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November 6, 1989


Ann Claire Williams, United States District Judge.

The opinion of the court was delivered by: WILLIAMS


 This case is once more before the court for a ruling on the defendants' motion to dismiss the plaintiff FMC Corporation's first amended complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). In its sixteen count complaint, FMC alleges that some or all of the defendants violated various provisions of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78a-78kk, one provision of the Securities Act of 1933, 15 U.S.C. §§ 77a-77bbbb, all four provisions of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1962(a)-1962(d), and various provisions of state common law. The parties' struggle in this case has many of the attributes of a title fight between heavy-weight boxers. The marquee lists several well-known participants including the plaintiff FMC, a large corporation whose total revenues exceeded $ 3.16 billion in 1987, as well as the infamous Ivan F. Boesky, and co-defendant investment banking firms Goldman, Sachs & Co., Shearson Lehman Brothers, Inc., and Drexel Burnham Lambert, Inc., among others. Moreover, the stakes are high as FMC claims in excess of $ 235 million in damages.

 In the first round, this court granted the defendants' motion to dismiss FMC's Complaint. See FMC Corp. v. Boesky, 673 F. Supp. 242 (N.D.Ill. 1987) (Wiliams, J.) ("FMC I"). The court reviewed the allegations of FMC's complaint and concluded that FMC lacked standing to pursue its claims because it did not suffer an injury. Id. at 251. In round two, a Seventh Circuit panel reversed this court's judgment by a two to one vote. See FMC Corp. v. Boesky, 852 F.2d 981 (7th Cir. 1988) ("FMC II"). In this third round, the defendants attack FMC's amended complaint with a flurry of contentions. Some of these arguments are Tyson-like blows which purportedly "knock out" all or at least large segments of FMC's federal claims. Other arguments are directed towards eliminating individual counts. Finally, the defendants "jab" at some counts by attacking the specificity of FMC's pleadings. Interestingly, the defendants direct most of their efforts toward obtaining the dismissal of FMC's securities law claims. They make some attempts to undermine the RICO claims and allow the common law claims to stand virtually unchallenged. After a review of the parties' arguments and the pertinent authority, the court concludes that this third round will end in a split decision: FMC's securities law claims have been "knocked out" but its RICO and common law claims remain largely intact.


 Factual Background

 As the court has previously noted, this case was one of the first private civil actions filed in the wake of the Securities and Exchange Commission's well-publicized charges that Boesky had been the recipient of wrongfully leaked insider information. The SEC charged that Boesky used the leaked corporate information to make millions of dollars while trading in the stock of at least seven corporations. FMC is one of these seven corporations. FMC alleges that Boesky's illegal trading in its stock caused it to suffer in excess of $ 235 million dollars of damages in connection with its May, 1986 recapitalization. The pertinent factual allegations of the amended complaint are as follows. *fn1"

 FMC is a Delaware corporation with its principal place of business in Chicago. It produces machinery and chemicals for industry, government, and agriculture. Prior to its May, 1986 recapitalization 80 percent of FMC's twenty-two million common shares were publicly owned. FMC's common stock is traded on the New York Stock Exchange. In addition to Boesky, Goldman, Shearson, and Drexel, the rest of the defendants are as follows: David Brown, an officer of the defendant investment banking firm Goldman, Ira Sokolow, an officer of Shearson, Dennis Levine, an officer of Drexel, and the Boesky affiliated entities, *fn2" the various entities through which Boesky conducted his activities.

 Sometime before early 1985, Boesky, Levine, Sokolow, and Brown agreed to share confidential business information about impending corporate transactions for their individual and collective financial benefit. As high-ranking officers of influential Wall Street investment banking firms, each had access to such confidential business information. As a securities arbitrager, Boesky had the ability to turn that information into profits.

 In early 1985, after Boesky and his associates had made their arrangement, FMC's management embarked on a plan to "restructure" the corporation. To this end, it hired Goldman as financial advisor. At first management considered a leveraged buy-out, but later rejected that course in favor of a plan of recapitalization. By this plan, FMC sought to decrease the proportionate equity interest of public shareholders and increase the equity held by management. *fn3" Between December 1985 and May 1986 FMC and Goldman worked out the terms of the deal. In doing so, Goldman analyzed FMC's corporate structure, its long-term prospects in light of anticipated general economic and business conditions, and the growth nature of FMC's principal businesses. Goldman also had to evaluate the recapitalization plan and offer an opinion about its fairness to public shareholders.

