The opinion of the court was delivered by: WORTENDYKE
WORTENDYKE, District Judge:
Jurisdiction of this action is predicated upon § 27 of the Securities Exchange Act of 1934, 15 U.S.C. § 78aa et seq. The plaintiff, a stockholder of United Fruit Company brings this action in behalf of that corporation to recover alleged secret profits pursuant to § 16(b) of the Act, 15 U.S.C. § 78p(b).
The complaint alleges that the capital of United consists of approximately 213,334 shares of preferred stock and approximately 8,053,361 shares of common stock, all registered on the New York Stock Exchange. Plaintiff charges that on September 24, 1968 AMK Corporation, hereinafter AMK, purchased 733,200 shares of United common from Donaldson, Lufkin & Jenrette, Inc. acting as agent and from six institutional investors for whom DLJ acted as broker, at $56 per share and thereafter an additional 7,100 shares of United common on open market, thereby acquiring in direct ownership 740,300 shares at an aggregate cost of $41,778,000.
Plaintiff alleges that AMK is controlled by a group of mutual funds owning approximately 25% of AMK, and it is charged that on September 30, 1968 these mutual funds also owned 14% of United common.
It is further alleged, and not contradicted, that by the terms of a letter, dated September 24, 1968, from AMK to the defendants it was provided as follows:
"We have today purchased from you - shares of Common Stock of United Fruit Company at a price of $56 per share plus commissions, payment of which will be made to you through Donaldson, Lufkin & Jenrette, Inc., in accordance with customary settlement procedures.
We hereby confirm that as part of such transaction we have agreed with you that, if, pursuant to a general offer to shareholders of United Fruit Company made within twelve months of the date hereof, we purchase shares of United Fruit Company for cash at a higher price then $56 per share, we will make an adjustment with you so that the price paid to you will be equal to such higher price. If we purchase shares of United Fruit Company pursuant to such a general offer in exchange for securities or commence action within twelve months of the date hereof to combine with United Fruit Company, whatever the legal mechanics, you will have the right to rescind your sale to us provided you then resell to us the shares received by you on rescission in exchange for the best package of securities which we give to any other person."
The 733,200 shares of United stock purchased by United pursuant to the terms of said letter were transferred to the name of AMK and certificates thereof delivered into its possession.
On January 24, 1969, upon a prospectus of that date, AMK made a public exchange offer to common and preferred stockholders of United. The AMK securities offered in exchange for United stock were $317,107,287 principal amount of 5 1/2% convertible subordinated debentures, due February 1, 1994, and 4,589,711 shares of common stock, together with 12,517,393 warrants to purchase shares of common stock as set forth in its prospectus by the provisions of which the offer was to expire at 5:00 P.M., New York City Time on January 31, 1969, unless extended by AMK. Upon the motion for summary judgment, hereinafter referred, a copy of this prospectus was admitted in evidence and marked P-1 of September 8, 1969.
This case is now before this Court upon the motion of AMK for summary judgment dismissing the complaint as to all defendants for failure to set forth a cause of action upon which relief can be granted. The motion was duly briefed in behalf of the respective parties, and orally argued on September 8, 1969. This opinion embodies the decision of the Court granting summary judgment to the moving party AMK.
Affidavits have been submitted and filed on behalf of AMK and the plaintiff does not dispute the facts set forth in these affidavits, but no affidavit has been filed in behalf of the plaintiff.
It is further conceded, and indeed alleged in the complaint, that on or about January 24, 1969, and within six months of the purchase pursuant to the letter of September 24, 1968, AMK through Donaldson, Lufkin and Jenrette, Inc. as agent for the six institutional investors named as defendants herein, separately advised AMK of their respective elections to exercise their rights under the letter agreement of September 24, 1968 by returning the initial payment of $56 per share which they had made thereunder and to receive the "package" of AMK securities offered pursuant to the AMK prospectus which they deemed to be worth more than the $56 which they had paid pursuant to the 1968 letter.
It appears from the affidavit of Irving Jacobson, of counsel for AMK, submitted in support of the pending motion that the "mechanics" employed to effect the "price adjustment" with respect to the 733,200 shares of United pursuant to the letter of September 24, 1968 were as follows:
"(a) The 733,200 common shares of United were registered in the name of AMK at the time of the transfer of said shares to AMK in September 1968. They remained registered in ...