                                                                                                                           Opinions of the United
2007 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


9-18-2007

In Re: Daimler
Precedential or Non-Precedential: Precedential

Docket No. 05-2363




Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2007

Recommended Citation
"In Re: Daimler " (2007). 2007 Decisions. Paper 335.
http://digitalcommons.law.villanova.edu/thirdcircuit_2007/335


This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova
University School of Law Digital Repository. It has been accepted for inclusion in 2007 Decisions by an authorized administrator of Villanova
University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.
                            PRECEDENTIAL

       UNITED STATES COURT OF APPEALS
            FOR THE THIRD CIRCUIT


                     No. 05-2363


           * TRACINDA CORPORATION,

                                         Appellant

                           v.

    DAIMLERCHRYSLER AG, a Federal Republic of
  Germany Corporation; DAIMLER-BENZ AG, a Federal
Republic of Germany Corporation; JURGEN SCHREMPP, a
        citizen of the Federal Republic of Germany;
 MANFRED GENTZ, a citizen of the Federal Republic of
   Germany; HILMAR KOPPER, a citizen of the Federal
                    Republic of Germany

  * (Caption Amended as per the Clerk’s 8/24/07 Order)



                     No. 05-2482




    IN RE: DAIMLERCHRYSLER AG SECURITIES
                       LITIGATION

                    DaimlerChrysler AG; Daimler-Benz AG,
                    Jurgen Schrempp, and Manfred Gentz,

                                          Appellants


        Appeal from the United States District Court
                  for the District of Delaware
    (D.C. Nos. 00-cv-00993, 00-cv-00984, 00-cv-00995,
   00-cv-00997, 00-cv-00999, 00-cv-01000, 00-cv-01001,
   00-cv-01003, 00-cv-01008, 00-cv-01009, 00-cv-01010,
   00-cv-01011, 00-cv-01022, 00-cv-01023, 00-cv-01025,
   00-cv-01031, 00-cv-01033, 00-cv-01039, 00-cv-01042,
   00-cv-01072, 01-cv-00004, 01-cv-00122, 01-cv-00128,
                  01-cv-00138, 01-cv-00638)
       District Judge: Honorable Joseph J. Farnan, Jr.


               Argued on September 26, 2006


Before: RENDELL, CHAGARES and ROTH, Circuit Judges


            (Opinion Filed: September 18, 2007)



Natalie J. Haskins, Esquire

                              2
Alan J. Stone, Esquire
Jay N. Moffitt, Esquire
Morris, Nichols, Arsht & Tunnell
1201 North Market Street
P. O. Box 1347
Wilmington, DE 19899

Terry N. Christensen, Esquire (ARGUED)
Mark G. Krum, Esquire
Eric P. Early, Esquire
Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP
10250 Constellation Boulevard, 19th Floor
Los Angeles, CA 90067

Julie E. Kamps, Esquire
William G. McGuinness, Esquire
Fried, Frank, Harris, Shriver & Jacobson, LLP
One New York Plaza
New York, NY 10004

                    Counsel for Appellant/Cross-Appellee
                    Tracinda Corporation


Thomas J. Allingham, III, Esquire
Robert S. Saunders, Esquire
Skadden, Arps, Slate, Meagher & Flom, LLP
One Rodney Square
P. O. Box 636
Wilmington, DE 19899



                              3
Jonathan J. Lerner, Esquire (ARGUED)
Lea H. Kuck, Esquire
Joseph N. Sacca, Esquire
Skadden, Arps, Slate, Meagher & Flom, LLP
Four Times Square
New York, NY 10036

                  Counsel for Appellees/Cross-Appellants
                  DaimlerChrysler AG,
                  Daimler-Benz AG, Jurgen Schrempp and
                  Manfred Gentz



Jeffrey A. Barist, Esquire (ARGUED)
Douglas W. Henkin, Esquire
Josh Porter, Esquire
Milbank, Tweed, Hadley & McCloy, LLP
One Chase Manhattan Plaza
New York, NY 10005

                  Counsel for Defendant/Appellee
                  Hilmar Kopper



                       OPINION


ROTH, Circuit Judge:


                           4
       This appeal arises from the 1998 merger of Daimler-Benz
AG, a German corporation and owner of the Mercedes-Benz
brand, and Chrysler Corporation, one of the “Big Three”
American automakers. Prior to closing, the merger had been
billed as a “merger of equals,” with management of the new
company, DaimlerChrysler AG, to be shared equally between
former Daimler-Benz and Chrysler executives. Shortly after the
merger, however, several former Chrysler executives left the
company, leaving a greater share of control to the former
Daimler-Benz executives.            In 2000, the CEO of
DaimlerChrysler, Jurgen Schrempp, made public statements
suggesting that these management changes were exactly what he
and other Daimler-Benz executives had wanted prior to the
merger. In response, various Chrysler shareholders, including
Kirk Kerkorian’s investment company, Tracinda Corporation,
brought suit against DaimlerChrysler, Daimler-Benz, Schrempp,
Manfred Gentz, and Hilmar Kopper (Defendants), alleging
fraud, misrepresentation, and other violations of the federal
securities laws in connection with the merger. The Chrysler
shareholders alleged that, had they known the merger was a
takeover, rather than a “merger of equals,” they would have
demanded a change-in-control premium upon consummation of
the merger.

       The cases were consolidated before the United States
District Court for the District of Delaware. Defendants reached
a settlement with most of the plaintiffs. Tracinda’s case,
however, culminated in a bench trial. In April 2005, the District
Court issued a lengthy written opinion, finding in favor of
Defendants on all counts. Tracinda appealed that finding, as
well as the District Court’s pre-trial rulings striking Tracinda’s

                                5
demand for a jury trial and dismissing defendant Hilmar Kopper
for lack of personal jurisdiction. Defendants have cross-
appealed, contending that the District Court erred in its post-trial
decision, levying a half-million-dollar sanction against them for
discovery violations. Defendants have also appealed the District
Court’s denial of their motion for summary judgment on statute
of limitations grounds.1

I. BACKGROUND

       None of the District Court’s factual findings is
challenged on Tracinda’s appeal. We derive the factual portion
of the following summary from the District Court’s post-trial
opinion. See Tracinda Corp. v. DaimlerChrysler AG, 364 F.

   1
        The three opinions and orders under review on
Tracinda’s appeal are Tracinda Corp. v. DaimlerChrysler AG,
364 F. Supp. 2d 362 (D. Del. 2005) (post-trial findings of fact
and conclusions of law); Tracinda Corp. v. DaimlerChrysler
AG, No. 00-CV-993-JJF, 2003 WL 22769051 (D. Del. Nov. 19,
2003) (striking Tracinda’s jury demand); and In re
DaimlerChrysler AG Sec. Litig., 247 F. Supp. 2d 579 (D. Del.
2003) (dismissing Kopper for lack of personal jurisdiction). The
two opinions and orders under review on Defendants’ cross-
appeal are Tracinda Corp. v. DaimlerChrysler AG, No. 00-CV-
993-JFF, 2005 WL 927187 (D. Del. April 20, 2005) (reviewing
and adopting findings of Special Master, at docket item no. 944,
and levying discovery sanctions against Defendants); and In re
DaimlerChrysler AG Sec. Litig., 269 F. Supp. 2d 508 (D. Del.
2003) (denying Defendants’ motion for summary judgment on
statute of limitations grounds).

                                 6
Supp. 2d 362, 366-388 (D. Del. 2005). Our summary of the
procedural history draws from the entire record.

       A. Factual Findings

        Tracinda Corporation is a holding company, involved
primarily in private investment. Its chairman, chief executive
officer, and sole shareholder is multi-billionaire Kirk Kerkorian.
Prior to the merger of Daimler-Benz and Chrysler Corporation
in 1998, Tracinda was the largest holder of Chrysler stock at
approximately 14%. Between 1992 and 1996, Kerkorian had a
contentious relationship with Chrysler’s managers. He
frequently pressured them for stock buybacks, stock splits, and
dividend increases, and he threatened to initiate a proxy fight in
1995. In 1996, Chrysler and Kerkorian settled their differences
with various agreements. Among other things, Chrysler agreed
to appoint a Tracinda designee, James Aljian, to the Chrysler
Board of Directors.

       With Aljian on Chrysler’s Board, Kerkorian acquired
significant inside information about the company. In 1997,
Aljian reported to Kerkorian that he believed Chrysler’s
managers were inept and the company faced imminent financial
trouble. Consequently, Kerkorian considered selling large
blocks of Tracinda’s Chrysler shares and also looked into the
possibility of a merger partner for Chrysler. Kerkorian
approached Bob Eaton, the chairman and CEO of Chrysler, to
discuss a possible combination with Daimler-Benz. At that
time, Kerkorian learned that Eaton had already spoken with
Jurgen Schrempp, the chairman of Daimler-Benz’s Board of
Management, about possibly merging Chrysler with Daimler-

                                7
Benz. Kerkorian consulted Jerome York, Tracinda’s vice-
chairman and the former chief financial officer of Chrysler.
York advised Kerkorian that “now is the time” for the merger
because Chrysler faced imminent financial risk. York analyzed
various issues relating to the potential merger, including the tax
consequences for Tracinda, and reported his findings to
Kerkorian. Kerkorian was enthusiastic about the merger as it
would provide tremendous value to Chrysler shareholders.


       Schrempp and Eaton were the primary negotiators for
Daimler-Benz and Chrysler. Over the course of several
meetings, the two CEOs discussed various aspects of the
proposed merger, including the tax consequences of
incorporating the new company as an American corporation, as
a German Aktiengesellschaft (AG), or as a corporate entity in
another nation such as Holland. Schrempp and Eaton discussed
the feasibility of joint management shared equally among
executives from Daimler-Benz and Chrysler. Eventually, the
term “merger of equals” was used to describe the proposed
transaction.

       In a memo to Kerkorian, Aljian described the proposed
management composition of the new company,
DaimlerChrysler, and also characterized the merger as a “merger
of equals” without elaboration. Kerkorian was not concerned
with management structure and supported the merger even
before the discussions about corporate governance. Kerkorian
had some discussions with Eaton about the implementation of
the merger, but they were “reasonably general” and “not on a
very deep level.” Kerkorian understood that the details of the

                                8
merger would be incorporated into the Business Combination
Agreement (BCA).

        The Chrysler Board received a fairness opinion from
Credit Suisse First Boston (CSFB), assessing the value of
Chrysler shares in light of the proposed merger. CSFB analyzed
the merger as a strategic business combination, not involving a
sale of or change in control which might warrant a control
premium.2 In determining that the proposed merger was fair to
Chrysler shareholders, CSFB considered sixteen previously
announced or completed transactions viewed as comparable.
For each earlier “merger of equals,” CSFB listed one company
as the “acquiror” and one company as the “target” and noted that
the distribution of seats on the combined company’s boards was
not always equal between acquiror and target.

        On May 6, 1998, the Chrysler Board of Directors
unanimously approved the merger and recommended that the
Chrysler shareholders do the same. On that same day,
simultaneously with the execution of the BCA, Tracinda,
Kerkorian, Chrysler, and Daimler-Benz executed the
Stockholder Agreement (SHA), which obligated Tracinda to
vote its shares in favor of the merger. The SHA contained a jury
waiver clause:


   2
       In the securities context, a “premium” refers to the
“amount by which a security’s market value exceeds its face
value.” BLACK’S LAW DICTIONARY 1219 (8th ed. 2004). A
“control premium” is a “premium paid for shares carrying the
power to control a corporation.” Id.

                               9
       Each of the parties hereto . . . agrees to waive any right
       to a trial by jury with respect to any claim, counterclaim
       or action arising out of or in connection with this
       Agreement or the transactions completed hereby.

Schrempp signed the SHA on behalf of Daimler-Benz; he did
not sign in his individual capacity. The agreement was
negotiated at arm’s length with both sides represented by
counsel and other advisors.

        Substantively, the SHA did not use the term “merger of
equals” and contained no representations concerning corporate
governance. Rather, the SHA referred to the BCA, which
described the shared governance structure of the new company.
Although the BCA used the term “merger of equals” and
contained a lengthy definition section, the BCA did not define
that term.

        On August 6, 1998, the proxy statement and prospectus
(Proxy) – which described the proposed merger between
Daimler-Benz and Chrysler and sought shareholder approval for
the transaction – was filed with the SEC. The Proxy was mailed
to the Chrysler shareholders along with several attached
documents, including a cover letter from Eaton, the BCA, and
the CSFB opinion. The Proxy stated, among other things, that
“DaimlerChrysler AG” would be the surviving entity, it would
be incorporated in Germany, and it would have two
headquarters (in Auburn Hills, Michigan, and Stuttgart,
Germany). The Proxy explained that the German AG form was
chosen primarily for its tax advantages. The Proxy described
various risks relating to the merger, including the difficulties

                               10
inherent in integrating two large corporations from different
countries and business cultures. The Proxy reiterated the terms
of the BCA’s corporate governance provisions, noting among
other things that (1) the DaimlerChrysler Supervisory Board
would consist of 5 shareholder representatives designated by
Daimler-Benz, another 5 from Chrysler, and 10 labor
representatives; (2) the DaimlerChrysler Management Board
would initially consist of 8 members designated by Daimler-
Benz, another 8 from Chrysler, and 2 members from Daimler’s
non-automotive group;3 and (3) Schrempp and Eaton would
serve as co-CEOs of DaimlerChrysler for three years. The
Proxy included a clear standalone clause that stated these initial
management structures could change after the merger was
consummated. Kerkorian did not concern himself with the
Proxy because he had already committed in the SHA to voting
for the merger.

