Also known as: enmasse · collectively · as a group
Written by attorneys — see sources below.
An adverbial phrase indicating that members of a group act or decide simultaneously as a single body. The phrase captures collective conduct in which individual participation merges into unified group action without separate sequential steps.
Fifty unit owners in the ForgeWorks industrial condominiums met and voted together to create Steel Dock Owners Association. Their simultaneous action supplied the majority required under the governing documents. The new association immediately assumed management of the shared loading docks and access road.
Several Boston banks filed a single lawsuit attacking the constitutionality of a state law restricting corporate political speech. Their coordinated filing presented the First Amendment claim as a unified group challenge. The Supreme Court addressed the banks' collective standing to assert the rights at issue.
Mass. Gen. Laws Ann., ch. 55, § 8 prohibits banks and business corporations from making contributions or expenditures for the purpose of influencing the vote on any referendum question other than one materially affecting the corporation's property, business, or assets. The statute also specifies that no question solely concerning the taxation of individuals would be deemed to have such an effect. Appellants, the First National Bank of Boston, New England Merchants National Bank, the Gillette Company, Digital Equipment Corporation, and Wyman-Gordon Company, wished to spend corporate funds to publicize their opposition to a proposed constitutional amendment authorizing the legislature to impose a graduated personal income tax. That amendment was scheduled for submission to voters on November 2, 1976. Appellants brought suit in the Supreme Judicial Court of Massachusetts seeking a declaration that the statute was unconstitutional as applied to their proposed expenditures. The case was submitted on an expedited basis upon agreed facts to a single justice of that court, who referred the matter to the full bench the same day. The statement of agreed facts reflected disagreement among economists on whether a graduated personal income tax would affect corporate business or assets. Appellants' management nevertheless believed the tax would have a significant effect on their businesses. The Supreme Judicial Court upheld the statute in a 1973 decision. After the United States Supreme Court vacated the judgment and remanded for further consideration in light of Buckley v. Valeo, the Massachusetts court again upheld the statute in a February 1977 opinion. It construed the law to bar the proposed corporate expenditures on the individual-tax referendum. Although the November 1976 referendum was held and the amendment defeated, the United States Supreme Court addressed the merits. The controversy fell within the class of cases capable of repetition yet evading review. Similar graduated-income-tax amendments had been submitted to voters four times in recent years. The interval between legislative authorization and election was only about eighteen months. The statute prescribed a maximum fine of $50,000 for a violating corporation. It also prescribed a maximum fine of $10,000 or imprisonment for up to one year, or both, for a violating corporate officer, director, or agent.
View caseThe entire board of Reynolds Investing Company submitted resignation letters on the same day. Their simultaneous departures left the corporation's negotiable securities without immediate oversight. A court later examined whether the group action breached fiduciary duties of care.
Macmillan, Inc. is a publishing, educational and informational services company with approximately 27,870,000 common shares traded on the New York Stock Exchange. In May 1987 its chairman and CEO Edward P. Evans and president and COO William F. Reilly began exploring defensive measures including a restructuring that would give management majority control of a restructured entity through restricted shares, options and an ESOP whose trustee they would control. The board approved related transactions on June 11, 1987, including golden parachute agreements for Evans and Reilly and a poison pill exempting the ESOP. The Robert M. Bass Group acquired 7.5 percent of Macmillan stock and made an initial $64 per share offer in May 1988. After the board rejected that offer and approved a management restructuring valued at $64.15 per share, Bass raised its bid to $73 per share. On July 14, 1988 the Court of Chancery preliminarily enjoined the restructuring in Macmillan I. Hours later Evans and Reilly authorized investment advisors to explore a sale of the company and began discussions with KKR for a management-sponsored leveraged buyout. On July 20, 1988 Robert Maxwell proposed an $80 all-cash merger and later made an $80 per share tender offer conditioned on receiving the same non-public information previously given to KKR. Maxwell increased its bid to $84, then $86.60, and then $89 per share. KKR submitted competing blended bids of $85, $89.50 and finally $90.05 per share. Throughout the process Evans and Reilly met repeatedly with KKR, provided KKR detailed due diligence information weeks before Maxwell received equivalent data, and on September 26 Evans telephoned KKR to disclose the price and form of Maxwell's $89 bid. On September 27, 1988 the Macmillan board approved a merger agreement with KKR that included a lockup option to purchase seven subsidiaries for $865 million, a $29.3 million breakup fee, and a no-shop clause. The next day Maxwell raised its cash offer to $90.25 per share conditioned on invalidation of the lockup. On October 4 the board rejected the new Maxwell bid. After a hearing the Court of Chancery on October 17, 1988 denied Maxwell's motion to enjoin the lockup, breakup fees and expenses, finding that KKR had been favored but that Maxwell had not been prevented from submitting a higher bid. Maxwell appealed. The Supreme Court of Delaware accepted the interlocutory appeal and on November 2, 1988 announced its decision reversing the denial of injunctive relief, with the full opinion issued May 3, 1989.
