Before SWAIM and SCHNACKENBERG, Circuit Judges, and WHAM, District Judge.
This appeal seeks a reversal of a judgment of the district court denying injunctive relief and dismissing on its merits the action filed by plaintiffs, minority stockholders of Continental Foundry and Machine Company, a Delaware Corporation (hereinafter called "Continental"), as a secondary action under Rule 23(b), Fed.Rules Civ.Proc., 28 U.S.C.A., to prevent Continental, its officers, directors and stockholders from selling its assets and liquidating the corporation.
The record shows that Continental, a large steel foundry and manufacturing company in sound financial condition, in June 1955 received from Blaw-Knox Company, a Delaware Corporation, (hereinafter called "Blaw-Knox"), another steel manufacturing concern, an offer to purchase approximately all of its assets for cash at approximate book value and to assume certain of its liabilities, including the cost of its employee pension plan. The offer was considered during the summer by the officers, the Executive Committee and certain of the directors of Continental who after such consideration concluded that the offer was sufficiently favorable that even though its acceptance would require liquidation of the corporation, which eventuality some of the directors opposed for personal reasons, the stockholders should have opportunity to pass on it.The details of the offer were not finally settled and reduced to writing until near September 1, 1955 after Blaw-Knox had succeeded in securing figures from actuaries estimating the cost to it of assuming Continental's pension plan. The writing was entitled Asset Purchase Agreement, specified the consideration, terms and conditions of the transaction, stated that the actuarial estimate of the pension liability Blaw-Knox offered to assume was approximately ten million dollars ($10,000,000) and fixed the closing time of the contract as not later than November 14, 1955.
On September 19 a directors' meeting was held by Continental with all directors present. The chairman submitted for consideration and action by the directors a plan for the liquidation of the corporation and for the sale of its assets to Blaw-Knox pursuant to its offer as set forth in writing in the Asset Purchase Agreement which was read to the meeting.
After a lengthy discussion and consideration of the plan and of the offer by Blaw-Knox to purchase the assets on terms set forth in the agreement, the board by resolution approved the plan to liquidate, recommended to the stockholders the authorization of the sale of the assets as expedient and for the best interests of the corporation, authorized the officers of Continental to execute and deliver the Asset Purchase Agreement subject to subsequent approval by the stockholders and directed that a notice be given of a special stockholders' meeting to be held on October 31, 1955 to consider and act on the plan and offer of purchase. The Asset Purchase Agreement was executed by the proper officers of the respective corporations on September 19, 1955.
The notice of such special stockholders' meeting was mailed to each shareholder on October 3 with a statement by the Board of Directors thereto attached recommending the liquidation of the corporation and the sale of its assets to Blaw-Knox pursuant to the Asset Purchase Agreement as being expedient and for the best interests of the corporation; also with a factual statement describing Continental's assets, liabilities, earnings, reserves, taxes, nature of its business including percentage of defense contracts, the market value of its common stock over the preceding three years and other pertinent information; also a copy of the Asset Purchase Agreement, with a brief summary of its terms and conditions, including the pension plan to be assumed by Blaw-Knox with an estimate of the liability so assumed at $10,000,000; also an estimate of dividends to be distributed after liquidation of $52 per share to Continental's stockholders after payment of debts; and stated that the recommended sale price of assets would approximate their book value and be higher than the highest price the stock had sold for on the market.
On October 21, 1955 plaintiffs served demands upon the Board of Directors of Continental that the resolution adopted at the directors' meeting be rescinded and no further steps be taken toward the sale of its assets and the liquidation of the corporation.
On October 28, 1955 plaintiffs began this action by filing their complaint against Continental and part of its officers, directors and stockholders (Blaw-Knox not being made a party) seeking temporary and permanent injunctions to restrain the special stockholders' meeting from approving the plan and restraining and enjoining the defendants from executing it with notice to defendants that the temporary injunction would be sought in district court at 10:00 a.m. on October 31, 1955. Pursuant to this notice the district court heard the parties by their counsel, denied the temporary injunction and set the hearing on the prayer for a permanent injunction and on the merits of the complaint for November 4, 1955 at 10:00 a.m.
On October 31, 1955 at 11:00 a.m., after the denial of the temporary injunction, the special stockholders' meeting was held and of the outstanding common stock of Continental having voting power of close to 500,000 shares, approximately 395,000, or 79%, were voted to authorize the sale of Continental's assets to Blaw-Knox and the liquidation of the corporation; approximately 25,000, or 5%, were voted in opposition; and approximately 80,000, or 16%, were not voted or were not represented at the meeting.
On November 4 the court proceeded with the hearing on the merits of the complaint and application for a permanent injunction. Copious evidence, oral and written, was received from witnesses for both parties, arguments of counsel heard and the case taken under advisement. On November 14, 1956 which was the closing date fixed in the contract with Blaw-Knox the court filed written findings of fact and conclusions of law and pursuant thereto entered judgment denying the prayer for permanent injunction and dismissing the action at plaintiffs' cost. On November 14, following the denial of the injunction sought and the dismissal of the action by the district court, the Asset Purchase Agreement between Continental and Blaw-Knox was closed between the two corporations pursuant to its terms, the assets being delivered by Continental and the consideration paid by Blaw-Knox. Continental then proceeded with its plan to liquidate.
On November 21, the court on plaintiffs' motion fixed the amount of the cost bond for appeal at $250 and on November 26 plaintiffs filed their notice of appeal with approved bond in said amount. No application for a stay order against defendants pending appeal was made by plaintiffs in district court after final judgment.
On December 2 appellants filed in this court a petition with extensive allegations of fact relating to the merits of the case and the proceedings in the district court praying an order from this court restraining appellees from consummating the sale of the corporate assets and the liquidation of the corporation pending the outcome of the appeal. On December 5 appellees filed their motion (1) to dismiss appellants' petition for injunction and (2) to dismiss the appeal.Appellees' motion to dismiss the appeal was supported by affidavit setting up facts calculated to show that the sale of assets had been consummated on November 14 and the liquidation in part completed before appellants' petition for injunction was filed in this court on December 2. Briefs were filed and on December 6 Judge Major of this court denied the petition for injunction and denied the motion to dismiss the appeal, but without prejudice.
On April 28, 1956 it was stipulated by counsel for the parties before the clerk of this court that an attorney for Blaw-Knox was present in the courtroom during ...