OPINION OF THE COURT
SCIRICA, Circuit Judge.
This securities appeal arises from the acquisition of Rockefeller Center Properties, Inc. by a group of investors led by Whitehall Street Real Estate Limited Partnership V. Plaintiffs are former Rockefeller Center Properties, Inc. shareholders who allege the proxy statement and other documents prepared in connection with the acquisition were materially misleading because they failed to disclose (1) that the Whitehall Group was negotiating to sell roughly 20% of Rockefeller Center to General Electric following the acquisition and (2) that, as a result of the acquisition, the Whitehall Group would own transferable development rights (air rights) associated with Rockefeller Center.
Rockefeller Center Properties, Inc. was a real estate investment trust created in 1985 via a $750 million initial public offering of common stock. Rockefeller Center Properties, Inc. used the offering proceeds together with $550 million raised through the sale of discounted debentures to make a $1.3 billion loan to Rockefeller Center Properties and RCP Associates, two partnerships (the "Partnerships")
In the fall of 1994, Rockefeller Center Properties, Inc. realized it lacked sufficient cash to make upcoming debenture payments. In order to avoid default, it signed financing agreements with Whitehall Street Real Estate Limited Partnership V and Goldman Sachs & Co. Whitehall agreed to make a $150 million loan to Rockefeller Center Properties, Inc. in exchange for an assignment of part of the Rockefeller Center mortgages, warrants for Rockefeller Center Properties, Inc. stock and "excess" cash. Goldman Sachs bought $75 million of Rockefeller Center Properties, Inc. debentures in exchange for a seat on Rockefeller Center Properties, Inc.'s board of directors. Goldman Sachs subsequently designated defendant Daniel M. Niedich, who served as a director until August 1995.
Rockefeller Center Properties, Inc.'s financial problems were soon compounded by the Partnerships' financial problems. On May 11, 1995, the Partnerships filed for Chapter 11 bankruptcy and ceased making mortgage payments. Realizing that without these payments it would soon be unable to meet its own financial obligations, Rockefeller Center Properties, Inc.'s board of directors began to consider recapitalization and acquisition proposals. Three groups expressed significant interest. The first group was led by Samuel Zell, a Chicago real-estate investor, and included General Electric Company, whose subsidiary the National Broadcasting Company leased approximately 20% of Rockefeller Center. The second was led by Gotham Partners, L.P., an investment firm that held 5.6% of Rockefeller Center Properties, Inc.'s shares. The third group included Whitehall Street Real Estate Limited Partnership V, Goldman Sachs & Co., Daniel M. Niedich and David Rockefeller. On August 11, 1995, Rockefeller Center Properties, Inc. entered into a combination agreement with the Zell Group, in which the Zell Group pledged a $250 million cash capital contribution plus $700 million in new financing. The agreement also contained an escape clause under which Rockefeller Center Properties, Inc. could terminate the combination plan and pursue another proposal it considered superior.
In the fall of 1995, the Partnerships filed a Chapter 11 reorganization plan in which they agreed to transfer full ownership of Rockefeller Center to Rockefeller Center Properties, Inc. Also in the fall, the Zell, Gotham and Whitehall Groups continued to submit additional proposals to Rockefeller Center Properties, Inc. In September, Rockefeller Center Properties, Inc.'s board rejected the Whitehall Group's offer to buy out Rockefeller Center Properties, Inc. for $100 million, an amount that equaled $6.50 per share. It also rejected the Gotham Group's $105 million rights offering proposal. But in November the board unanimously approved the Whitehall Group's all-cash merger bid of $8.00 per share, believing this offer was superior to the Zell Group's final bid, which contained both cash and debt components and was valued at $7.65 to $7.76 per share.
On February 14, 1996, Rockefeller Center Properties, Inc. filed a final proxy statement regarding the Whitehall Group's
The proxy statement also contained a detailed description of the Whitehall Group's plans if the merger were approved. It stated that the Whitehall Group would take title to Rockefeller Center and raise at least $430 million in debt financing, part of which would be used to repay Rockefeller Center Properties, Inc.'s existing debt.
