A $36 million damage award - the largest ever made under federal securities law - was overturned by the Supreme Court yesterday.
The loser in Christ-Craft Industries, Inc., which had been awarded the money in connection with an unsuccessful bid in 1968-1969 to over Piper Aircraft Corp.
The principal winners - which won't have to pay the $36 million - are Bangor Punta Corp., the successful bidder for Piper, and First Boston Corp., an investment banking firm.
Other winners are the leading law firms that represented the parties through nearly eight years of what Justice John P. Stevens termed "this monumental litigation . . . three trials, three appeals, and three groups of . . . petitions" for Supreme Court review. By early 1975, Fortune magazine has estimated, lawyers' fee totaled an estimated $4 million.
The key issue in the case was whether the 1968 Williams Act, enacted in response to the growing use of case tender offers in corporate takeovers, gave an "implied" right to sue to anyone victimized by fraud committed by any takeover contestants.
In a 7-to-2 opinion for the court Chief Justice Warren E. Burger said that the legislative history of the law shows that "the sole purpose . . . was the protection of who had been described in a Senate report on the legislation as the "pawn in a form of industrial warfare."
The purpose was to put investors on an equal footing with takeover bidders "without favoring either the tender odder or existing management," Burger said.
"This express policy of neutrality," he continued, "scarcely suggests an intent to confer highly important new rights upon the class of participants whose activities prompted the legislation in the first instance."
The decision reversed the Second Circuit U.S. Court of Appeals, which in its final ruling had divined the intent of Congress to be to grant to takeover bidder an implied right to sue as a "means of furthering the general objective" of the Williams Act.
Burger wrote, however, that Christ-Craft, as a takeover bidder, did not have standing to sue even though lower courts had held that Bangor Punta, First Boston and members of the Piper family had violated antifraund provisions in the securities law in blocking Chris-Craft's efforts to acquire control of the aircraft company.
On violation found by the lower courts was a letter to Piper shareholders from W.T. Piper Jr. that termed the Chris-Craft offer "inadequate" without disclosing that First Boston had termed the offer fair.
The courts found a second violation in a Piper press release and second letter to stockholders that admitted a key aspect of then-pending negotiations for the sale to Grumman Aircraft Corp. of enough Piper shares to render it less vulnerable to takeover by Chris-Craft.
They found a third violation in Bangor Punta and First Boston financial statements that did not reveal an offer to Bangor of only $5 million for the Bangor and Aroostock Railroad although the BAR was carried on Bangor's books at $18.4 million and although no other offer was on the horizon.
Justice Stevens, in a dissent joined by Justice William J. Brennan Jr., said that Christ-Craft had an implied right to sue because its shareholders had been injured by a fraudulent tender offer and because its legal rights had been invaded by the securities-law violations.
The legislative history "also indicates that Congress was concerned about misconduct by insiders as well as outsiders," Stevens wrote.
Yesterday's decision appeared to have been signalled last October when the Supreme Court heard oral argument.
By questions and remarks, majority justices indicated they would rule against Chris-Craft in keeping with an expressed dislike for lawsuits that have been explicity protected by Congress and that, as they saw it, could interfere unduly with business.
The attorneys in the case included Chadbourne, Parke, Whiteside & Wolf of New York City for for the Piper family; Sullivan and Cromwell, also New York, and Louis Loss, Cambridge, for First Boston; Wilmer, Cutler & Pickering, Washington, Webster & Sheffield, New York, and Charles A. Wright, Austin, Tex., Bangor Punta, and Paul, Weiss, Rifkind, Wharton & Garrison, New York, Chris-Craft.