TSC INDUSTRIES INC. V. NORTHWAY INC.
426 U.S. 438 (1976)
NATURE OF THE CASE: Northway (P), a TSC (D) shareholder, filed suit claiming that a joint
proxy statement was incomplete and materially misleading in violation of 14(a) of the
Securities Exchange Act of 1934. D appealed from a grant of summary judgment to P.
FACTS: In February 1969, National Industries acquired 34% of D voting securities from
Charles Schmidt and his family. Mr. Schmidt was the founder and president of the company and
resigned after the purchase in October of 1969. Five National nominees were placed on D's
board. The D board, with the attending National nominees abstaining, approved a proposal to
liquidate and sell all of D's assets to National. D and National issued a joint proxy
statement to their shareholders, recommending approval of the proposal. The proxy
solicitation was successful, D was placed in liquidation and dissolution, and the exchange
of shares was effected. P claimed the proxy was incomplete and misleading, as it did not
state that Schmidt's sale to National had already given them control of D. P seeks money
damages, restitution, and other equitable relief. P moved for summary judgment on the issue
of D's and National's liability. The District Court denied the motion. The Court of Appeals
reversed the District Court's denial of summary judgment to P on its Rule 14a-9 claims,
holding that certain omissions of fact were material as a matter of law. The Supreme Court
granted certiorari because the standard applied by the Court of Appeals in resolving the
question of materiality appeared to conflict with the standard applied by other Courts of
Appeals.
ISSUE:
RULE OF LAW:
HOLDING AND DECISION:
LEGAL ANALYSIS:
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