Rail Reorganization Act Cases, 419 U.S. 102 (1974), the Supreme Court
recognized that an intervening act which occurred after the District Court ruled
that the case was filed prematurely rendered the case ripe for adjudication.
We agree with the parties that this change in
circumstance has substantially altered the posture of
the case as regards the maturity of the
final-conveyance issues. Whatever may have been the
case at the time of the District Court decision, there
can be little doubt, for reasons to be detailed, that
some of the "conveyance taking" issues can and must be
decided at this time. And, since ripeness is peculiarly
a question of timing, it is the situation now rather
than the situation at the time of the District Court's
decision that must govern.
Id. at 139-40 (emphasis supplied); see also Buckley v. Valeo, 424 U.S. 1, 115-17
(1976) (issuance of regulations by Federal Election Commission subsequent to
lower court's decision and inevitability of the exercise of its other functions
renders case ripe for adjudication)
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(citing Regional Rail Reorg. Act Cases, 419 U.S. 102); see also Stewart v.
Hannon, 675 F.2d 846, 850 (7th Cir. 1982) (case or controversy existed by the
time plaintiffs filed their amended Court II to their complaint, even though no
case or controversy existed at the time the original Count II was filed);
Associated Gen. Contractors of Am., Inc., Okla. Chapter - Builder's Div. v.
Laborers Int'l Union of N. Am., 476 F.2d 1388, 1403 (Temp. Emer. Ct. App. 1973)
("The allegations in the complaint concerning a case of actual controversy
within the purview of the Declaratory Judgment Act are exceedingly questionable
for sufficiency; and until the International intervened the adversary nature of
the proceedings was most dubious. There is no question, however, that after that
intervention the case became highly adversary . . . .").
In the present dispute, the harm Moore alleged did occur, i.e., the
Wallace Board did reject Moore's offer. Also, the Wallace Board has not redeemed
or made inapplicable the poison pill, nor has it taken steps to make Section 203
and Article Ninth inapplicable to the offer. D.I. 28, p. 22. Taking plaintiff's
allegations that these actions amount to a breach of fiduciary duty as true, see
Armstrong, 961 F.2d at 410, n. 10, the Court finds that there is sufficient
adversity between the parties.
(2) Conclusivity
The second part of the Step-Saver tripartite analysis requires the
decree issued by the district court to be sufficiently conclusive to define and
clarify the legal rights or relations of the parties. Step-Saver, 912 F.2d at
648. A court must consider whether judicial action at the present time would
amount to more than an advisory opinion based on a hypothetical set of facts.
Presbytery, 40 F.3d at 1468. Furthermore, a conclusion of ripeness is supported
by factors that "the parties' claims would not substantially change in
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future litigation [and] that the current parties were appropriate to raise the
issues at bar . . . ." Id. (quoting Atlanta Gas Light Co. v. United States Dept.
of Energy, 666 F.2d 1359, 1363, n. 7 (11th Cir.), cert. denied, 459 U.S. 836
(1982)) (cited with approval in Armstrong, 961 F.2d at 421).
Wallace's alleged breach of fiduciary duty arising out of its failure
to redeem or otherwise make inapplicable its anti-takeover defenses is an issue
which must be resolved before this tender offer can be consummated. Similarly,
the issue of Moore's compliance with applicable laws has been raised by
Wallace's pending antitrust action against Moore in New York. Judicial action at
this time would therefore not amount to an advisory opinion based on a
hypothetical set of facts, since the factual predicate for both litigants'
allegations has already occurred. Accordingly, the conclusivity requirement of
the Step-Saver test is satisfied.
(3) Utility
The utility inquiry examines whether the court's decree will be
useful, in the sense that the parties' plans or actions are likely to be
affected by a declaratory judgment. Step-Saver, 912 F.2d at 649 n. 9. "The idea
behind the Act was to clarify legal relationships so that plaintiffs (and
possibly defendants) could make responsible decisions about the future." Id.;
see also Armstrong, 961 F.2d at 423 ("the proper focus of the utility inquiry is
the effect of a declaratory judgment on the parties' plans of action. . . .").
In light of these goals, it is clear that a legal decree from this Court would
substantially affect the actions of both Moore and Wallace.
