Rondeau v. Mosinee Paper Corp.,
422 U.S. 49 (1975)

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U.S. Supreme Court

Rondeau v. Mosinee Paper Corp., 422 U.S. 49 (1975)

Rondeau v. Mosinee Paper Corp.

No. 74-415

Argued April 15, 1975

Decided June 17, 1975

422 U.S. 49


Respondent corporation brought this action against petitioner to enjoin him from voting or pledging his stock in respondent and from acquiring additional shares, and to require him to divest himself of the stock that he already owned. Respondent claimed that the failure of petitioner, who had acquired more than 5% of respondent's stock, to make timely disclosure as required by § 13(d) of the Securities Exchange Act of 1934, as added by the Williams Act, was a scheme to defraud respondent and its stockholders. Petitioner, who had filed the disclosure schedule about three months after the statutory filing time, contended that the Williams Act violation, which he readily conceded, resulted from his lack of familiarity with the securities laws, and that neither respondent nor its shareholders had been harmed. The District Court granted petitioner's motion for summary judgment, having found no material issues of fact regarding petitioner's lack of willfulness in failing to make a timely filing and no basis in the record for disputing petitioner's claim that he first considered the possibility of obtaining control of respondent sometime after he discovered his filing obligation. It concluded that respondent had suffered no cognizable harm from the late filing, and that this was not an appropriate case in which to grant injunctive relief. The Court of Appeals reversed, concluding that respondent was harmed by having been delayed in its efforts to respond to petitioner's potential to obtain control of the company but that, in any event, respondent was not required to show irreparable harm as a prerequisite to obtaining permanent injunctive relief since, as the securities' issuer, respondent was in the best position to assure that § 13(d)'s filing requirements were being timely and fully complied with.

Held: A showing of irreparable harm, in accordance with traditional principles of equity, is necessary before a private litigant can obtain injunctive relief based upon § 13(d) of the Securities Exchange Act. Pp. 422 U. S. 57-65.

(a) The Court of Appeals erred in concluding that respondent suffered "harm" because of petitioner's technical default, since

Page 422 U. S. 50

petitioner has not attempted to obtain control of respondent, has now made proper disclosure, and has given no indication that he will not report any material changes in his disclosure schedule. Pp. 422 U. S. 58-59.

(b) Persons who allegedly sold their stock to petitioner at unfairly depressed pre-disclosure prices have adequate remedies by an action for damages, and those who would not have invested, had they thought a takeover bid was imminent, are not threatened with injury. Pp. 422 U. S. 59-60.

(c) The District Court was entirely correct in insisting that respondent satisfy the traditional prerequisites of extraordinary equitable relief by establishing irreparable harm, and its conclusions that petitioner acted in good faith and promptly filed a disclosure schedule when he became aware of his obligation to do so support the exercise of that court's sound judicial discretion to deny the application for an injunction, relief that is historically "designed to deter, not to punish." Hecht Co. v. Bowles, 321 U. S. 321, 321 U. S. 329. Pp. 422 U. S. 60-62.

(d) Respondent is not relieved of the burden of establishing those prerequisites simply because it is asserting a so-called implied private right of action under § 13(d). Pp. 422 U. S. 62-65.

500 F.2d 1011, reversed and remanded.

BURGER, C.J., delivered the opinion of the Court, in which STEWART WHITE, BLACKMUN, POWELL, and REHNQUIST, JJ., joined. BRENNAN, J., filed a dissenting opinion, in which DOUGLAS, J., joined, post, p. 422 U. S. 65. MARSHALL, J., dissented.

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