The opinion of the court was delivered by: Bua, District Judge.
The above-captioned matter came before the Court for trial on
the merits of Counts IV and VII of plaintiffs' Second Amended
Complaint.*fn1 Also pending before the Court is a motion to dismiss
by defendant Paul A. Downing, Illinois Commissioner of Savings
and Loan Associations. The Court, having heard testimony on
October 24 and 25, 1983, and having reviewed deposition
designations, exhibits and memoranda submitted by the parties,
does hereby enter the following findings of fact and conclusions
of law pursuant to Rule 52(a) of the Federal Rules of Civil
1. Plaintiff Treco, Inc. ("Treco") is a Florida corporation
with its principal office in Jacksonville, Florida.
2. Plaintiff Wisconsin Real Estate Investment Trust ("WREIT")
is a common law business trust formed under the laws of the State
of Wisconsin with its principal executive office in Chicago,
3. Defendant Land of Lincoln Savings and Loan ("Lincoln") is a
savings and loan association chartered under the laws of
Illinois. Deposits at Lincoln are insured by the Federal Savings
and Loan Insurance Corporation. Lincoln is regulated by the
Federal Home Loan Bank Board and the Illinois Commissioner of
Savings and Loan Associations.
4. Nine individual defendants are members of Lincoln's Board of
Directors. The remaining defendant, Paul A. Downing, Illinois
Commissioner of Savings and Loan Associations, was added as a
party-defendant by the Second Amended Complaint filed October 18,
5. Between June 7 and June 23, 1983, plaintiffs' affiliate,
Technical Equipment Leasing Corporation, acquired shares of
Lincoln's stock. On June 24, 1983, WREIT and Treco each purchased
shares of Lincoln's stock from Technical. On September 21, 1983,
Lincoln had 2,496,956 shares of stock outstanding. Together,
Treco and WREIT own approximately 9.956 percent of the
outstanding common shares of Lincoln.
6. In June, 1983, Lincoln directors planned a public offering
of Lincoln stock to be effective June 9, 1983.
7. On June 8, 1983, Randy E. Nonberg, legal counsel for Dean
Witter Reynolds, Inc., underwriter of Lincoln's proposed public
stock offering, received a telephone call from an attorney
representing a California group of Lincoln's shareholders. The
California attorney told Nonberg that his clients owned 41
percent of Lincoln shares and wanted Lincoln to delay or stop its
public offering of stock, and if Lincoln refused, these
shareholders would seek a special meeting of Lincoln stockholders
in order to remove all the directors, elect new directors and
liquidate the association.
8. Dean Witter and Lincoln determined to proceed with the
offering. The California attorney then told Nonberg that his
clients were attempting to stay Lincoln's permit to offer and
sell securities in the State of California. Attorneys with
Nonberg's office later verified that such an attempt had been
made but was unsuccessful.
9. The threat was subsequently disclosed by Lincoln in the
offering circular issued on June 9, 1983:
Counsel for the Underwriters has been advised by
telephone that certain stockholders, whose percentage
ownership of the currently outstanding shares was
reported to exceed the minimum number necessary to
call a special stockholders' meeting, intend to call
such a meeting for the purpose of removing incumbent
directors, electing new directors and liquidating the
Association. (Plaintiffs' Exhibit 4, p. 41.)
10. Based upon the testimony of Thomas Kinst, President, Chief
Executive Officer and a member of the board of directors of
Lincoln, Lincoln's directors reasonably believed that liquidation
of Lincoln would substantially decrease the value of stock owned
by Lincoln's shareholders. Lincoln's directors also reasonably
believed that sudden removal of all of Lincoln's directors would
cause many depositors to withdraw their savings. Such action
would have not been in the best interest of Lincoln and its
shareholders. Kinst and Dean Witter reasonably believed the
threats of the California shareholders to be serious.
11. On June 15, 1983, a meeting was held at the offices of Dean
Witter in Chicago to discuss how Lincoln should respond to the
threats of the California group. At that meeting, potential bylaw
amendments were discussed and Lincoln's attorneys were requested
to draft bylaw amendments in response to the threats received
from the California shareholders. Other anti-takeover and
anti-liquidation measures were discussed.
12. On June 22, 1983, at a meeting of the board of directors,
the directors, pursuant to recommendation of counsel, voted to
amend Article XI of Lincoln's bylaws. ...