In addition, the proxy statement contained references to possible "credit lease financing" transactions with General Electric. Specifically, it described a September 1995 transaction in which Rockefeller Center Properties, Inc., General Electric and a Zell affiliate agreed to modify NBC's lease so that Rockefeller Center Properties, Inc. could obtain credit lease financing
Accompanying the proxy statement were a letter signed by Rockefeller Center Properties, Inc.'s president and its chairman of the board as well as a letter from the board. The first letter described the rights offering agreement, stating that Rockefeller Center Properties, Inc. had not decided whether it would pursue such an offering if the merger failed. The second letter stated that the board had unanimously approved the merger.
On March 25, 1996, Rockefeller Center Properties, Inc.'s shareholders approved the merger. Soon thereafter, the Bankruptcy Court approved the Partnerships' reorganization plan, which transferred
On April 23, 1996, Rockefeller Center Properties, Inc. agreed to sell General Electric the property subject to the NBC lease for $440 million, an amount defendants claim was equal to the present value of the future payments due under the lease. A May 6, 1996 Wall Street Journal article describing the sale mentioned that General Electric and NBC had been considering this transaction for over two years. In a June 6, 1996 New York Daily News article, an NBC executive vice president stated that NBC began thinking about the transaction in 1995.
Plaintiffs filed suit on November 15, 1996, claiming that defendants violated Sections 10(b) and 14(a) of the Securities Exchange Act of 1934, 15 U.S.C. § 78aa et seq., and SEC rules promulgated thereunder through misstatements and omissions in connection with their acquisition of Rockefeller Center Properties, Inc. Plaintiffs made essentially four allegations, two of which they raise on appeal: first, that defendants failed to disclose the Whitehall Group's intention to sell a portion of Rockefeller Center to General Electric, and second, that defendants failed to disclose the existence of the air rights and the fact that the Whitehall Group would acquire them if its merger bid were approved.
On April 30, 1997, defendants filed a motion to dismiss, supporting this motion with an affidavit containing, inter alia, a 1994 appraisal of Rockefeller Center and newspaper articles discussing the 1995 "bidding war" for Rockefeller Center Properties, Inc. Defendants also referred to a January 1997 affidavit containing several documents Rockefeller Center Properties, Inc. had filed with the SEC. Plaintiffs responded to defendants' motion on in 1997, submitting the Form 10-K Rockefeller Center Properties, Inc. filed with the SEC in 1996, the Form 10-K the Rockefeller Center Properties Trust filed in 1997, two bankruptcy disclosure statements filed by the Partnerships and a transcript from the Partnerships' bankruptcy hearings.
On October 7, 1997, the court heard argument on the motion to dismiss. Following argument, plaintiffs submitted a letter from Winthrop, Stimson, Putnam & Roberts, a New York law firm, to the New York City Planning Commission regarding the Rockefeller Center air rights. Later, plaintiffs also submitted two newspaper articles "discussing the interest of several parties in Rockefeller Center."
The District Court issued its ruling on December 7, 1997. Because the court had considered "affidavits and other evidence submitted by the parties," it converted the motion to dismiss into a motion for summary judgment under Rule 12(b). The District Court granted defendants summary judgment with respect to the General Electric sale negotiations claim. After suggesting that defendants' disclosure may have been sufficient, the court observed that "[p]laintiffs offer no proof that defendants knew of the details of [the General Electric] transaction at the time of the Proxy Statement or the shareholder vote." But the court decided it need not resolve either issue because it concluded the General Electric transaction was not materially different from the potential lease financing disclosed in the proxy statement. It reasoned that because both a sale and a lease financing provide an "immediate source of cash," they are economically identical. It added that because General Electric's general interest in Rockefeller
The District Court refused to grant defendants summary judgment on plaintiffs' transferable development rights (air rights) claim. Finding the proxy statement did not disclose that Rockefeller Center Properties, Inc. would acquire the air rights when it acquired Rockefeller Center, the court then examined whether this omission was material. The court determined it could not conclude the air rights were immaterial because it had no evidence to support defendants' claims that the air rights were either impossible to value or of minimal value.