View caseMultiple investors filed a consolidated securities-fraud complaint against Tellabs. Their joint pleading alleged that company statements were materially false when viewed collectively. The Supreme Court evaluated whether the group allegations met the required pleading standard.
Petitioner Tellabs, Inc. manufactures specialized equipment used in fiber optic networks. During the time period relevant to this case, petitioner Richard Notebaert was Tellabs' chief executive officer and president. Respondents purchased Tellabs stock between December 11, 2000, and June 19, 2001. The shareholders alleged that Notebaert made statements indicating that demand for Tellabs' flagship networking device, the TITAN 5500, was continuing to grow when in fact demand for that product was waning. Notebaert made statements indicating that the TITAN 6500 was available for delivery and that demand for that product was strong and growing when in truth the product was not ready for delivery and demand was weak. Notebaert falsely represented Tellabs' financial results for the fourth quarter of 2000 and, in connection with those results, condoned the practice of channel stuffing under which Tellabs flooded its customers with unwanted products. Notebaert made a series of overstated revenue projections when demand for the TITAN 5500 was drying up and production of the TITAN 6500 was behind schedule. The first public glimmer that business was not so healthy came in March 2001 when Tellabs modestly reduced its first quarter sales projections. On June 19, 2001, the last day of the class period, Tellabs disclosed that demand for the TITAN 5500 had significantly dropped. Simultaneously, the company substantially lowered its revenue projections for the second quarter of 2001. The next day, the price of Tellabs stock, which had reached a high of $67 during the period, plunged to a low of $15.87. On December 3, 2002, the shareholders filed a class action in the District Court for the Northern District of Illinois. Their complaint stated, inter alia, that Tellabs and Notebaert had engaged in securities fraud in violation of section 10(b) of the Securities Exchange Act of 1934. Tellabs moved to dismiss the complaint on the ground that the shareholders had failed to plead their case with the particularity the PSLRA requires. The District Court agreed and therefore dismissed the complaint without prejudice. The shareholders then amended their complaint, adding references to 27 confidential sources and making further, more specific allegations concerning Notebaert's mental state. The District Court again dismissed, this time with prejudice. The Court of Appeals for the Seventh Circuit reversed in relevant part. Like the District Court, the Court of Appeals found that the shareholders had pleaded the misleading character of Notebaert's statements with sufficient particularity. Unlike the District Court, however, the Seventh Circuit concluded that the shareholders had sufficiently alleged that Notebaert acted with the requisite state of mind. The Supreme Court granted certiorari to resolve the disagreement among the Circuits on whether and to what extent a court must consider competing inferences in determining whether a securities fraud complaint gives rise to a strong inference of scienter.
View caseCede & Co. and other stockholders acting together demanded access to Technicolor's corporate books. Their unified demand triggered the board's duty to respond under Delaware law. The court assessed whether the collective request satisfied statutory prerequisites.