       The Proxy repeatedly used the term “merger of equals”
but did not expressly define it. The term is first used in the
Proxy to describe the similar size of the Daimler-Benz and
Chrysler constituencies and later used to describe the joint
leadership of the new company, as provided in the BCA. The
term is used in Eaton’s cover letter in a similar fashion. The
Proxy also used the term in reference to CSFB’s fairness
opinion, which compared the proposed merger to earlier
strategic combinations not involving a sale of control.


  3
        German law requires publicly-owned companies to have
two boards – a board of supervisors and a board of management
that is supervised by the board of supervisors.

                               11
       After a media campaign by Daimler-Benz and Chrysler
to foster support for the proposed “merger of equals,” the
Chrysler shareholders voted overwhelmingly (97%) for the
merger. Chrysler’s shareholders received approximately 42%
of DaimlerChrysler’s outstanding shares and Daimler-Benz
shareholders received approximately 58%. On November 12,
1998, the merger closed consistent with the provisions in the
BCA, including those relating to shared corporate governance.

        For two years, the composition of the DaimlerChrysler
Supervisory Board did not change; 5 of the 10 shareholder
representatives were former Chrysler directors. As provided for
in the BCA, the DaimlerChrysler Management Board initially
consisted of 10 designees from Daimler-Benz and 8 from
Chrysler. Because the Management Board acted by consensus
rather than through formal votes, the initial disparity between
Chrysler and Daimler-Benz designees was not significant. The
managers from Chrysler were able to provide their input with
regard to all operations of DaimlerChrysler and their opinions
were taken seriously. The Integration Committee, a transitional
body provided for in the BCA, was formed with 50% of its
members from Chrysler and 50% from Daimler-Benz, pursuant
to the terms of the BCA. This committee was later renamed the
Shareholder Committee. Aljian was a member of the
Shareholder Committee until Kerkorian directed him to resign
on November 24, 2000.           Consistent with the BCA,
DaimlerChrysler maintained two operational headquarters, in
Stuttgart and Auburn Hills.

      Because both Daimler-Benz and Chrysler designees
considered the 18-person Management Board to be too large,

                              12
approximately a year after the merger the Board was reduced to
14 members. Five of the remaining members were Chrysler
designees. At the time, neither Aljian nor Kerkorian was
concerned about this imbalance. The three Chrysler designees
who first left the Management Board were Dennis Pawley
(voluntarily retired), Ted Cunningham (asked to resign), and
Thomas Stallkamp (fired). Later, on January 26, 2000, Eaton
also voluntarily retired. The BCA had stated that Eaton would
remain co-CEO for three years, but Eaton chose to depart early
for personal reasons. In late 2000, another former Chrysler
executive, James Holden, was removed from the Management
Board. Holden had been placed in charge of the Chrysler brands
after Eaton’s retirement and was held responsible for the
Chrysler Group’s $500 million loss in the third quarter of 2000.
Most Board members, including those designated by Chrysler,
supported the removal of Holden in light of the Chrysler
Group’s abysmal performance. At the time of trial, only one
executive from Chrysler, Tom Sidlik, remained on the
Management Board; four former Chrysler directors served on
the Supervisory Board.

       In late 2000, the management changes at
DaimlerChrysler were widely reported in the press. Because the
Germans were taking over a larger share of management control
in the new company, there was widespread speculation that,
contrary to its billing, the merger between Daimler-Benz and
Chrysler had not been a “merger of equals.” Around this time,
Schrempp agreed to interviews with the London Financial
Times and Barron’s Magazine. During these interviews,
Schrempp made various statements suggesting that, in order to
close the merger, he had intentionally misled the public,

                              13
Chrysler shareholders, and Chrysler management into thinking
the Daimler-Benz/Chrysler merger was a “merger of equals,”
even though he had no intention of sharing control of the
combined company with the Americans. For example, in the
Financial Times, Schrempp was quoted as saying:


      Me being a chess player, I don’t normally talk
      about the second or third move. The structure we
      have now with Chrysler (as a standalone division)
      was always the structure I wanted. We had to go
      a roundabout way but it had to be done for
      psychological reasons. If I had gone and said
      Chrysler would be a division, everybody on their
      side would have said, “There is no way we’ll do
      a deal.” But it’s precisely what I wanted to do.

In Barron’s, Schrempp was quoted as saying:

      We said in spirit it was a merger of equals, but in
      our minds we knew how we wanted to structure
      the company, and today I have it. I have Daimler,
      and I have divisions.

Schrempp did not deny making these statements and never
issued a correction or demanded a retraction.

      B. Procedural History

      A few months after these interviews were made public in
late 2000, Tracinda filed suit against Daimler-Benz,

                              14
DaimlerChrysler, and DaimlerChrysler executives Schrempp,
Manfred Gentz, and Hilmar Kopper4 (collectively
DaimlerChrysler).5 In its complaint, Tracinda alleged violations
of Sections 10(b), 14(a), and 20(a) of the Securities Exchange
Act of 1934 (and SEC Rules 10b-5 and 14a-9 promulgated
thereunder) and Sections 11, 12(a)(2), and 15 of the Securities
Act of 1933. Tracinda also alleged common law fraud and civil
conspiracy. Prior to trial, Tracinda voluntarily dropped its ‘33
Act claims. In addition, DaimlerChrysler successfully moved to
dismiss Tracinda’s civil conspiracy claim, and Kopper
successfully moved for dismissal of the action against him,
based on lack of personal jurisdiction. DaimlerChrysler
unsuccessfully moved for summary judgment on statute of
limitations grounds, but its motion to strike Tracinda’s jury
demand was granted. A bench trial commenced on the
remaining claims (for common law fraud and ‘34 Act violations
under §§ 10, 14, and 20) against the remaining defendants


   4
      Kopper had been chairman of Daimler-Benz’s
Supervisory Board, and Gentz a member of its Management
Board before and at the time of the merger.
  5
       When discussing the substantive issues raised on appeal
and cross-appeal, “DaimlerChrysler” will usually refer to
Daimler-Benz, DaimlerChrysler, Schrempp, and Gentz, who
were all defendants at trial and are represented by the same
counsel on appeal. Although Kopper is not a party to this
appeal, he has interests related to it and is represented by
separate counsel. Kopper’s counsel has filed a brief arguing that
the District Court correctly granted Kopper’s motion to dismiss
for lack of personal jurisdiction.

                               15
(Daimler-Benz, DaimlerChrysler, Schrempp, and Gentz).

        After a 13-day bench trial, the District Court issued a
123-page opinion with 51 pages of factual findings; the factual
findings are not challenged on appeal. In its post-trial opinion,
the District Court made numerous rulings, including (1)
dismissing Gentz for lack of personal jurisdiction, (2)
concluding that Tracinda could allege its § 14 claim, (3) entering
judgment for DaimlerChrysler on Tracinda’s oral
misrepresentation claims under § 10 and § 14 because Tracinda
failed to prove DaimlerChrysler made any false or misleading
oral statements, (4) entering judgment for DaimlerChrysler on
Tracinda’s written misrepresentation claims under § 10 and § 14
because Tracinda failed to prove DaimlerChrysler made any
false or misleading written statements,6 (5) concluding that, even
if Tracinda did show that DaimlerChrysler’s oral or written
statements were false or misleading under § 10 or § 14, those

   6
       Tracinda alleged misleading and/or false written
statements in (1) the BCA, (2) the Proxy, (3) Eaton’s cover letter
to the Proxy, and (4) Chrysler’s SEC form 8-K. These
statements were allegedly misleading and/or false with regard to
(1) the reasons for choosing the German AG form, and the
extent of the negotiations behind this decision; (2) the “merger
of equals,” i.e., joint management by a similar number of
Daimler-Benz and Chrysler designees; (3) the risk factors of the
merger, including the possibility that the joint management
structure could be altered in favor of former Daimler-Benz
officers immediately after the merger; and (4) the voting status
of the two Management Board members representing
DaimlerChrysler’s non-automotive interests.

                               16
misrepresentations would not have been material to Tracinda, a
sophisticated party with insider information, (6) entering
judgment for DaimlerChrysler on Tracinda’s “control person”
claim under § 20, as that claim is predicated on a primary
violation of the federal securities law (such as a violation of § 10
or § 14) and Tracinda failed to prove a primary violation at trial,
and (7) entering judgment for DaimlerChrysler on Tracinda’s
common law fraud claim, as that claim requires a showing of
misrepresentation, and misrepresentation was not proven at trial.

        Of these rulings, Tracinda appeals only the District
Court’s decision with respect to the § 14 written
misrepresentation claim. Specifically, Tracinda alleges that the
District Court erred (1) by concluding that DaimlerChrysler’s
statements were not false or misleading, (2) by applying a
subjective standard rather than an objective one in assessing the
materiality of the alleged misrepresentations, and (3), along a
similar line, by requiring Tracinda to prove reliance, which is
not an element of a § 14(a) claim. Tracinda also appeals the
District Court’s orders granting DaimlerChrysler’s motion to
strike the jury demand and Kopper’s motion to dismiss for lack
of personal jurisdiction.7

       On cross-appeal, DaimlerChrysler challenges two other
rulings by the District Court. DaimlerChrysler asserts that the
District Court abused its discretion by levying a half-million
dollar discovery sanction against DaimlerChrysler absent bad
faith and particularized proof of costs and fees.

   7
       Tracinda has not appealed the District Court’s decision
to dismiss Gentz for lack of personal jurisdiction.

                                17
DaimlerChrysler also contends that, if the District Court’s
judgment is not affirmed in all respects, this Court should
reverse the District Court’s denial of DaimlerChrysler’s motion
for summary judgment on statute of limitations grounds.

II. DISCUSSION

       Subject matter jurisdiction was premised on Section 27
of the Securities Exchange Act of 1934, 15 U.S.C. § 78aa,
Section 22 of the Securities Act of 1933, 15 U.S.C. § 77v; 28
U.S.C. § 1367, and 28 U.S.C. § 1331 and § 1332. We have
appellate jurisdiction pursuant to 28 U.S.C. § 1291 and §
1294(1). Tracinda’s appeal and DaimlerChrysler’s cross-appeal
are timely under 28 U.S.C. § 2107 and FED. R. APP. P.
4(a)(1)(A) and 4(a)(3).

       A. Jury Trial Waiver

        In granting DaimlerChrysler’s motion to strike
Tracinda’s jury demand, the District Court concluded that the
Stockholder Agreement entered into by Tracinda, Kerkorian,
Daimler-Benz and Chrysler contained a broadly worded jury
trial waiver that covered the claims brought by Tracinda against
Defendants. The District Court determined that, in light of the
business sophistication of all parties involved, the waiver was
entered into knowingly and voluntarily. The District Court also
found that the waiver covered the individual defendants,
Schrempp and Gentz, who are not parties to the agreement.8

   8
       Because Tracinda has not appealed the District Court’s
                                               (continued...)

                              18
The District Court based these conclusions on ordinary agency
principles that we have previously applied when interpreting
agreements to arbitrate.

       Although Tracinda does not contest that the jury waiver
covers Daimler-Benz and Chrysler, Tracinda asks us to remand
for a jury trial involving both corporate and individual
defendants because it claims that parallel trials involving
common issues of fact and law (a bench trial for the corporate
defendants and a jury trial for the individual defendants) would
be unworkable and in violation of the Seventh Amendment.
DaimlerChrysler argues in opposition that the District Court
correctly construed the SHA by applying the jury waiver to all
defendants. DaimlerChrysler contends that the District Court
applied the appropriate constitutional standard for assessing the
validity of the jury waiver and that it was appropriate for the
District Court to look to the arbitration clause cases for ordinary
agency and equitable estoppel principles.

       To decide this issue, we must determine whether a valid
contractual jury waiver provision, which applies to a signatory
corporation, will also apply to a nonsignatory officer acting as
an agent of the signatory corporation.

          1. Non-Signatory Agents


   8
    (...continued)
dismissal of Gentz for lack of personal jurisdiction, the District
Court’s decision to apply the jury waiver to Gentz is not at issue
on this appeal.

                                19
       Because Tracinda has not challenged the District Court’s
findings that the jury waiver was valid and that Schrempp was
an agent of Daimler-Benz, we are left to determine whether the
District Court correctly construed the jury waiver provision to
cover the non-signatory agent of the signatory principal.9

        The right to a jury trial in a civil case is a fundamental
right expressly protected by the Seventh Amendment to the
United States Constitution. Aetna, Inc. v. Kennedy, 301 U.S.
389, 393 (1937); Bouriez v. Carnegie Mellon Univ., 359 F.3d
292, 294 (3d Cir. 2004). The question of a waiver of a
constitutional right, including the Seventh Amendment right to
a jury trial, is a federal question controlled by federal law. See
Brookhart v. Janis, 384 U.S. 1, 4 (1966); In re City of Phila.
Litig., 158 F.3d 723, 726 (3d Cir. 1998). Federal courts apply
federal law in determining whether a contractual jury trial
waiver is enforceable. See K.M.C., Inc. v. Irving Trust Co., 757
F.2d 752-56 (6th Cir. 1985). Using federal law to determine the
jury trial right assures “the uniformity in its exercise which is
demanded by the Seventh Amendment.” Simler v. Conner, 372
U.S. 221, 222 (1963) (per curiam).

      Because the “right of jury trial is fundamental, courts
indulge every reasonable presumption against waiver.” Aetna,
301 U.S. at 393; Collins v. Gov’t of Virgin Islands, 366 F.2d

  9
       Our review of such a question of law is subject to plenary
review. See Pritzker v. Merrill Lynch, Pierce, Fenner & Smith,
Inc., 7 F.3d 1110, 1113 (3d Cir. 1993) (conducting plenary
review of district court’s construction of contractual arbitration
provision).

