Seinfeld v. Bartz case brief

Seinfeld v. Bartz case brief summary
2002 WL 243597 (N.D. Cal.)

CASE SYNOPSIS

Plaintiff shareholder brought a derivative action against defendants, the company and its directors. The shareholder alleged that defendants acted negligently in preparing their statement to solicit proxies to vote in favor of an amendment. Defendants moved to dismiss.

CASE FACTS
The shareholder asserted that the Black-Scholes valuations of the option granted to the outside directors were omitted material facts.

DISCUSSION

• However, based on persuasive case law presented by defendants, and the lack of convincing rebuttal by the shareholder, the court ruled that, as a matter of law, Black-Scholes valuations were not material for purposes of SEC R. 14a-9 analysis. 
• Because omissions must be material in order to be actionable, and Black-Scholes valuations were not material, it was clear that the shareholder could not have alleged any facts that would have allowed him to state a claim under that theory. 
• Additionally, the shareholder alleged that the proxy statement was misleading because it failed to disclose all federal tax consequences when it described the options' federal income tax consequences. 
• However, no law or regulation required defendants to include the potential treatment of the option granted under the federal estate tax, gift tax, or generation-skipping transfer tax. 
• Stating that an act had no federal income tax consequences did not imply that the act had absolutely no federal tax consequences whatsoever. 
• The shareholder therefore failed to state a claim.

CONCLUSION
Defendants' motion to dismiss was granted, and the shareholder's complaint was dismissed, with prejudice, in its entirety.


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