On December 23, 1997, plaintiffs moved for reargument or, in the alternative, for certification for interlocutory appeal, claiming the District Court had improperly converted the motion to dismiss into a motion for summary judgment. They also filed a Rule 56(f) affidavit documenting their need for discovery. On March 4, 1998, defendants moved for summary judgment on plaintiffs' air rights claim. They supported this motion with affidavits from Robert Von Ancken, a real estate appraiser who had appraised Rockefeller Center in 1994, and Norman Marcus, former general counsel to the New York City Planning Commission and author of many laws governing air rights. Von Ancken explained his appraisal of Rockefeller Center had ascribed no value to the air rights because the "possibility they would be sold for value was too remote and speculative." He added that only one site—Rockefeller Plaza West—could feasibly make use of the air rights and explained that Rockefeller Plaza West could obtain air rights from a number of properties other than Rockefeller Center. Based on these facts, Von Ancken stated the air rights were worth at most $8.5 million. Marcus agreed that Rockefeller Plaza West was the only practical receiving site for the air rights.
Plaintiffs responded with three declarations of their own. Michael Ryngaert, a professor of finance and former senior economist at the SEC, explained the air rights could be valued using methods employed to price stock options and concluded the omission of the air rights and the sale negotiations with NBC were, when combined, materially misleading. Mary Beach, a former senior associate director with the SEC, agreed with Ryngaert's assessment. Peter Korpacz, a real estate appraiser, valued the air rights at "at least $30 million" and disputed Von Ancken and Marcus's conclusion that a number of sites could transfer air rights to Rockefeller Plaza West.
On July 10, the District Court declined to reverse its decision to convert the motion to dismiss into a motion for summary judgment. The District Court also rejected plaintiffs' claim they had not received notice of conversion as required by Rule 12(b) and Rose v. Bartle, 871 F.2d 331, 340 (3d Cir.1989), although without explanation. The court then granted defendants' motion for summary judgment on the air rights claim. After reviewing all the evidence, the court observed the highest value assigned to the air rights was a newspaper article's $42 million estimate. The court stated that even this number was small when compared to Rockefeller Center's $1.2 billion value and therefore concluded that "no reasonable trier of fact would conclude [the failure to mention the air rights was] a material omission."
This appeal followed.
Because the plaintiffs asserted claims under the Securities Exchange Act of 1934, the District Court had federal question jurisdiction under 15 U.S.C. § 78aa
There are two issues on appeal: whether the District Court's conversion of the motion to dismiss was proper with respect to plaintiffs' General Electric negotiations claim
Fed.R.Civ.P. 12(b) provides that if on a 12(b)(6) motion to dismiss
The process of treating a motion to dismiss as a motion for summary judgment is known as "conversion." When reviewing a District Court's decision to convert a motion to dismiss into a motion for summary judgment, we typically examine three issues: first, whether the materials submitted require conversion; second, whether the parties had adequate notice of the district court's intention to convert; and third, if the parties did not have notice, whether the court's failure to provide notice was harmless error. See Rose v. Bartle, 871 F.2d 331 (3d Cir.1989).
Although the plain language of Rule 12(b) seems to require conversion whenever a district court considers materials outside the pleadings, we and other courts of appeals have held that a court may consider certain narrowly defined types of material without converting the motion to dismiss. In In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410 (3d Cir.1997), we held that a court can consider a "`document integral to or explicitly relied upon in the complaint.'" Burlington, 114 F.3d at 1426 (quoting Shaw v. Digital Equip. Corp., 82 F.3d 1194, 1220 (1st Cir.1996)). And in PBGC v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir.1993), we decided that a district court may examine an "undisputedly authentic document that a defendant attaches as an exhibit to a motion to dismiss if the plaintiff's claims are based on the document." The rationale for these exceptions is that "the primary problem raised by looking to documents outside the complaint—lack of notice to the plaintiff—is dissipated [w]here plaintiff has actual notice ... and has relied upon these documents in framing the complaint.'" See Burlington, 114 F.3d at 1426 (quoting Watterson v. Page, 987 F.2d 1, 3-4 (1st Cir.1993)).