                               20
279, 284 (3d Cir. 1966). Nevertheless, as with other
constitutional rights, the Supreme Court has long recognized
that a private litigant may waive the right to a jury trial in a civil
case. Commodity Futures Trade Comm’n v. Schor, 478 U.S.
833, 848-849 (1986); In re City of Phila. Litig., 158 F.3d 723,
726 (3d Cir. 1998); Nat’l Equip. Rental, Ltd. v. Hendrix, 565
F.2d 255, 258 (2d Cir. 1977); see also FED. R. CIV. P. 38. To be
valid, a jury waiver must be made knowingly and voluntarily
based on the facts of the case. Brookhart, 384 U.S. at 4-5;
Hendrix, 565 F.2d at 258; 8 JAMES WM. MOORE ET AL.,
MOORE’S FEDERAL PRACTICE ¶ 38.14 (3d ed. 1997 & Supp.
2005); see also First Union Nat’l Bank v. United States, 164 F.
Supp. 2d 660, 663 (E.D. Pa. 2001) (listing factors).

        Tracinda does not challenge the District Court’s finding
that the contractual jury waiver was entered into knowingly and
voluntarily. Rather, Tracinda argues that the District Court
erred as a matter of law by applying an agency principle used in
arbitration clause cases such as Pritzker v. Merrill Lynch,
Pierce, Fenner & Smith, Inc., 7 F.3d 1110, 1115 (3d Cir. 1993),
to hold that Schrempp, a non-signatory agent, is covered by the
waiver. Tracinda points out that, while all reasonable
presumptions should be construed against jury waivers, Collins,
366 F.2d at 284, courts have construed arbitration agreements in
light of the Federal Arbitration Act (FAA) policy that “any
doubts concerning the scope of arbitral issues should be resolved
in favor of arbitration . . ..” Pritzker, 7 F.3d at 1114-15.
Tracinda contends that, by relying on arbitration clause cases,
the District Court applied a presumption in favor of jury waiver,
when in fact the Seventh Amendment requires a presumption
against waiver.

                                 21
        Considering that the “loss of the right to a jury trial is a
necessary and fairly obvious consequence of an agreement to
arbitrate,” Snowden v. Checkpoint Check Cashing, 290 F.3d
631, 638 (4th Cir. 2002), and that the “submission of a case to
arbitration involves a greater compromise of procedural
protections than does the waiver of the right to trial by jury,”
Gurfein v. Sovereign Group, 826 F. Supp. 890, 921(E.D. Pa.
1993) (Pollak, J.), some commentators consider it curious that
courts apply a presumption in favor of an arbitration clause but
against a mere jury waiver provision.10 Nevertheless, the
tension between the cases favoring arbitration clauses and those
disfavoring jury waivers does not affect the propriety of the
District Court’s reliance here on arbitration cases such as
Pritzker. The reason for this is that, in Pritzker and similar
arbitration clause cases, it is traditional agency principles of who
is bound by an agreement – and not the FAA’s favoring of

arbitration over a jury trial – which determined who was bound
by the agreement to arbitrate.

       In Pritzker, pension plan trustees brought an ERISA
action against three defendants – a brokerage firm that traded on

   10
       See, e.g., Jean R. Sternlight, Mandatory Binding
Arbitration and the Demise of the Seventh Amendment Right to
a Jury Trial, 16 OHIO ST. J. ON DISP. RESOL. 669, 674 (2001)
(contrasting courts’ legal treatment of contractual jury waivers
and arbitration clauses); Stephen J. Ware, Arbitration Clauses,
Jury-Waiver Clauses, and Other Contractual Waivers of
Constitutional Rights, 67 LAW & CONTEMP. PROBS. 167, 170-
176 (2004) (responding to Sternlight’s article).

                                22
behalf of the pension plan, the brokerage firm’s wholly owned
subsidiary, which provided the pension plan with investment
advice, and an individual broker who serviced the pension
plan’s accounts. The trustees alleged violations, arising out of
the cash management accounts opened with the brokerage firm.
Because each cash management agreement between the pension
plan and the brokerage firm contained an arbitration clause, all
defendants moved to compel arbitration, despite the fact that
only the brokerage firm, and not the wholly owned subsidiary or
the individual broker, was a party to the cash management
agreements. The District Court denied the motion to compel
arbitration and the defendants appealed. On appeal, the trustees
defended the District Court’s ruling by urging that they could
not be compelled to arbitrate because two of the three
defendants – the subsidiary and the broker – were not
signatories to any agreement containing an arbitration clause.
We rejected this argument and reversed the order of the district
court based on “traditional agency theory” principles. Pritzker,
7 F.3d at 1121. Specifically, we stated that, “[b]ecause a
principal is bound under the terms of a valid arbitration clause,
its agents, employees, and representatives are also covered
under the terms of such agreements.” Id.

        Relying on Pritzker, the District Court rejected
Tracinda’s argument that the individual defendants, who did not
sign the agreement containing the jury waiver, were not bound
by it. The District Court held that the jury waiver covered both
the signatory corporations and its nonsignatory officers and
directors. This was a proper determination – not of whether the
jury waiver was knowing and enforceable, Tracinda conceded
that – but of who, under traditional agency principles, was

                               23
bound by that agreement.

        The Pritzker rule – that nonsignatory agents may invoke
a valid arbitration agreement entered into by their principal – is
well-settled and supported by other decisions of this Court. See
Barrowclough v. Kidder, Peabody & Co., 752 F.2d 923, 938-39
(3d Cir. 1985), overruled on other grounds by Pritzker, 7 F.3d
at 1115 n.5 (holding that contingent beneficiaries’ “inchoate and
derivative claims should not entitle them to maintain separate
litigation in a forum that has been waived by the principal
beneficiary.”); Isidor Paiewonsky Asscs., Inc. v. Sharp Props.,
Inc., 998 F.2d 145, 155 (3d Cir. 1993) (holding that an
arbitration agreement between a landlord and a “head tenant”
also covered a subtenant, who was not a party to the agreement,
where the head tenant and subtenant had interests that were
“directly related”); E.I. DuPont de Nemours & Co. v. Rhone
Poulenc Fiber & Resin Intermediates, S.A.S., 269 F.3d 187,
198-99 (3d Cir. 2001) (reaffirming that “[t]raditional principles
of agency law may bind a non-signatory to an arbitration
agreement.”)11
        Tracinda, however, attempts to cast doubt on Pritzker and
similar cases by citing to our decision in Bel-Ray Co. v.

   11
       In DuPont, we refused to bind a non-signatory parent
corporation to the arbitration agreement of its subsidiary. 269
F.3d at 199. DuPont therefore presented the reverse situation of
Pritzker, where we bound agents to their principal’s arbitration
agreement. The two cases are therefore distinguishable in this
regard. DuPont, 269 F.3d at 199 (“Here, appellants seek to hold
a principal to an agent’s agreement and the rationale of Pritzker
does not apply with equal force.”).

                               24
Chemrite Ltd., 181 F.3d 435 (3d Cir. 1999). In Bel-Ray, a New
Jersey manufacturer, alleging various business torts against its
South African distributor, brought suit to compel arbitration in
New Jersey based on arbitration agreements entered into by the
manufacturer and a predecessor of the distributor. The
manufacturer also alleged claims against various officers and
directors of the distributor and sought to compel arbitration
against them. The distributor and the individual defendants
objected to arbitration. We held that the distributor was bound
to arbitrate, Bel-Ray, 181 F.3d at 440-443; however, we also
held that the individual defendants were not bound to arbitrate
as they were not signatories to the arbitration agreements, id. at
444-446. We discussed Pritzker and a similar case, Letizia v.
Prudential Bache Sec., 802 F.2d 1185 (9th Cir. 1986), but
distinguished those cases because, like the instant case, they
involved nonsignatory agents who sought to invoke an
arbitration agreement entered into by their corporate principal,
whereas Bel-Ray involved nonsignatory agents who sought to
avoid their principal’s agreement to arbitrate. Bel-Ray, 181 F.3d
at 444. This is not a “distinction without a difference.” DuPont,
269 F.3d at 202 (discussing the related concept of equitable
estoppel as applied in the arbitration context and noting that
courts are willing to estop a signatory from avoiding an
arbitration clause but are reluctant to enforce an arbitration
clause against a nonsignatory who seeks to avoid it); see also
Thomson-CSF, S.A. v. Am. Arbitration Assc., 64 F.3d 773, 779
(2d Cir. 1995) (same). In the instant action, Schrempp, a
nonsignatory agent, seeks to invoke the jury waiver provision in
the agreement entered into by his corporate principal, Daimler-
Benz. Therefore, Pritzker and Letizia are similar to the case
before us and Bel-Ray is distinguishable.12


   12
        Tracinda also relies heavily on our decision in Dayhoff,
Inc. v. H.J. Heinz Co., 86 F.3d 1287, 1296 (3d Cir. 1996), where
                                                   (continued...)

                               25
        Tracinda also relies on Paracor Fin. Inc. v. Gen. Elec.
Capital Corp., 96 F.3d 1151 (9th Cir. 1996) and Hulsey v. West,
966 F.2d 579 (10th Cir. 1992) (per curiam). However, like Bel-
Ray, these cases are distinguishable. In Paracor, the Court of
Appeals for the Ninth Circuit did not allow a nonsignatory third-
party financier and its CEO to invoke a jury waiver provision in
a purchase agreement where they were not agents of the
contracting party. 96 F.3d at 1166. Clearly Paracor is
distinguishable from Pritzker and the instant action, where the
non-signatories were agents of the signatory principals. In
Hulsey, on a loan guarantor’s petition for writ of mandamus in
which he sought to reinstate his jury demand, the Court of
Appeals for the Tenth Circuit held that the nonsignatory
guarantor was not bound by a jury waiver provision in an
amendment to a loan agreement between the borrower and
lender. 966 F.2d at 583. The court in Hulsey did not allow the
signatory to enforce the waiver provision against the resistant
nonsignatory who was being sued in his personal capacity.
Therefore, Hulsey is also distinguishable.

       As set out above, we conclude that, when a valid
contractual jury trial waiver provision applies to a signatory
corporation, the waiver also applies to nonsignatory directors
and officers seeking to invoke the waiver as agents of the
corporation. This rule is consistent with the concept that
corporations can “act only through agents and employees.” Bel-
Ray, 181 F.3d at 444; see also In re Mulco Prods., Inc., 123


   12
    (...continued)
we stated that arbitration clauses “can be enforced only by the
signatories to those agreements,” to argue that Pritzker has since
been superceded. In Dayhoff, however, we noted that Pritzker
was “not applicable to the facts before us.” Dayhoff, 86 F.3d at
1296-97.


                               26
A.2d 95, 103 (Del. Sup. Ct. 1956) (“It is axiomatic that a
corporation by structural necessity must act, if it acts at all,
through its agents.”), aff’d sub nom. Mulco Prods., Inc. v. Black,
127 A.2d 851 (Del. 1956);13 Nat’l Risk Mgmt., Inc. v. Bramwell,
819 F. Supp. 417, 434 (E.D. Pa. 1993). If we did not allow
nonsignatory agents of a signatory corporation to invoke a valid
contractual jury waiver provision, such an “agreement would be
of little practical value,” Trott v. Paciolla, 748 F. Supp. 305, 309
(E.D. Pa. 1990), as “it would be too easy to circumvent the
agreements by naming individuals as defendants instead of the
entity” itself, Roby v. Corp. of Lloyd’s, 996 F.2d 1353, 1360 (2d
Cir. 1993). See also Arnold v. Arnold Corp., 920 F.2d 1269,
1281 (6th Cir. 1990) (“[I]f appellant can avoid the practical
consequences of an agreement to arbitrate by naming
nonsignatory parties as [defendants] in his complaint . . . the
effect of the rule requiring arbitration would, in effect, be
nullified.”) (quotation marks and citations omitted).14

   13
       “Delaware agency law is consistent with the general
common law.” Phoenix Canada Oil Co. Ltd. v. Texaco, Inc.,
842 F.2d 1466, 1477 n.4 (3d Cir. 1988) (citing Japan Petroleum
Co. (Nigeria) Ltd. v. Ashland Oil, Inc., 456 F. Supp. 831, 838-
841 (D. Del. 1978) (applying Restatement)).
   14
        Because our holding relies on the agency principles
applied in Pritzker and similar cases, we need not address the
District Court’s alternate basis for its decision, i.e., that
equitable estoppel as applied in other courts of appeals’
arbitration clause cases, such as MS Dealer Serv. Corp. v.
Franklin, 177 F.3d 942 (11th Cir. 1999), precluded Tracinda’s
argument that the jury waiver did not cover the individual
defendants. We also need not address the District Court’s
conclusion that, as a linguistic matter, the plain language of the
jury waiver is broad enough to cover all claims “arising out of
or in connection with” the SHA without limitation as to whom
                                                     (continued...)

                                27
           2. Laches

       Next, we address Tracinda’s alternate argument that the
District Court should have barred DaimlerChrysler’s motion to
strike Tracinda’s jury demand on the basis of laches. Because
laches is an equitable doctrine, we review the District Court’s
decision for abuse of discretion. See Holmes v. Pension Plan of
Bethlehem Steel Corp., 213 F.3d 124, 134 (3d Cir. 2000). In
order to successfully assert the defense of laches, Tracinda must
show (1) “inexcusable delay” by DaimlerChrysler, and (2)
“prejudice” to Tracinda “as a result of the delay.” Santana
Prods., Inc. v. Bobrick Washroom Equip., Inc., 401 F.3d 123,
138 (3d Cir. 2005).

        DaimlerChrysler moved to strike Tracinda’s jury demand
approximately three years after Tracinda filed it. Tracinda had
demanded a jury trial against the individual defendants but not
against the corporate defendants. DaimlerChrysler’s motion to
strike came after the close of discovery, about six weeks before
trial and approximately eight months after DaimlerChrysler filed
its motions for summary judgment. When DaimlerChrysler
filed its motion to strike, the District Court had not yet decided
all of DaimlerChrysler’s summary judgment motions.

