(dissenting in part).
In this case we are split three ways. Judge Frank holds for affirmance of the dismissal of Counts I and II and for reversal and remand as to Counts III, IV and V. I would affirm the dismissal of all Counts; and Judge Brennan goes with Judge Frank as to Count V and with me as to Counts III and IV. We all agree that Counts I and II were properly dismissed. The upshot is that we affirm Judge Walsh’s order dismissing Counts I, II, III and IV and reverse so much of his order as dismisses Count V, with remand for further proceedings in due course as to that Count. Except for the portion of this opinion which concerns the dismissal of Count V on motion for summary judgment, what I have to say represents the views of Judge Brennan and myself.
Counts I, II, III and IV
On July 22, 1954, an agreement was made between Julius Kayser & Co. and Diamond Hosiery Corp. by the terms of which Kayser was to purchase Diamond as a going business. In substance the *774agreement contemplated the merger of an old established firm with a rapidly expanding new one. There were included in the agreement elaborate provisions for the scheduling and transfer of numerous parcels of real property, leases, patents and patent, applications, trade-marks,. trade-names and applications therefor; raw materials and supplies required the taking of a special inventory; numerous adjustments were provided for with respect to prepaid insurance, wages and salaries, including accrued vacation pay, taxes, rents, mortgage interest, prepaid advertising and promotion expense and similar matters; the agreement provided that unless a majority of the stockholders approved on or before September 15, 1954, either party had the option to cancel and terminate the'transaction; the seller warranted that the net worth at the date of closing “will be not less than $900,-000;” and the purchaser, in addition to the various amounts found to be due on inventory, adjustments and so on, was to pay cash in the amount of $353,051 and assume an unpaid principal balance of $389,500 on a certain mortgage indebtedness; Kayser was not to be burdened with other miscellaneous .obligations. The stockholders’ meeting was scheduled for August 20, 1954. Plaintiff, a competitor of Kayser, acquired his 100 shares of Kayser stock one week before the announcement of the merger agreement; and he brought this action a few days before the meeting, unsuccessfully applying for an injunction to prevent the consummation of the merger.
The amended complaint, for reasons which are far from clear, is divided into five Counts, the last four of which repeat and reallege in a bewildering manner certain selected paragraphs and groups of paragraphs of the first and other Counts. It is not even clear whether all, or only a few, or perhaps one, of the Counts are derivative. This devious method of approach is probably due to difficulties relating to jurisdiction or perhaps to the security provisions of Section 61-b of the New York General Corporation Law; but we shall not concern ourselves with such reasons as may lie behind this seemingly needless confusion. The substance of the first four Counts is the charge that the Proxy Statement sent out prior to the stockholders’ meeting contained false and misleading statements, contrary to the requirements of SEC Rule X-14A-9, from which plaintiff spells out a substantive right to sue, relying on Sections 14(a) and 29(b) of the Securities Act. It is claimed that the fact that the Proxy Statement was prepared in consultation with the staff of the SEC, and in full compliance with the SEC Rules and Regulations as interpreted by the staff, is of no moment, as the Commission gave no formal approval nor was any adjudication .made as to the sufficiency of the Statement and we agree that such participation in the preparation of the Proxy Statement by staff members of the SEC as may have taken place cannot affect the sufficiency as matter of law of the allegations of the complaint.
In limine it is at least doubtful that it was the intention of the Congress to create any substantive rights by the provisions of Sections 14(a) and 29(b) of the Security Act. We do not think the authorities cited in support of plaintiff’s position on this point do more than affect supposedly analogous situations. We need not reach that point, however, as the allegations contained in the first four Counts are insufficient to state a claim for relief, even if it be assumed that the inclusion of false and misleading statements in the Proxy Statement would constitute a sufficient basis for enjoining the consummation of an otherwise proper and legal agreement of purchase and sale or the undoing of one already carried out.
The Proxy Statement is lengthy and sets forth in elaborate detail the terms of the proposal, including a copy of the agreement of purchase and sale, elaborate descriptions of the properties involved, the nature of the business of the two companies and the anticipated effect of the merger, supplemented by vari*775ous financial statements, with explanatory notes. The business of Diamond is to be taken over as a going concern with its key employees, including A. Philip Goldsmith, its president and general manager. Under the title “Interest of Directors, Officers and Stockholders of the Company and Associates,” the Proxy Statement discloses the interests of A. Philip Goldsmith, who with associates, owns 75% of the stock of Diamond, and those of Abraham Feinberg and Benjamin Hinerfeld, owners of a majority of the stock of Hillcrest Factors, Inc. and Hamilton Textile Mills, Inc. It therein appears that Diamond, Hillcrest and Hamilton each owns 62,442 or 62,443 or 10.4% of the stock of Kayser and that Goldsmith, Feinberg and Hinerfeld are directors of Kayser. It further appears that Hamilton and Feinberg and Hiner-feld are associates of the Hamilton lease to Diamond and that the large stockhold-ings above described were acquired on May 13, 1954.
