Opinion ID: 2361133
Heading Depth: 2
Heading Rank: 3

Heading: Other Alleged Disclosure Violations

Text: Appellants' remaining disclosure claims also lack merit. First, they contend that Zaucha should have disclosed that he and the board were engaged in a dispute regarding the rents that he was charging Northstar. Zaucha fully disclosed his lease arrangements with Northstar, including the origin of the transactions, the price Zaucha paid for the properties and the amount of rent he receives. Zaucha was under no obligation to disclose the board's view of the fairness of the lease terms or the actions the board may have been contemplating. [10] Second, appellants argue that Zaucha unfairly attacked the integrity of board members Jarrett and Pesci by accusing them of engag[ing] in a continuous pattern of self-dealing and self-enrichment to the neglect of the interests of stockholders. In fact, Zaucha never singled out Jarrett or Pesci. He stated that the board, as a whole, had engaged in that conduct. The record establishes that the board did approve a number of self-dealing transactions. Thus, Zaucha's statement was not factually inaccurate. Third, appellants argue that Zaucha's solicitation materials misrepresented and omitted significant facts concerning the 400,000 options allocated to Brody and Smallacombe. According to appellants, Zaucha mischaracterized the options as bargain-priced and excessive, even though he himself had approved some of them and had acknowledged that the $1.75 option price, approved by the board's independent investment banking firm, was consistent with the fair market value of the shares. Appellants also complain that Zaucha failed to disclose that 150,000 of the 400,000 options were subject to strict vesting conditions. We conclude that Zaucha did not commit any disclosure violations regarding the options. Again, Zaucha was under no obligation to disclose the board's expert opinion as to the fair market value of the options and he did disclose that he had voted in favor of certain options. Zaucha's failure to disclose that 150,000 of the 400,000 options were subject to certain vesting conditions was not, under the circumstances, a material omission. The stockholders were voting on a slate of directors. The details of how and when certain options would vest would not have been important to their decision.