Howing Co. v. Nationwide Corp.
United States Court of Appeals for the Sixth Circuit
927 F.2d 700 (1992)
Nationwide Corporation (defendant) solicited the proxy votes of Howing Company (plaintiff) and other minority shareholders to approve Nationwide’s merger with its corporate parent. Such going-private and freezeout-merger transactions were governed by § 13(e) of the Securities Exchange Act of 1934 (Exchange Act) and Securities and Exchange Commission (SEC) Rule 13e-3. Howing sued Nationwide for failing to comply with Rule 13e-3’s disclosure requirements. Nationwide moved to dismiss the case on the grounds that the United States Supreme Court’s Virginia Bankshares decision denied minority shareholders such as Howing any opportunity to establish actionable causation if they lacked the votes needed to stop a majority shareholder from pushing through a transaction on its own. Howing attempted to distinguish Virginia Bankshares on two points: (1) Virginia Bankshares arose under § 14(a) of the Exchange Act and SEC Rule 14a-9, which lacked the special disclosure requirements imposed by § 13(e) and Rule 13e-3; and (2) whereas Virginia law provided the Virginia Bankshares plaintiffs with no state-law remedies, Howing’s and Nationwide’s other minority shareholders had state-law rights to demand an appraisal, which Nationwide’s misleading disclosures effectively prevented the minority shareholders from exercising.
Rule of Law
Holding and Reasoning (Brown, J.)
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