When a District Court decides to convert a motion to dismiss into a motion for
We believe the District Court did not provide adequate notice of conversion. The record contains no orders suggesting the District Court would convert the motion to dismiss. Nor did the District Court provide notice at the October 7, 1997 hearing on the motion to dismiss. Rather, at the hearing the court repeatedly stated that it was deciding a motion to dismiss. See Appendix at 1254 ("If [plaintiffs] survive the motion to dismiss ...."); id. at 1273 ("I am not saying I am going to deny the motion to dismiss."); id. at 1292 ("[I]f I ... grant the motion to dismiss ...."); id. (speaking of defendants' motion as "a motion to dismiss"); id. at 1294 (speculating on future proceedings if "there is a failure in the pleadings . . . .").
Defendants maintain that plaintiffs had constructive notice of conversion because they chose to submit material beyond the pleadings.
A district court's failure to provide notice compels reversal unless the failure is harmless error. See Rose at 342. Failure to provide notice is harmless error if the plaintiff's complaint would not have survived a motion to dismiss. See id. In this case the motion to dismiss must be informed by the pleading standards of the Private Securities Litigation Reform Act, 15 U.S.C. § 78u-4 et seq. In the past, we have applied the harmless error analysis where we determined the parties did not have notice of conversion. See Rose v. Bartle, 871 F.2d 331 (3d Cir.1989), Hancock Industries v. Schaeffer, 811 F.2d 225 (3d Cir.1987); Davis Elliott International, Inc. v. Pan American Container Corp., 705 F.2d 705 (3d Cir.1983). In each case, we were able to determine the propriety of dismissal by applying established law to relatively straightforward allegations in the complaint. Although material beyond the pleadings had been submitted, it does not appear to have been voluminous or to have raised complex issues of pleading.
When appropriate, a court of appeals may decide a motion to dismiss even after conversion. But in cases like this one, involving complex principles of law and voluminous materials (an 1800-page Appendix), the District Court, which is familiar with the record, is better suited for this task in the first instance. Furthermore, the motion to dismiss here involves interpreting a recently-enacted law—the Private Securities Litigation Reform Act—whose scope is still being defined. In addition, the parties briefed and argued their cases prior to our recent decision in In re Advanta Corporation Securities Litigation, 180 F.3d 525 (3d Cir.1999), setting forth the pleading standard under section 78u-4(b)(2) of the Reform Act. We believe the wiser course is to vacate the grant of summary judgment on this claim and remand so the parties have the opportunity to frame their arguments in light of this opinion and Advanta.
For these reasons, we will vacate and remand the District Court's grant of summary judgment on plaintiffs' General Electric sale negotiations claim.
B. Transferable Development Rights (Air Rights)
Plaintiffs assert that the failure to disclose the existence and value of the air rights was a "material omission" violating Rules 10b-5 and 14a-9.
Plaintiffs claim the District Court erred in determining the materiality of the air rights by comparing their value to the value of Rockefeller Center. Asserting that knowledge of the air rights and their value would have been important to a reasonable shareholder's decision on whether to vote for the merger, plaintiffs note their expert appraised the air rights at "at least $30 million" and that defendants had promised to pay shareholders $308 million to complete the merger. From these facts they contend a reasonable shareholder would have determined that defendants should have paid shareholders $30 million more. (This $30 million breaks down to nearly eighty cents per share—roughly ten percent of price proposed by the Whitehall Group.)
Defendants offer three reasons we should affirm the District Court's grant of summary judgment on the air rights issue. First, they claim that Rockefeller Plaza West—the only practical receiving site for the air rights—has recently been developed without any air rights, which in their eyes "prove[s] conclusively" the air rights never had any value. Second, they contend they did disclose the Whitehall Group would acquire the air rights through the acquisition of Rockefeller Center Properties, Inc.; specifically, that Rockefeller Center Properties, Inc. documents filed with the SEC disclosed that Rockefeller Center had air rights and the Proxy Statement disclosed that the Whitehall Group would acquire Rockefeller Center through the acquisition. They contend these documents disclosed the impending transfer of the air rights because "Rockefeller Center" "naturally includes" the air rights associated with it. Finally, defendants maintain the air rights were immaterial because their sale was contingent and speculative and even the $30 million value proffered by plaintiffs was negligible compared to Rockefeller Center's $1.2 billion value and would have played no role in the reasonable shareholder's voting decision.
