Opinion ID: 588840
Heading Depth: 3
Heading Rank: 1

Heading: Howing I: The First Appeal to the Sixth Circuit

Text: 11 The class Plaintiffs, but not Belle Efros, appealed. We reversed the judgment of the district court and remanded the case. See Howing Co. v. Nationwide Corp., 826 F.2d 1470 (6th Cir.1987) (hereinafter Howing I). 12 We first held that a private right of action for damages exists under § 13(e) of the Securities Exchange Act of 1934. We next discussed compliance with Rule 13e-3, 17 C.F.R. § 240.13e-3, a rule, promulgated under § 13(e), that prescribes the form and content of the disclosures that must be given to shareholders in going-private transactions such as the one under consideration. Rule 13e-3 mandates that certain parts of the issuer's Schedule 13E-3, a document that must be filed with the SEC during going-private transactions, be disclosed verbatim in the proxy solicitation. 13 The instructions to Item 8 of Schedule 13E-3, 17 C.F.R. § 240.13e-100, require a statement as to the fairness of the transaction and the factors upon which such belief is based. In considering the Defendants' compliance with Rule 13e-3, we first noted that conclusory statements that the transaction is fair in relation to net book value, going-concern value, and future prospects fail to satisfy the Rule. Noting that the Rule requires a high level of specificity, we concluded that the Nationwide Defendants had made just the sort of conclusory statements prohibited by the Rule; they provided only a laundry list of factors considered by the investment banker, which the Defendants had employed to render an opinion as to the fairness of the transaction. In Howing I, we concluded that the Rule requires a reasonably detailed analysis of the various financial valuation methods discussed by the Rule and the weights attached thereto. Howing I, 826 F.2d at 1479. Because the proxy statement failed to provide a reasonably detailed analysis applying the various valuation methods and the weights attached thereto, we found that the Defendants failed to comply with the disclosure obligations imposed by Rule 13e-3. Id. 14 We also reversed the district court's determination that, since there is no evidence of any breach of fiduciary duty owed by the defendants, and the merger was neither unauthorized by statute, illegal nor ultra vires under Ohio corporation law, the Ohio statutory appraisal right constituted the plaintiffs' exclusive state law remedy. Id. at 1474. We remanded the case, instructing the district court (1) to reconsider the Defendants' failure to provide the information required by the instructions to Item 8 of Schedule 13E-3; (2) to consider issues of materiality of the Defendants' omissions under Rule 13e-3; and (3) to decide the state-law breach-of-fiduciary-duty claims and, if necessary, make detailed findings of fact and conclusions of law concerning the claim asserted under the state standard of fiduciary duty. We denied the Defendants' petition for rehearing and suggestion for rehearing en banc. The Supreme Court denied the Defendants' petition for certiorari. 15