A decision on the alleged securities and antitrust violations will be
useful in that it will permit the parties to alter their conduct. Should a court
find any violations of
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applicable laws, securities, antitrust, or otherwise, Moore will need to revise
its proposed course of conduct to remedy or preempt its legal violations. A
decision by this Court will have a significant effect on how both Wallace and
Moore conduct themselves in the future. Thus, the Step-Saver requirement that
the Court issue an order which will be useful is satisfied.
This Court finds that the Third Circuit tripartite test to establish
the existence of a case or controversy in an action for declaratory relief to be
satisfied. Accordingly, at the present time, this action is ripe for declaratory
relief, if warranted. By finding this action justiciable, the Court expresses no
opinion on the merits of the underlying causes of action.
B. Forum Shopping
As an alternative ground for dismissal of this action, Wallace argues
that Moore engaged in impermissible forum shopping, a practice condemned by the
Third Circuit appellate court. D.I. 22, p. 14. Wallace asserts that Moore filed
this suit prematurely, in an effort to preempt the filing of Wallace's own
antitrust suit, which Wallace has since filed in the Southern District of New
York. Id. at 16. Wallace argues that Moore prematurely filed this complaint to
prevent Wallace from availing itself of favorable Second Circuit precedent
granting antitrust standing to targets of hostile tender offers. Id.; see
Consolidated Gold Fields, PLC v. Minorco, S.A., 871 F.2d 252 (2d Cir.), cert.
dismissed, 492 U.S. 939 (1989). Accordingly Wallace urges this Court to dismiss
this action.
Where two actions are pending concurrently in separate forums, there
is a potential for conflicting resolutions. In response to this contingency, the
Third Circuit Court
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of Appeals has adopted the so-called "first-filed" rule, whereby in all cases of
federal concurrent jurisdiction, the court which first has possession of the
subject must decide it. See Crosley Corp. v. Hazeltine Corp., 122 F.2d 925, 929
(3d Cir. 1941), cert. denied, 315 U.S. 813 (1942); see also E.E.O.C. v.
University of Pa., 850 F.2d 969, 971 (3d Cir.), cert. granted in part, 488 U.S.
992 (1988), aff'd, 493 U.S. 182 (1990)[hereinafter EEOC]. This policy is based
on principles of equity and comity, and empowers a trial judge to exercise his
or her discretion and dismiss an action, where an action involving the same
issues between the same parties is already pending in another forum.
The rule, however, is not hard and fast. As the Third Circuit Court of
Appeals in EEOC observed, "[t]hat authority, however, is not a mandate directing
wooden application of the rule without regard to rare or extraordinary
circumstances, inequitable conduct, bad faith, or forum shopping. District
courts have always had discretion to retain jurisdiction given appropriate
circumstances justifying departure from the first-filed rule." EEOC, 850 F.2d at
972. Thus, given the appropriate set of "exceptional circumstances," a district
court need not adhere to the first-filed rule of the Third Circuit.
In EEOC, plaintiff University of Pennsylvania ("University") sought
dismissal of an action pending in the Eastern District of Pennsylvania, on the
grounds that the University had previously instituted similar proceedings in the
District of Columbia. Id. at 973. The district court declined to dismiss, and
the Third Circuit Court of Appeals affirmed, finding that the case presented a
set of facts appropriate to warrant departure from the first-filed rule. Id. at
977.
Wallace argues that EEOC is directly on point, and thus requires
dismissal of Moore's action. D.I. 22, p. 14. However, EEOC is distinguishable
from the present case.
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First, in EEOC, the University clearly filed suit in a bad faith, preemptive
fashion. The EEOC had subpoenaed the University's confidential tenure peer
review files, and had given the University twenty days in which to respond
before it would institute subpoena enforcement proceedings. Id. at 973. The
University knew that the EEOC planned to bring an action. Notwithstanding this
knowledge, the University took advantage of the twenty day grace period by
filing a preemptive suit in the District of Columbia, where it could avoid
unfavorable law, just three days before the expiration of the grace period. Id.
at 973. The University knew that the Third Circuit appellate court had
previously declined to recognize a privilege that would prevent disclosure of
confidential peer review files, which is the precise relief the University
sought. See E.E.O.C. v. Franklin & Marshall College, 775 F.2d 110 (3d Cir.
1985), cert. denied, 476 U.S. 1163 (1986).
Here, however, Moore filed suit with no similar knowledge of imminent
judicial proceedings on the part of Wallace, and thus the argument that Moore
filed suit preemptively, in bad faith, is more attenuated. Further, Moore's suit
was not preemptive and premature, as Wallace alleges, since this case is ripe
for judicial determination. Once the premature filing argument is stripped away,
Wallace is left arguing that the case must be dismissed solely on the grounds
that Moore engaged in forum shopping.
