Santa Fe Industries, Inc. v. Green case brief

Santa Fe Industries, Inc. v. Green case brief summary
430 U.S. 462 (1977)

CASE SYNOPSIS

Petitioner majority stockholder appealed a decision of the United States Court of Appeals for the Second Circuit, which held respondents' complaint alleged a claim under S.E.C. Rule 10b-5, 17 C.F.R. § 240.10b-5, because it charged, in connection with a Delaware short-form merger, that petitioner committed a breach of its fiduciary duty to deal fairly with minority shareholders by effecting a merger without a justifiable business purpose.

CASE FACTS
Petitioner acquired 95 percent of corporate stock and carried out a short-form merger under Delaware corporation law. Respondent minority stockholders sued, alleging petitioner's actions violated federal law because they employed a device, scheme, or artifice to defraud and engaged in an act, practice, or course of business that operated as a fraud or deceit in connection with the purchase of a security in violation of S.E.C. Rule 10b-5. The appellate court found respondents stated a cause of action upon which relief could be granted because S.E.C. Rule 10b-5 reached breaches of fiduciary duty by a majority against minority shareholders without any charge of misrepresentation or lack of disclosure.

DISCUSSION

• The Court reversed, holding that the merger, if carried out as respondents' alleged in their complaint, was neither deceptive nor manipulative and, therefore, did not violate federal law. 
• The Court found the short-form merger was carried out in full compliance with Delaware law and did not involve manipulation or deception as those terms were used in § 10b of the Securities Exchange Act of 1934, 15 U.S.C.S. § 78j.

CONCLUSION
The Court reversed the judgment.



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