Leasco Data Processing Equipment Corp. v. Maxwell

Robert Maxwell (defendant) attempted to arrange a joint venture between his company, Pergamon Press Limited (Pergamon), and Leasco Data Processing Corporation (Leasco) (plaintiff), a United States entity. When Leasco declined, Maxwell and others within his company and other companies he controlled, along with their accountants and bankers (collectively, the Maxwell team) (defendants), engaged in an extensive campaign to convince Leasco to acquire Pergamon. During the campaign, the Maxwell team provided false and misleading information about Pergamon’s business, financial health, and value. They also created a false deadline for the transaction, forcing expedited action by Leasco. In addition, the Maxwell team convinced Leasco to buy large quantities of Pergamon stock on the London Stock Exchange market before the takeover, again based on false and misleading information. While the parties intended to complete the transaction in England, where Pergamon and many of the Maxwell team were based, there were a significant number of meetings, disclosures, and communications between the parties in the United States. After signing a conditional agreement to proceed with the acquisition in June 1969, Leasco was able to conduct further due diligence. Based on its investigation, Leasco withdrew from the transaction. However, Leasco was left holding $22 million of Pergamon stock. Leasco sued the Maxwell parties in New York federal court pursuant to Rule 10b-5 promulgated under the Securities and Exchange Act of 1934 for fraud committed in connection with a securities transaction. The Maxwell team moved to dismiss the complaint, averring that English law should apply and, therefore, the court could not exercise subject-matter jurisdiction under the act. The federal district court denied the motion, and the Maxwell team appealed.