Gissen v. Colorado Interstate Corp.

60 F.R.D. 500, 18 Fed. R. Serv. 2d 282, 1973 U.S. Dist. LEXIS 12276
CourtDistrict Court, D. Delaware
DecidedAugust 15, 1973
DocketCiv. A. Nos. 4645, 4697
StatusPublished

This text of 60 F.R.D. 500 (Gissen v. Colorado Interstate Corp.) is published on Counsel Stack Legal Research, covering District Court, D. Delaware primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Gissen v. Colorado Interstate Corp., 60 F.R.D. 500, 18 Fed. R. Serv. 2d 282, 1973 U.S. Dist. LEXIS 12276 (D. Del. 1973).

Opinion

MEMORANDUM OPINION

LATCHUM, District Judge.

On May 3, 1973 an action entitled Cecilia R. Gissen v. Colorado Interstate Corporation, et al., Civil Action No. 4645 (“Gissen action”) was filed in this District. The complaint as amended in that action charges that Colorado Interstate Corporation (“CIC”), Coastal States Gas Corporation (“Coastal") and their respective directors, in violation of Sections 10(b) and 14(a) of the Securities and Exchange Act of 1934 (the “Act”) and the rules promulgated thereunder, engaged in an illegal course of conduct whereby they failed adequately to disclose and falsely represented allegedly material circumstances in connection with the dissemination of a joint proxy statement issued by CIC and Coastal incident to a merger of the two companies.1 The Gissen action was brought by the plaintiff on her own behalf and on behalf of all other persons similarly situated, namely all persons who were CIC stockholders on November 1, 1972 and who received a notice of a special meeting of CIC stockholders to be held on December 20, 1972 and an accompanying proxy statement. After hearing, the Court found that (1) the class sought to be represented was so numerous that joinder of all members was impracticable, (2) there were questions of law and fact common to the members of the class which predominate over any questions affecting only individual members, (3) a class action was superior to all other available methods for a fair and efficient adjudication of the controversy, (4) the claims of the representative party were typical of the claims of the class, and (5) the representative party will fairly and adequately protect the interest of the class. Consequently, the Court determined on July 16, 1978, in accordance with Rule 23(c)(1), F.R.Civ.P., that the Gissen action could be maintained as a 23(b)(3) class action on behalf of all persons, exclusive of the defendants, who were stockholders of CIC on November 1, 1972 and ordered that specified notice of the pendency of the action be given to the class pursuant to Rule 23(c)(2), required the enclosure of a request for exclusion from the class and provided for the payment of expenses for preparation and mailing of the notices.2

Thereafter, on July 30, 1972 an action entitled Osher Chechik v. Coastal States Gas Corporation, et al., Civil Action No. 4697 (“Chechik action”) was transferred to this Court from the United States District Court For The Eastern District of New York. The Chechik action had been filed there on June 21, 1973. When the Chechik action was transferred to this District, plaintiff moved for an order (a) determining that the suit could be maintained as a class ac[502]*502tion on behalf of all persons, exclusive of the defendants therein, who were stockholders of CIC on November 1, 1972 and as a separate class, all persons who were CIC stockholders continuously between July 7, 1972 and January 2, 1973, (b) consolidating the Chechik action with the Gissen action for pre-trial purposes and (c) authorizing a joint notice to the classes covered in both suits advising of the pendency of both actions.3

A hearing was held on that motion on August 2, 1973. At that hearing, CIC and Coastal moved (a) to stay all discovery pending in both the Gissen and Chechik actions, and (b) to stay the sending of the class action notices ordered by the Court in the Gissen action on July 16, 1973.4

After fully reviewing the record in both eases and hearing counsel, the Court ruled from the bench that (1) Chechik’s motion to consolidate his action with the Gissen action for pretrial purposes under Rule 42(a) was granted, (2) Chechik’s motion to give a joint notice to the classes in both actions was denied, (3) CIC and Coastal’s motions to stay discovery and stay sending class action notices were denied, and (4) decision was reserved on Cheehik’s motion for a determination that his action could be maintained as a class action.5 In ruling on these latter motions, the Court concluded that the class action notices which had been ordered by the Court on July 16, 1973 and were ready for mailing should not be further delayed in putting the class members on notice of the pending Gissen action and that this would be the effect if a joint notice had to be prepared as requested by Chechik or if a stay were granted as requested by CIC and Coastal. The Court also did not believe that discovery should be stayed in the Gissen and Chechik actions pending a possible transfer to this District of a like suit filed in the United States District Court for the Western District of Texas.6 However, it did order the Gissen and Chechik actions consolidated for pre-trial purposes, including discovery, with the admonition to the attorneys for the plaintiffs not to duplicate their efforts and to be reasonable in scheduling discovery with the defendants.

This brings the Court to the point of determining the remaining question whether the Chechik action should be maintained as a class action as provided by Rule 23(c) (1).

Upon the present record the Court concludes that the Chechik action may be maintained, at least at present, as a class action representing a sub-class, that is, persons who were stockholders of CIC continuously from July 7, 1972 to January 2, 1973 with respect to the First and Fourth Claims of the Chechik complaint.

The Second and Third Claims of the Chechik complaint are identical to the claims asserted in the Gissen action. Since the Gissen action has been determined to be a class action brought under Rule 23(b)(3) representing those persons, other than defendants, who were CIC stockholders on November 1, 1972 and since it has also been determined that the plaintiff Gissen would adequately and fairly represent the class with respect to the charges that the defendants violated Sections 10(b) and 14 (a) of the Act and the rules promulgated thereunder, there is no good reason to permit the Chechik action to duplicate this effort and to proceed as a class action for the same class members in [503]*503order to vindicate the same alleged wrongs.

However, Chechik contends that its First and Fourth Claims asserted in the complaint are in fact broader than the claims asserted in the Gissen action. The First Claim asserted in the Chechik action on behalf of CIC stockholders who held stock continuously from July 7, 1972 to January 2, 1978 (referred to as the “Forced Seller Class”) is based on Section 10(b) of the Act and appears to be as follows: As a result of a collusive agreement between the management of CIC and Coastal, which resulted in misleading information contained in a tender offer and disseminated to the shareholders of Colorado, 47 % of CIC’s shareholders were induced to sell their stock to Coastal. Thereafter the defendants forced a merger of CIC into Coastal. This merger was assured because Coastal together with CIC’s management controlled a majority of CIC’s stock. Thus, in a continuous pattern dating from the July 1972 tender offer, the defendants forced a merger between Coastal and CIC on January 2, 1973 in which a minority of CIC’s shareholders received an inadequate return for the CIC stock they were forced to surrender in the merger.

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Bluebook (online)
60 F.R.D. 500, 18 Fed. R. Serv. 2d 282, 1973 U.S. Dist. LEXIS 12276, Counsel Stack Legal Research, https://law.counselstack.com/opinion/gissen-v-colorado-interstate-corp-ded-1973.