        Tracinda contends that DaimlerChrysler strategically and


   14
     (...continued)
that action is brought against.

       In addition, because we affirm the holding that the waiver
applies to Schrempp, we do not need to consider Tracinda’s
contention that parallel bench and jury trials involving common
issues of fact and law are unworkable and violate the Seventh
Amendment.


                                  28
inexcusably delayed filing its motion to strike and consequently
caused Tracinda undue prejudice. Tracinda argues that it would
have conducted discovery differently had it known that it would
be trying its case to the court rather than to a jury. Tracinda
asserts that it was unable to modify its trial strategy in time
because the District Court struck Tracinda’s jury demand only
a few weeks before trial. In opposition, DaimlerChrysler
contends that it did not inexcusably delay filing its motion to
strike because the motion was filed in accordance with Federal
Rule of Civil Procedure 39. DaimlerChrysler also argues that
Tracinda could not have been prejudiced by DaimlerChrysler’s
delay because Tracinda knew all along that its claims against the
corporate defendants were likely to be tried by the court.
DaimlerChrysler points out that Tracinda never demanded a jury
trial against the corporate defendants, presumably because
Tracinda was fully aware that the SHA’s jury waiver provision
covered Daimler-Benz and Chrysler.

        Parties “have a great deal of latitude on the timing of
motions to strike a jury demand.” MOORE’S FEDERAL PRACTICE
¶ 8-39.13. Since “a court has the power to act sua sponte at any
time” under Rule 39,15 “it follows that a court has the discretion
to permit a motion to strike a jury demand at any time, even on
the eve of trial.” Id. For example, in United States v.
Schoenborn, 860 F.2d 1448 (8th Cir. 1988), the government
filed a motion to strike the defendant’s jury demand one week


   15
        Rule 39(a) states in part:

        The trial of all issues so demanded shall be by jury,
        unless (1) [the parties stipulate to a bench trial] or (2) the
        court upon motion or of its own initiative finds that a
        right of trial by jury of some or all of those issues does
        not exist under the Constitution or statutes of the United
        States.

                                 29
before trial, and the District Court granted the government’s
motion one day before trial. Id. at 1455. On appeal, the
defendant conceded that he had no constitutional or statutory
right to a jury trial in light of the fact that the government’s suit
for restoration of wetlands was in equity and defendant’s
counterclaims were against the United States. Nevertheless, the
defendant asserted that the District Court abused its discretion
by striking his jury demand because the government’s motion
came immediately before trial and was in violation of the court’s
pretrial scheduling order. Citing Rule 39(a), the Court of
Appeals for the Eighth Circuit rejected defendant’s argument.
Id. See United States v. L.D.T. Corp., 302 F. Supp. 990, 991
(E.D. Pa. 1969) (rejecting laches defense to government’s
motion to strike defendant’s jury demand where government
waited five years to file its motion but defendant showed no
resulting prejudice from the delay other than the “mere lapse of
time”).

        Because a party may file a motion to strike a jury demand
at any time under Rule 39(a), we conclude that DaimlerChrysler
did not commit inexcusable delay by filing its motion to strike
after the close of discovery. Having reached this conclusion, we


need not consider whether DaimlerChrysler’s delay caused
prejudice to Tracinda.16


   16
       In any case, it is clear that Tracinda suffered no
prejudice. Tracinda demanded a jury trial against the individual
defendants, but not the corporate defendants. Therefore,
Tracinda knew at the outset of its case that it would have to
prepare for a non-jury trial against some of the defendants. It is
highly unlikely that Tracinda, a sophisticated investment firm
represented by able counsel, failed to plan for a jury trial
                                                    (continued...)

                                 30
        The District Court did not abuse its discretion by
rejecting Tracinda’s laches defense. As discussed above,
Tracinda does not challenge the District Court’s findings that the
SHA’s jury waiver is valid, that it covers the claims brought by
Tracinda, and that Schrempp is an agent of Daimler-Benz, a
signatory to the SHA. Therefore, in light of our holding that a
nonsignatory agent of a signatory corporation may invoke a
contractual jury waiver provision, we will affirm the District
Court’s order striking Tracinda’s jury demand as to all
defendants.


        B. Written Misrepresentation Under § 14

       After a three-week bench trial, the District Court issued
a very thorough written opinion devoting over 50 pages to
findings of fact and over 70 pages to conclusions of law, only
one of which is challenged on appeal, i.e., the conclusion that no
misrepresentation had occurred under § 14(a) of the Securities
Exchange Act of 1934 and Rule 14a-9 promulgated thereunder.



   16
     (...continued)
because it believed that the District Court would accept its
argument that its claims against all defendants should be tried to
a single jury, notwithstanding the clear applicability of the
contractual jury waiver to the corporate defendants (which
Tracinda itself appeared to have acknowledged). Additionally,
approximately seven months before DaimlerChrysler filed its
motion to strike, Tracinda was on notice of DaimlerChrysler’s
position that a bench trial was warranted. See 3/26/03 Letter to
Court at 3 n.1. In short, even though we need not reach the issue
of prejudice, it is clear that Tracinda could not have been
prejudiced by DaimlerChrysler’s three-year delay in filing its
motion to strike.

                               31
        Section 14(a) is designed “to prevent management or
others from obtaining authorization for corporate actions by
means of deceptive or inadequate disclosures in proxy
solicitations.” Seinfeld v. Becherer, 461 F.3d 365, 369 (3d Cir.
2006) (quotation marks omitted). Section 14(a) makes it
unlawful to solicit a proxy “in contravention of such rules and
regulations as the [SEC] may prescribe as necessary and
appropriate in the public interest or for the protection of
investors.” 15 U.S.C. § 78n(a). Rule 14a-9, which the SEC
promulgated under § 14(a), provides that no proxy statement
shall contain “any statement which, at the time and in the light
of the circumstances under which it is 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 or misleading or necessary to correct any
statement in any earlier communication with respect to the
solicitation of a proxy for the same meeting or subject matter
which has become false or misleading.” 17 C.F.R. § 240.14a-
9(a) (emphasis added).

        Pursuant to J.I. Case v. Borak, 377 U.S. 426 (1964),
which found an implied private right of action under § 14(a),
shareholders are authorized to sue for damages when a
misrepresentation in a proxy statement interferes with “fair
corporate suffrage.” Id. at 431. To prevail on a § 14(a) claim,
a plaintiff must show that “(1) a proxy statement contained a
material misrepresentation or omission which (2) caused the
plaintiff injury and (3) that the proxy solicitation itself, rather
than the particular defect in the solicitation materials, was an
essential link in the accomplishment of the transaction.” Cal.
Pub. Employees’ Ret. Sys. v. Chubb Corp., 394 F.3d 126, 144
(3d Cir. 2004) (citing Gen. Elec. Co. v. Cathcart, 980 F.2d 927,
932 (3d Cir. 1992) (citing Mills v. Elec. Auto-Lite Co., 396 U.S.
375, 385 (1970))). To be actionable under Rule 14a-9, “a
statement or omission must have been misleading at the time it
was made; liability cannot be imposed on the basis of

                                32
subsequent events.” In re NAHC, Inc. Sec. Litig., 306 F.3d
1314, 1330 (3d Cir. 2002). Information “is material if there is
a substantial likelihood that a reasonable shareholder would
consider it important in deciding how to vote.” Shaev v. Saper,
320 F.3d 373, 379 (3d Cir. 2003) (citing TSC Indus., Inc. v.
Northway, Inc., 426 U.S. 438, 449 (1976)). In order to succeed,
a § 14(a) claim that relies on the undisclosed intent and “unclean
heart of a director” must also be accompanied by objective and
external evidence of actual misrepresentation. Lewis v. Chrysler
Corp., 949 F.2d 644, 651 (3d Cir. 1991); see also Virginia
Bankshares, Inc. v. Sandberg, 501 U.S. 1083, 1095-96 (1991)
(holding that § 14(a) liability may not be established on “mere
disbelief or undisclosed motive without any demonstration that
the proxy statement was false or misleading”).

        At trial, Tracinda sought to prove that DaimlerChrysler
made false and/or misleading statements and/or omissions in the
Proxy and associated documents with regard to four topics
material to Tracinda’s decision to vote in favor of the proposed
merger at the stock price offered to Chrysler shareholders. First
and foremost, Tracinda alleged that DaimlerChrysler made
misrepresentations in the Proxy, together with Eaton’s cover
letter and the attached BCA, by characterizing the proposed
merger as a “merger of equals.” Second, Tracinda alleged that
the Proxy contained misrepresentations and omissions relating
to the reasons for choosing the German AG corporate form and
the extent of the negotiations behind that decision. Third,
Tracinda alleged that the Proxy omitted certain risk factors of
the merger, including the possibility that the shared corporate
governance structure provided for in the BCA could be altered
in favor of former Daimler-Benz executives shortly after
closing. Fourth, Tracinda alleged that a press release attached
to Chrysler’s SEC Form 8-K, filed to announce the proposed
merger and incorporated by reference by the Proxy, falsely
stated that the two DaimlerChrysler Management Board
members representing non-automotive interests from the

                               33
Daimler-Benz side would be non-voting members.

       After trial, the District Court concluded that Tracinda had
not shown that the Proxy and associated documents contained
any misrepresentations under § 14(a) and Rule 14a-9. The
District Court also concluded, as a secondary basis for its
decision, that even if the statements and omissions at issue were
false or misleading, they had not been material to Tracinda’s
decision to vote its shares in favor of the proposed merger. The
District Court noted that, prior to the merger, Tracinda had been
focused on the economics of the transaction, not corporate
governance or structural issues. The District Court also
concluded that Tracinda, a highly sophisticated investor with
unique access to the Chrysler Board, did not rely on the Proxy
documents in deciding how to vote. The District Court noted
that Tracinda had committed to vote for the merger, by way of
the Stockholder Agreement, before the Proxy solicitation and 8-
K release. Thus, the alleged misrepresentations in the Proxy
could not have caused injury to Tracinda.

       On appeal, Tracinda argues that the District Court erred
(1) by concluding that the Proxy and associated documents did
not contain any actionable misrepresentations, (2) by applying
a subjective standard rather than an objective one in assessing
the materiality of the alleged misrepresentations, and, along a
similar line, (3) by requiring Tracinda to prove causation by
demonstrating its reliance on the alleged misrepresentations
where no such proof was required.

       With regard to whether there were written
misrepresentations, Tracinda argues that plenary review applies
for two reasons. First, the District Court’s finding of no written
misrepresentation is similar to a finding made upon a Rule
12(b)(6) motion to dismiss. Second, in finding the term “merger
of equals” not false or misleading, the District Court engaged in
contract construction of the BCA. We do not agree, however,

                               34
that plenary review applies.           Whether any particular
representation in the Proxy was false or misleading is a question
of fact subject to review under the clearly erroneous standard.
See Healy v. Chelsea Res., Ltd., 947 F.2d 611, 618 (2d Cir.
1991) (“Matters of misrepresentation, knowledge, reliance,
causation, and scienter are questions of fact, and the trial court’s
findings as to those facts may not be set aside unless they are
clearly erroneous.”) (citing FED. R. CIV. P. 52(a)). Furthermore,
plenary review is not appropriate here because Tracinda did not
allege breach of contract; it alleged fraud and violations of the
federal securities laws. The District Court engaged in
interpretation of the BCA’s corporate governance provisions in
order to decipher the meaning of the term “merger of equals,” as
it was used in the Proxy, for the purposes of determining
whether any misrepresentation had occurred. The District Court
did not engage in construction of the BCA in order to determine
the legal relations of the BCA signatories pursuant to that
contract. See John F. Harkins Co. v. Waldinger Corp., 796 F.2d
657, 659-660 (3d Cir. 1986) (noting that contract interpretation
– the determination of “‘what ideas [the contract] language
induces in other persons’” – is a question of fact reviewed under
the clearly erroneous standard, whereas contract construction –
“‘the determination of the legal relations of the parties’” to the
contract – is a question of law reviewed under the de novo
standard) (quoting 3 CORBIN, CORBIN ON CONTRACTS § 534 at
9 (1960)). We will review the District Court’s post-trial finding
of no misrepresentation for clear error. Under the clearly
erroneous standard, “‘a finding of fact may be reversed on
appeal only if it is completely devoid of a credible evidentiary
basis or bears no rational relationship to the supporting data.’”
Shire U.S., Inc. v. Barr Labs., Inc., 329 F.3d 348, 352 (3d Cir.
2003) (citation omitted).

       Because we agree with the District Court that, as a factual
matter, the Proxy and associated documents contained no
misrepresentations, we need not reach the second and third

                                35
issues on appeal, regarding the proper legal standards for
determining materiality and causation.

          1. “Merger of Equals”

       We begin with the most prominent alleged written
misrepresentation, i.e., the characterization of the merger of
Daimler-Benz and Chrysler as a “merger of equals.” We must
answer two questions. First, as a factual matter, was the District
Court’s definition of the term “merger of equals” clearly
erroneous? Second, also as a factual matter, was it clearly
erroneous for the District Court to find the term “merger of
equals,” so defined, not false or misleading?

        As described by the District Court, the term “merger of
equals” appears in three relevant documents: (1) the
Proxy/Prospectus, which solicited Chrysler shareholder approval
for the proposed merger; (2) Eaton’s cover letter to the Proxy,
which introduced the proposed merger and announced a special
stockholder meeting; and (3) the BCA, which dictated the terms
of the business combination and was attached and referred to in
the Proxy.

