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June 6, 1972


The opinion of the court was delivered by: McLAREN, District Judge.


This action arises from an alleged agreement for an exchange of stock involving plaintiffs, Orthopedic Equipment Company, Inc. ("OEC") and its sole shareholder, F.I. Saemann, and defendant, Everest & Jennings, International ("E&J International"). Plaintiffs have moved for a preliminary injunction directing all of the defendants, their officers, agents, and attorneys to immediately cease their prosecution of Everest & Jennings International v. F.I. Saemann, 1968 E. No. 2217, in the High Court of Justice, Chancery Division, of Great Britain. Defendants have filed an opposing motion to stay the proceedings in this Court pending the outcome of the British litigation. Hearings were held on plaintiffs' motion from May 1 to May 5, 1972.

The motion for preliminary injunction is denied. The motion for stay of these proceedings pending the outcome of the British litigation is granted. The following constitutes this Court's findings of fact and conclusions of law for the purposes of the motion for a preliminary injunction and defendants' motion to stay.

E&J International owns all of the shares in Everest & Jennings, Inc. ("E&J INC."), which in turn owns all of the shares of Jennings Investment Company ("Jennings"). Jennings and Saemann each own 45.3 per cent of the equity, which gives each 50 per cent voting control, of Zimmer Orthopaedic Ltd. ("ZOL"), a British corporation. OEC and Jennings each own 46.4 per cent of the equity, which gives each 50 per cent voting control, of Orthopedia GmbH ("OK"), a West German corporation.

In 1967, the owners of the several Everest & Jennings companies decided to make a public offering of stock so that their interests in E&J INC., Jennings Plating Company, and Bernic Screw Products Company, Inc. would have a market quotation. E&J International was formed in 1967 as the holding company through which the reorganization and public offering would be made.

At a meeting with certain officers of the Everest & Jennings companies in Chicago on February 12, 1968, Saemann signed an instrument offering his shares in ZOL and OEC's shares in OK in exchange for E&J International shares as a part of the reorganization. On June 11, 1968, E&J International's registration statement became effective and the public offering commenced. In July of 1968, Saemann started an action in the High Court of Justice, Chancery Division, Case 1968 S No. 3704 (the A shares case) against ZOL and its British directors who held the remainder of the shares (non-voting). He immediately obtained a temporary injunction against the planned transfer of these shares to E&J International. In October 1968, E&J International brought the suit to which plaintiffs' motion for a preliminary injunction is directed (the 2217 case). That action seeks to compel specific performance of an alleged contract based on Saemann's offer of February 12, 1968.

This action was commenced on December 3, 1971. Count I alleges that that part of the 1968 reorganization whereby all of E&J Inc.'s stock was acquired by E&J International constituted, in effect, the sale of Jennings' interests in ZOL and OK, in breach of Saemann's right of first refusal created by a 1955 contract. Count I is a claim for specific performance; it requests that the defendants be directed to transfer their ZOL and OK shares to Saemann.

Count III is a bill for declaratory judgment requesting a determination that no contract is or ever was in existence requiring Saemann and OEC to exchange their interests in ZOL and OK for shares in E&J International.

Count II asserts a claim for damages and a declaratory judgment that defendants have violated § 10(b) of the Securities Exchange Act (the "Act"), 15 U.S.C. § 78j(b), and Rule 10b-5, 15 C.F.R. § 240.10b-5, promulgated thereunder, and that any contract based on the February 12, 1968 offer which might otherwise exist is void under § 29 of the Act, 15 U.S.C. § 78cc. The instant motion for a preliminary injunction is directed to Count II.

To prevail on a motion for a preliminary injunction, plaintiffs must show (1) that they will suffer immediate irreparable injury if it is not granted; (2) that the balance of hardships and conveniences to each side weighs in their favor; and (3) that there is a reasonable likelihood of their success on the merits. Midland-Ross Corp. v. Sunbeam Equip. Corp., 316 F. Supp. 171, 173 (W.D.Pa.), aff'd, 435 F.2d 159 (3d Cir. 1970). The plaintiffs have failed to sustain their burden of proof on any of these points.


Plaintiffs allege that they will be irreparably injured in several ways if defendants are permitted to prosecute the 2217 case for specific performance. They complain that the trial of the case in England will deprive them of a jury trial. This argument can be accorded little weight considering that Saemann himself began the English litigation with the A shares case, to which the 2217 case is primarily a defense (P.Ex. 157). The same consideration applies to plaintiffs' contention that costs, including attorney's fees, are normally assessed against the losing parties in England. Such costs, as well as the inconvenience and expense of defending the 2217 case, are not, of course, irremediable by money damages. As to injury through an adverse decision in that case — such as loss of control of the foreign corporations and contempt penalties — this does not rise above the level of harm that "may possibly ensue." Standard Brands, Inc. v. Zumpe, 264 F. Supp. 254, 267 (E.D.La. 1967). Indeed, it appears that even the defendants' English counsel has expressed the opinion that the February 12 document is too vague to be specifically performed under English law, and that the suit was brought only to assist in the defense of the A shares case (P.Ex. 157).

The fact that there have been settlement discussions in the 2217 case also tends to undermine the allegation of irreparable harm (Tr. 690-91).

Thus, it appears that any allegation as to irreparable injury from the English proceedings is ...

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