 On February 21, 1986, in a letter to FMC's board, Goldman outlined the terms of the proposed recapitalization. The proposal called for an exchange of old FMC shares for newly issued stock ("new FMC stock"). The public shareholders would receive one share of new FMC stock plus $ 70 in cash in exchange for each share of old FMC stock. Management would receive 5.667 shares of new FMC stock in exchange for each share of old FMC stock. FMC's Thrift Plan, a type of employee profit sharing plan, would receive $ 25 in cash plus four shares of new FMC stock for each share of old FMC stock. At the time Goldman announced the plan, it also issued its fairness opinion, stating that the terms were fair to public shareholders.

 In reaching its fairness opinion, Goldman estimated that each share of old FMC stock held by the public shareholders and management had a value of $ 85. This estimate was consistent with the price at which the stock was trading. On February 21, 1986, the day Goldman issued its fairness opinion, FMC stock closed at $ 85 per share on the New York Stock Exchange ("NYSE"). Goldman also expected that each share of new FMC stock would have a market value of $ 15 after the recapitalization.

 On the morning of February 21, 1986, the price of FMC's stock continued to rise. By mid-morning the stock climbed to $ 83.00 per share. At this point, FMC requested that trading in its stock be temporarily suspended; it then made public the possibility that the corporation would be recapitalized. After this announcement, trading in the stock resumed. At the close of trading that day, the price of the stock stood at $ 85.625. The next day FMC's board approved the recapitalization plan and announced its terms to the public. By that time, Boesky had begun to sell the 95,300 shares he had purchased between February 18 and February 21.

 After the February 22nd approval and announcement of the recapitalization, the price of FMC stock continued to rise. Therefore, Goldman urged FMC to review the cash portion of the deal. Because of the price rise, Goldman believed that a cash payment of $ 70 would no longer be fair to the public shareholders. As a result, Goldman began to urge FMC's board to review the cash portion. Unbeknownst to FMC, Brown told Sokolow and Levine that the cash portion was under review. Levine then told Boesky. With this leaked information, Boesky and his Affiliated Entities bought about 1,922,000 shares of FMC stock between March 12, 1986 and April 4, 1986. These purchases accounted for more than 50% of the total volume of trading in FMC stock during this period. The amended complaint alleges that, because of Boesky's purchases, the price of FMC stock rose sharply to an artificial and distorted price level.

 On April 7, 1986, Goldman informed FMC's board that because of the high market price of FMC stock, Goldman might withdraw its February 21, 1986 fairness opinion. *fn4" Subsequently the trading price of FMC stock continued to rise, reaching $ 97 per share on April 25. As a result, Goldman told FMC that it would withdraw the fairness opinion unless FMC either increased from $ 70 to $ 80 the cash payment to be made to public shareholders, or decreased the number of shares of new FMC stock to be given to management shareholders. FMC's board opted for the $ 10 cash increase to public shareholders. *fn5" Goldman also revised its estimate of the post-recapitalization market value of new FMC stock. The new estimate was $ 17.14 per share.

 While the FMC board considered this new plan, the trading price of its stock continued to rise. Thus, on April 26, 1986, FMC's board agreed with Goldman and publicly announced that it would increase from $ 70 to $ 80 the cash portion to be paid to public shareholders. The Thrift Plan was also to receive 4.209 shares of new FMC stock for each share of its old FMC stock. As a result of this cash increase, the revised recapitalization plan called for an additional $ 220 million to go to the public shareholders. On this date, Goldman issued a fairness opinion stating that the new plan was fair to public shareholders. On May 2, 1986, FMC distributed a joint proxy statement/prospectus to the shareholders for the annual meeting to be held on May 22, 1986. The shareholders also approved an amendment to FMC's charter requiring a supermajority to authorize certain business combinations. At the meeting, the shareholders approved the plan. On May 28, 1986, FMC executed the plan.