       Of these three documents, language describing a “merger
of equals” appears in Eaton’s cover letter as follows:

       The Chrysler Merger and the other transactions described
       in the attached Proxy Statement/Prospectus together will
       have the effect of combining the businesses, stockholder
       groups, managements and other constituencies of
       Chrysler and Daimler-Benz in a “merger of equals”
       transaction. DaimlerChrysler AG will bring together two
       companies with equal financial strength under the joint
       leadership of both management groups and with its
       common equity about evenly split between the two


                               36
       shareholder groups.17

Eaton’s cover letter demonstrates that “merger of equals” could
refer to (1) the similar size and strength of Daimler-Benz and
Chrysler, or (2) the joint corporate governance that was to be
shared between managers from both companies – or both.
Because Tracinda did not claim that Daimler-Benz and Chrysler
were not equal in size or strength at the time of the merger, the
District Court focused on the corporate governance aspect of the
merger.

        The District Court noted that the Proxy repeatedly
referred to the proposed transaction as a “merger of equals” but
failed to define the term. The Proxy reiterated the joint
governance provisions for the combined company as set forth in
the BCA and made reference to “[t]he merger of equals
corporate governance structure contemplated by the [BCA].”
Importantly, the District Court concluded that the Proxy made
clear that these joint governance provisions were “initial”
management compositions subject to change after
consummation of the merger and that vacancies in the
management board of the new company could be filled without
regard to former corporate affiliation. The District Court
emphasized that the Proxy clearly stated, in a standalone clause
immediately following the summary of the BCA’s corporate
governance provisions, that the “Combination Agreement
[BCA] contains no provision that would bar governance changes
after the Transactions have been consummated.”

       In the BCA, the term “merger of equals” was first


  17
        When the SEC, after reviewing the draft Proxy, sought a
clarification of the meaning of “merger of equals,” outside
counsel for Chrysler and Daimler-Benz referred the SEC to this
paragraph of Eaton’s letter.

                               37
introduced as follows:

       WHEREAS, Daimler-Benz and Chrysler desire to
       combine their respective businesses, stockholder groups,
       managements and other constituencies in a merger-of-
       equals transaction upon the terms and subject to the
       conditions of this Restated Agreement;

       WHEREAS, Daimler-Benz, Chrysler and
       DaimlerChrysler AG desire to make certain
       representations, warranties, covenants and agreements in
       connection with the transactions contemplated by this
       Restated Agreement . . ..

The District Court noted that the BCA provided that
“DaimlerChrysler AG shall have a corporate governance
reflecting that the transactions contemplated herein are a merger
of equals.” Based on this language, and the language in the
Proxy and Eaton’s cover letter, the District Court concluded, as
a factual matter, that the term “merger of equals” was to be
understood as incorporating the joint corporate governance
provisions set forth in the BCA. This conclusion was firmly

grounded in the evidence presented at trial and was not clearly
erroneous.

       Was it clearly erroneous then for the District Court to
find the term “merger of equals,” as defined in relation to the
BCA, not to be false or misleading? In order to make this
determination, we must assess whether DaimlerChrysler
followed the corporate governance structure set forth in the
BCA. Pursuant to German law, the BCA provided for a
DaimlerChrysler Supervisory Board responsible for appointing
members to the Management Board and overseeing their
operations. The BCA states that the Supervisory Board shall
consist of 20 members, including 10 labor representatives

                               38
(pursuant to German law), 5 shareholder representatives
designated by Daimler-Benz, and 5 shareholder representatives
designated by Chrysler. The District Court found that this
provision was followed; Tracinda does not assert otherwise. At
the time the District Court issued its post-trial opinion, the
Supervisory Board was about evenly split between Daimler-
Benz and Chrysler designees.

      DaimlerChrysler’s handling of the Management Board,
however, is a more contentious issue. The post-merger changes
to that board’s composition, as colored by Schrempp’s
comments in the Financial Times and Barron’s, are what
prompted Tracinda to bring its suit. With respect to the
Management Board’s composition, the BCA states (with
emphasis added):

      The Management Board . . . of DaimlerChrysler AG
      shall consist of 18 members. In general, 50% of such
      members shall be those designated by Chrysler, and 50%
      of such members shall be those designated by Daimler-
      Benz, and there will be two additional members with
      responsibility for Daimler-Benz’s non-automotive
      businesses. For three years following the Effective
      Time, Jurgen E. Schrempp and Robert J. Eaton shall be
      the Co-CEOs and Co-Chairmen . . . of the Management
      Board . . . of DaimlerChrysler AG and members of the
      Office of the Chairmen of DaimlerChrysler AG. If any
      person designated as a member of the Office of the
      Chairmen or the Management Board of DaimlerChrysler
      AG ceases to be a full-time employee of either Chrysler
      or Daimler-Benz at or before the Effective Time,
      Daimler-Benz, in the case of any such employee of
      Daimler-Benz on the date hereof or any such employee
      to be designated by Daimler-Benz, or Chrysler, in the
      case of any such employee of Chrysler on the date hereof
      or any such employee to be designated by Chrysler, shall

                             39
       designate another person to serve in such person’s stead.
       As highlighted by the District Court, the 50-50 split

between Daimler-Benz and Chrysler designees was meant to be
understood in general, initial terms. The BCA provided for the
right of Chrysler and Daimler-Benz to replace a designee to the
Management Board or Office of the Chairman if that individual
ceased to be a full-time employee of the company prior to the
effective date of the merger, but no such provision exists for the
departure of executives after the merger closed. Other than the
time frames placed on the co-chairmanship, no provision of the
BCA specified how long the composition of the Management
Board was to last after the merger closed. Indeed, the Proxy
explicitly stated that the Management Board members chosen by
Daimler-Benz and Chrysler pursuant to the BCA were “initial”
designees. Further, as noted by the District Court, the BCA
provides that the post-merger governance structure is based on
“recommendations” and is subject to the powers of the
DaimlerChrysler shareholders and the Supervisory and
Management Boards. As made clear in the Proxy, the BCA
“contains no provision that would bar governance changes after
the [merger has] been consummated.” Therefore, the District
Court found that the post-merger changes to the Management
Board composition, resulting in more Daimler-Benz designees
sitting on the Board than Chrysler designees, were permitted
under the BCA. The District Court explicitly found that “[t]he
Merger closed consistent with the provisions in the BCA.”
Tracinda Corp. v. DaimlerChrysler AG, 364 F. Supp. 2d 362,
380 (D. Del. 2005).

       Consequently, the District Court concluded that Tracinda
had not proved, by a preponderance of the evidence, a
misrepresentation based on use of the term “merger of equals,”
as defined by the BCA’s corporate governance provisions. The
District Court explained its decision as follows:


                               40
       Although the BCA and the Proxy/Prospectus set forth
       proposals concerning the numbers of individuals on the
       Management Board and the Supervisory Board from
       each side of the transaction, those documents do not
       require the proposed compositions to last for any specific
       period of time, reiterate that the proposed compositions
       are initial compositions, state that the proposed
       compositions are recommendations subject to the rights
       and approval of the shareholders and the Supervisory
       Board, and make clear that changes to the corporate
       governance structure are not barred after consummation
       of the transaction.

Id. at 409. This finding was firmly grounded in the evidence
presented at trial and was not clearly erroneous.

        In affirming this conclusion of the District Court, we
reject the primary argument pressed by Tracinda in its briefs and
during oral argument. Tracinda vehemently insists that the
District Court’s conclusion that the BCA corporate governance
provisions “apply only until the moment in time when
DaimlerChrysler was created . . . . renders the entire proxy
solicitation process . . . meaningless, except as a means to
deceive” and “also renders the corporate governance provisions
of the BCA illusory.” In effect, Tracinda argues that due to the
fact that the composition of the Management Board was
gradually altered in favor of former Daimler-Benz executives in
the years following the merger, we should set aside the District
Court’s finding that the BCA’s corporate governance provisions
were complied with. We reject this argument because, as noted
above, the BCA permitted these changes, and the Proxy
expressed this point in clear terms.


       Moreover, as noted by the District Court, Tracinda’s
insistence upon a Management Board perpetually divided


                               41
between 5 Daimler-Benz designees and 5 Chrysler designees is
potentially unworkable and legally flawed. Upon closing,
Daimler-Benz and Chrysler merged into one new company, at
which point there were no longer two independent companies to
make future board membership designations. In addition, a rigid
quota system based on nationality or former corporate affiliation
might have prevented the Supervisory Board from making
personnel decisions in the best interests of the shareholders, thus
interfering with its fiduciary duty.


        We also reject Tracinda’s argument to the extent it
suggests that the District Court erred by drawing on the BCA’s
corporate governance provisions in defining “merger of equals.”
Tracinda does not identify any alternate source that might have
better assisted the District Court in defining the term “merger of
equals,” other than perhaps Tracinda’s own notion of fairness.
Even if Tracinda had identified a suitable alternate source, that
would not necessarily render the District Court’s chosen


definition clearly erroneous. The court’s definition is based on
the evidence before it.


       Indeed, even if we were to define “merger of equals” in
general terms of shared or joint control, without reference to
specific BCA provisions, we would still reject Tracinda’s appeal
in light of the District Court’s findings of a degree of shared
control by the managers from Daimler and Chrysler: “The
Management Board did not take formal votes, but acted by
consensus;” “[f]ormer Chrysler executives who served on
DaimlerChrysler’s Board of Management had the opportunity
to provide input into all the operations of DaimlerChrysler,
including the former Daimler-Benz divisions;” and “their views
and opinions were taken seriously.” Tracinda Corp., 364 F.
Supp. 2d at 382.

                                42
        Because we will affirm the District Court’s factual
finding that no written misrepresentation occurred in the Proxy
solicitation, we need not consider the effect of Schrempp’s
comments to the Financial Times and Barron’s, since intent to
deceive without actual misrepresentation is insufficient to
prevail on a § 14(a) claim. See Virginia Bankshares, Inc. v.
Sandberg, 501 U.S. 1083, 1095-96 (1991); Lewis v. Chrysler
Corp., 949 F.2d 644, 651 (3d Cir. 1991); see also In re NAHC,
Inc. Sec. Litig., 306 F.3d 1314, 1330 (3d Cir. 2002) (to be
actionable under Rule 14a-9, “a statement or omission must
have been misleading at the time it was made; liability cannot be
imposed on the basis of subsequent events”).


          2. Other Claims


       Next, we briefly address Tracinda’s remaining claims of
misrepresentation in the Proxy regarding (1) the reasons for and
negotiations behind the selection of the German AG form for
DaimlerChrysler, (2) risk factors relating to the potential for
post-merger corporate governance changes in favor of Daimler-
Benz designees, and (3) the voting status of the two
Management Board members representing Daimler-Benz’s non-
automotive interests.


       German AG Form. At trial, Tracinda argued that the
Proxy misrepresented (1) the reasons for organizing
DaimlerChrysler as a German Aktiengesellschaft (AG), and (2)
the extent of the negotiations behind this decision.

       With regard to the first claim, Tracinda argued that the
Proxy falsely or misleadingly stated that the AG form was
chosen “because it best achieved both parties’ objectives” –
which Tracinda argued related to the “post-merger governance
structure of a ‘merger of equals’” – when in fact, according to

                               43
Tracinda, the AG form was chosen to facilitate Schrempp’s
secret takeover plan, or perhaps appease Daimler-Benz
shareholders. The District Court rejected this argument and
found no such misrepresentation. The District Court observed
that the Proxy did not define the “parties’ objectives” as the
“post-merger governance structure of a ‘merger of equals.’”
Rather, the District Court found that the Proxy clearly linked the
“parties’ objectives” to structural efficiency and favorable tax
consequences for the Daimler-Benz, Chrysler, and
DaimlerChrysler constituencies. After reviewing the language
of the Proxy and the evidence presented at trial, including
testimony of both American and German executives of
DaimlerChrysler that was consistent with the Proxy, the District
Court found that tax benefits were in fact the real reason for
choosing the AG form; therefore, no misrepresentation occurred.

        On appeal, Tracinda simply disagrees with the District
Court’s factual finding and reiterates its argument that it was
erroneous to link the “parties’ objectives” to tax consequences,
rather than to the shared corporate governance resulting from a
“merger of equals.” Tracinda’s argument is belied by the plain
language of the Proxy. As noted by the District Court, the
Proxy explains the reasons for choosing the AG form as follows
(with emphasis added):

       Over the course of their discussions, the parties
       considered various alternative transaction structures for
       the combination of the two enterprises, including through
       (1) a newly incorporated U.S. company, (2) a company
       incorporated in The Netherlands and (3) either a newly
       organized German Aktiengesellschaft or Daimler-Benz
       itself. The simplest structural solution, a direct merger of
       Daimler-Benz and Chrysler, was not possible under
       German law. The parties believed that the structure for
       the Transactions was the preferable alternative to a
       combination through a newly-incorporated U.S. company

                               44
       or a company incorporated in The Netherlands because
       this structure was believed to be the most tax efficient for
       the combined entity on an ongoing basis, could be tax-
       free to Chrysler's U.S. stockholders and to Daimler-Benz'
       German stockholders and was the only structure which
       would enable the elimination of all minority stockholders
       of Daimler-Benz and Chrysler thereby creating a parent
       corporation with one group of stockholders holding a
       single publicly traded equity security. The structure for
       the Transactions was therefore selected because it best
       achieved both parties' objectives.

The Proxy clearly explained that the AG form was chosen for its
tax benefits, and the testimony of executives from both sides of
the merger supported the Proxy’s explanation. Therefore, we
will affirm the District Court’s finding of no misrepresentation
as to the reasons for organizing DaimlerChrysler as a German
AG.

