The opinion of the court was delivered by: Rosemary M. Collyer United States District Judge
MEMORANDUM OPINION AND ORDER ON APPLICATION FOR PRELIMINARY INJUNCTIVE RELIEF RE: SECTION 13D COMPLIANCE
The instant matter is but one part of a long-running dispute concerning the future of plaintiff Independence Federal Savings Bank ("Independence" or "Bank"), a minority-owned savings and loan institution in Washington, D.C. See Indep. Fed. Sav. Bank v. Bender, No. 04-736, 2004 U.S. Dist. LEXIS 12759 (D.D.C. July 9, 2004); Bender v. Parks, No. 03-2485 (D.D.C. Jan. 15, 2004). The Bank began a slow decline after the death of its founder, William B. Fitzgerald, III. It was further shaken by alleged mismanagement in connection with financial improprieties at the Washington Teachers' Union. The widow of Mr. Fitzgerald invited defendant Morton A. Bender to consider acquiring Independence.*fn1 Once his attention was drawn to the possibility, Mr. Bender began to acquire stock in the Bank and to observe its operations. He has since become an unhappy and vocal shareholder.
Savings and loan associations are regulated by the federal Office of Thrift Supervision ("OTS"), which labeled the Bank a "troubled" institution in November 2003. When he acquired five percent (5%) of its outstanding shares, Mr. Bender was required to, and did, file a report under § 13(d) of the Securities Exchange Act of 1934 ("Exchange Act"), as added by § 2 of the Williams Act, 15 U.S.C. § 78m(d). This "Schedule 13D" described his acquisition, its purpose, the source of his funds, and other mandatory details.*fn2 Plfs.' Exh. 3. Last winter, Mr. Bender sued the Bank's Board of Directors in an effort to force a Special Meeting of shareholders for the purpose of voting out those directors with whom he disagreed. That effort was unsuccessful. See Bender v. Parks, No. 03-2485 (D.D.C. Jan. 15, 2004). On March 15, 2004, the Board of Directors of Independence voted to accept a bid from Carver Bancorp, Inc. and Carver Federal Savings Bank (collectively, "Carver") to merge the Bank into Carver.*fn3 Mr. Bender thereafter began purchasing large quantities of Bank stock; in his 13D reports, he noted his disagreement with the Board's decision and his intention to vote his shares against the merger. In response, the Board of Directors adopted a Shareholder Rights Plan, also known as a "poison pill," and approved the instant lawsuit against Mr. Bender. See Indep. Fed. Sav. Bank v. Bender, No. 04-736, 2004 U.S. Dist. LEXIS 12759 (D.D.C. July 9, 2004).
In its current incarnation, this dispute centers around the Bank's allegations that Mr. Bender's 13D filings were inaccurate, incomplete and misleading. By way of remedy, Independence seeks, inter alia, an order "neutralizing" the shares purchased by Mr. Bender since the date the Board announced the Carver merger.*fn4 This would cause eight percent (8 %) of the outstanding shares of the Bank, i.e., those acquired by Mr. Bender after March 15, 2004, to be voted on the Carver merger question in the same proportion as all other votes.
After careful consideration of the entire record, including the testimony and demeanor of the witnesses, the Court finds that the Bank has failed to demonstrate the necessary prerequisites for a preliminary injunction. Its application therefore will be denied.
For speed and convenience, the facts are recited in numbered paragraphs. Despite the vigor of this litigation, the parties essentially agree on the material facts. Where there is a dispute, it is noted.
1. On October 16, 2002, Mr. Bender filed a Schedule 13D with OTS, disclosing ownership of 5.8% of the outstanding shares of the Bank's common stock. Plfs.' Exh. 3. This original 13D stated that the purpose in acquiring the stock was to "profit from the appreciation in the market price of the Common Stock through the assertion of shareholder rights." Id. at 4.
