General Steel Industries v. Walco Nat. Corp.

527 F. Supp. 305 (1981)

GENERAL STEEL INDUSTRIES, INC., Plaintiff,
v.
WALCO NATIONAL CORPORATION, et al., Defendants.
WALCO NATIONAL CORPORATION, Counterclaim Plaintiff,
v.
GENERAL STEEL INDUSTRIES, INC., Counterclaim Defendant,
and
Joseph H. Bascom, Robert J. Crain, William L. Davis, Taylor S. Desloge, W. Ashley Gray, Jr., Douglas Grymes, Edwin S. Jones, Thomas R. Remington, Boyd F. Schenk, Elliott B. Stein, J. A. Van Sant and Robert C. West, Additional Defendants on Counterclaims.

Civ. A. No. 81-1410C(1).

United States District Court, E. D. Missouri, E. D.

December 8, 1981.

Thomas E. Wack, St. Louis, Mo., Reid L. Ashinoff, Skadden, Arps, Slate, Meagher & Flom, New York City, for plaintiff.

Peper, Martin, Jensen, Maichel & Hetlage, Lewis R. Mills, P. Terence Crebs, Arthur L. Smith, St. Louis, Mo., for defendants.

ORDER

WANGELIN, Chief Judge.

Plaintiff General Steel Industries ("GSI") and the counterclaim defendants have moved this Court for an order enjoining Walco National Corporation ("Walco"), defendant and counterclaim plaintiff in the above case, from prosecuting in an action pending in the United States District Court for the Western District of Missouri, claims identical to the counterclaims first filed by Walco in this action.

The Court, having reviewed said motion and supporting memoranda and being fully apprised of the record in this case, and having fully heard the arguments of respective counsel, FINDS that:

1. The action initiated in the Western District of Missouri styled Walco National Corporation, Plaintiff vs. General Steel Industries, Inc., et al., Defendants, Civil Action No. 81-4231-CV-C-5, was initiated by Walco for the sole purpose of enjoining and restraining defendants from invoking or enforcing the provisions of the Missouri Takeover Bid Disclosure Act. Defendants have consented to the entry of a preliminary injunction enjoining and restraining them from invoking or enforcing the provisions of the Missouri Act, and the issues originally raised by Walco in that action are not the subject of the pending controversy.

2. GSI filed the present action on November 9, 1981, alleging that defendants Walco and Richmond have violated Sections 14(d) and 14(e) of the Securities Exchange Act of 1934 by making materially false and misleading statements in, and omitting material facts from, Walco's tender offer materials.

3. On November 16, 1981, Walco served and filed in this action an Answer and Verified Counterclaim, alleging that the individual directors of GSI had violated the federal securities laws and their fiduciary duties by attempting to entrench themselves in control of GSI and by taking actions designed to defeat Walco's tender offer.

4. Notwithstanding the filing of this claim, three days later, on November 19, 1981, Walco amended its Amended and Supplemental Complaint in the action in the United States District Court for the Western District of Missouri. Count I of that Amended pleading was again based upon the Missouri Act, and GSI later consented to a preliminary injunction on that claim. Count II, against GSI and its directors, was substantially identical to the allegations of Walco's counterclaim previously made in this Court.

5. The parties hereto have vigorously conducted discovery in this action on an expedited basis. In conjunction with its counterclaim, defendant Walco has conducted numerous depositions, propounded several sets of interrogatories, and made a series of document demands upon GSI and the individual directors in this action. On November 24, 1981, this Court entered an order of Preliminary Injunction, after full hearing, in favor of GSI and against defendants on GSI's Complaint. It does not appear that Walco made any effort to proceed with discovery in the United States District Court for the Western District of Missouri until November 30, 1981. On or about December 4, 1981, Walco first filed its motion in the Western District to enjoin GSI from further prosecution of this action, despite the extensive proceedings already conducted in this case.

The Court CONCLUDES that it should exercise its power to enjoin Walco from prosecuting its later filed claim in the United States District Court for the Western District of Missouri in order to best serve the interests of judicial economy, to avoid inconsistent results, for the convenience of all parties and witnesses (most of whom are located within this judicial district), and to avoid duplicative litigation.

ACCORDINGLY, IT IS HEREBY ORDERED THAT:

1. Defendant Walco National Corporation, until further order of this Court and subject to any ruling from the United States Court of Appeals for the Eighth Circuit, is hereby enjoined and restrained from prosecuting claims or issues in the United States District Court for the Western District of Missouri which are the same or similar to those raised in its counterclaim in this action.

2. Defendant Walco National Corporation is not enjoined or restrained from prosecuting Count I of its Amended and Supplemental Complaint in the Western District action based upon the Missouri Takeover Bid statute.

3. Pursuant to the provisions of Section 1292(b) of Title 28, United States Code, this Court is of the opinion that this order involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation.

Bond approved in the amount of $50,000.