The amended complaint alleges the purchase of the respective amounts of common stock of Kayser on May 13, 1954, by Diamond, Hillcrest and Hamilton Textile, that Goldsmith, Feinberg and Hinerfeld are “variously officers and directors of defendant Kayser and variously officers, directors and controlling stockholders of Diamond, Hillcrest and Hamilton Textileand that “defendants Goldsmith, Hinerfeld and Feinberg dominate and control the board of directors of defendant Kayser and the management of said corporation through their control of Diamond, Hillcrest and Hamilton Textile, which said corporations are the controlling stockholders of defendant Kay-ser.” This conflict of interest is substantially disclosed in the Proxy Statement, except for the characterization of control, which may be inferred from the ownership of the three blocks of 10.4% each of the Kayser stock.
Rule X-14A-9 prohibits solicitation by means of any proxy statement “containing any statement which, at the time and in the light of the circumstances under which it was made, is false or misleading with respect to any material fact, or which omits to state any material fact necessary in order to make the statements therein not false and misleading.” Accordingly, the amended complaint purports to set forth a series of allegedly false statements and a series of alleged omissions.
The so-called false statements turn out to be nothing of the kind. Thus paragraph 14 of the amended complaint has a long, involved preliminary sentence which, when read carelessly, appears to charge that certain specified statements of fact in the Proxy Statement are false. But this is merely an impression; there is no such enumeration. The preliminary sentence does allege that the Proxy Statement “contained statements” which “were false and misleading,” and it continues “among others, statements contained under” certain headings such as “Summary of Proposals,” “Description of Diamond” and so on. But the subdivision (a), which immediately follows, merely states that “said statements,” without specifying them, were intended to represent “that (i) it would be to the advantage and interest of Kayser and its stockholders to acquire said properties and assets of Diamond,” with more to the same effect. The whole paragraph is no more than a series of conelusory characterizations. Not a single specific part of the Proxy Statement is identified and alleged to be false. A similar paragraph might be contrived by an artful and ingenious pleader who knew nothing of the facts and had good and sufficient reasons for not taking the responsibility of making a serious charge as to any specific supposedly false statement, for fear of the consequences, should it develop that such specific statement was absolutely true.
The long enumeration of a host of alleged omissions in paragraph 15 of the amended complaint again boils down to nothing at all. Most of these alleged omissions are bits of miscellaneous information which plaintiff’s knowledge of the business as a competitor appears to have made it possible for him to think *776up, although a Proxy Statement containing such a mass of detail would likely confuse more than help a stockholder. Thus information is said to have been omitted, such as the names of the Kayser officers who inspected Diamond’s properties and reported thereon, the proportion of Diamond’s backlog of hosiery orders for full-fashioned hosiery and for seamless hosiery, the ratio of net earnings to net sales of Diamond for the four months ended June 30, 1954, the age of the machinery to be acquired by Kayser from Diamond (despite the description in the Proxy Statement of Diamond’s “completely modern hosiery manufacturing plant”), and the reason why the agreement provided for cancellation of the agreement if Goldsmith died before a certain cíate.
The alleged omission which is principally relied upon is supposed to be “the amount of money borrowed by Diamond, Hillerest and Hamilton Textile to purchase the stock of Kayser, as aforesaid; the date or dates on which said corporations were required to repay such loans; and the portion of the purchase price to be paid by defendant Kayser to Diamond which will be used by Diamond, Hillerest or Hamilton Textile respectively to repay such loans made by them for the purpose of acquiring the stock of defendant Kayser.” But nowhere in the amended complaint is it alleged that any such loans were made.
Judge Walsh properly held these allegations to be insufficient in law on their face. Otherwise a speculator or competitor interested in muddying the waters could attack any substantial proposed corporate transaction, without knowing anything about it, and harass the officers and directors of the contracting parties indefinitely with' the taking of depositions and demands for the production of documents and admissions, and the answering of interrogatories.
Count V
This brings us to Count V which reads:
“29. Plaintiff repeats and real-leges as part of this cause of action each and all of the allegations contained in paragraphs 1, 2, 5-9 in-elusive, 22, 23-26 inclusive and 28 of this amended complaint, with like effect as if herein fully repeated.
30. The amount in controversy exceeds, exclusive of interest and costs, the sum of $3,000.00.”
This Count incorporates by reference: diversity of citizenship (1); plaintiff’s ownership of 100 shares of Kayser stock (2); the purchase of Kayser stock by Diamond, Hillerest and Hamilton Textile, the alleged control and conflicting interests of Goldsmith, Hinerfeld and Feinberg, a charge that the agreement was negotiated by Kayser “at the instigation and direction of” Goldsmith, Hin-erfeld and Feinberg (5-9); an allegation that plaintiff brings the action “on behalf of himself and all other stockholders of defendant Kayser similarly situated” (22); allegations that a demand upon the Board of Directors to bring the suit would be futile in view of the control and the interest of Goldsmith, Hinerfeld and Feinberg, that the action is not collusive, that plaintiff has no adequate remedy at law (23-26); and an allegation that “said purchase would constitute an improper and wasteful expenditure of its funds, would be detrimental and injurious to it, and would be solely for the benefit of defendants Goldsmith, Hinerfeld, Feinberg and Diamond, Hillerest and Hamilton Textile,” (28).
