Field v. Trump
United States Court of Appeals for the Second Circuit
850 F.2d 938 (1988)
Julius and Eddie Trump (the Trumps) (defendants) proposed to acquire Pay’n Save, Inc. through a two-step merger. On September 7, 1984, the board of Pay’n Save accepted the Trumps’ offer and announced that the Trumps would commence a tender offer at $22.50 per share to be followed by a cash-out merger at the same price. Two Pay’n Save directors, Samuel Stroum and Stuart Sloan, dissented from the proposal and issued a statement criticizing the board. On September 12, the Trumps informed the Pay’n Save board that they were withdrawing their tender offer in order to negotiate with Stroum and Sloan. The same day, the Trumps reached an agreement to purchase Stroum and Sloan’s holdings for $3.3 million, a rate of $23.50 per share. Additionally, the Trumps agreed to pay $900,000 for Stroum and Sloan’s expenses. The total sum equaled a price of $25 per share. On September 13, Pay’n Save’s board announced that the Trumps would soon open a new tender offer for shares of Pay’n Save at a price of $23.50 per share. A Pay’n Save shareholder (plaintiff) who tendered shares at $23.50, sued the Trumps, Pay’n Save, and Pay’n Save’s directors and officers on behalf of a purported class of shareholders. The complaint alleged that the Trumps made a discriminatory tender offer that granted Stroum and Sloan a better price in violation of Securities and Exchange Commission (SEC) Rule 14d-10. The trial court granted the defendants’ motion to dismiss, holding that because the Trumps had withdrawn their initial tender offer, the best price rule did not apply to the transaction with Stroum and Sloan. The plaintiff appealed.
Rule of Law
Holding and Reasoning (Winter, J.)