Piper v. Chris-Craft Industries, Inc., 430 U.S. 1 (1977)

Piper v. Chris-Craft Industries, Inc.

No. 75-353

Argued October 6, 1976
Decided February 23, 1977 *
430 U.S. 1

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

Syllabus

Respondent Chris-Craft Industries was the unsuccessful tender offeror in a contest for the control of a corporation. During the course of the takeover contest, Chris-Craft brought suit for damages and injunctive relief against the management of the target corporation, its investment adviser, and Bangor Punta Corp., the successful competitor, alleging, inter alia, violations of § 14(e) and other provisions of the Securities Exchange Act of 1934, and Rule 10b-6 of the Securities and Exchange Commission. Section 14(e) makes unlawful

any fraudulent, deceptive, or manipulative acts or practices, in connection with any tender offer . . . or any solicitation of security holders in opposition to or in favor of any such offer. . . .

Rule 10b-6 prohibits issuers whose stock is in the process of distribution from market tampering by purchasing stock or stock rights until the distribution has been completed. After protracted litigation, the Court of Appeals ultimately held that Chris-Craft had standing to sue for damages under § 14(e) and Rule 10b-6, and that a claim for damages had been established. The court stated that it would not infer from the silence of the statute that Congress intended to deny a federal remedy as a "means of furthering the general objective of § 14(e). . . ." On the merits the court found violations of § 14(e) by all the defendants and violations of Rule 10b-6 by the successful competitor. The court then remanded for a determination of the amount of damages, and instructed the District Court to enjoin the successful competitor for at least five years from voting the target company’s shares acquired through violation of § 14(e) and Rule 10b-6.

Held:

1. A tender offeror, suing in its capacity as a takeover bidder, does not have standing to sue for damages under § 14(e); hence, the Court of Appeals erred in holding that Chris-Craft, as a defeated tender offeror, had an implied cause of action for damages under that provision. Pp. 24-42.

(a) The legislative history shows that the sole purpose of § 14(e) was the protection of investors who are confronted with a tender offer. Congress was intent on regulating takeover bidders, who had previously operated covertly, in order to protect shareholders of target companies; tender offerors, the class regulated by the statute, were not the intended beneficiaries of the legislation. Pp. 26-37.

(b) The creation of an implied cause of action for damages by judicial interpretation, such as is urged by Chris-Craft, is not necessary to effectuate Congress’ objectives in enacting § 14(e). This conclusion is confirmed by the four factors identified in Cort v. Ash, 422 U.S. 66, as "relevant" in determining whether a private remedy is implicit in a statute not expressly providing one: (i) Chris-Craft, a member of the class whose activities Congress intended to regulate for the benefit of target shareholders, was not "`one of the class for whose especial benefit [§ 14(e)] was enacted . . .’"; (ii) although nothing in the legislative history manifests an intent to deny a damages remedy to tender offerors, there is no material showing an intention to create such a remedy, and the pervasive legislative history negates any claim that the statute was intended to provide tender offerors with additional weapons in contests for control; (iii) it is not consistent with the underlying legislative purpose to imply a damages remedy for the tender offeror in a statute especially designed to protect shareholders of target corporations, particularly where the damages award (here $36 million to Chris-Craft) favors the tender offeror, not the "injured" shareholders of the target; and (iv) the cause of action by a tender offeror is one appropriately "relegated to state law," to the extent that the offeror seeks damages for loss of an opportunity to control a corporation. Pp. 37-41.

2. In the context of this case, Chris-Craft has no standing to sue for damages on account of the asserted Rule 10b-6 violations by the successful competitor, since Chris-Craft’s complaint is not that the price paid for the target company’s shares was influenced by the Rule 106 violations, but that the opportunity to gain control of the target company was lost by virtue of those violations. Thus, Chris-Craft’s complaint does not implicate the concerns of Rule 10b, which is aimed at maintaining an orderly market for the distribution of securities free from manipulative influences. Pp. 42-46.

3. The Court of Appeals erred, under the circumstances presented here, in awarding Chris-Craft injunctive relief. The case was tried in the District Court exclusively as a suit for damages after Chris-Craft expressly waived any claim to injunctive relief. Under these circumstances, this Court’s holding that Chris-Craft has no cause of action for damages under either § 14(e) or Rule 106 renders the injunction granted by the District Court inappropriate, premised as it was upon the impermissible award of damages. Pp. 47-48.

516 F.2d 172, reversed.

BURGER, C.J., delivered the opinion of the Court, in which STEWART, WHITE, MARSHALL, POWELL, and REHNQUIST, JJ., joined. BLACKMUN, J., filed an opinion concurring in the judgment, post, p. 48. STEVENS, J., filed a dissenting opinion, in which BRENNAN, J., joined, post, p. 53.