        With regard to its second claim, Tracinda argued at trial
that the Proxy misrepresented the extent of the negotiations
behind the selection of the AG form. Tracinda claimed that the
Proxy gave the false impression that the negotiations were not
hotly debated and did not extend beyond March 2, 1998, even
though evidence presented at trial suggested otherwise. The
District Court rejected this argument. The District Court noted
that the “Background of the Transactions” section of the Proxy
repeatedly referred to these negotiations and clearly explained
that they occurred on and beyond April 7, 1998. On appeal,
Tracinda simply asks us to second-guess the factual findings of
the District Court. Finding no clear error, we decline to do so.


      Risk Factors. At trial, Tracinda argued that the Proxy
misrepresented the risk factors associated with the proposed
merger by failing to mention that (1) absent a combination with


                               45
Daimler-Benz, Chrysler might not survive the next economic
downturn in the automotive industry, and (2) the
DaimlerChrysler Supervisory Board could, at any time after the
merger closing, remove all former Chrysler executives from the
Management Board and replace them with former Daimler-Benz
executives.

        With regard to the first allegedly omitted risk factor,
relating to the consequences of voting against the merger, the
District Court concluded that it need not be included because the
Proxy solicited votes in favor of the merger, and therefore the
Proxy’s risk factor section was designed to warn Chrysler
shareholders of the dangers of voting for the merger, not against
it. In any case, the District Court found that the Proxy addressed
the likelihood of future consolidation in the automobile industry
in other sections. On appeal, Tracinda fails to demonstrate how
this finding was clear error, or how an allegedly omitted risk
factor relating to the danger of voting against the merger could
possibly support its § 14(a) claim based on alleged
misrepresentations and omissions that induced it to vote in favor
of the merger.

       With regard to the second allegedly omitted risk factor,
relating to possibility of post-merger changes to the shared
corporate governance set forth in the BCA, the District Court
concluded that this risk was adequately explained because:

       the Proxy/Prospectus explicitly disclosed that (1) the
       Merger's governance provisions did not limit the
       Supervisory Board's duties and responsibilities under
       German law; (2) that the Supervisory Board had the
       power to remove members of the Management Board and
       (3) the BCA contained “no provisions that would bar
       governance changes after the [DaimlerChrysler]
       Transactions have been consummated.”


                               46
Tracinda Corp. v. DaimlerChrysler AG, 364 F. Supp. 2d 362,
413 (D. Del. 2005) (citations to Proxy omitted). On appeal,
Tracinda recycles various arguments, in slightly different form,
that we have already rejected in the context of the alleged
“merger of equals” misrepresentation, discussed supra, Section
II.B.1. In light of the explicit Proxy language clearly describing
the possibility of future corporate governance changes, we
conclude that Tracinda has failed to demonstrate clear error.

       SEC Form 8-K. DaimlerChrysler admits that a May 6,
1998, press release attached to a Chrysler SEC Form 8-K filing
erroneously stated that the two Daimler-Benz non-automotive
designees to the Management Board would be non-voting
members. At trial, Tracinda argued material misrepresentation
under § 14(a) because the Proxy incorporated the 8-K by
reference without explicitly identifying this error. The District
Court rejected this argument because of the Proxy’s disclaimer
that:

       Any statements contained herein, or in a document
       incorporated or deemed to be incorporated by reference
       herein, shall be deemed to be modified or superseded for
       purposes of this Proxy Statement/Prospectus to the extent
       that a statement herein, or in any other subsequently filed
       document that is or is deemed to be incorporated by
       reference herein, modifies or supersedes such previous
       statement. Any statement so modified or superseded
       shall not be deemed to constitute a part hereof except as
       so modified or superseded.

The District Court also reviewed the Proxy’s thorough
discussion of the BCA’s corporate governance provisions and
found no mention of the non-automotive Management Board
members as non-voting. Finally, the District Court observed
that the DaimlerChrysler Articles of Association, attached to the
Proxy, made no reference to any non-voting members of the

                               47
Management Board. Therefore, the District Court concluded
that the 8-K failed to establish misrepresentation in the Proxy.
On appeal, Tracinda expresses its disagreement with this factual
finding but fails to establish clear error.

       For the above stated reasons, we will affirm the District
Court’s finding that the Proxy and associated documents
contained no misrepresentations under § 14(a) and Rule 14a-9.18


  18
        We do not reach Tracinda’s appeal of the District Court’s
order granting Kopper’s motion to dismiss for lack of personal
jurisdiction because that appeal is moot. Even if we were to
conclude that the District Court had jurisdiction over Kopper
(which we do not), Tracinda would be precluded from further
pursuing the claims it brought against Kopper because each such
claim has been finally resolved in Defendants’ favor. See
Surrick v. Killion, 449 F.3d 520, 526 (3d Cir. 2006) (“‘[F]ederal
courts are without power to decide questions that cannot affect
the rights of litigants in the case before them.’”) (citing DeFunis
v. Odegaard, 416 U.S. 312, 316 (1974)).

        At the relevant times, Kopper was the chairman of the
Supervisory Board for Daimler-Benz and DaimlerChrysler.
Tracinda’s complaint asserted three claims against Kopper: two
claims for control person liability (under § 20(a) of the ‘34 Act
and § 15 of the ‘33 Act), and one claim for conspiracy to
defraud. None of these claims are before us on appeal. The
District Court dismissed Tracinda’s conspiracy claim in
Tracinda Corp. v. DaimlerChrysler AG, 197 F. Supp. 2d 86 (D.
Del. 2002), and Tracinda has not appealed that decision. Shortly
before trial, Tracinda voluntarily dismissed all of its ‘33 Act
claims, including its § 15 claim. The District Court held a bench
trial on all remaining claims (i.e., for common law fraud and
violations of § 10(b), § 14(a), and § 20(a) of the ‘34 Act), after
                                                    (continued...)

                               48
   18
     (...continued)
which judgment was entered for Defendants on all counts.
Tracinda’s notice of appeal purported to challenge the District
Court’s entire post-trial decision, but only the § 14(a) claim was
addressed in Tracinda’s opening brief. See In re Suprema
Specialties, Inc. Sec. Litig., 438 F.3d 256, 286 n.17 (3d Cir.
2006) (“[I]t is well-settled in this court that ‘an appellant’s
failure to identify or argue an issue in his opening brief
constitutes waiver of that issue on appeal.’”) (citation omitted).
Therefore, every claim brought against Kopper (under § 20, §
15, and for conspiracy) has been resolved against Tracinda, and
each such claim has been rendered finally resolved by
Tracinda’s waiver of those issues on appeal.

        Tracinda argues that its claim against Kopper under § 20
has not been waived on appeal by virtue of its § 14 claim, which
was addressed in Tracinda’s opening brief. Although a primary
violation of § 14(a) can be a predicate to control person liability
under § 20(a), Tracinda’s complaint makes clear that its § 20(a)
claim against Kopper was based on alleged violations of § 10(b),
not § 14(a). See Compl. ¶ 48 (“Messrs. Schrempp, Gentz and
Kopper knew or should have known of the violations of Section
10(b) of the Exchange Act as set forth in the First Claim for
Relief, above.”). In any case, even if we were to read
Tracinda’s § 20(a) claim as alleging an underlying § 14(a)
violation (which is dubious, in light of the clear language cited
above), the appeal of Kopper’s dismissal would still be moot, as
we have already affirmed the District Court’s finding of no
liability under § 14(a). We have also affirmed the District
Court’s decision to strike the jury demand and thus Tracinda is
not entitled to retry its entire case to a jury. Therefore, the
District Court’s post-trial finding of no liability on all counts is
finally resolved. Having failed to establish any primary
                                                     (continued...)

                                49
        C. Discovery Sanctions

       Because we have rejected Tracinda’s appeal in its
entirety and will affirm the District Court’s final judgment in
favor of DaimlerChrysler, we need not address
DaimlerChrysler’s claim on cross-appeal that the District Court
erred in denying DaimlerChrysler’s motion for summary
judgment on statute of limitations grounds. We therefore
proceed to the final issue before us – DaimlerChrysler’s claim
on cross-appeal that the District Court erred by awarding
Tracinda $556,061 in costs for DaimlerChrysler’s late document
production, which violated the District Court’s scheduling order.
An order granting sanctions is reviewed for abuse of discretion.
Saldana v. Kmart Corp., 260 F.3d 228, 236 (3d Cir. 2001). For
the reasons that follow, we find no abuse of discretion and will
affirm the order, awarding costs.

          1. Background19

   18
     (...continued)
violations of the federal securities laws, Tracinda has necessarily
failed to establish control person liability as well. Cal. Pub.
Employees’ Ret. Sys. v. Chubb Corp., 394 F.3d 126, 159 n.21
(3d Cir. 2004).

       If we were to find jurisdiction over Kopper and remand,
the District Court would have to dismiss Kopper for lack of any
outstanding claims against him. Therefore, Tracinda’s appeal of
Kopper’s dismissal for lack of personal jurisdiction is moot.
  19
     We derive our factual summary from the District Court’s
memorandum opinion and order granting Tracinda’s motion for
                                             (continued...)

                                50
        Pursuant to the District Court’s Rule 16 pretrial
scheduling order, discovery closed on January 15, 2003. Nearly
a year later, on December 16, 2003 – the eve of the last day of
trial – DaimlerChrysler informed the District Court that it had
failed to produce 61 pages of documents responsive to
Tracinda’s earlier discovery requests. DaimlerChrysler had just
discovered that these documents had not been produced as
required. Because the District Court found that these documents
were “highly relevant to issues raised throughout this litigation,”
the District Court recessed trial. See Tracinda Corp. v.
DaimlerChrysler AG, No. 00-CV-993-JFF, 2005 WL 927187,
at *2 (D. Del. April 20, 2005). DaimlerChrysler provided
copies of the 61 pages to Tracinda and, after further
investigation, produced 6 more pages a few days later.

        The sixty-seven pages of documents came from the files
of Gary Valade, Chrysler’s CFO at the time of the merger and
later a member of DaimlerChrysler’s Management Board. The
documents consisted primarily of Valade’s handwritten notes
taken during the merger negotiations; Valade had been one of
the principal negotiators for Chrysler. After considering the
various requests of the parties and reviewing Valade’s notes, the
District Court referred the matter to a special master for an
evidentiary hearing and determination of the reasons for
DaimlerChrysler’s delayed production. The Special Master had
been responsible for managing discovery throughout the course
of this complex litigation and was very familiar with the case.


   19
     (...continued)
sanctions (at Tracinda Corp. v. DaimlerChrysler AG, No. 00-
CV-993-JFF, 2005 WL 927187 (D. Del. April 20, 2005)) and
the Special Master’s report (at docket item no. 944), which was
adopted by the District Court (by 4/11/05 Order, at docket item
no. 1099). Our summary of the procedural history draws from
the entire record.

                                51
       On December 22, 2003, the Special Master conducted a
full-day hearing at which live testimony and exhibits were
presented regarding the circumstances giving rise to the
production delay. On January 12, 2004, the Special Master
issued a 22-page written report making detailed factual findings,
which we summarize as follows:

         On December 15, 2003, shortly before he was to testify
at trial, Valade flew to Wilmington, Delaware. He brought with
him one of two binders he kept, containing various documents
relating to the Daimler-Benz/Chrysler merger negotiations.
Included in the binders were his handwritten notes of the details
of the key pre-merger meetings. During the flight, Valade
reviewed the contents of the binder and found a page of meeting
notes that he believed was helpful to DaimlerChrysler’s trial
position. When Valade arrived in Wilmington, he showed the
page to the attorneys from Skadden, Arps, Slate, Meagher &
Flom LLP, one of the law firms representing DaimlerChrysler.
The Skadden attorneys immediately investigated whether the
page had been provided to Tracinda during discovery. After
searching Skadden’s electronic database of produced
documents, they concluded that it had not. Skadden then began
an investigation to determine why not. In Michigan, Skadden
attorneys located the other binder which Valade had used to
collect materials and handwritten notes during the merger
negotiations. Skadden discovered that a substantial portion of
the material from Valade’s two binders had been produced to
Tracinda, but several dozen pages of handwritten notes had not.
The next day, on December 16, Skadden reported the problem
to the District Court.

        In preparing for this case, Skadden had followed its usual
practice for a large document production. Various safeguards
were employed, including the creation of two sets of copies of
all potentially discoverable material (approximately 2.5 million
documents) to be stored at separate locations in New York and

                               52
New Jersey. Material collected from DaimlerChrysler’s
Michigan headquarters, including Valade’s office, was
duplicated in Auburn Hills by an outside copy vendor. The
original documents were returned to DaimlerChrysler’s offices.
The set of copies was sent to New York City, where it was
duplicated again by a different copy vendor. The first,
“inviolate” set of copies – the set of copies received from
Michigan – was stored in Jersey City; it remained untouched.
The second “working” set, the copies made from the “inviolate”
set, was kept at Skadden’s New York City offices where
Skadden attorneys reviewed the documents to determine
whether they should be produced. Approximately 250,000
documents were deemed to be responsive to Tracinda’s
discovery requests and not to be protected by the attorney-client
privilege. The remaining 2.25 million documents were
classified and stored separately as either unresponsive or
privileged. A New York City copy vendor scanned the 250,000
producible documents into a searchable electronic database for
Skadden’s internal use and made a set of hard copies that was
delivered to Tracinda.

        Between December 15 and 22, Skadden conducted an
elaborate search of both the inviolate and working sets of
documents. The working set was more difficult to examine
because it was no longer intact, having been divided up based on
responsiveness and privilege. As a result of the search, Skadden
determined that copies of the material from Valade’s binders
appeared in two separate boxes in the inviolate set. Box 261
contained an incomplete set of the binder material, i.e., all of the
pages first produced to Tracinda but none of the 67 tardily
produced pages. Box 363, however, contained a more complete
set, including all the earlier produced pages and almost all of the
67 tardily produced pages.