This is the Count which was disposed of on the merits by the granting of defendants’ motion for summary judgment.
Perhaps the most significant feature of the papers submitted in support of and in opposition to the motion for summary judgment is the complete failure of plaintiff to present any proofs whatever to establish his charges. The affidavit of counsel is no more than an argumentative memorandum. And so the proofs submitted in support of the motion remain unanswered.
The affidavits filed by defendants include one by the lawyer who prepared *777the Proxy Statement and who conducted the conferences with the SEC staff, one by the accountant who assisted at these conferences and another by Abraham Feinberg, a director and Chairman of the Board of Kayser. The details, including letters’ passing between counsel and the Assistant Director of the Division of Corporate Finance of the SEC, appearing in the affidavit of Emanuel Klimpl, demonstrate the scrupulous care with which the Proxy Statement was prepared. There was full disclosure of the conflict of interest upon which plaintiff relies so confidently; many of the supposed omissions were due to specific Eegulations stating that such information was unnecessary; others were found upon consultation to be of little or no importance.
The Feinberg affidavit establishes in the most convincing manner that the purchase, far from constituting “an improper and wasteful expenditure” of the Kayser funds, and “detrimental and injurious to it,” and “solely for the benefit of” Goldsmith and the other defendants, was in every way advantageous to Kayser, whose “business had steadily fallen off from an annual volume of $6,-500,000 for the year 1949 to approximately $3,500,000 for the year ended June 30, 1954.” The Kayser Hosiery Division had been operating at a loss. On the other hand, under the guidance of Goldsmith, who, by the way, stood to lose the most if the new set-up failed to live up to expectations, Diamond, with a modern, efficient, up-to-date plant and an aggressive and successful sales organization, had been making rapid strides ahead, in the face of a contrary trend in the industry as a whole.
Thus some of the advantages and benefits to Kayser were thus catalogued by Feinberg:
“The addition of Diamond’s $9,-000,000 volume of business will result in a 50% increase in the gross volume of business done by Kayser.
“The addition of the Diamond business will treble Kayser’s volume of hosiery business. Kayser will have as the active head of its Hosiery Division one of the most successful, outstanding figures in the industry.
“Kayser will acquire a topnotch merchandising and selling organization with which the Kayser hosiery staff can be integrated.
“Kayser hosiery products, now in the higher price lines under its ‘Kayser’ and its ‘Christian Dior’ brand names, will have added to them the Diamond ‘Fruit of the Loom’ and ‘Custom-Pack’ lines, which are in the lower, popular price ranges, resulting in a well rounded line in the branded and private label field.
“On the basis of current operations of both companies, I have conservatively estimated that the absorption of the Diamond business into Kayser will make possible savings in factoring costs, overhead and finishing costs which, added to the Diamond current earnings, will add a minimum of $700,000 to Kayser’s annual earnings, before taxes. This figure should go higher when overlapping in the two organizations is eliminated and when, as we are confident they will, the ‘Kayser’ and ‘Christian Dior’ brand name sales increase.
“Along with a merchandise inventory consisting of newly manufactured hosiery, at the lower of cost or market value, we get the benefit of approximately $500,000 of unfilled Diamond orders.”
If it be said that no appraisals of independent experts were submitted to prove that the value of the assets and properties purchased, including good will, were in excess of the purchase price, it is a sufficient answer to point out that *778the allegation in the original complaint that the amount paid was “in excess of the fair and reasonable value of such assets and properties” was omitted from the. amended complaint. Moreover, under the circumstances and in the absence of any evidence whatever to the contrary, no such affidavits were required in any event. Nor was it necessary that defendants produce affidavits of each of the directors to the effect that they gave the matter independent consideration and voted approval of the transaction because they were convinced that it was a good purchase for a fair price in Kayser’s interest.
The nub of the charge in Count V is not that the directors acted in bad faith or that their votes did not represent their true views concerning the business advantages to Kayser, but that the “purchase would constitute an improper and wasteful expenditure of its funds, would be detrimental and injurious to it” and would be solely for the benefit of Goldsmith, Hinei'feld, Feinberg and their companies. Surely it cannot be the law that the purchase of a few shares of stock just prior to the consummation of a merger or similar corporate transaction of purchase and sale, involving large sums of money, can put the purchaser in a position to make charges of wasteful and improper expenditure of funds, leave such charges wholly unsubstantiated when defendants move on proper proofs for summary judgment, and then proceed to take advantage of the discovery procedures provided in the Federal Rules of Civil Procedure. Especially is this so, when, as pointed out in Judge Walsh’s opinion below, the purchaser is a competitor.
For these reasons I would affirm Judge Walsh’s order in its entirety, and I dissent from so much of the determination of this court as reverses and remands with respect to Count V of the complaint.
BRENNAN, J., concurs as to counts I, II, III and IV.