JI Case v. Borak (1964)
§ The issue that is always of concern with misrepresentation is whether or not the fact is material. The fact must be material.
§ In
14(a) there is nothing in the statute that says who can sue if
something goes wrong – specifically it does state whether or not a
private action may be brought. So if it does not specify it – can the
court still allow it?
§ Once there has been a merger it is almost impossible to put back the way it was – so the only real remedy is damages.
§ So the court in order to interpret the statutes looks at the purpose.
§ You need to private parties to enforce the law.
§ Certiorari
was granted to consider whether Securities Exchange Act provision
authorizes federal cause of action for rescission or damages to
corporate stockholder with respect to consummated merger which was
authorized pursuant to use of proxy statement alleged to contain false
and misleading statements in violation of the Act. Securities Exchange
Act of 1934, §§ 14(a)
§ The
purpose of Securities Exchange Act provision making it unlawful to
solicit proxy or consent authorization in violation of commission rule
is to prevent management or others from obtaining authorization for
corporate action by means of deceptive or inadequate disclosure of proxy
solicitation, stemming from congressional belief that fair corporate
suffrage is important right that should attach to every equity security
bought on a public exchange. Securities Exchange Act of 1934, § 14(a)
§ It
is for federal courts to adjust their remedies so as to grant necessary
relief where federally secured rights are invaded, and when federal
statute provides for general right to sue for such invasion, federal
courts may use any available remedy to make good wrong done.
§ Today’s court would never have made this decision.
o If
an investor does not feel they are meaningful protected they will stop
investing, so it is critical to have the utmost integrity in the market.
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