Howing Co. v. Nationwide Corp.

826 F.2d 1470 (1987)

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Howing Co. v. Nationwide Corp.

United States Court of Appeals for the Sixth Circuit
826 F.2d 1470 (1987)

RW

Facts

Howing Company (plaintiff) owned a minority share in the stock of Nationwide Corporation (defendant). Nationwide solicited proxy votes from Howing and other shareholders to approve Nationwide’s freezeout merger with its corporate parent. The merger was designed to cash out Nationwide’s public shareholders and privatize the company. The proxy statement listed factors that Nationwide’s investment banker reviewed before concluding that the transaction would be financially fair to the shareholders, but the statement neither weighted those factors nor discussed them in any detail. Howing sued, accusing Nationwide of having breached its fiduciary duty by failing to comply with Securities and Exchange Commission (SEC) Rule 13e-3 disclosure requirements and by violating various Securities and Exchange Commission (SEC) rules against securities fraud. The federal district court ruled that § 13(e) of the Securities Exchange Act of 1934 (Exchange Act) gave Howing a private right of action to bring its suit. However, the district court also ruled that private litigants could bring fraud charges only to the extent that omitted or misleading disclosures were intended to defraud investors. The district court found no evidence of fraudulent intent on Nationwide’s part, and therefore, the court dismissed the case. Howing appealed to the Sixth Circuit.

Rule of Law

Issue

Holding and Reasoning (Merritt, J.)

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