Friday, November 22, 2013

Wilson v. Great American Industries, Inc. case brief

Wilson v. Great American Industries, Inc. case brief summary
979 F.2d 924 (1992)

Defendants appealed decision on remand from United States District Court for Northern District of New York that imposed liability pursuant to Security and Exchange Act § 14(a) for misrepresentations contained in proxy issued in connection with merger of defendant subsidiary into defendant parent. Defendants appealed and plaintiffs cross-appealed damages calculation.

Plaintiffs were class of former minority shareholders of defendant subsidiary. Defendants were two corporations, defendant subsidiary and defendant parents, as well as various officers, directors, and attorneys associated with the corporations. In connection with a proposed merger of defendant subsidiary into defendant parent, defendants issued a joint proxy that was distributed to all shareholders. Plaintiffs alleged that material misrepresentations therein induced them to exchange their undervalued shares of defendant subsidiary common stock for overvalued shares of new preferred stock in defendant parent. On appeal, defendants argued that an intervening Supreme Court decision precluded minority shareholders' relief under the Securities and Exchange Act of 1934 § 14(a), 15 U.S.C.S. § 78n(a), when they were unable to affect the outcome of a merger vote.

The court disagreed because the injury sustained by minority shareholders powerless to affect the outcome of a merger vote was not the merger but loss of appraisal right.

Decision that imposed liability was affirmed in part and remanded in part. Although finding of materiality in proxy satisfied elements of loss and transaction causation for forfeited state appraisal rights, plaintiffs must also prove that they in fact lost state appraisal rights. Damages calculation affirmed.

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