Life would assume all "liabilities, obligations and penalties of
Consumers." Accordingly, Susman contends that the Section 12(g)
requirements, under Delaware law and defendants' own merger
documents, survive Consumers' dissolution and bind Lincoln Life.
That argument is without merit. It wholly fails to address the
threshold issue already discussed: the invalidity of the
unsupported "vesting" concept. Moreover, even if the "vesting"
notion were to be accepted, it could only bind Lincoln Life as to
proxy solicitations made by it after Section 14 had assertedly
become applicable to it: that is, after the presumed "filing"
date of the arguably required registration statement (60 days
after April 30, 1973, or June 29, 1973). And at that date Lincoln
Life's sole shareholder was Lincoln, not Susman and his
counterparts. It would avail Susman nothing to have the proxy
solicitation rules apply at that time.
Susman's second contention is based on Section 12(g)'s express
provisions for deregistration by several means.*fn4 Dissolution
of a Section 12(g) corporation is not itself one of the defined
events permitting deregistration under those provisions, nor have
defendants otherwise adhered to the "deregistration" procedures
of the Act. Thus, Susman contends, there is no basis for assuming
defendants' obligations were extinguished.
Again, Susman's argument begs the threshold question by its
reliance on the "vesting" concept. Moreover, in Bastian v.
Lakefront Realty Corp., 581 F.2d 685 (7th Cir. 1978), our Court
of Appeals held that an issuer that had failed to register under
Section 12(g) and subsequently became entitled to
"deregistration"*fn5 was not required to engage in the "idle and
useless" act of applying for deregistration in order to
extinguish its Section 12(g) obligations. That decision
definitively disposes of Susman's second contention.
Susman next argues that defendants' construction of Section
12(g) would lead to results that could not have been intended: An
issuer "could perpetually escape registration by the simple
expedient of merging into a private corporation within 120 days
after registration is required." In fact, Susman asserts, that is
precisely what occurred in this case, as indicated by the
deposition admission of defendant Bernstein (President of
Lincoln) that the purpose for the timing of the merger was to
Of course a merger into a private corporation is no more than
the precise legal equivalent of a decline in a registrant's
shareholders below the 300 number. And as just noted, Bastian
teaches that to be a perfectly legitimate basis for
deregistration. As for defendant Bernstein's statement that the
timing of the merger was calculated to avoid registration (as
opposed to the reason for the merger), the Court finds that
decision no more legally significant than the filing of a lawsuit
shortly before the expiration of a statute of limitations period.
Finally, Susman argues that even if the obligation to register
under Section 12(g) were extinguished upon consumer's
dissolution, its distribution of the April 1973 proxy materials
without SEC approval constituted a violation of Section 14(a). In
that respect Susman relies on language from Reserve Life
Insurance Co. v. Provident Life Insurance Co., 499 F.2d 715, 724
(8th Cir. 1974), in which the Court of Appeals for the Eighth
Circuit noted that "[t]he obligation to register under § 12
brings into play the provisions of § 14(a) of the 1934 Act . . ."
(emphasis added). Susman construes that statement to require
compliance with the proxy solicitation requirements immediately
at the end of the fiscal year in which the issuer obtains Section
12(g) status-even before the due date of timely-filed
As already stated, such an argument is belied by the specific
language and interaction of Sections 12(g)(1) and 14(a). By their
terms no violation of the proxy solicitation rules can occur
until after the effective date of a registration statement-sixty
days after its filing due date of April 30, 1973, even if
Susman's argument as to registration were accepted (as it is not)
by this Court. Reserve Life is wholly consistent with that
conclusion, for in that case the issuer had failed to register
its securities, and then distributed proxy materials well after
expiration of the Section 12(g) 120-day period. Thus Susman's
final argument is equally untenable.
As already stated, Susman's Motion for Leave To Amend the
Amended Complaint is granted, but paragraphs 3, 4, and 5 of the
offered amendment are subject to this Court's concurrent granting
of defendants' motion for summary judgment. For the reasons
discussed at length in this opinion, this Court concludes that:
1. There is no genuine issue as to any
material fact as to Susman's claims
under Sections 12(g) and 14 of the
Act or the related SEC Rules.
2. Defendants are, and Susman is not,
entitled to judgment on such claims
as a matter of law.