Friday, November 22, 2013

Prudent Real Estate Trust v. Johncamp Realty, Inc. case brief

Prudent Real Estate Trust v. Johncamp Realty, Inc. case brief summary
599 F.2d 1140 (1979)


CASE SYNOPSIS
Plaintiff, the target of a hostile takeover, appealed the order of the United States District Court for the Southern District of New York that denied its motion for a preliminary injunction to prohibit defendants from continuing with their tender offer, where plaintiff alleged that the offer and the materials filed with the Securities and Exchange Commission by defendants were materially misleading, in violation of 15 U.S.C.S. § 78n(e).

CASE FACTS
Plaintiff was a real estate investment trust (REIT) under 26 U.S.C.S. §§ 856-59. In a hostile takeover bid, defendant corporation made a tender offer to purchase any and all of plaintiff's outstanding shares in order to gain control and liquidate plaintiff's assets. Plaintiff then sought injunctive relief, claiming that defendant's offer and the materials it filed with the Securities and Exchange Commission were materially misleading, in violation of 15 U.S.C.S. § 78n(e), in that defendant failed to disclose the financial interests of defendant's president and major stockholder, as required by 17 C.F.R. 240.14d-100, Item 9; the discussion of the loss of REIT status was inadequate; and statements regarding how plaintiff could be liquidated were false. A preliminary injunction was denied and plaintiff appealed.

DISCUSSION
In reversing and ordering the issuance of an injunction, the court held that there was a fair ground for litigating the issues raised by plaintiff and that the balance of hardships tipped heavily in its favor.

CONCLUSION
The order was reversed and the case remanded with instructions to issue an appropriate preliminary injunction because there was a fair ground for litigating whether the offer and materials were materially misleading and the balance of hardships tipped heavily in plaintiff's favor.

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