 Meanwhile, on April 28, 1986, the first day of trading after the announcement of the increase in the cash to be paid to public shareholders, Boesky and the Affiliates began to sell their FMC stock. By May 1, 1986, they had sold enough of their shares to realize a profit in excess of $ 20 million. Eventually, all four of the individual defendants, Boesky, Levine, Brown, and Sokolow, were either sued by the SEC or indicted by the federal government on charges of violating various securities laws. These four individual defendants have all pled guilty to various criminal charges relating to the SEC's investigation. Boesky, as FMC dryly notes, currently resides at the Federal Correctional Institution in Lompoc, California.

 When ruling on this Rule 12(b)(6) motion, the court will accept FMC's allegations as true and will dismiss the complaint "for failure to state a claim only if [FMC] can prove no set of facts upon which relief will be granted." First Interstate Bank, N.A. v. Chapman & Cutler, 837 F.2d 775, 776 (7th Cir. 1988); Rutan v. Republican Party of Illinois, 868 F.2d 943, 944 (7th Cir. 1989). Nevertheless, the court notes that it is "not obligated . . . to ignore any facts set forth in the complaint that undermine the plaintiff's claim or to assign any weight to unsupported conclusions of law." Gray v. Dane County, 854 F.2d 179, 182 (7th Cir. 1988). The court will treat the voluminous exhibits that were appended to the complaint as part of the pleadings for the purposes of this motion. See Beam v. IPCO Corp., 838 F.2d 242, 244 (7th Cir. 1988).


 All Federal Claims: FMC Suffered No Actual Damages

 The defendants' first and most powerful argument supporting the dismissal of the complaint is that FMC suffered no actual economic damages as a consequence of their allegedly fraudulent activities. In its initial opinion, this court predicated its holding that FMC lacked standing on a finding that FMC suffered no damage from the recapitalization and its attendant costs. See FMC I, 673 F. Supp. at 250, 251 & n. 8. In its opinion, the Seventh Circuit held that the question of whether FMC suffered any specific amount of damages was irrelevant to the determination of "whether FMC was injured for the purpose of Article III's case or controversy requirement." FMC II, 852 F.2d at 992 n. 21. The Seventh Circuit found that this court erred by concentrating on the prudential or statutory dimension of the standing inquiry without first completing its analysis of whether FMC had satisfied the Article III constitutional requirements of the standing doctrine. Id. at 988-89. The Seventh Circuit proceeded to find that FMC had indeed made sufficient allegations to satisfy Article III's injury requirement. Id. at 994.

 However, the court did " not hold that FMC has satisfied any of the [applicable] nonconstitutional or prudential standing limitations" as it is possible to allege an injury that satisfies Article III's case or controversy requirement "yet fails to fall within the zone of interests protected by a specific federal statute." Id. at 994, 989 (emphasis in original). As a result of the majority's more narrowly focused inquiry, it did not evaluate this court's determination that FMC suffered no damages on account of the recapitalization. *fn6"

 This court's task on remand is "to determine whether FMC's federal claims fall within the zones of interests protected by the federal statutes under which FMC seeks relief." Id. at 994. *fn7" The question of whether FMC suffered any actual economic damage as a consequence of the defendants' actions is a pertinent one. To be able to recover under its securities claims, FMC must establish that it suffered actual damages. See 15 U.S.C. § 78bb; Pelletier v. Stuart-James Co., Inc., 863 F.2d 1550, 1557 (11th Cir. 1989); Sound Video Unlimited, Inc. v. Video Shack, Inc., 700 F. Supp. 127, 142 (S.D.N.Y. 1988); The Limited, Inc. v. McCrory Corp., 683 F. Supp. 387, 392 (S.D.N.Y. 1988) (listing cases). "'Actual damages' has been interpreted to mean some form of economic loss and does not include punitive damages." Pelletier, 863 F.2d at 1557, 1558.

 Under the RICO statute, persons may recover treble damages if they have been injured in their business or property. 18 U.S.C. § 1964(c). A plaintiff must show that his or her injury resulted in economic loss to recover under RICO. See Agency Holding Corp. v. Malley-Duff & Associates, Inc., 483 U.S. 143, 151, 97 L. Ed. 2d 121, 107 S. Ct. 2759 (1987) ("RICO . . . [is] designed to remedy economic injury"); Religious Technology Center v. Wollersheim, 796 F.2d 1076, 1089 (9th Cir. 1986), cert. denied, 479 U.S. 1103, 94 L. Ed. 2d 187, 107 S. Ct. 1336 (1987) ("the treble damages remedy is a potent weapon, [which] necessarily ...

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