## Facts

- Becton, Dickinson & Co. was a publicly traded New Jersey corporation historically associated with the Dickinson family.
- Fairleigh S. Dickinson, Jr., a significant shareholder and former senior officer/director, held roughly 6% of Becton’s outstanding shares and was removed as chairman in April 1977 after disputes with management.
- After his removal, Dickinson consulted investment bankers (including Salomon Brothers and F. Eberstadt & Co.) about transactions that could shift influence or control at Becton, including placing a large block of shares with a third party.
- Investment bankers approached Sun Company, Inc. and represented that a substantial combined block of Becton shares (including shares held by Dickinson, certain outside directors, and an institutional holder) could be made available in connection with a potential control transaction.
- Sun ultimately acquired a large stake in Becton (about 34%).
- No Schedule 13D disclosure was filed by Dickinson or any coordinated shareholder “group” before the combined effort facilitated acquisitions exceeding the 5% threshold.
- The SEC, Becton, and shareholder plaintiffs claimed the coordinated actions and nondisclosure violated § 13(d) of the Securities Exchange Act of 1934.

## Issues

1. Whether Dickinson’s coordinated efforts with other shareholders and intermediaries constituted a § 13(d)(3) “group” formed for the purpose of disposing of securities.
2. Whether aggregation of the group’s holdings and concerted action triggered § 13(d)(1)’s Schedule 13D filing obligation once the 5% threshold was crossed.
3. Whether the district court properly granted declaratory and equitable relief on the § 13(d) violation and properly addressed remedies in the consolidated actions.

## Decision

- The Second Circuit affirmed the finding that Dickinson violated § 13(d).
- The court held that Dickinson and others formed a § 13(d)(3) “group” based on a common plan to dispose of a significant block of shares in a control-related transaction, even without a formal written agreement.
- The group’s collective position and coordinated disposition effort constituted beneficial ownership for § 13(d) purposes, requiring timely disclosure once holdings exceeded 5%.
- The failure to file the required disclosures with the SEC, the issuer, and the exchange within the statutory period was a § 13(d) violation.
- The court upheld the district court’s handling of the SEC’s narrowed request for declaratory relief and its termination of the SEC action against Dickinson with prejudice after entry of the declaration.
- A dissent in part warned the majority’s reading of “group” risked sweeping ordinary coordinated sale negotiations into § 13(d) liability.

## Legal Principles

- A § 13(d)(3) “group” may be found from coordinated action and a shared objective regarding acquiring, holding, or disposing of an issuer’s securities; formality and written agreement are not required.
- When a § 13(d) group exists, members’ holdings are aggregated and treated as held by a single “person” to determine whether the 5% threshold is met.
- Section 13(d) applies to groups formed to dispose of securities, not only to those accumulating shares, when the coordinated activity has potential control implications.
- Section 13(d) functions as an early-warning disclosure regime intended to inform the issuer and the market of potential changes in control; interpretations that enable evasion through transaction structure are disfavored.
- In private § 13(d) litigation, equitable relief focused on achieving timely, accurate disclosure and preventing ongoing violations is commonly central; damages require proof of causation and injury.

## Conclusion

The Second Circuit concluded that Dickinson participated in a coordinated shareholder arrangement amounting to a § 13(d) “group” formed to dispose of a control-significant block of shares, and that the group’s failure to file timely Schedule 13D disclosures violated the Securities Exchange Act’s disclosure requirements.


Wellman v. Dickinson, 682 F.2d 355 (2d Cir. 1982)