Blau v. Harrison
United States District Court for the Northern District of Illinois
2006 U.S. Dist. LEXIS 19795 (2006)
Facts
Blau and others (shareholders) (plaintiffs) owned shares in J. P. Morgan Chase & Company (J.P. Morgan). Chief executive officer (CEO) William B. Harrison Jr. and other J.P. Morgan directors (defendants) solicited the shareholders’ proxy votes in favor of J.P. Morgan’s merger with Bank One Corporation. The proxy statement described the merger agreement as fair. However, the proxy statement failed to mention that the directors had rejected Bank One’s demand for Harrison to step down as CEO and that, in order to retain Harrison as CEO, the directors had agreed to pay a multibillion-dollar purchase premium for Bank One’s stock. When the details of this deal came to light, the shareholders filed a federal suit against the directors, accusing the directors of having issued a misleading proxy statement in violation of § 14(a) of the Securities Exchange Act of 1934. The directors moved to dismiss the suit on the grounds that (1) the shareholders failed to specify with particularity in what ways the board acted fraudulently and (2) the board was not required to disclose its negotiating positions.
Rule of Law
Issue
Holding and Reasoning (Hibbler, J.)
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