2. On December 3, 2002, Mr. Bender filed Amendment No. 2 to the Schedule 13D, disclosing that he had increased his ownership of Bank shares to 9.8%. Plfs.' Exh. 34. Amendment No. 2 also recited events concerning meetings between Mr. Bender and Bank officials, at which he expressed his views on the Bank's performance and recommended changes, and a letter Mr. Bender had sent to the Chairman of the Board on November 13, 2002, requesting a Special Meeting of shareholders for the purpose of removing four directors from the Board. 3. On January 8, 2003, Independence announced that it had retained Keefe, Bruyette & Woods, Inc. ("KBW"), an investment banking firm, to help it explore ways to enhance shareholder value.
4. On March 19, 2003, Mr. Bender proposed two nominees for the Independence Board of Directors, Elliott Hall and Nelson Deckelbaum (collectively, "Bender Nominees"). After a proxy contest, Messrs. Hall and Deckelbaum were elected to the Board at the Bank's 2003 Annual Meeting.
5. On March 21, 2003, Mr. Bender and affiliated parties, including Colombo Bancshares, Inc. ("Colombo"), a savings and loan holding company controlled by Mr. Bender, filed an application with OTS "to acquire, either individually or together, up to 100% of the outstanding common stock" of the Bank, including through a merger with Colombo. Plfs.' Exh. 37.
6. At the advice of the OTS, because he had nominated the Bender Nominees, Mr. Bender filed Amendment No. 3 to the Schedule 13D on April 15, 2003, reporting that he, his wife and Messrs. Deckelbaum and Hall had formed a Section 13(d) "Group." Plfs.' Exh. 38 at 6. Amendment No. 3 noted that "[t]he 100 shares of Common Stock beneficially owned by each of Messrs. Deckelbaum and Hall were acquired for them by Bender using Bender's personal funds." Id. This Amendment recited the entire history of Mr. Bender's demands on the Bank and the nominations of Messrs. Deckelbaum and Hall for the Board.
7. On October 30, 2003, Mr. Bender filed Amendment No. 4 to his Schedule 13D filing. Plfs.' Exh. 10. While recounting the background of events, Amendment No. 4 reported the OTS approval, on October 14, 2003, of his application to acquire up to 100% of the Bank's shares. It also advised that Mr. Bender had increased his ownership interest in the Bank to 9.99% and the Group's ownership to 10.01%. Id. at 8. Amendment No. 4 stated that Mr. Bender had delivered a letter to the Chairman of the Bank's Board on October 27, 2003, requesting a Special Meeting of shareholders for the purpose of removing for cause five of the eight current directors. The parties acknowledge that this letter, although drafted, was never delivered and that, in this respect, Amendment No. 4 was inaccurate.
8. Amendment No. 5 was filed on November 17, 2003. Plfs.' Exh. 48. It reported Mr. Bender's acquisition of additional shares so that he personally owned 10% of the Bank's common stock. The Amendment repeated the history of Mr. Bender's disaffection with the Bank and its management, including the statement, "Accordingly, an effort was made, on November 7, 2003, to obtain the resignations of certain directors of the Issuer, which effort was unsuccessful." Id. at 8. This sentence was added at the request of Mr. Deckelbaum to report a motion by Mr. Hall, at a Board of Directors meeting, to have all non-Bender Nominees resign their Board positions. Mr. Deckelbaum directly contacted Silver, Freedman & Taff, L.L.P., securities lawyers for Mr. Bender who prepared the Schedule 13D and all Amendments, to inform them of this motion so that it could be included in Amendment No. 5.