We need not decide whether $30 million is material when compared either to the $1.2 billion value of Rockefeller Center or to the $308 million plaintiffs received from the Whitehall Group because plaintiffs have provided no evidence the air rights would be sold, that the Whitehall Group planned to sell them or that one of the possible receiving sites had expressed any interest in acquiring them at any point in the future. Without such evidence, the value shareholders (as opposed to appraisers) would attach to the air rights is contingent and speculative, which weighs against a finding of materiality. In addition, full disclosure of the air rights would have mentioned not only their possible value but also the limited prospect they would ever be sold. For these reasons, we do not think disclosure of the air rights would have been important to a reasonable shareholder's voting decision. Therefore we will affirm the District Court's grant of summary judgment on plaintiffs' air rights claims.
For these reasons, we will vacate and remand the District Court's grant of summary judgment on plaintiffs' General Electric sale negotiations claim but will affirm its grant of summary judgment on their air rights claim. We will remand for proceedings consistent with this opinion.
NYGAARD, Circuit Judge, concurring and dissenting.
I agree that the District Court's grant of summary judgment was proper as to plaintiffs'
A. Air Rights
It is undisputed that the total appraised value of Rockefeller Center was $1.25 billion. It is also undisputed that 38.2 million shares were transferred during the buyout merger and that these shares were transferred at a price of $8.00 per share. Further, the Record shows that, viewing the proffered evidence in the light most favorable to the shareholders, the highest possible value for the air rights was $42 million. By the following calculations, its "true" per share values result:
Taking these figures and using basic ratios and proportions, it is clear that the resulting increase in share value is approximately 3.25%:
A 3.25% increase in value is immaterial. For this reason, I conclude that the District Court properly granted summary judgment.
Moreover, the shareholders were placed on notice that the air rights were transferable as part of the Buyout Merger. The 10k annual reports, which were incorporated by reference into the proxy statements, disclosed that the air rights were allocable to Rockefeller Center under New York law and that under the RCPI mortgages the partnership owners reserved the right to transfer these rights. See JA 950 (stating that "there is allocable to the Property the right to develop up to approximately 2.0 million square feet of floor areas" that "may be transferred to other properties or, with the approval of the New York City Landmarks Preservation Commission, used to construct additional floor area within the Property," and advising that "[t]he Borrower has reserved the right to transfer these rights" and "all of the Borrower's rights to the air space above the Music Hall, together with easements for support, operations and access." The 10k annual report also reveals that "as part of the settlement of a lawsuit, 100,000 square feet of these [air] rights were added to the Mortgage."). I therefore conclude that the possible transfer of the air rights was properly disclosed to the shareholders.
B. Conversion of the Motion to Dismiss Plaintiffs' General Electric Negotiations Claim
The majority has done a fine analysis, and I agree that the District Court improperly converted the motion by failing to provide the plaintiffs with adequate notice of the conversion. I do not believe, however,
It is undisputed that the following documents were submitted by the parties either to support, or oppose, the motion to dismiss the GE negotiations claim:
After receiving these various affidavits and other 538<!> documents, the District Court converted defendant's 12(b)(6) motion to dismiss to a Rule 56 motion for summary judgment.