      Testimony, presented at the evidentiary hearing, revealed
that Box 363 had been reviewed and processed during

                                53
Skadden’s document review. Nevertheless, the 67 pages of
Valade’s notes were not included in the set of 250,000
documents produced to Tracinda. The 67 pages were also not
included in Skadden’s privilege log or its collection of
unresponsive documents. In other words, the 67 pages were
present in Box 363 of the inviolate set but were nowhere to be
found in the working set.

        Having made the above factual findings, the Special
Master identified two possible reasons for DaimlerChrysler’s
failure to produce the 67 pages of Valade’s notes. First, the
Special Master noted that the copy vendor in Auburn Hills
apparently erred by creating two separate copies – both
incomplete to varying degrees – of the material in Valade’s
binders, which probably led to some confusion during
Skadden’s document review. Second, the Special Master noted
that the copy vendor in New York City, responsible for copying
the set of documents sent there, might have failed to duplicate
the entire contents of Box 363, including the missing Valade
notes. This might explain how Skadden could have reviewed
and processed Box 363 of the working set without producing the
missing notes or placing them in either its privilege log or its
collection of non-responsive documents.

        Despite the apparent improbability that two separate copy
vendors in different cities could each make copying mistakes
with the same group of documents, the Special Master
concluded in his report that such a coincidence was in fact “the
most likely explanation for the late production” of the 67 pages
of Valade’s notes. The Special Master concluded that, while
there was “no definitive answer why the complete set of
[Valade’s binders] were not produced” and “no explanation for
the coincidence” noted above, there was nevertheless “no
evidence that the Skadden attorneys or Mr. Valade intentionally
or in bad faith withheld the missing documents from production
to the plaintiffs.” The Special Master did not clearly address

                               54
whether DaimlerChrysler or Skadden had acted negligently.

        Tracinda filed objections to the Special Master’s report
to the extent it found coincidental copying error to have caused
DaimlerChrysler’s late production. Tracinda also filed a motion
for sanctions requesting that (1) Valade be barred from
testifying at trial about the subject matter of his notes, except in
response to questions about the notes by Tracinda and the Court;
(2) Jurgen Schrempp and Thomas Stallkamp be recalled to
testify at trial; and (3) DaimlerChrysler be ordered to pay
Tracinda all of its fees and costs incurred from December 16,
2003, through the conclusion of trial. At a teleconference on
January 30, 2004, the District Court denied Tracinda’s request
to limit Valade’s testimony. The District Court did not need to
rule on Tracinda’s second request because DaimlerChrysler
agreed to have Schrempp and Stallkamp recalled. The District
Court indicated that it would grant Tracinda’s request for costs
and fees, with the precise amount to be determined after trial.
Consequently, the District Court postponed ruling on Tracinda’s
objections to the Special Master’s report. Trial resumed on
February 9, 2004, and concluded two days later.

        On April 7, 2005, the District Court issued its post-trial
opinion and order, entering final judgment for DaimlerChrysler
on all remaining counts. Shortly thereafter, the District Court
overruled Tracinda’s objections to the Special Master’s report,
adopted its findings and awarded Tracinda $556,061 for the
costs and fees it expended as a result of DaimlerChrysler’s late
production. Even though the Special Master found no bad faith
or intentional misconduct by DaimlerChrysler or Skadden – a
finding the District Court accepted – the District Court
concluded that the imposition of monetary sanctions was
permitted and warranted in this case under FED. R. CIV. P. 16(f).
In so concluding, the District Court cited the inconvenience and
expense DaimlerChrysler caused Tracinda and the court, the
particular relevance of Valade’s tardily produced notes, and, in

                                55
light of the advanced stage of the litigation, the irremediable
prejudice suffered by Tracinda. Like the Special Master, the
District Court did not clearly address whether DaimlerChrysler
or Skadden had acted negligently in failing to produce all of
Valade’s notes during discovery. The District Court also
concluded that the sanction amount awarded was reasonable.
The District Court rejected DaimlerChrysler’s argument that
Tracinda’s attorney’s declaration was insufficient to
demonstrate the reasonableness of Tracinda’s fee request. The
District Court accepted the declaration’s summary of the hours
expended by Tracinda’s attorneys (and their corresponding
hourly fees) as a result of DaimlerChrysler’s late production,
even though the declaration did not precisely detail the specific
tasks the attorneys performed or attach their actual billing
records.

       On appeal, DaimlerChrysler contends that the District
Court abused its discretion by imposing sanctions absent a
finding of bad faith or intent. DaimlerChrysler argues that Rule
16(f) sanctions are not designed to punish or deter blameless
conduct and therefore the Court’s decision was “unjust” under
the Rule. Alternatively, DaimlerChrysler argues that the District
Court abused its discretion by awarding an unreasonably large
sanction award that was not sufficiently supported by
particularized evidence.

        As noted above, we review the District Court’s decision
for abuse of discretion. “An abuse of discretion is a clear error
of judgment, and not simply a different result which can
arguably be obtained when applying the law to the facts of the
case.” SEC v. Infinity Group Co., 212 F.3d 180, 195 (3d Cir.
2000) (quotation marks and citations omitted). A court abuses
its discretion if its decision to impose sanctions is based upon an
incorrect legal standard or clearly erroneous factual findings.
Bowers v. Nat’l Coll. Athletic Ass’n, 475 F.3d 524, 538 (3d Cir.
2007) (citing Cooter & Gell v. Hartmarx Corp., 496 U.S. 384,

                                56
405 (1990)).

          2. Sanctions Under Rule 16(f)

        Federal Rules of Civil Procedure 16(a) through (e) set
forth standards for pretrial conferences, case management, and
scheduling orders. Rule 16(f), which authorizes sanctions for
violations of pretrial orders issued pursuant to this Rule, states
in relevant part (with emphasis added):
        If a party or party's attorney fails to obey a scheduling or
pretrial order, . . . the judge, upon motion or the judge's own
initiative, may make such orders with regard thereto as are just,
and among others any of the orders provided in Rule
37(b)(2)(B), (C), (D).20 In lieu of or in addition to any other
sanction, the judge shall require the party or the attorney
representing the party or both to pay the reasonable expenses
incurred because of any noncompliance with this rule, including
attorney's fees, unless the judge finds that the noncompliance
was substantially justified or that other circumstances make an
award of expenses unjust.

As the plain language of Rule 16(f) indicates, monetary
sanctions for noncompliance with Rule 16 pretrial orders are
required and appropriate absent a showing that the violation was
“substantially justified” or the award of expenses is “unjust”
under the circumstances of the case. See 3 JAMES WM. MOORE
ET AL., MOORE’S FEDERAL PRACTICE - CIVIL § 16.91[2][b] (3d
ed. 1997 & Supp. 2006).



   20
      These sections of Rule 37 authorize a district court to
impose a variety of non-monetary litigation sanctions (including
dismissing the case, striking claims or defenses, and barring
evidence) for failures to make disclosures or cooperate in
discovery.

                                57
        Because there was no dispute that the tardily produced
Valade notes were relevant to the case and clearly within the
scope of Tracinda’s earlier discovery requests, DaimlerChrysler
does not contend that its late document production, which
violated the District Court’s scheduling order, was “substantially
justified.” See Fitz, Inc. v. Ralph Wilson Plastics Co., 174
F.R.D. 587, 591 (D.N.J. 1997) (noting that, in the context of
Rule 37 sanctions, “substantial justification” occurs when there
is a “genuine dispute concerning compliance”) (citing Pierce v.
Underwood, 487 U.S. 552, 565 (1988)).                     Instead,
DaimlerChrysler argues that the District Court’s imposition of
Rule 16(f) expense sanctions, absent a finding of bad faith or
intent, renders the sanction “unjust” and thus barred by the Rule.
In the alternative, DaimlerChrysler argues that such a sanction
requires at least a finding of negligence. DaimlerChrysler
contends that the Special Master and the District Court found no
negligence on the part of DaimlerChrysler or its attorneys – only
negligence on the part of the outside copy vendors – and
therefore the sanction awarded was “unjust” under Rule 16(f).

        “Unjust” can be variously defined as “unfair,”
“unreasonable,” “inequitable,” or “harsh.” These definitions do
not, in and of themselves, contain a requirement of intent or
negligence. Instead, “unfair,” “unreasonable,” “inequitable” and
“harsh” invite a consideration of the degree of the sanction in
light of the severity of the transgression which brought about the
failure to produce. Certainly, whether a failure to produce is
intentional, negligent, or inadvertent is a significant factor in
assessing the severity of the transgression. On the other hand,
a failure to produce documents that is rectified many months
before trial causes less prejudice and is less expensive to rectify
than a failure to produce relevant documents that is discovered
on the eve of the last day of a long and complicated trial. Thus,
the circumstances and timing of the eventual production of the
documents is a correlative factor for the district court to
consider, along with the nature of the failure to produce, in

                                58
determining the nature and severity of the sanction. A $500,000
assessment of costs for an inadvertent failure to product
documents would be unjust if the documents were produced two
months after the close of discovery but six months before trial
is to begin. The failure to produce here, however, occurred
eleven months after the close of discovery and, even more
significantly, on the eve of the last day of a long trial. This case
was extraordinarily complex and the preparations for trial,
particularly in light of the huge number of documents produced,
had been immensely time consuming. Nevertheless, on the eve
of the last day of trial, Tracinda was required, through no fault
of its own, to reexamine its trial strategy, reevaluate its
examination of various witnesses, prepare for re-examination of
several witnesses, and redevelop its cross-examination of
Valade. In addition, as noted by the District Court, the late
production prejudiced Tracinda’s whole trial preparation
strategy by its effect on Tracinda’s “ability to develop its case,
including most particularly its impact on Tracinda’s decision of
who to depose, the order of depositions and the substance and
conduct of the trial prior to the revelation of the documents.”
Tracinda Corp., 2005 WL 927187 at *3.

       Even though the Special Master’s report found that
“[t]here was no evidence in the record . . . that the Skadden
attorneys had any part in [the copying] mix-up,” the obligation
to produce the documents was DaimlerChrysler’s and
Skadden’s. As between DaimlerChrysler and Tracinda, if
anyone is to be charged with the significant expenses that
Tracinda incurred because of the late and prejudicial production,
it does not seem unjust that DaimlerChrysler should bear the
expense. Indeed, the District Court noted in its sanctions
opinion that, “regardless of the reason for the failure to produce
these documents, the fault for this production failure and the
related delays and proceedings which followed, lies with
Defendants.” Id. at *3. We conclude that, under the extreme
circumstances of this case, the District Court acted within its

                                59
discretion by imposing Rule 16(f) expense sanctions.

        This conclusion is consistent with the very broad
discretion which district courts have to “use sanctions where
necessary” to ensure compliance with pretrial orders; this
facilitates the “expeditious and sound management of the
preparation of cases for trial.” In re Sanction of Baker, 744 F.2d
1438, 1440 (10th Cir. 1984) (en banc). Although a finding of
bad faith is generally required for a court to impose sanctions
pursuant to its inherent authority, see Roadway Express, Inc. v.
Piper, 447 U.S. 752, 765-766 (1980) (discussing a court’s power
to impose sanctions before 1983, when Rule 16 was amended to
add subdivision (f)); Martin v. Brown, 63 F.3d 1252, 1265 (3d
Cir. 1995), no express requirement of intent or negligence exists
in the language of Rule 16(f).

       DaimlerChrysler argues, however, that the purpose of
Rule 16(f) is to punish and deter egregious misconduct, not
innocent mistakes, and therefore the imposition of sanctions in
this case constituted an “unjust” award. In support of this
proposition, DaimlerChrysler cites to two cases, Williams v.
Saint-Gobain Corp., No. 00-CV-502E, 2002 WL 1477618, at *2
(W.D.N.Y. June 28, 2002) and Flaherty v. M.A. Bruder & Sons,
Inc., 202 F.R.D. 137, 141-142 (E.D. Pa. 2001), where motions
for sanctions were denied because, among other things, the
discovery violations at issue were inadvertent.21 As we discuss
supra, however, the standard we find relevant in defining


  21
       DaimlerChrysler also cites to Zambrano v. City of Tustin,
885 F.2d 1473, 1478 (9th Cir. 1989), where the court of appeals
vacated a sanction award that was based on “simple
negligence.” Zambrano is inapposite, however, as it did not
address Rule 16(f); the decisions under review in that case relied
upon the district court’s local rules, not the Federal Rules of
Civil Procedure. Id. at 1477 n.9 and 1481.

                               60
“unjust” is the contrast between the nature of the violation of
Rule 16 and the impact on the parties caused by the delay.
Therefore, the fact that the party with the obligation to produce
documents may have been negligent is a factor to consider.
Nevertheless, even if the failure to produce has been inadvertent,
sanctions may be called for under Rule 16(f) if the impact is
severe on the party who was due the discovery. See MOORE’S
FEDERAL PRACTICE § 3-16.92[2] (noting that one of the relevant
factors in considering whether to impose Rule 16(f) sanctions is
“the nature and consequences of the misconduct”). The
prejudice caused by DaimlerChrysler’s discovery violation was
significant because the effect on Tracinda’s trial preparation
could not be remedied and because the delay imposed
substantial costs on Tracinda – significantly beyond what the
cost of trial preparation would have been had the documents
been produced in a timely fashion. See Scarborough v.
Eubanks, 747 F.2d 871, 876 (3d Cir. 1984) (noting that
prejudice includes “excessive and possibly irremediable burdens
or costs imposed on the opposing party”). Although Valade’s
notes surfaced before he testified at trial, and Schrempp and
Stallkamp were recalled for further testimony in light of the
newly discovered evidence, Tracinda still suffered a degree of
irremediable prejudice. Flaherty and Williams are therefore
distinguishable from the instant case as the prejudice caused by
the misconduct in those cases was substantially curable and
therefore largely insignificant.

