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1991-06-27
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Subject: 89-1448 -- CONCUR/DISSENT, VIRGINIA BANKSHARES, INC. v. SANDBERG
SUPREME COURT OF THE UNITED STATES
No. 89-1448
VIRGINIA BANKSHARES, INC., et al., PETITIONERS v. DORIS I. SANDBERG et al.
on writ of certiorari to the united states court of appeals for the fourth
circuit
[June 27, 1991]
Justice Stevens, with whom Justice Marshall joins, concurring in part
and dissenting in part.
While I agree in substance with Parts I and II of the Court's opinion,
I do not agree with the reasoning in Part III. In Mills v. Electric
Auto-Light Co., 396 U. S. 375 (1970), the Court held that a finding that
the terms of a merger were fair could not constitute a defense by the
corporation to a shareholder action alleging that the merger had been
accomplished by using a misleading proxy statement. The fairness of the
transaction was, according to Mills, a matter to be considered at the
remedy stage of the litigation.
On the question of the causal connection between the proxy solicitation
and the harm to the plaintiff shareholders, the Court had this to say:
"There is no need to supplement this requirement, as did the Court of
Appeals, with a requirement of proof of whether the defect actually had a
decisive effect on the voting. Where there has been a finding of
materiality, a shareholder has made a sufficient showing of causal
relationship between the violation and the injury for which he seeks
redress if, as here, he proves that the proxy solicitation itself, rather
than the particular defect in the solicitation materials, was an essential
link in the accomplishment of the transaction. This objective test will
avoid the impracticalities of determining how many votes were affected,
and, by resolving doubts in favor of those the statute is designed to
protect, will effectuate the congressional policy of ensuring that the
shareholders are able to make an informed choice when they are consulted on
corporate transactions. Cf. Union Pac. R. Co. v. Chicago & N. W. R. Co.,
226 F. Supp. 400, 411 (D. C. N. D. Ill. 1964); 2 L. Loss, Securities
Regulation 962 n. 411 (2d ed. 1961); 5 id., at 2929-2930 (Supp. 1969)."
Id., at 384-385.
Justice Harlan writing for the Court then appended this footnote:
"We need not decide in this case whether causation could be shown where
the management controls a sufficient number of shares to approve the
transaction without any votes from the minority. Even in that situation,
if the management finds it necessary for legal or practical reasons to
solicit proxies from minority shareholders, at least one court has held
that the proxy solicitation might be sufficiently related to the merger o
satisfy the causation requirement, see Laurenzano v. Einbender, 264 F.
Supp. 356 (D. C. E. D. N. Y. 1966) . . . ." Id., at 385, n. 7.
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