Wilson v. Great American Industries, Inc.

Great American Industries (GAI) (defendant) owned 73 percent of Chenango Industries (defendant) and proposed a merger to acquire the rest, with Chenango shareholders receiving GAI preferred stock. New York law did not require a full proxy statement, but GAI issued one anyway, containing material misrepresentations that undervalued Chenango. Enough minority shareholders voted for the merger to strip Chenango shareholders of appraisal rights. Minority shareholders (plaintiffs) sued under SEC Rule 14a-9, alleging the misstatements induced their vote and caused a loss. GAI argued there was no causation because, needing only a two-thirds vote, it could have merged regardless. The plaintiffs responded that GAI needed a higher percentage for favorable tax treatment and that the vote cost them appraisal rights. The trial court ruled for the plaintiffs; GAI appealed, invoking Virginia Bankshares v. Sandberg.

Whether causation is established for a Rule 14a-9 action when a material misstatement in a proxy statement induces minority shareholders to give up important state-law remedies.