        We conclude, therefore, in light of the circumstances of
this case, that the District Court did not abuse its discretion in
awarding Tracinda expense sanctions under Rule 16(f).
DaimlerChrysler was wholly responsible for the late document
production that caused Tracinda to incur substantial expenses.
Despite the efforts of DaimlerChrysler and the District Court,
the late production of Valade’s notes irremediably prejudiced
Tracinda’s case. Valade’s notes, which were not produced until
the eve of the last day of trial, were highly relevant and would

                               61
have had an impact on Tracinda’s strategy and actions prior to
that point, throughout discovery and during trial.

       DaimlerChrysler argues to the contrary that our holding
will open the door to a “flood of satellite litigation” over Rule
16(f) expenses every time a document production error is
unearthed after the close of discovery, which can be a common
occurrence in complex litigations. DaimlerChrysler points out
that scheduling orders often require document production to be
completed before depositions commence, at which time
witnesses often identify relevant documents not previously
produced.

        We do not concur with this assessment of the results of
our decision. Production errors discovered at the pre-trial stage
of litigation will result in little, if any, expense or prejudice to
the opposing party and therefore are not likely to warrant the
imposition of sanctions under Rule 16(f). On the other hand, if
a litigant knows that even inadvertent failure to produce relevant
documents may result in a sanction when the existence of the
documents is discovered during trial, the litigant may exercise
more care in ensuring that all relevant documents are produced.

        DaimlerChrysler also argues that our holding will have
the effect of deterring future litigants from admitting and
rectifying discovery errors. However, as DaimlerChrysler
admits, the obligation on parties and counsel to come forward
with relevant documents not produced during discovery is
“absolute.” Indeed, the failure to do so can result in penalties
more severe than monetary sanctions, including dismissal of the
case. We are not concerned about chilling conduct that is
compulsory and required by law.

          3. Reasonableness of Expense Award

       Having concluded that it was within the District Court’s

                                62
discretion to impose sanctions on DaimlerChrysler, we must
now consider whether the amount of expenses awarded to
Tracinda was reasonable. If a party or attorney violates a
pretrial order, Rule 16(f) authorizes a district judge to “make
such orders with regard thereto as are just,” including orders
requiring the noncompliant person “to pay the reasonable
expenses incurred because of any noncompliance with this rule,
including attorney’s fees.” FED. R. CIV. P. 16(f) (emphasis
added). DaimlerChrysler argues that the District Court abused
its discretion by awarding Tracinda $556,061 because,
according to DaimlerChrysler, the evidence of expenses
presented by Tracinda – an attorney declaration including a
summary of individual hours worked and corresponding hourly
rates – failed to justify that amount. DaimlerChrysler argues
that the declaration failed to distinguish adequately which
expenses were incurred “because of” DaimlerChrysler’s
discovery error, and which were not, because the declaration did
not include a precise breakdown of specific tasks performed.
Even though the District Court awarded only half of the
expenses originally requested by Tracinda,22 DaimlerChrysler
argues that such a breakdown was required because the District
Court had an obligation to parcel out the relevant and irrelevant
expenses. DaimlerChrysler also argues that the declaration was
insufficient to demonstrate reasonableness because it was not
accompanied by actual time sheets or receipts.

      With regard to what DaimlerChrysler calls the District
Court’s “aversion to parceling,” we find no abuse of discretion.
Tracinda’s attorney’s declaration explicitly sets forth only those


   22
       As the District Court noted in its opinion awarding the
fees, Tracinda modified its request, reducing it by one half, “in
order to avert the need to litigate any question concerning the
reasonableness of the fees and expenses it seeks.” Tracinda
Corp., 2005 WL 927187, at *3.

                               63
expenses incurred “in connection with the late production of Mr.
Valade’s Notes” (emphasis added), and declared, “under penalty
of perjury pursuant to 28 U.S.C. § 1746 [permitting unsworn
declaration in lieu of sworn affidavit],” that “Tracinda and its
counsel never would have had to incur these additional
attorneys’ fees and costs but for the Defendants[’] late
production of Mr. Valade’s Notes” (emphasis added). Because
the declaration listed only expenses incurred “because of”
DaimlerChrysler’s late production, FED. R. CIV. P. 16(f), there
was no need for the District Court to parcel out the relevant fees
and costs from the irrelevant ones as only relevant ones were
requested.

         We also reject DaimlerChrysler’s argument to the extent
it challenges the causation link between the late production of
Valade’s notes and the expenses incurred by Tracinda as set
forth in the attorney declaration. DaimlerChrysler first produced
Valade’s notes during trial, on December 16, 2003. The trial
was supposed to end the following day but was forced into
recess because of DaimlerChrysler’s late production. The
litigation continued for several more weeks, through the
Christmas and New Year’s holidays, with trial finally coming to
an end on February 11, 2004. As stated in Tracinda’s attorney
declaration, throughout this period, Tracinda had to (1) prepare
for and participate in the December 22, 2003, hearing before the
Special Master, (2) prepare and file its objections to the Special
Master’s findings, (3) prepare and file its motion for sanctions,
(4) review and analyze the newly produced Valade notes and
alter its trial strategy accordingly, (5) prepare for and participate
in the examination of Valade and re-examination of Schrempp
and Stallkamp in light of the new evidence, and (6) prepare for
and participate in three days of trial, including at least one day
not originally planned for. It is self-evident that the
overwhelming majority of these tasks had to be performed
directly because of DaimlerChrysler’s late production.
Although it is true that some parts of these tasks had to have

                                 64
been performed irrespective of DaimlerChrysler’s error (e.g.,
Tracinda’s examination of Valade on subjects not covered by
the tardily produced notes), certainly significant attorney’s fees
and costs incurred by Tracinda during this time period were

directly caused by DaimlerChrysler’s noncompliance with Rule
16.

        Next, we address DaimlerChrysler’s argument that
Tracinda’s attorney’s declaration was insufficient to prove the
reasonableness of the expenses awarded because the declaration
did not attach actual time sheets and receipts for corroboration.
Although “the preferred practice is for the attorney to attach
contemporaneously recorded time sheets,” we conclude that the
declaration in this case is sufficient. Yeager’s Fuel, Inc. v.
Penn. Power & Light Co., No. 91-CV-5176, 1992 WL 78827,
at *4 (E.D. Pa. Apr. 10, 1992) (under Rule 37, sanctioning
plaintiff for discovery abuses and awarding defendant
reasonable expenses based on attorney’s affidavit summarizing
time spent by and billable rates of defense counsel) (citing Webb
v. County Bd. of Education, 471 U.S. 234, 238 n.6 (1985)
(reviewing attorney’s affidavit in support of prevailing party’s
request for attorney’s fees pursuant to 42 U.S.C. § 1988)).

        The declaration supporting Tracinda’s request for
expenses was made by Alan Stone, a partner at a Wilmington
law firm (Morris, Nichols, Arsht & Tunnel), one of three large
firms representing Tracinda, the other two being located in New
York (Fried, Frank, Harris, Shriver & Jacobson LLP) and Los
Angeles (Christensen, Miller, Fink, Jacobs, Glaser, Weil &
Shapiro LLP). With regard to attorney’s fees, the declaration
sets forth three tables, one for each firm, listing the names of the
legal professionals who worked for Tracinda (including
partners, associates, and support staff), their hourly rates
(ranging from $690/hour to $100/hour), the number of hours
they worked during the relevant 7-week time period (ranging

                                65
from 239 hours to less than 1 hour), and the total fees accrued
(approximately $145,000 for 456 hours for the Wilmington firm,
$264,000 for 683 hours for the New York firm, and $465,000
for 1,249 hours for the Los Angeles firm), which came to a
grand total of approximately $874,000 for 2,388 hours of work.
The declaration states, under penalty of perjury, that these
“tables set forth the actual amount of hours worked by attorneys
and support staff from Plaintiff’s counsel in connection with the
late production of Valade’s Notes.” With regard to other costs,
the declaration sets forth three more tables listing miscellaneous
expenses (e.g., travel, hotel, consulting, duplication, etc.)
incurred by each firm as a result of DaimlerChrysler’s late
production, which totaled approximately $119,000.

       DaimlerChrysler does not directly challenge the hourly
rates or the total for miscellaneous costs set forth in the
declaration. Rather, DaimlerChrysler focuses on the quantity of
legal work summarized in the declaration (approximately 2400
hours) and contends that it exaggerates the actual legal fees
incurred by Tracinda as a result of DaimlerChrysler’s late
production. DaimlerChrysler argues that it was abuse of
discretion for the District Court not to require corroborating
evidence, such as contemporaneously recorded time records.

       We reject DaimlerChrysler’s argument to the extent it
accuses Alan Stone of issuing a false declaration. Stone’s
declaration was made “under penalty of perjury” and the District
Court’s made an implicit factual finding that Stone’s declaration
was credible. There is nothing in the record to cast doubt on the
District Court’s conclusion that it was reasonable for Tracinda’s
lawyers to spend 1200 hours of time collectively during a 7-
week recess from trial (representing approximately 170 hours a
week) in this remarkably complicated, high-stakes litigation.
The District Judge presided over this massive case for over 4
years and was intimately familiar with its complexity, the
lawyers involved, and the amount of work required to prosecute

                               66
it. Without any evidence of error, we will not second-guess the
judgment of a District Judge well-positioned to determine the
reasonableness of a fee request.

III. CONCLUSION

        For the foregoing reasons, we will AFFIRM the District
Court’s order of November 19, 2003, granting
DaimlerChrysler’s motion to strike Tracinda’s jury demand and
the judgment of April 7, 2005, finding DaimlerChrysler not
liable for common law fraud or federal securities violations.
Without reaching the merits, we will DENY AS MOOT
Tracinda’s appeal of the District Court’s order of March 5,
2003, granting defendant Kopper’s motion to dismiss for lack of
personal jurisdiction. With regard to DaimlerChrysler’s cross-
appeal, we will AFFIRM the District Court’s order of April 20,
2005, awarding Tracinda $556,061 in costs for
DaimlerChrysler’s late discovery production. Finally, we will
DENY AS MOOT DaimlerChrysler’s cross-appeal of the
District Court’s order of June 25, 2003, denying
DaimlerChrysler’s motion for summary judgment on statute of
limitations grounds.



Tracinda Corp. v. DaimlerChrysler AG, Nos. 05-2363/05-2482


RENDELL, Circuit Judge - dissenting.

      I respectfully dissent from that portion of the majority’s
opinion that affirms the award of costs and attorney’s fees under
Fed. R.Civ. P. 16(f) for DaimlerChrysler’s accidental




                               67
noncompliance with the District Court’s discovery order.23 In
not one of the cases cited by the parties, or by the District Court,
has a party been ordered to pay expenses under Rule 16(f) based
on less than the party’s negligent noncompliance. See Ayers v.
City of Richmond, 895 F.2d 1267, 1270 (9th Cir. 1990)
(reviewing imposition of Rule 16(f) sanctions on attorney who
received notice of hearing, but failed to appear because the date
“slipped by him”); Matter of Baker, 744 F.2d 1438, 1441
(10th Cir. 1984) (noting that the “record reflects not
contumaciousness, but a pattern of negligence”); Reilly Foam
Corp. v. Rubbermaid Corp., 206 F. Supp. 2d 643, 660 (E.D. Pa.
2002) (imposing Rule 16 sanctions for plaintiff’s “wilful
violation of the Court's scheduling order”); Martin Family Trust
v. Heco/Nostalgia Enters. Co., 186 F.R.D. 601, 603 (E.D. Cal.
1999) (imposing Rule 16(f) sanctions for plaintiff’s unexplained
failure to file a status report as required no later than 14 days
prior to a specific scheduling conference); Santos v. U.S. Dep’t
of Hous. & Urban Dev., Nos. 89-2892, 89-2979 & 89-4824,
1992 WL 165677, at *10 (E.D. Pa. July 2, 1992) (reviewing
sanctions imposed by bankruptcy court for counsel’s failure to
assist in the preparation of a joint pretrial statement as ordered
by that court and noting that “[w]ith adequate notice and
opportunity for a hearing, the bankruptcy court may impose a
punitive sanction for even negligent noncompliance with
Rule 16”). To do so here is, I suggest, unprecedented and
unjust.

       Here, a Special Master conducted an evidentiary hearing
concerning the noncompliance with the discovery order and,
based on the record developed at the hearing, determined that
the “DaimlerChrysler attorneys did not intentionally or in bad
faith withhold relevant documents from production.” Supp.


  23
     I do not disagree with the majority’s rulings with respect to
the rest of the District Court’s orders.

                                68
Appx. 6173. The Special Master found that the most likely
explanation for the late production was the careless copying of
the documents in question by outside copy vendors. Id. No
blame was leveled at DaimlerChrysler by the Special Master, or
by anyone else, for that matter.

        I have found no authority that supports holding
DaimlerChrysler strictly liable under Rule 16(f) for its
accidental noncompliance with a court order. While it is
regrettable that the copy vendors’ errors were not discovered
earlier, it is not “just” within the meaning of Rule 16(f) to
punish DaimlerChrysler merely because something went wrong.
Only in extreme situations do we penalize without regard to
fault and Rule 16 does not allow for the imposition of such a
penalty here.

        Moreover, the $556,061 penalty assessed was imposed
without adequate foundation. The attorney billing records
submitted by Tracinda included only the number of hours
expended per attorney and each attorney’s billing rate, but did
not give a detailed breakdown of what tasks each attorney
performed. District Court avoided making a determination as
to which hours of work were expended for what purpose by
assuming that a 50% reduction in the total amount of claimed
attorney’s fees resulted in a “reasonable” sum. Appx. 7782.
This only adds to my discontent regarding the award.
I therefore would have vacated the award rather than approve of
such an unwarranted and unsupported sanction.




                              69