In 1983 MAF acquired Technicolor through its wholly owned subsidiary Macanfor in a cash-out merger that became effective on January 24, 1983. MAF first purchased 3,534,181 shares at $23 per share in a tender offer that, together with 220,000 shares previously acquired, gave it control of approximately 82 percent of Technicolor’s outstanding stock; the Technicolor board then waived the charter’s 95 percent supermajority vote requirement and the shareholders approved the merger by the required two-thirds vote. Cinerama, Incorporated, beneficial owner of 201,200 shares representing roughly 4.5 percent of Technicolor’s common stock, and Cede & Company, the record owner, rejected the tender offer and voted against the merger. Cinerama demanded appraisal under 8 Del. C. § 262 and filed its appraisal action against Technicolor in the Court of Chancery in March 1983. In June 1983 the court entered an order declaring that Cinerama had perfected its appraisal rights. Document discovery was completed by mid-1985, after which Cinerama began deposing Technicolor officers and directors. During a December 1985 deposition, former director Charles S. Simone testified that he had neither voted to waive the supermajority requirement nor supported the merger. On the basis of this and other information obtained in appraisal discovery, Cinerama filed a separate fraud action in January 1986 against Technicolor, all but two of its directors, MAF, Macanfor, and Ronald O. Perelman. The complaint alleged fraud, conspiracy, self-dealing, waste, and breach of fiduciary duty and sought rescission of the merger or, alternatively, rescissory damages. In March 1986 the defendants moved to dismiss the fraud action, asserting that Cinerama lacked standing after electing appraisal. In April 1986 Cinerama moved to amend its appraisal complaint to add the fraud claims or, alternatively, to consolidate the two actions for discovery and trial. By unreported opinion and interlocutory order dated January 13, 1987, the Court of Chancery denied the motion to dismiss, the motion to amend, and the motion to consolidate, but directed Cinerama to elect which action to pursue to trial after completing discovery. Both sides appealed. Cinerama appealed the denial of amendment, the requirement of a pre-trial election, and the denial of consolidation. The defendants cross-appealed the denial of dismissal and the timing of any election.
View caseRevlon's directors met and unanimously authorized the sale of the company to a single bidder. Their simultaneous approval shifted the board's fiduciary focus from preserving the corporation to maximizing shareholder value. The Delaware Supreme Court reviewed the collective decision under enhanced scrutiny.
In June 1985, Ronald O. Perelman of Pantry Pride met with Michel C. Bergerac of Revlon to discuss a friendly acquisition at prices between forty and fifty dollars per share. Bergerac rejected the overture as below the company's intrinsic value. On August 14, Pantry Pride's board authorized Perelman to acquire Revlon either by negotiation in the forty two to forty three dollar range or by hostile tender offer at forty five dollars per share. All further discussions were rebuffed when Bergerac conditioned talks on execution of a standstill agreement. On August 19, the Revlon board met specially to consider the impending threat of a hostile bid by Pantry Pride. Lazard Freres advised the directors that forty five dollars per share was a grossly inadequate price for the company. Martin Lipton recommended that the company repurchase up to five million of its nearly thirty million outstanding shares and adopt a Note Purchase Rights Plan. Under this plan, each Revlon shareholder would receive as a dividend one Note Purchase Right for each share of common stock. The Rights entitled the holder to exchange one common share for a sixty five dollar principal Revlon note at twelve percent interest with a one-year maturity. Felix Rohatyn and William Loomis of Lazard Freres explained to the board that Pantry Pride's financial strategy for acquiring Revlon would be through junk bond financing followed by a break-up of Revlon and the disposition of its assets. With proper timing, such transactions could produce a return to Pantry Pride of sixty to seventy dollars per share while a sale of the company as a whole would be in the mid fifty dollar range. Pantry Pride made its first hostile move on August 23 with a cash tender offer for any and all shares of Revlon at forty seven dollars and fifty cents per common share and twenty six dollars and sixty seven cents per preferred share. The offer was subject to obtaining financing and the Rights being redeemed. On August 29, Revlon commenced its