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Mills v. Electric Auto-Lite Co.

United States Supreme Court
396 U.S. 375 (1970)


Electric Auto-Lite Company (Electric) (defendant) merged with Mergenthaler Linotype Company (Mergenthaler). Mills, et al. (plaintiffs) were shareholders of Electric and brought suit seeking to set aside the merger on the grounds that the proxy statement contained misleading statements in violation of Section 14(a) of the Securities and Exchange Act of 1934. The plaintiffs’ claim was that the proxy statement told shareholders that the Electric board of directors had approved the merger, but failed to tell the shareholders that all of the directors were also nominees of Mergenthaler and were under Mergenthaler’s control. The District Court for the Northern District of Illinois found that the omission was material, and that a causal connection existed between the violation of Section 14(a) and the harm to the plaintiffs. The United States Court of Appeals for the Seventh Circuit affirmed that the proxy statement was improper, but reversed on the issue of causal connection, finding that the terms of the merger were fair. The United States Supreme Court granted certiorari.

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