Opinion ID: 2598489
Heading Depth: 4
Heading Rank: 2

Heading: Materiality of Huna Totem's omissions

Text: In addition to claiming that the trial court applied the wrong legal test of materiality, the shareholders maintain that the proxy materials are materially false and misleading under the right standard. As previously noted, [13] after hearing the testimony at trial and reviewing the various documents shareholders had received regarding the trust, Judge Collins determined that, while some of the documents were ambiguous, their ambiguities were not material. Specifically, Judge Collins found that Huna Totem's July 1994 proxy solicitation gave shareholders a complete and accurate picture of the periodic review process: [T]he proxy statement and the full text of the settlement trust that was submitted to the shareholders is neither overly simplified [n]or unclear. Given the broad distribution and ready availability of this information, the court concluded, [t]he total mix of materials submitted to the Huna Totem shareholders was essentially accurate if to some degree overly simplified; and in the court's view, any ambiguities or omissions in the May 1994 preliminary information packet or in the directors' post-solicitation oral presentations were immaterial under Brown v. Ward 's objective test, which defines a misleading or false statement as `material if there is a substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote.' [14] In propounding a contrary view on appeal, the shareholders concentrate primarily on the incompleteness of the preliminary information distributed in May 1994, insisting that the confusion generated by this information sowed a lasting seed of ambiguity that violated the clear statement rule and Huna Totem's duties of disclosure, completeness and candor; omitted facts so obviously important to individual shareholders as to be material as a matter of law; and should therefore be resolved in favor of the shareholders under ordinary rules of contract interpretation. But the shareholders' narrow focus on the trial court's finding of an ambiguity in Huna Totem's preliminary information impermissibly views that information in isolation, mistakenly disregarding the need to decide the materiality of a particular omission in light of the totality of available information. For as we have already observed, the Alaska Securities Act expressly requires us to determine the materiality of a statement's omissions contextually, rather than in isolation, by considering whether the statement omit[s] to state a material fact necessary in order to make the statement[] made, in the light of the circumstances under which [it is] made, not misleading. [15] Or as Judge Collins more simply phrased it, the pertinent inquiry here was whether  [t]he total mix of materials submitted to the Huna Totem shareholders was essentially accurate. (Emphasis added.) Here, no matter how sketchy the corporation's initial description of its proposed settlement trust might seem, the uncontroverted facts establish that Huna Totem's preliminary packet of information was labeled as a brief introduction to the proposed settlement trust; it expressly warned the shareholders of its own incompleteness and promised more information to follow. Keeping this promise, Huna Totem delivered the proxy solicitation itselfthe most crucial documentwhich provided each shareholder a complete and accurate summary of the proposed trust's review process, as well as a copy of the entire settlement trust document. Applying Brown v. Ward 's objective test to the total mix of available information, as the securities act requires, we conclude, as Judge Collins did, that a reasonable shareholder considering the information actually provided would not have been likely to find the information omitted from Huna Totem's preliminary packet and post-solicitation oral communications to be important in deciding how to vote. [16] We thus affirm the superior court's materiality ruling. [17]