However, only where forum shopping is the sole motivating factor for
plaintiff's choice of forum is dismissal proper. While EEOC broadly states that
"forum shopping [has] always been regarded as [a] proper bas[is] for departing
from the [first-filed] rule," EEOC, 850 F.2d at 976, the cases cited for that
proposition hold that only where forum shopping is the sole factor motivating a
choice of forum might dismissal be proper. See Mattel, Inc. v. Louis Marx & Co.,
353 F.2d 421, 424, n. 4 (2d Cir. 1965)("[e]xamples
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of situations which would justify a departure from the 'first filed' rule of
priority include . . . cases where forum-shopping alone motivated the choice of
the situs for the first suit")(citations omitted)(emphasis supplied), cert.
dismissed, 384 U.S. 948 (1966); Rayco Mfg. Co. v. Chicopee Mfg. Co., 148 F.
Supp. 588, 593-94 (S.D.N.Y. 1957) ("[b]ut, I believe that I am justified [in my
decision on forum] by the readily apparent 'forum-shopping,' by the jumbled
plaintiffs and defendants in this case . . . .").
The Eastern District of Pennsylvania recently made this same
observation in Fischer & Porter Co. v. Moorco Int'l Inc., 869 F. Supp. 323 (E.D.
Pa. 1994). There, the court found no "exceptional circumstances" justifying
departure from the first-filed rule. The court reiterated the requirement that
forum shopping be the sole reason for choosing one forum over another in order
to warrant dismissal of the first-filed action. Id. at 325.
I do not find that there are any exceptional
circumstances present here that warrant departure from
the first-filed rule. There is no evidence that
plaintiffs' declaratory judgment action was brought in
bad faith. Furthermore, forum shopping cannot be the
sole reason for the choice of Pennsylvania as the situs
for the litigation because it is the logical and proper
place for it to go forward. Id.
Since a court will exercise its discretion and depart from the
long-standing first-filed rule only where the defendant can show that plaintiff
chose a particular forum solely for the purposes of forum shopping, the question
becomes whether there were other ties which logically connect the action to
Delaware. Wallace argues that Moore filed prematurely in Delaware in order to
deny Wallace the ability to file its antitrust lawsuit in a forum of its
choosing. D.I. 22, p. 16. Wallace alleges that New York should have been the
situs of this litigation, given the extensive contacts Moore has with New York.
D.I. 31, p.
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15. Wallace argues that in addition to the fact that FRDK is incorporated in New
York, FRDK's financial advisor Lazard Freres & Co., its information agent, and
its counsel all are located in New York. Id. at 16-17. Additionally, Wallace
points out that most of the meetings and communication between the parties
occurred in New York. Id. Moore, on the other hand, argues that since the issues
raised involve Delaware law, a Delaware corporation, and a Delaware Board of
Directors, Delaware is a proper and logical place to bring this lawsuit. D.I.
28, pp. 30-31. Moreover, Moore urges, under Delaware law, it would obtain
jurisdiction over the individual Wallace Board defendants, but would not do so
under New York law. The fact that Wallace has now agreed to enter an appearance
for its individual Board members in the New York district court action is of no
moment. At the time Moore filed suit in the Delaware district court, Moore could
not know that the individual members of the Wallace Board would be amenable to
being defendants in the Southern District of New York.
A plaintiff is entitled to file suit in any forum of his choosing,
provided that the particular forum is otherwise proper. Wallace's objection
stems more from the fact that Wallace wanted the New York district court to
decide the matter, rather than the fact that it does not believe that Delaware
is a proper forum. The fact is that both litigants had favored forums. Wallace
prefers the Southern District of New York because case precedent in the Second
Circuit Court of Appeals confers antitrust standing to hostile takeover targets.
Moore favors the District of Delaware because the Third Circuit Court of Appeals
has not decided the antitrust standing issue. Since, however, Delaware is a
logical and appropriate choice of situs for the litigation, Wallace's argument
that Moore was motivated solely by impermissible forum shopping is not
persuasive.
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IV. Conclusion
The Court has concluded that this matter is ripe and that Moore cannot
be said to have engaged in forum shopping to such a degree as to warrant
depriving Moore of its chosen forum. An order will therefore be entered denying
Wallace's motion to dismiss.
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