Opinion ID: 473998
Heading Depth: 2
Heading Rank: 2

Heading: The Allegations Concerning Representatives of FGB Holding Corporation

Text: 32 Kas next challenges the proxy statement's depiction of discussions between representatives of FGB Holding Corporation and Eugene Casey concerning a fair price for the Class A shares. The challenged paragraph reads as follows: 33 On June 3, 1982, representatives of FGBHC [i.e., FGB Holding Corporation] proposed to Eugene B. Casey, who holds approximately 30.5% of the outstanding Class A Shares and is the largest single holder of Class A Shares, that FGBHC acquire all of the Class A Shares as well as the [regular common] Shares in the Merger. After discussion, FGBHC and Mr. Casey agreed that a price of $28.00 per Class A Share in cash would be fair. 34 Proxy Statement at 8. 35 Kas argues on appeal that this statement is materially false and misleading because it fails to disclose that the representatives of FGBHC were Clifford and Altman, who also served as attorneys, directors, and officers of Financial General. Kas offers several theories in support of his claim that the District Court erred in concluding that the representatives statement omitted no material fact. First, Kas attempts to link this alleged failure to disclose to his buried facts argument, challenging the failure to adequately disclose the various roles played by Clifford and Altman. This argument has some plausibility: a reasonable shareholder might well want to know that Clifford and Altman were taking an active role on behalf of the Investors in facilitating the merger at the same time that they served as officers and directors of Financial General. Were this the only indication of the active role played by Clifford and Altman on behalf of the Investors, therefore, the failure to identify the representatives of FGB Holding Corporation would clearly be a material omission. The proxy statement, however, contains many indications elsewhere that Clifford and Altman actively facilitated the merger on behalf of the Investors. For instance, the proxy statement disclosed that Clifford and Altman signed the merger agreement as officers and directors of the Investors' corporations. Since the dual roles of Clifford and Altman were disclosed in the proxy statement, we find that the additional failure to identify the representatives of FGB Holding Corporation who negotiated with Casey was not materially misleading as a matter of law. See Kademian v. Ladish Co., 792 F.2d 614, 623 (7th Cir.1986) (materiality requires examination of the total mix of information available to shareholders). It is highly unlikely that a reasonable shareholder would fail to correlate the Investors' acquisition of 95% of Financial General's voting power with the plan of merger. Any reasonable shareholder would thus realize that all of the directors who approved the plan of merger served only at the Investors' sufferance and that all of the directors, not merely Clifford and Altman, were presumably acting on the Investors' behalf as well as on behalf of the Class A shareholders in facilitating the merger. 36 Kas next argues that Clifford and Altman had conflicts of interest in their dealings with Casey, since as the Investors' representatives their goal was to minimize the price paid for the Class A shares while their duty as directors and officers of Financial General was to protect the interests of the Class A shareholders. This purported conflict of interest does not, however, by itself make the failure to identify the representatives of FGB Holding Corporation materially misleading. A reader would assume that the representatives of FGB Holding Corporation had interests completely adverse to the Class A shareholders. Identifying the representatives as Clifford and Altman could only lead a Class A shareholder to believe that his interests were more rather than less protected, since Clifford and Altman might temper their pursuit of the Investors' interests in order to accommodate their duty to the Class A shareholders. We are frankly at a loss to comprehend Kas's argument that the failure to identify the representatives of FGB Holding Corporation had the effect of suggesting that the negotiation with Casey was an arms-length transaction. It seems to us that the effect of identifying Clifford and Altman would be to suggest less adversity of interests, not more, than if the representatives remained anonymous. A reader would not expect the representatives of FGB Holding Corporation to be looking out for the interests of the shareholders of the target corporation. 37 Kas also suggests that disclosure of the identity of the representatives was material because Casey greatly admired his fellow director Clifford. This argument is fundamentally flawed. In the first place, it is unclear why the revelation that the representatives of FGB Holding Corporation were none other than Clifford and Altman would alert readers to this awe factor. More importantly, however, Kas has presented absolutely no indication that Casey's admiration for Clifford actually impaired his independent judgment on the value of the stock. See infra Part II.C. Without more, therefore, we cannot find that the proxy statement violated the Securities Exchange Act by failing to reveal that Casey met with Clifford. Such information would not be material to a reasonable shareholder. 38