Source: https://www.legalcrystal.com/case/100870/j-case-co-vs-borak
Timestamp: 2016-12-11 01:44:42
Document Index: 374711369

Matched Legal Cases: ['§ 14', '§ 27', '§14', '§ 14', '§ 27', '§ 180', '§ 27', '§ 14', '§ 27', '§ 14', '§ 240']

J I Case Co Vs Borak - Citation 100870 - Court Judgment | LegalCrystal
Save as PDF Add a Tag Add a Note Semantics Visualize J. I Case Co. Vs. Borak - Court Judgment	LegalCrystal Citationlegalcrystal.com/100870CourtUS Supreme CourtDecided OnJun-08-1964Case Number377 U.S. 426AppellantJ. I Case Co.RespondentBorakExcerpt:.....that the merger can be dissolved only if it was fraudulent or nonbeneficial, issues upon which the proxy material would not bear. but the causal relationship of the proxy material and the merger are questions of fact to be resolved at trial, not here. we therefore do not discuss this point further.
the purpose of § 14(a) is to prevent management or others from obtaining authorization for corporate action by means of deceptive or inadequate disclosure in proxy solicitation. the section stemmed from the congressional belief that "[f]air corporate suffrage is an important right..... Judgment:
J. I Case Co. v. Borak - 377 U.S. 426 (1964)
1. Private suits are permissible under § 27 for violation of §14(a) for both derivative and direct causes. Pp.
377 U. S. 430
2. Federal courts will provide the remedies required to carry out the congressional purpose of protecting federal rights. Pp.
(a) Remedies are not limited to prospective or declaratory relief, but the overriding federal law controls the measure of redress. P.
(b) The character of the right remains federal, although state law questions must also be decided. P.
(c) The determination of a remedy in this case must await trial on the merits. P.
This is a civil action brought by respondent, a stockholder of petitioner J. I. Case Company, charging deprivation of the preemptive rights of respondent and other shareholders by reason by a merger between Case and the American Tractor Corporation. It is alleged that the merger was effected through the circulation of a false and misleading proxy statement by those proposing the merger. The complaint was in two counts, the first based on diversity and claiming a breach of the directors' fiduciary duty to the stockholders. The second count alleged a violation of § 14(a) [
] of the Securities Exchange Act of 1934 with reference to the proxy solicitation material. The trial court held that as to this court it had no power to redress the alleged violations of the Act, but was limited solely to the granting of declaratory
relief thereon under § 27 of the Act. [
] The Court held Wis.Stat., 1961, § 180.405(4), which requires posting security for expenses in derivative actions, applicable to both counts, except that portion of Count 2 requesting declaratory relief. It ordered the respondent to furnish a bond in the amount of $75,000 thereunder and, upon his failure to do so, dismissed the complaint, save that part of Count 2 seeking a declaratory judgment. On interlocutory appeal, the Court of Appeals reversed on both counts, holding that the District Court had the power to grant remedial relief and that the Wisconsin statute was not applicable. 317 F.2d 838. We granted certiorari. 375 U.S. 901. We consider only the question of whether § 27 of the Act authorizes a federal cause of action for rescission or damages to a corporate stockholder with respect to a consummated merger which was authorized pursuant to the use of a proxy statement alleged to contain false and misleading statements violative of § 14(a) of the Act. This being the sole question raised by petitioners in their petition for certiorari, we will not consider other questions subsequently presented.
Supreme Court Rule 40(1)(d)(2); [
357 U. S. 96
Respondent, the owner of 2,000 shares of common stock of Case acquired prior to the merger, brought this suit based on diversity jurisdiction seeking the enjoin a proposed merger between Case and the American Tractor Corporation (ATC) on various grounds, including breach of the fiduciary duties of the Case directors, self-dealing among the management of Case and ATC and misrepresentations contained in the material circulated to obtain proxies. The injunction was denied, and the merger was thereafter consummated. Subsequently, successive amended complaints were filed, and the case was heard on the aforesaid two-count complaint. The claims pertinent to the asserted violation of the Securities Exchange Act were predicated on diversity jurisdiction as well as on § 27 of the Act. They alleged: that petitioners, or their predecessors, solicited or permitted their names to be used in the solicitation of proxies of Case stockholders for use at a special stockholders' meeting at which the proposed merger with ATC was to be voted upon; that the proxy solicitation material so circulated was false and misleading in violation of § 14(a) of the Act and Rule 14a-9 which the Commission had promulgated thereunder; [
"unlawful for any person . . . to solicit or to permit the use of his name to solicit any proxy or consent or authorization in respect of any security . . . registered on any national securities exchange in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest
We therefore believe that, under the circumstances here, it is the duty of the courts to be alert to provide such remedies as are necessary to make effective the congressional purpose. As was said in
See also Tunstall v. Brotherhood of Locomotive Firemen & Enginemen,
309 U. S. 201
(1940). It is for the federal courts "to adjust their remedies so as to grant the necessary relief" where federally secured rights are invaded.
(1946). Section 27 grants the District Courts jurisdiction "of all suits in equity and actions at law brought to enforce any liability or duty created by this title. . . ." In passing on almost identical language found in the Securities Act of 1933, the Court found the words entirely sufficient to fashion a remedy to rescind a fraudulent sale, secure restitution and even to enforce the right to restitution against a third party holding assets of the vendor.
311 U. S. 288
See also Porter v. Warner Holding Co.,
Mitchell v. Robert DeMario Jewelry, Inc.,
361 U. S. 288
Schine Chain Theatres, Inc., v. United States,
Nor do we find merit in the contention that such remedies are limited to prospective relief. This was the position taken in
Dann v. Studebaker-Packard Corp.,
288 F.2d 201, where it was held that the
At 214. But we believe that the overriding federal law applicable here would, where the facts required, control the appropriateness of redress despite the provisions of state corporation law, for it "is not uncommon for federal courts to fashion federal law where federal rights are concerned."
(1957). In addition, the fact that questions of state law must be decided does not change the character of the right; it remains federal. As Chief Justice Marshall said in
to attach no responsibility to the use of misleading proxy statements, the whole purpose of the section might be frustrated. Furthermore, the hurdles that the victim might face (such as separate suits, as contemplated by
Dann v. Studebaker-Packard Corp., supra,
security for expenses statutes, bringing in all parties necessary for complete relief, etc.) might well prove insuperable to effective relief.
No solicitation subject to §§ 240.14a-1 to 240.14a-10 shall be made by means of any proxy statement, form of proxy, notice of meeting, or other communication written or oral containing any statement which, at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or which omits to state any material fact necessary in order to make the statements therein not false or misleading or necessary to correct an statement in any earlier communication with respect to the solicitation of a proxy for the same meeting or subject matter which has become false or misleading."