9. On December 22, 2003, Mr. Bender filed Amendment No. 6. Plfs.' Exh. 39. For the first time, and on the advice of OTS, this Amendment did not recite the entire chronology but incorporated earlier Amendments by reference. The purpose of filing Amendment No. 6 was to report that Mr. Bender mailed a letter on November 10, 2003, demanding a Special Meeting of shareholders to remove for cause six of the eight current directions (all but the Bender Nominees) and that he had filed an action in D.C. Superior Court to force such a meeting. Id. at 7; see also Bender v. Parks, No. 03-2485 (D.D.C. Jan. 15, 2004). In commenting on that litigation, Amendment No. 7 stated that this Court had "indicated [at a hearing in which the Court denied the application for a temporary restraining order] that Mr. Bender, as the holder of at least 10% of the shares of the Issuer, was entitled to a special meeting separate from the annual meeting...." Id. In addition, Amendment No. 6 stated that Mr. Bender had submitted a non-binding indication of interest with the Bank to purchase all shares and that he would, therefore, participate in an on-going due diligence process by which KBW hoped to receive acquisition bids for the Bank.
10. Thereafter, Mr. Bender learned of the Carver bid of $21 per share and declined to submit a bid for the Bank. After receiving and considering two offers, the Board of Directors unanimously voted on March 15, 2004, to accept the offer from Carver, in cash, with the merger to close by the end of 2008.
11. On April 7, 2004, Mr. Bender submitted Amendment No. 7 to his Schedule 13D filing. Plfs.' Exh. 7. This was a "Group" filing, as all had been since Amendment No. 3.*fn5 Amendment No. 7 reported that "Mr Bender was unsuccessful in his attempt to hold a special meeting of shareholders of the Issuer to remove certain directors[,]" but made no other comment on the litigation he had initiated in Bender v. Parks. Id. at 7. Further, the Amendment disclosed that Mr. Bender had acquired 65,000 shares of Bank stock on March 29, 2004, at a per-share price of $20.78. The purpose of this acquisition was to "increase the level of Mr. Bender's voting rights" because "Mr. Bender does not support" the Carver merger and "he does not intend to vote his shares of Common Stock in favor of the Merger Agreement." Id.
12. For the first time, Amendment No. 7 included the paragraph: Mr. Bender continues to believe that, if the Merger Agreement is not approved, a change in the management and composition of the board of directors of Independence is necessary. Mr. Bender intends to take action to effect such a change in the management and directors of the Issuer, if the Merger Agreement is not approved.
13. Pursuant to Powers of Attorney signed by Messrs. Deckelbaum and Hall and Mrs. Bender, Mr. Bender entered all signatures on Amendment No. 7 directly under the legend, "After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct." Id. at 12. Such information included the statement that members of the Group "may dispose of all or all of the shares of Common Stock held by them, although they have no current intention to do so" and that "the Group members do not have any other plans or proposals [to report]." Id. at 7.
14. Between April 7 and 16, 2004, both Messrs. Deckelbaum and Hall, who had joined the unanimous Board vote to merge the Bank with Carver, signed agreements by which they pledged to vote their entire shares (at that point, each man held 110 shares) in favor of the merger.
15. Neither Mr. Deckelbaum nor Mr. Hall informed Mr. Bender that they (i) had voted in favor of the Carver merger as Board members, or (ii) had pledged to vote their stock in favor of the merger. Neither Mr. Deckelbaum nor Mr. Hall contacted attorneys at Silver, Freedman & Taff to notify them of these votes and intentions.
16. On April 16, 2004, Mr. Bender filed Amendment No. 8 as a Group filing, including Messrs. Deckelbaum and Hall (and Mrs. Bender) in the "Group." Plfs.' Exh. 8. As before, Mr. Bender executed the document via the Powers of Attorney. This Amendment continued to inform investors of Mr. Bender's opposition to the Carver merger. Its filing was prompted by Mr. Bender's purchase, on April 15, 2004, of 24,300 shares of Bank stock at a per-share price of $20.75.
17. On April 28, 2004, Mr. Bender filed Amendment No. 9 to his Schedule 13D report. Plfs.' Exh. 9. This too was a "Group" report signed solely by Mr. Bender pursuant to the Powers of Attorney. Amendment No. 9 reported that Mr. Bender had acquired 8,500 shares of Bank stock on April 26, 2004, for $20.84 per share, and 12,000 shares of Bank stock on April 27, 2004, for $20.89 per share. This Amendment continued to state that ...