own offer for up to ten million shares. It exchanged for each share of common stock tendered one Senior Subordinated Note of forty seven dollars and fifty cents principal at eleven point seven five percent interest due in nineteen ninety five and one-tenth of a share of nine dollar Cumulative Convertible Exchangeable Preferred Stock valued at one hundred dollars per share. Revlon stockholders tendered eighty seven percent of the outstanding shares and the company accepted the full ten million shares on a pro rata basis. Pantry Pride announced a new tender offer at forty two dollars per share on September 16 conditioned upon receiving at least ninety percent of the outstanding stock. The Revlon board held a regularly scheduled meeting on September 24 and rejected the latest Pantry Pride offer. Pantry Pride remained determined in its efforts and continued to make cash bids for the company. It offered fifty dollars per share on September 27 and raised its bid to fifty three dollars on October 1 and then to fifty six dollars and twenty five cents on October 7. On October 3, the Revlon board met to consider Pantry Pride's fifty three dollar bid and to examine possible alternatives. Both Forstmann and Adler & Shaykin made proposals. As a result, the directors unanimously agreed to a leveraged buyout by Forstmann. The terms of this accord were as follows: each stockholder would get fifty six dollars cash per share; Forstmann would assume Revlon's four hundred seventy five million dollar debt incurred by the issuance of the Notes; and Revlon would redeem the Rights and waive the Notes covenants for Forstmann or in connection with any other offer superior to Forstmann's. Part of Forstmann's plan was to sell Revlon's Norcliff Thayer and Reheis divisions to American Home Products for three hundred thirty five million dollars. Before the merger, Revlon was to sell its cosmetics and fragrance division to Adler & Shaykin for nine hundred five million dollars. On October 12, Forstmann made a new fifty seven dollars and twenty five cents per share offer based on several conditions. The principal demand was a lock-up option to purchase Revlon's Vision Care and National Health Laboratories divisions for five hundred twenty five million dollars if another acquiror got forty percent of Revlon's shares. Revlon also was required to accept a no-shop provision. There would be a twenty five million dollar cancellation fee to be placed in escrow and released to Forstmann if the new agreement terminated or if another acquiror got more than nineteen point nine percent of Revlon's stock. The board unanimously approved Forstmann's proposal because it was for a higher price than the Pantry Pride bid, it protected the noteholders, and Forstmann's financing was firmly in place. The board further agreed to redeem the rights and waive the covenants on the preferred stock in response to any offer above fifty seven dollars cash per share. Pantry Pride, which had initially sought injunctive relief from the Rights plan on August 22, filed an amended complaint on October 14 challenging the lock-up, the cancellation fee, and the exercise of the Rights and the Notes covenants. Moreover, on October 22, Pantry Pride again raised its bid with a cash offer of fifty eight dollars per share conditioned upon nullification of the Rights, waiver of the covenants, and an injunction of the Forstmann lock-up. On October 15, the Court of Chancery prohibited the further transfer of assets and eight days later enjoined the lock-up, no-shop, and cancellation fee provisions of the agreement. The trial court concluded that the Revlon directors had breached their duty of loyalty by making concessions to Forstmann out of concern for their liability to the noteholders rather than maximizing the sale price of the company for the stockholders' benefit. The Supreme Court of Delaware granted this expedited interlocutory appeal to consider for the first time the validity of such defensive measures in the face of an active bidding contest for corporate control.
View caseA majority of nondeveloper owners may act simultaneously to form an association when the declaration creates common rights but does not establish or forbid one. Their collective vote binds all owners once the association is properly organized.
Supporting sources
Simultaneous resignation of the entire board can expose directors to claims if it leaves corporate assets without protection. Courts examine whether the group action was taken with due regard for the risk of dissipation.
When multiple plaintiffs allege fraud through a consolidated complaint, the court evaluates the allegations taken collectively to determine whether they raise a strong inference of scienter.