Piper v. Chris-Craft Industries, Inc.

Chris-Craft Industries, Inc. (Chris) (plaintiff) tried to take control of Piper Aircraft Corporation (Piper) (defendant) by purchasing stock, making a cash tender offer, and making a stock exchange tender offer. Chris stopped purchasing stock on the open market after being told by Securities and Exchange Commission (SEC) officials that making such purchases while an exchange offer was pending were not permitted under SEC Rule 10b-6. Piper tried to ward off the takeover by sending letters to shareholders, issuing stock to Grumman Aircraft Corporation (Grumman) without making full disclosure to shareholders, then cancelling the Grumman deal and entering an arrangement with Bangor Punta Corporation (Bangor). Piper family members traded their 31 percent share of Piper for Bangor shares and supported an exchange tender offer by Bangor. While the Bangor offer was pending, Bangor made private purchases of Piper stock. The SEC had already announced that Rule 10b-13 would expressly prohibit such purchases, which had been previously considered barred by 10b-6. The SEC did not warn Bangor as it did Chris. Bangor and Chris continued vying for control, and ultimately Bangor held more than 50 percent of Piper stock to Chris’ 42 percent. Chris sued in district court. The court of appeals determined that Chris had standing under § 14(e) of the Williams Act and was owed damages by Piper. The district court awarded over $1.6 million in damages plus $600,000 in interest. The court of appeals reversed the damage award, setting damages at more than $25 million and calculating interest at about $10 million. Piper appealed to the United States Supreme Court.