The general rule is that "a district court ruling on a motion to dismiss may not consider matter extraneous to the pleadings." In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir.1997); see also 5A Charles Alan Wright & Arthur Miller, Federal Practice and Procedure § 1366, at 93 (West 1990) (observing that Rule 12(b)(6) commands a court to convert a motion to dismiss into a motion for summary judgment "[o]nce the court decided to accept matters outside the pleading"). However, we have carved out some exceptions to this general rule. For example, a "`document integral to or explicitly relied upon in the complaint' may be considered `without converting the motion to dismiss into one for summary judgment.'" Burlington Coat, 114 F.3d at 1426 (quoting Shaw v. Digital Equipment Corp., 82 F.3d 1194, 1220 (1st Cir.1996)). Thus, when an Amended Complaint quotes from certain press releases and public announcements, we may consider the entire text of those public statements. See Id. (commenting that "plaintiffs cannot prevent a court from looking at the texts of the documents on which its claim is based by failing to attach or explicitly cite them"); In re Westinghouse, 90 F.3d 696, 707 (3d Cir.1996).
We have also allowed a court to consider matters of public record when ruling on a motion to dismiss. See Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir.1993). For purposes of a motion to dismiss, however, matters of public record do not include all
First, I agree with the approach of the Courts of Appeal for the Second and Fifth Circuits and would allow the District Court to take judicial notice of all public disclosure documents which are either required to be filed with the SEC or are actually filed with the SEC. See Kramer v. Time Warner, Inc., 937 F.2d 767, 774 (2d Cir. 1991); Lovelace v. Software Spectrum Inc., 78 F.3d 1015, 1018 (5th Cir.1996). As the Court of Appeals for the Second Circuit said:
Kramer, 937 F.2d at 774. This approach is consistent with our practice of allowing consideration of indisputably authentic documents which serve as the basis for plaintiffs' complaint. See Pension Benefit Guar. Corp., 998 F.2d at 1196-97 (holding that "a court may consider an undisputably authentic document that a defendant attaches as an exhibit to a motion to dismiss if the plaintiff's claims are based on the document" because "[w]hen a complaint relies on a document ... the plaintiff obviously is on notice of the contents of the document, and the need for a chance to refute evidence is greatly diminished").
I conclude that the District Court could properly consider the authenticated copies of SEC filings submitted by both the shareholders and the defendants, which relate to or are the basis for the shareholders' complaint, on a motion to dismiss. In sum, the documents which are properly considered on a motion to dismiss are:
Looking at what can be properly considered on a motion to dismiss, the District Court's error of conversion is harmless because these documents support a dismissal of the complaint for failure to state a claim.
A determination of materiality "requires delicate assessments of the inferences a `reasonable shareholder' would draw from a given set of facts and the significance of those inferences to him." TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 450, 96 S.Ct. 2126, 2133, 48 L.Ed.2d 757 (1976); see Shapiro v. UJB Fin. Corp., 964 F.2d 272, 281 n. 11 (3d Cir.1992). Thus, materiality is often a question for a jury. See TSC. 426 U.S. at 450, 96 S.Ct. at 2133. However, when a complaint alleging securities fraud contains claims of omissions or misstatements that are "so obviously unimportant to an investor that reasonable minds cannot differ on the question of materiality," we may deem the misrepresentations and omissions immaterial as a matter of law. In re Westinghouse, 90 F.3d at 710; see In re Craftmatic Sec. Litig., 890 F.2d 628, 641 (3d Cir.1989).
An omission or misrepresentation is material if "there is a substantial likelihood that the disclosure would have been viewed by the reasonable investor as having `significantly altered the "total mix" of information' available to that investor." In re Westinghouse, 90 F.3d at 714 (quoting Shapiro, 964 F.2d at 281 n. 11). Thus, the shareholders need not prove that disclosure of the allegedly omitted facts would have changed their vote regarding the buy-out merger. See TSC, 426 U.S. at 449, 96 S.Ct. at 2132; see also Virginia Bankshares, Inc. v. Sandberg, 501 U.S. 1083, 1097-98, 111 S.Ct. 2749, 2760-61, 115 L.Ed.2d 929 (1991).
