Sonesta International Hotels Corporation v. Wellington Associates

United States Court of Appeals for the Second Circuit · 1973 · Civil Procedure

483 F.2d 247 (1973)

Updated July 29, 2026

Civil ProcedureSecurities disclosureTender offersPreliminary injunctionspreliminary injunctiontender offerSection 14(e)material omission

Facts

Wellington announced a cash tender offer for up to 1,000,000 Sonesta shares at $7 per share and filed a Schedule 13D. Sonesta claimed the tender materials omitted material facts, including that Wellington owed Sonesta more than $2.4 million, that Wellington's abstention from voting on two shareholder proposals could help defeat proposals that might yield shareholders nearly $2 per share, and that a fully successful offer could lead to delisting of Sonesta stock from the New York Stock Exchange. The district court rejected these claims and denied preliminary injunctive relief. Before appeal was decided, the offer expired with 419,623 shares tendered and Sonesta's shareholder proposals were approved at the annual meeting.

Issue

Whether Sonesta was entitled to a preliminary injunction against consummation of Wellington's tender offer because Wellington's Schedule 13D and tender offer omitted material facts in violation of Section 14(e). More specifically, the question was whether the omitted information was material to a reasonable shareholder deciding whether to tender shares and whether preliminary relief was appropriate before consummation of the offer.

Rule

A preliminary injunction should issue only upon a clear showing of either (1) probable success on the merits and possible irreparable injury, or (2) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly toward the party requesting relief. In the tender-offer context, omitted facts are material if a reasonable investor might have considered them important in deciding whether to accept the offer, and prospective or contingent events must be disclosed when there appears to be a reasonable likelihood of their occurrence and they could influence the shareholder's decision.

🔒

See the holding & full analysis

Create a free KwikCourt account to unlock the rest of this brief — and practice the case.

The court's holding and reasoning
Doctrine tests, pitfalls & exam hypotheticals
10 practice questions + 4 AI-graded essays on this case

Free sample · practice this case

Test yourself

One of 10 multiple-choice questions for this case. Pick an answer to see why.

Lakefront Hospitality Group launched a cash tender offer for shares of Harborview Lodging, a publicly traded company based in Chicago. Harborview sued in federal court, showing that the offer materials likely omitted a material debt Lakefront owed Harborview, but Harborview offered only a weak showing of present injury beyond the risk that the offer would close before corrected disclosure could be made.

Which is the strongest basis for granting preliminary injunctive relief before the offer is consummated?

Explanation. The governing standard is disjunctive. A preliminary injunction may issue on a clear showing of either probable success on the merits and possible irreparable injury, or sufficiently serious questions going to the merits plus a balance of hardships tipping decidedly toward the movant. In the tender-offer setting, the risk that the offer will be consummated before lawful disclosure is made supports possible irreparable injury because post-closing relief may be difficult.