Azurite Corp. v. Amster & Co.

52 F.3d 15 (1995)

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Azurite Corp. v. Amster & Co.

United States Court of Appeals for the Second Circuit
52 F.3d 15 (1995)

Facts

Arnold Amster, Barry Lafer, and Joel Packer were the partners of Lafer, Amster & Co. (LACO), which subsequently became Amster & Co. (collectively, Amster management) (defendants). In August 1985, Amster management acquired over 5 percent of the stock of Graphic Scanning Corp. (Graphic). Accordingly, Amster management filed a Schedule 13D form with the Securities and Exchange Commission (SEC), which indicated that Amster management acquired the stock as an investment and not with the present intention of acquiring control of Graphic’s business. Amster management had invested in Graphic based on the anticipated liquidation of Graphic’s assets. Consequently, Amster management became worried when Graphic’s SEC filings on January 28, 1986, indicated that Graphic might not sell all of its assets if the purchase offers were too low. Thereafter, from February 3, 1986, though March 2, 1986, Amster management weighed its options. During that period, Amster management met with Graphic institutional investors, discussed the option of a proxy contest to force the liquidation of Graphic, and sought legal and investment advice. The evidence showed that the advisors all considered these discussions to be preliminary. Meanwhile, Amster management increased its holdings in Graphic. Despite amending the Schedule 13D form twice beforehand, Amster management did not disclose an intent to wage a proxy contest to gain control of Graphic until approximately March 3, 1986. A shareholder in Graphic, Azurite Corp. Ltd (Azurite) (plaintiff), sued Amster management for damages on the ground that Amster management’s alleged false disclosures and omissions in its Schedule 13D amendments caused Azurite and other investors to sell their shares in Graphic for lower prices. The district court granted summary judgment in Amster management’s favor. Azurite appealed.

Rule of Law

Issue

Holding and Reasoning (Lumbard, J.)

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