Further, although information may be relevant and an investor may want to know that information, it may be "of such `dubious significance' as to be `trivial,' and `hardly conducive to informed decision making,' so that to reasonable shareholders, such omission must be immaterial as a matter of law." In re Westinghouse, 90 F.3d at 714 (quoting In re Westinghouse Securities Litigation, 832 F.Supp. 948, 972 (W.D.Pa.1993) (other quotations omitted)). Additionally, we have cautioned that when plaintiffs allege a claim akin to "failing to predict the future" it is often "difficult to ascertain whether the reasonable investor would have considered the omitted information significant at the time" especially "where an event is contingent or speculative in nature." Shapiro, 964 F.2d at 283. However, these "opinions, predictions and other forward-looking statements are not per se inactionable." In re Donald J. Trump Sec. Litig., 7 F.3d 357, 368 (3d Cir.1993). Materiality of contingent or speculative information or events depends on "a balancing of both the indicated probability that the event will occur and the anticipated magnitude of the event in light of the totality of the company activity." Basic, Inc. v. Levinson, 485 U.S. 224, 232, 108 S.Ct. 978, 99 L.Ed.2d 194 (1988) (citations omitted). "If the speaker does not genuinely and reasonably believe the opinions, then plaintiffs may support a claim for misrepresentation." Id.
In light of our recent opinion in In re Advanta Securities Litigation, 180 F.3d 525
On appeal, the shareholders raise three main arguments to support their contention that the District Court erred by granting summary judgment as to the shareholders' claims that the Board failed to disclose negotiations involving the sale of twenty percent of Rockefeller Center for $440 million. I will address each argument in turn.
1. Materiality of the Sale Negotiations was a question for the jury
The shareholders argue that they "had a number of choices when defendants solicited their proxies." Shareholders' Br. at 35. This is a classic example of "fraud by hindsight." As the District Court observed, none of the facts presented by the shareholders, indeed, no set of facts, support the shareholders' allegations that the Investor Group did not disclose material negotiations for the sale of a part of Rockefeller Center before the Buy-out Merger vote. None of the newspaper articles reveal that firm negotiations were underway. Rather, the articles show that at some point everything under the sun was being negotiated with numerous corporate entities to salvage the financial status of Rockefeller Center. Thus, the sale of Rockefeller Center was so speculative that it was immaterial as a matter of law.
2. The Buy-Out Group's Uncorrected Denial of any Plan to Sell Part of Rockefeller Center in the Next Two Years
The shareholders also contend that Goldman Sachs and the defendants had a duty to disclose that they were contemplating a sale to GE/NBC especially in light of Goldman Sachs's statement that it did not have a plan "to sell any or all of the twelve buildings [at Rockefeller Center] in the next few years." The District Court correctly decided that non-disclosure of potential negotiations was immaterial as a matter of law. It is well settled, even mandated by SEC regulations, that a company is barred from including in proxy materials any tentative negotiations or plans, especially when those plans are only speculative. Further, this comment by Goldman Sachs cannot be attributed to the Investor Group. This statement was made on or before September 19, 1995, approximately ten to thirteen days before the Investor Group was formed. A 125. Therefore, the Investor Group and other defendants did not have a duty to update the statements originally made by Goldman Sachs.
3. A Sale is not "The Economic Equivalent" of a "Credit Lease Financing Agreement"
The District Court concluded that:
Moreover, the proxy materials clearly reveal that GE was interested in both RCPI and Rockefeller Center. The record shows that GE was part of the Zell Group. Therefore, if anyone would be aware of the possible sale of part of Rockefeller Center to GE, it would be GE. However, the Zell Group did not make a bid higher than the $8.00-$8.75 per share bid made by the Investor Group. As such, the District Court properly concluded that "no reasonable shareholder would consider the potential sale of part of Rockefeller Center to be important in deciding how to vote." Charal Investment Co., Civ. A. No. 96-543-RRM, at 17.
Additionally, the shareholders have not alleged that the refinancing agreements with Goldman Sachs were either fraudulent or illegitimate in any manner. Therefore, I do not believe that remanding the case to provide the parties an "opportunity to frame their arguments in light of ... Advanta" is the most efficient, or even a necessary course. I would affirm.
Rule 14a-9, promulgated by the SEC under § 14(a), prohibits the solicitation of proxies by means of a proxy statement that contains a statement that "is false or misleading with respect to any material fact, or which omits to state any material fact necessary in order to make the statements therein not false or misleading."