Romer v. Green Point Savings Bank

27 F.3d. 12 (2nd Cir. 1994).

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Nature of the Case

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Facts

D is a mutual savings bank chartered under the laws of New York. D's board of trustees began formulating and executing a conversion plan. The board adopted a plan to convert to a capital stock bank. Eligible D depositors--those with $100 or more on deposit in accounts at Green Point as of February 28, 1993--would receive subscription rights to purchase shares of common stock at the initial offering price. The Superintendent of Banks of the State of New York approved the plan and D began mailing proxy materials for a December 10 depositors' meeting at which approval for the Plan would be sought. Republic New York Corporation proposed to acquire D and was rejected by D's board of trustees. On November 4, Republic publicly issued a merger proposal, which D again rejected. On November 12, 1993, a group of D depositors (Ps) filed a class action alleging that Ds had conspired to deter them from exercising their subscription rights, asserting violations of § 10(b) of the Securities Exchange Act of 1934, see 15 U.S.C. § 78j(b), and Securities and Exchange Commission Rule 10b-5 see 17 C.F.R. § 240.10b-5. Ps alleged that D had made materially false and misleading statements in order 'to induce depositors to vote for the Proposed Conversion but to forego their right to purchase shares of common stock.' Ps claimed that DS had breached their fiduciary duties. Ps alleged that the officers and trustees of D had structured the conversion, not for the benefit of the depositors, but to enrich themselves by providing for their acquisition of undervalued D shares not purchased by the depositors. The complaint alleged that the proxy materials failed to disclose the enormous value to these insiders of their stock acquisition rights. The state started an investigation. Ps moved for a preliminary injunction. The district court denied the motion, holding that no 'irreparable harm will result if the conversion vote goes forward at the December 10, 1993, meeting' in light of the Superintendent's pending investigation of the same matters. The district court noted that the Superintendent planned to 'void the results' of the depositors' meeting if he determined after his investigation that such action was appropriate. The Superintendent concluded his investigation on January 23, 1994, and required modification of the conversion plan. The most significant change eliminated the compensation packages that had been arranged for Green Point executives and trustees and precluded the insiders from acquiring Green Point shares in the conversion and for a substantial time thereafter. The Superintendent found the plan of conversion, as modified, was in the 'best interests' of the bank and its depositors and therefore approved the consummation of the modified plan. The next day Ps sought a temporary restraining order in state court to prevent the Superintendent from filing D's restated organization certificate. The state court rejected their claims and refused to grant the temporary restraining order. Ps then sought a TRO in this action barring the conversion. On January 26, 1994, the district court granted the motion and issued an order barring D from taking further action to accomplish the conversion, pending a preliminary-injunction hearing scheduled for February 3, 1994. Ds appealed and moved in this court to stay the district court's restraining order and to expedite the appeal.