Carter Hawley Hale for negotiation of a merger with Field; and
that in doing these things, defendants engaged in manipulative,
deceptive, and fraudulent conduct, knowingly recklessly, and with
full knowledge of the consequences to the rights of the
plaintiffs-shareholders affected. Plaintiffs insist that the
evidence now in the record shows defendants made defensive
acquisitions by which they succeeded in depriving Field
stockholders of the opportunity to sell their shares at an
advantageous price. These acts of the defendants, according to
the plaintiffs, were committed, not in the interest of Field
shareholders, but solely to perpetuate themselves in office as
directors of the company.
The evidence shows that all of the corporate decisions about
which plaintiffs complain were made by defendants in their
capacity as directors of Marshall Field. It is the law, which the
jury would have to follow were it to deliberate to a verdict,
that the general authority and power of defendants as Field
directors during the period in question was to manage the
corporate business and affairs for the stockholders, and their
authority at all times was absolute, as long as they acted within
the law. Questions of policy and internal management were, in the
absence of nonfeasance, misfeasance or malfeasance, left wholly
to their decision. 5 Fletcher, Cyclopedia of the Law of Private
Corporations § 2100 (1976 rev. vol.); see Shlensky v. Wrigley,
95 Ill. App.2d 173, 237 N.E.2d 776 (1968). The laws of the State of
Delaware governing the powers of corporate directors give
defendants this authority. See Del. Code Tit. 8, § 141(a).
Directors of a publicly owned corporation do not act outside of
the law when they, in good faith, decide that it is in the best
interest of the company and its shareholders that it remain an
independent business entity. Lipton, Takeover Bids in the
Target's Boardroom, 35 The Business Lawyer 101, 130 (1975).
Having so determined, they can authorize management to oppose
offers which, in their best judgment are detrimental to the
company and its shareholders. Northwest Industries, Inc. v. B.F.
Goodrich Company, 301 F. Supp. 706, 712 (N.D.Ill. 1969). Certainly
acquisitions, expansions, and the purchase of new stores are
management decisions which, even though some shareholders may
consider them breaches of fiduciary duty, are not grounds for
liability under Section 10b or Rule 10b-5 unless there is
deception, misrepresentation, or nondisclosure in violation of
the statute and the rule. Santa Fe Industries, Inc. v. Green,
430 U.S. 462, 476, 97 S.Ct. 1292, 1302, 51 L.Ed.2d 480 (1977).
These principles have to be considered together with another
well settled rule. There can be no violation of Section 10b or
Rule 10b-5 unless the evidence establishes that the person or
persons charged with such violation committed three acts in
connection with the transaction in question: (1) used the mail or
other instrumentality of interstate commerce; (2) purchased or
sold a security, or sought to affect the same; and (3) used a
manipulative or deceptive device. See Olympic Capital Corporation
v. Newman, 276 F. Supp. 646, 653 (C.D.Cal. 1967); accord Cameron
v. Outdoor Resorts of America, Inc., 608 F.2d 187 (5th Cir. 1979)
and Securities & Exchange Commission v. Diversified Industries,
465 F. Supp. 104 (D.D.C. 1979). The term "purchase or sale" as
used in the section and rule is not limited to common law
transactions. Spector v. LQ Motor Inns, Inc., 517 F.2d 278, 285
(5th Cir. 1975), cert. denied 423 U.S. 1055, 96 S.Ct. 786, 46
L.Ed.2d 644; see Annot. 4 A.L.R.Fed. 1048. Exchange of shares in
connection with the merger or sale of corporate assets
constitutes a purchase or sale within Section 10b and Rule 10b-5.
Securities & Exchange Commission v. National Securities,
393 U.S. 453, 467, 89 S.Ct. 564, 572, 21 L.Ed.2d 668 (1969); Swanson v.
American Consumer Industries, Inc., 415 F.2d 1326, 1330 (7th Cir.
More importantly, in all such cases, the evidence must prove
that the person or persons engaged in such sale or purchase, as
defined, did so with intent to deceive, manipulate or defraud.
Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193, 96 S.Ct. 1375,
1380, 47 L.Ed.2d 668 (1976). The expression
"any manipulative or deceptive device or contrivance," used in
the statute and found in the rule, proscribes knowing or
intentional misconduct. See Securities & Exchange Commission v.
Texas Gulf Sulphur Co., 401 F.2d 833, 868 (2nd Cir. 1968)
(Friendly, J., concurring), cert. denied 394 U.S. 976, 89 S.Ct.
1454, 22 L.Ed.2d 756 (1969); Loss, Summary Remarks, 30 Business
Law 163, 165 (special issue 1975). This is conduct quite
different from negligence. "Use of the word `manipulative' is
especially significant. It is and was virtually a term of art
when used in connection with securities markets. It connotes
intentional or willful conduct designed to deceive or defraud
investors by controlling or artificially affecting the price of
securities." Ernst & Ernst v. Hochfelder, supra at 199, 96 S.Ct.
at 1384; see Klamberg v. Roth, 473 F. Supp. 544, 549 n. 8
(S.D.N.Y. 1979); Annot. 3 A.L.R.Fed. 819.
In this case, there is no evidence from which the jury could
find that during the period relevant to this controversy any
defendant engaged in the purchase or sale of any security, no
matter how the term is defined. Additionally, while it is true
that Marshall Field shares have always been sold on the open
market, there is no evidence that in making their managerial
decisions as to remaining independent, making acquisitions, and
expanding the business of Marshall Field, defendants in any way
acted with intent to deceive investors by controlling or
artificially affecting the price of securities. Cf. Ernst & Ernst
v. Hochfelder, supra 425 U.S. at 199, 96 S.Ct. at 1383.
The law and evidence, particularly the minutes of the meetings
of Field's directors and the letters and press releases of
defendants in response to merger proposals and the proposed
exchange offer, simply do not support plaintiffs' allegations
that the defendants violated Section 10b or Rule 10b-5 by
intentionally and deceptively failing to disclose their policy of
remaining independent so as to manipulate the price of the
company's stock. Therefore, plaintiffs' evidence does not present
a jury question on their claims under Section 10b or under Rule
10b-5. See Sanders v. John Nuveen & Co., Inc., 554 F.2d 790 (7th
B. Plaintiffs' Sections 14(d) and 14(e) Claims
The provisions of law plaintiffs here invoke are two of the
1968 amendments to the Securities & Exchange Act of 1934,
sometimes collectively referred to as the "Williams Act," and are
found in 15 U.S.C. § 78n(d-f). Bath Industries, Inc. v. Blot,
427 F.2d 97 (7th Cir. 1970). Section 14(d) prohibits the making of a
tender offer for any class of a registered stock if, after
consummation, the offeror would own more than five percent of the
class, unless a Schedule 13D form is first filed with the
Securities & Exchange Commission. Kennecott Copper Corp. v.
Curtiss-Wright Corp., 584 F.2d 1195, 1205-1206 (2d Cir. 1978).
Section 14(e), on which plaintiffs particularly rely in this
case, provides that
It shall be unlawful for any person to make any
untrue statement of a material fact or omit to state
any material fact necessary in order to make the
statements made, in the light of the circumstances
under which they are made, not misleading, or to
engage in any fraudulent, deceptive, or manipulative
acts or practices, in connection with any tender
offer or request or invitation for tenders, or any
solicitation of security holders in opposition to or
in favor of any such offer, request, or invitation.
The Commission shall, for the purposes of this
subsection, by rules and regulations define, and
prescribe means reasonably designed to prevent, such
acts and practices as are fraudulent, deceptive, or
The sole purpose of Congress in adopting these amendments "was
the protection of investors who are confronted with a tender
offer." Piper v. Chris-Craft Industries, Inc., 430 U.S. 1, 35, 97
S.Ct. 926, 946, 51 L.Ed.2d 124 (1977). The Williams Act
amendments were intended "to insure that the public shareholders
who are confronted by a cash tender offer for their stock will
not be required to respond without adequate